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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Cal Dive International, Inc.
(Name of Issuer)
Common Stock, No Par Value
(Title of Class of Securities)
127 914 10 9
(CUSIP Number)
Andrew C. Becher, Esq.
Cal Dive International, Inc.
13430 Northwest Freeway, Suite 350
Houston, TX 77040
713-690-1818
(Name, Address and Telephone Number of Person Authorized
to receive Notices and Communications)
July 7, 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 should 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).
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(1) Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Owen Eugene Kratz ###-##-####
(2) Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [x]
(3) SEC Use Only
(4) Source of Funds
N/A; 00
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
[ ]
(6) Citizenship or Place of Organization
United States of America
(7) Sole Voting Power 1,440,929 Shares
Number of
Shares Bene-
ficially (8) Shared Voting Power
Owned by
Each Report- (9) Sole Dispositive Power 1,440,929 Shares
ing Person
With (10) Shared Dispositive Power Shares
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,440,929 Shares
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
(13) Percent of Class Represented by Amount in Row (11)
9.9%
(14) Type of Reporting Person (See Instructions) IN
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ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement relates is
the common stock, no par value (the "Common Stock"), of Cal Dive International,
Inc., a Minnesota corporation (the "Company"). The principal executive offices
of the Company are located at 13430 Northwest Freeway, Suite 350, Houston, TX
77040.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c). This statement is being filed by Owen Eugene Kratz.
Mr. Kratz is the President and CEO of Cal Dive International, Inc. The address
for Mr. Kratz is 13430 Northwest Freeway, Suite 350, Houston, TX 77040.
(d) and (e). During the last five years, the Reporting Person
has not been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) U.S.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Mr. Kratz had acquired these shares in July 1990 in connection
with founding the Company and is only filing this report in connection with the
Company's initial public offering.
ITEM 4. PURPOSE OF TRANSACTION
For investment.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
a) 1,609,249; 11.1
b) Owen E. Kratz has the sole voting power
c) N/A
d) Owen Kratz is the holder of an option to purchase 168,320 of the shares of
Common Stock in Item 5(a).
e) N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
Mr. Kratz has the right to acquire up to 168,320 shares of Common Stock
from Gerald G. Reuhl, the Company's Chairman of the Board pursuant to an Option
Agreement.
As a founding shareholder of the Company, Mr. Kratz is a party to a
Shareholders Agreement with the Company and certain other shareholders which
provides that the Company will nominate and use its best efforts to elect
certain persons to the Board of Directors. The Shareholders Agreement further
provides, among other things, certain customary transfer restrictions that
prohibit the parties from transferring any common stock, except for permitted
transfers.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1: Option Agreement
Exhibit 2: Shareholder Agreement
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: July 11, 1997 /s/ Owen E. Kratz
Owen E. Kratz
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OPTION AGREEMENT
THIS IS TO CERTIFY THAT, for value received and subject to the
provisions hereinafter set forth, the undersigned herewith grants to Owen Kratz
(the "Holder") the right to purchase 16,832 shares of the common stock (the
"Shares") of Cal Dive International, Inc., a Minnesota corporation, and its
successors and assigns (the "Company"). The exercise price for the Shares shall
be equal to $45.048 per share. This Option will expire on the earlier of (i) the
date upon which Gerald G. Reuhl sells all of his shares or (ii) the date upon
which the Holder is terminated by the Company for Cause or voluntarily
terminates employment. The defined terms in the preceding sentence have the
meanings ascribed to them in that certain Amended and Restated Shareholders
Agreement (the "Shareholders Agreement") dated as of January 12, 1995, by and
among the Company, Secured Energy Assets Fund, Limited Partnership, First
Reserve Fund V, Limited Partnership, First Reserve Fund VI, Limited Partnership,
and First Reserve Fund V-2, Limited Partnership (the "Funds"), Gerald G. Reuhl,
Owen Kratz and S. James Nelson, individually, and as Trustees of the Cal Dive
International, Inc. Voting Trust. The exercise price per share (the "Per Share
Option Price") when multiplied by the number of shares to be purchased hereunder
shall be referred to as the "Aggregate Option Price."
The following is a statement of rights of the Holder of this Option and
the terms and conditions to which this Option is subject, to which terms the
Holder hereof, by the acceptance of this Option, agrees.
1. EXERCISE OF OPTION. The exercise of this Option shall be contingent on all of
the following:
(a) Holder shall have sold only 25,000 shares of the common stock of
Cal Dive International as contemplated by the Purchase Agreement
dated January 12, 1995, by and between the Company, the Funds,
Gerald G. Reuhl, Owen Kratz and S.James Nelson, Jr.,
individually, and as Trustees of the voting Trust, and Gordon F.
Ahalt; and Gerald G. Reuhl shall have sold an additional 42,007
shares as provided for therein.
(b) The Holder's payment to the undersigned of the Aggregate Option
Price by wire transfer (together with a written statement
specifying that the Holder intends to exercise the rights under
the Option) for the Shares so purchased,
(c) The Holder must be employed by the Company on the date the
Option is exercised, and
(d) The Holder must agree to execute such instruments and to take
such further actions such that the Shares shall remain subject to
the Shareholders Agreement, as the same may be hereafter amended
from time to time. This Option may be exercised in whole or in
part, one time only, on or before the expiration of this Option.
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2. RESERVATION OF STOCK. The undersigned shall, at all times prior to the
expiration of this Option, reserve and keep available, out of the common
stock of the Company held by the undersigned, for the purposes of sale
upon exercise of this Option, such number of the shares of the Company's
common stock as shall from time to time be sufficient for the exercise
of this Option in whole.
3. ANTIDILUTION ADJUSTMENTS.
3.1. ADJUSTMENT OF THE SHARES AND THE PER SHARE OPTION PRICE.
(a) In case at any time the Company shall subdivide its outstanding
shares of common stock into a greater number of shares, the Per
Share Option Price in effect immediately prior to such a
subdivision shall be proportionately reduced (and the Shares
proportionately increased), and conversely, in case the
outstanding shares of common stock of the Company shall be
combined into a smaller number of shares, the Per Share Option
Price in effect immediately prior to such combination shall be
proportionately increased (and the Shares proportionately
decreased).
3.2. STOCK DIVIDENDS. In case any time the Company takes a record of
holders of common stock for the purpose of entitling them to
receive a dividend payable in common stock, the Holder shall
thereafter be entitled to receive, upon the exercise of this
Option, in addition to the Shares deliverable in accordance with
the provisions hereof, such proportionate number of additional
stock dividend Shares which the Holder would have been entitled
to receive had the Option been exercised immediately prior to the
taking of such record for such stock dividend.
4. NO VOTING RIGHTS
This Option shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
5. REGISTRATION RIGHTS AGREEMENT
The undersigned and the Holder shall take all reasonable and practicable
actions that they can so that the provisions of the Registration Rights
Agreement dated as of January 12, 1995, by and among the Company, the
Funds, Gerald G. Reuhl, Owen Kratz and S. James Nelson, which provides
rights to registration under the Securities Act of 1993, as amended, are
hereby incorporated herein by reference and made a part hereof and shall
be deemed to apply to the registration of the Shares.
6. NO TRANSFER
This Option is not transferable by either party to this Agreement
without the prior written consent of the other party.
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7. TAX WITHHOLDING
Whenever shares of Stock are sold due to the exercise of this Option,
the undersigned may require as a pre-condition to such sale that the
Holder remit to the Company an amount sufficient to satisfy any
applicable federal, state, or local withholding taxes relating to any
taxes due, including the value thereof. It is agreed that all such taxes
shall be the obligation of the Holder and not the undersigned.
8. GOVERNING LAW
This Option shall be construed and interpreted in accordance with, and
governed by, the law of the State of Minnesota without regard to the
principles of conflicts of law.
IN WITNESS WHEREOF, the undersigned has caused this Option to be duly
executed and delivered on this 25th day of February, 1995.
/s/ GERALD G. REUHL
Gerald G. Reuhl
The foregoing is accepted and agreed
to this 25th day of February, 1995.
/s/ OWEN KRATZ
Owen Kratz
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EXHIBIT 2
1997 AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This 1997 AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, dated as of April
11, 1997 (this "Agreement"), among Cal Dive International, Inc., a Minnesota
corporation (the "Company"), Coflexip, a French corporation ("CSO"), First
Reserve Secured Energy Assets Fund, Limited Partnership, a Delaware limited
partnership ("SEA"), First Reserve Fund V, Limited Partnership, a Delaware
limited partnership ("Fund V"), First Reserve Fund V-2, Limited Partnership, a
Delaware limited partnership ("Fund V-2"), First Reserve Fund VI, Limited
Partnership, a Delaware limited partnership ("Fund VI"; together with SEA, Fund
V and Fund V-2, the "Fund Shareholders"), Gerald G. Reuhl, Owen E. Kratz and S.
James Nelson (the foregoing three individuals, the "Executives"), Gordon F.
Ahalt ("Ahalt") and each of the Other Company Shareholders (as herein defined).
RECITALS
The Company and CSO are parties to a Purchase Agreement, dated as of April
11, 1997 (the "Purchase Agreement"), which has been approved by the CDI
Shareholders and the Fund Shareholders, pursuant to which CSO will purchase
3,699,788 shares of the common stock of the Company without par value ("Common
Stock") as described in the Purchase Agreement.
CSO and the Company are parties to a 1997 Registration Rights Agreement,
dated as of April 11, 1997 (the "1997 Registration Rights Agreement").
The Fund Shareholders, the Executives, the Other Company Shareholders and
the Company are parties to an Amended and Restated Shareholders Agreement, dated
as of January 12, 1995 (the "Existing Shareholders Agreement"), which will be
terminated and be restated pursuant to this Agreement upon closing under the
Purchase Agreement.
CSO, the Fund Shareholders, the Executives, and other Company Shareholders
(collectively, the "Shareholders") desire to enter into this 1997 Amended and
Restated Shareholders Agreement for the purpose of (i) regulating certain
aspects of their relationship as holders of shares of Common Stock and (ii)
addressing certain corporate governance issues of the Company, including the
composition of the Board of Directors of the Company.
The execution and delivery of this Agreement is a condition precedent to
the closing pursuant to the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
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AGREEMENT
ARTICLE 1.
DEFINITIONS
1.1 DEFINED TERMS. For purposes of this Agreement, the following
terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under common
control with, such Person, or (ii) any director (other than an Independent
Director as described in Section 2.1(b)), officer, 5% or greater
shareholder or general partner of such Person or any Person specified in
clause (i) above, or (iii) any Immediate Family Member of any Person
specified in clause (i) or (ii) above.
"AGREEMENT" means this 1997 Amended and Restated Shareholders
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
"BENEFICIALLY OWNED" has the meaning set forth in Rule 13d-3 of the
U.S. Securities and Exchange Commission.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means (i) the commission of an act by a Director
constituting fraud, embezzlement or a felony, (ii) willful malfeasance or
willful misconduct by a Director involving a matter which could reasonably
be expected to have a material adverse effect on the Company or any of its
Subsidiaries in connection with the performance of his duties as such,
(iii) a final determination by a court of competent jurisdiction in the
United States that such Director, as such or in any other capacity
(whether or not relating to the Company), breached a fiduciary duty owed
by him to another Person, or (iv) any act involving moral turpitude which
causes material harm to the customer relations, operations or business
prospects of the Company or any of its Subsidiaries.
"CDI SHAREHOLDERS" means the collective reference to the Executives
and the Other Company Shareholders.
"COMMON STOCK" means the common stock without par value of the
Company.
"COMPETITOR" means any Person which competes (or has a Competitive
Investment in), directly or indirectly, in any material respect with the
Company or any of its Subsidiaries, including, without limitation,
American Oilfield Divers, Inc., SubSea International, Inc., Oceaneering
International, Inc., Global Industries, Ltd., and Stolt Comex Seaway SA,
but
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specifically SHALL NOT include CSO and/or its Affiliates; PROVIDED that an
institutional lender or investor or an investment fund, including any of
the Fund Shareholders or any other fund for which First Reserve
Corporation acts as advisor or general partner, which has or in the future
acquires or makes Competitive Investments in such business or other
investments of the equity of other businesses competing with the Company
or any of its Subsidiaries shall not be deemed a Competitor.
"COMPETITIVE INVESTMENTS" means an investment of more than 10% of the
common stock or other equity interest of any Competitor.
"CSO SHARES" means the Common Stock held by CSO or any other CSO
Shareholder.
"CSO SHAREHOLDERS" means CSO or any of its successors and/or assigns
under the terms hereof in their capacity as shareholders only.
"DIRECTOR" means a director on the Board appointed in accordance with
the provisions of this Agreement.
"EMPLOYEE STOCK AGREEMENTS" means the employee stock agreements
entered into from time to time between the Company and Employee
Shareholders relating to the purchase by such Employee Shareholders of
Shares.
"EXECUTIVE SHAREHOLDERS" means the Executives in their capacity as
shareholders only.
"EXECUTIVE SHARES" means the Common Stock held by any Executive.
"FUND SHAREHOLDER" means any Fund which is the beneficial owner of
Shares.
"FUND SHARES" means the Common Stock held by the Fund Shareholders.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"IMMEDIATE FAMILY MEMBER" means, with respect to any Person, a
spouse, parent, child or sibling (whether natural or adopted) of such
Person and any trust or other mechanism established for estate or tax
planning purposes solely for the benefit of any such Person's Immediate
Family Members.
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"1995 REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated as of January 12, 1995, by and among the Company,
the Fund Shareholders and the Executives, individually and as Trustees, as
the same shall be amended pursuant to that certain letter agreement dated
April 11, 1997 among the Company, the Funds and CSO.
"1997 REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated as of April 11, 1997 by and between the Company and
CSO.
"OTHER COMPANY SHAREHOLDERS" means employee and director shareholders
of the Company who individually own less than 125,000 shares.
"PERSON" means an individual, partnership, corporation, limited
liability company business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"PREFERRED STOCK" means preferred stock of the Company issued
pursuant to its Articles of Incorporation.
"PROXY" means, in the case of a proxy running from any Executive
Shareholder, CSO Shareholder or Fund Shareholder, any person designated by
them or any of them.
"PUBLIC OFFERING" means a public offering of the Common Stock of the
Company pursuant to an effective registration statement under the
Securities Act.
"QUALIFIED PUBLIC OFFERING" means an underwritten Public Offering
pursuant to which the Company receives proceeds, net of underwriting
discounts and commissions, of at least $35,000,000.
"SALE OF THE COMPANY" means (i) the sale (in a transaction or series
of related transactions (directly or indirectly to the same Person or an
Affiliate of such Person) involving the transfer, assignment or other
disposal of the Company's capital stock for value) of more than 50% of the
outstanding voting stock of, or equity interests in, the Company to any
Person or "group" of Persons (as such term is defined in the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder) other than any Immediate Family Member of such
Shareholder; (ii) a liquidation of the Company or a sale of all or
substantially all of the Company's assets on a consolidated basis; or
(iii) a merger, consolidation or other business combination involving the
Company and another entity, whether or not the Company is the surviving
corporation, except where following such merger, consolidation or other
business combination, the existing shareholders of the Company immediately
prior to such merger, consolidation or other business combination will own
50% or more of the outstanding voting stock
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of, or equity interests in, the surviving entity immediately following
such merger, consolidation or other business combination.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SHAREHOLDERS" means all holders of Shares.
"SHARES" means (i) any Common Stock held by any Shareholder, now or
hereafter acquired, (ii) any other shares of any class or series of
capital stock of the Company, or options or warrants exercisable for or
convertible securities convertible or exchangeable for any class or series
of capital stock of the Company, now or hereafter acquired, and (iii) any
equity securities issued or issuable directly or indirectly with respect
to the capital stock referred to in clauses (i) and (ii) above by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"STOCK OPTION PLAN" means any plan adopted by the Board from time to
time granting to employees or Directors rights to purchase, in the
aggregate, when combined with all other outstanding options or other
rights to purchase Common Stock from the Company, up to 10% (as adjusted
for any subsequent stock splits, stock dividends, recapitalizations or
similar events) of the issued and outstanding Common Stock.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, business trust, joint stock
company, trust, unincorporated association , joint venture or other
business entity of which fifty percent (50%) or more of the total voting
power of shares of capital stock or other equity interest entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, or fifty percent
(50%) or more of the capital stock or other equity interest therein, is at
the time owned or controlled, directly or indirectly, by any Person or one
or more of the other Subsidiaries of such Person or a combination thereof.
"SUBSIDIARY BOARD" means the board of directors of any Subsidiary of
the Company.
"SUPERMAJORITY VOTE" means, with respect to a vote of the Board ,
approval by sixty-two percent (62%) of the Directors then constituting the
entire Board, and with respect to a vote of the Shareholders, approval by
the holders of eighty percent (80%) or more of the issued and outstanding
Common Stock.
"THIRD PARTY" means any Person other than the Shareholders, the
Company or any of their respective Affiliates.
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"TRANSFER" means any transfer, sale, assignment, distribution,
exchange, mortgage, pledge, hypothecation or other disposition of or
encumbrance on Shares.
"VOTING TRUST" AND "VOTING TRUST CERTIFICATES" means that certain
Voting Trust Agreement dated July 27, 1990 and Voting Trust Certificates
issued pursuant thereto.
1.2 OTHER DEFINITIONAL PROVISIONS; INTERPRETATION.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2.
BOARD OF DIRECTORS
2.1 ELECTION OF DIRECTORS. Each Shareholder hereby agrees that during
the term of this Agreement, such Shareholder will vote all of his Shares and any
other voting securities of the Company over which such Shareholder has voting
control and shall take all other necessary or desirable actions within his
control (whether in his capacity as a shareholder, Director, member of a Board
committee or officer of the Company or otherwise), and the Company shall take
all necessary and desirable actions within its control, in order to cause the
following:
(a) subject to the provisos set forth in Section 2.1(b) below, the
Board to consist of eleven (11) Directors;
(b) the election to the Board of
(i) two (2) designees of Fund V and V-2, who shall initially
be William E. Macaulay and David Kennedy and one (1) designee
of Fund V-1, who shall initially be Gerald M. Hage ( the
designees of the Fund Shareholders are collectively referred
to as the "Fund Directors:);
(ii) three (3) designees of CSO, who shall initially be
Jean-Bernard Fay, Tom Ehret and Kevin Peterson (the designees
of CSO are collectively referred to as the "CSO Directors");
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(iii) three (3) designees of the holders of a majority of the
Executive Shares, who shall initially be Gerald G. Reuhl, Owen
E. Kratz, and S. James Nelson (the designees of the holders of
Executive Shares are collectively referred to as the
"Executive Directors"); and
(iv) two (2) designees to be chosen by a majority vote of the
Board, who are independent of and not Affiliates of any of the
Company, the CSO Shareholders and the Fund Shareholders (the
"Independent Directors"), who shall initially be Ahalt and a
second designee to be chosen by a majority of the Board based
on the recommendation of the Nominating Committee of the Board
established pursuant to Section 2.2 as promptly as practicable
after the date of this Agreement.
PROVIDED, FURTHER that if, at any time the Fund Shareholders cease to
own, in the aggregate (i) at least 15% of the outstanding capital
stock of the Company, the number of Fund Directors shall immediately
decrease to two (2) (and one (1) Fund Director shall resign) and the
Board shall immediately thereafter take all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by one (1)
Director, (ii) at least 10% of the outstanding capital stock of the
Company, the number of Fund Directors shall immediately decrease to
one (1) (and one or two Fund Directors, as then necessary, shall
resign) and the Board shall immediately thereafter take all necessary
and desirable action to cause the aggregate number of Directors of
the Company under paragraph (a) of this Section 2.1 to decrease by
such number of Fund Directors as then resign or (iii) if the Fund
Shareholders cease to own at least 5% of the outstanding capital
stock of the Company, all the Fund Directors shall immediately resign
and the Board shall immediately thereafter take all necessary and
desirable action to cause the aggregate number of Directors of the
Company under paragraph (a) of this Section 2.1 to decrease by the
number of Fund Directors as then resign;
PROVIDED, FURTHER that if, at any time the CSO Shareholders cease to
own, in the aggregate (i) at least 15% of the outstanding capital
stock of the Company, the number of CSO Directors shall immediately
decrease to two (2) (and one (1) CSO Director shall resign) and the
Board shall immediately thereafter all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by one (1)
Director, (ii) at least 10% of the outstanding capital stock of the
Company, the number of CSO Directors shall immediately decrease to
one (1) (and one or two CSO Directors, as then necessary, shall
resign) and the Board shall immediately thereafter take all
necessary and desirable action to cause the aggregate number of
Directors of the Company under paragraph (a) of this Section 2.1 to
decrease by such number of CSO Directors as then resign or (iii) if
the CSO Shareholders cease to own at least 5% of the outstanding
capital stock of the Company, all the CSO Directors shall
immediately resign and the Board shall
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immediately thereafter take all necessary and desirable action to
cause the aggregate number of Directors of the Company under
paragraph (a) of this Section 2.1 to decrease by the number of CSO
Directors as then resign; PROVIDED, FURTHER that if, at any time the
CDI Shareholders cease to own, in the aggregate (i) at least 15% of
the outstanding capital stock of the Company, the number of
Executive Directors shall immediately decrease to two (2) (and one
(1) Executive Director shall resign) and the Board shall immediately
thereafter take all necessary and desirable action to cause the
aggregate number of Directors of the Company under paragraph (a) of
this Section 2.1 to decrease by one (1) Director, (ii) at least 10%
of the outstanding capital stock of the Company, the number of
Executive Directors shall immediately decrease to one (1) (and one
or two Executive Directors, as then necessary, shall resign) and the
Board shall immediately thereafter take all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by such number
of Executive Directors as then resign or (iii) if the CDI
Shareholders cease to own at least 5% of the outstanding capital
stock of the Company, all the Executive Directors shall immediately
resign and the Board shall immediately thereafter take all necessary
and desirable action to cause the aggregate number of Directors of
the Company under paragraph (a) of this Section 2.1 to decrease by
the number of Executive Directors as then resign;
PROVIDED, FURTHER, that in the event the Company issues or sells any
shares of its capital stock or any securities that, directly or
indirectly, are exercisable, convertible or exchangeable into or for
shares of its capital stock in a Public Offering, the percentage
ownership threshold amounts of outstanding capital stock of the
Company contained in the provisos set forth above in this paragraph
(b) shall, to the extent each Shareholder group continues to own at
least 5% of the issued and outstanding capital stock of the Company
immediately prior to such Public Offering, be proportionately
decreased by multiplying each such percentage ownership threshold
amount by a fraction the numerator of which shall be the total number
of shares of capital stock of the Company outstanding immediately
prior to such Public Offering and the denominator of which shall be
the total number of shares of capital stock of the Company
outstanding immediately after the completion of such Public Offering
(including any over-allotment option relating thereto);
(c) the removal from the Board or a Subsidiary Board, subject to
applicable law, of (i) any Director designated hereunder at the
written request, with or without Cause, of the Person or Persons who
previously designated such Director pursuant to paragraph 2.1(b)
above or (ii) any Director for Cause at the written request of the
Board, following a Supermajority Vote of the Board, but only upon
such written request and under no other circumstances; PROVIDED
that, notwithstanding clause 2.1(b)(iii) above, if any Executive
Director elected pursuant to clause 2.1(b)(iii) above ceases to be
an employee of the Company or any of its Subsidiaries or a
shareholder of at least 5% of the issued and outstanding Shares,
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such Director shall be removed as a Director promptly upon the later
of the termination of his employment or cessation of ownership of at
least 5% of the issued and outstanding Shares;
(d) in the event that any Director designated hereunder for any
reason ceases to serve as a member of the Board or a Subsidiary
Board during his term of office, the Person or Persons who
previously designated such Director pursuant to paragraph 2.1(b)
above shall be entitled to designate a successor Director to fill
the vacancy created thereby on the terms and subject to the
conditions of this Section 2.1.
(e) so long as the CSO Shareholders or the Fund Shareholders or the
CDI Shareholders have the right to designate more than one (1)
Director pursuant to paragraph 2.1(b) above, the Company shall cause
the Directors designated by such Shareholder group then serving on
the Board to be apportioned among the various classes of Directors
in order to ensure that their respective terms expire in consecutive
years.
2.2 COMMITTEES OF THE BOARD. The Board shall in accordance with the
By-laws of the Company establish the following committees of the Board: (I) a
five-member Executive Committee comprised, subject to the provisions of Section
2.1 (b), of one Fund Director, one CSO Director, one Independent Director and
two Executive Directors (one of whom shall be the Chairman of the Board) which,
when the Board is not in session, shall exercise such power and authority of the
Board in the management of the business of the Company pursuant to the unanimous
vote of such Committee as the Board may from time to time authorize, (ii) a
four-member Audit Committee comprised of, subject to the provisions of Section
2.1(b), one Fund Director, one CSO Director and two Independent Directors, which
shall consult with the independent public auditors of the Company in connection
with such auditors' audit and review of the financial statements of the Company
and shall consult with the Company's Chief Financial Officer and staff in
connection with the preparation of the Company's financial statements, subject
to such limitations as the Board may from time to time impose; (iii) a
five-member Compensation Committee comprised of, subject to the provisions of
Section 2.1(b), one Fund Director, one CSO Director, one Executive Director and
two Independent Directors, which shall administer awards under any Stock Option
Plan and shall evaluate and make recommendations with respect to the
compensation arrangements of executive officers of the Company, subject to such
limitations as the Board may from time to time impose; and (iv) a three-member
Nominating Committee comprised of, subject to the provisions of Section 2.1(b),
one Fund Director, one CSO Director and one Executive Director, which shall be
responsible for searching for and selecting nominees to serve as Independent
Directors from a list of acceptable potential nominees prepared by the Fund
Director and CSO Director with the advice of the Executive Director, from which
list the Executive Director shall select a nominee.
2.3 EXPENSES, FEES AND D & O INSURANCE. The Company shall pay the
reasonable out-of-pocket expenses incurred by each Director in connection with
attending the meetings of the Board, any Subsidiary Board and any committee
thereof. In addition, the Company shall pay to each Independent
- 9 -
Director a fee of $12,000 per year plus $2,000 for attending each of four (4)
regularly scheduled quarterly meetings, in each case payable in quarterly
installments on March 31, June 30, September 30 and December 31 of each year.
Furthermore, the independent Director will receive a fee of $250 for each
committee meeting he attends. The Company shall also maintain D&O insurance
coverage (including initial public offering and public company securities law
coverage) in such amounts and with such insurance carriers as determined by the
Board at all times during the term of this Agreement. The Board may amend this
Section 2.2 by a Supermajority Vote.
2.4 COMPETITORS AS DIRECTORS. Notwithstanding anything to the
contrary contained in this Article 2, no Shareholder shall vote or be required
to vote to elect any officer, director, employee, consultant, advisor, Affiliate
or partner of a Competitor (or Affiliate thereof), to the Board or any
Subsidiary Board; PROVIDED that the Person who designated such proposed Director
pursuant to paragraph 2.1 (b) hereof shall be entitled to designate a
substitute.
2.5 COMPANY INFORMATION. The Company shall deliver to the Directors
any and all financial and other information relating to the Company and its
Subsidiaries which may be reasonably requested from time to time, and the
Directors shall have access, during normal business hours and upon reasonable
notice, to such facilities and operations of the Company and its Subsidiaries as
may be reasonably requested from time to time.
ARTICLE 3.
IRREVOCABLE PROXY
In order to effectuate the provisions of Section 2.1(a), (b), (c),
(d) and (e), the CDI Shareholders, the Fund Shareholders and the CSO
Shareholders each hereby appoint the appropriate Proxy as his or its true and
lawful proxy and attorney-in fact, with full power of substitution, to vote at
any annual or special meeting of shareholders of the Company, or, if permitted
by law and the Company's Articles of Incorporation or By-Laws, to take action by
written consent in lieu of such meeting with respect to, or to otherwise take
action in respect of, all of the Shares owned or held of record by them in
connection with the matters set forth in Section 2.1(a),(b),(c),(d) and (e). The
Proxy may exercise the irrevocable proxy granted hereby at any time if the CSO
Shareholders, the CDI Shareholders or Fund Shareholders, as the case may be,
fail to comply with the provisions of Section 2.1(a),(b),(c), (d) and (e). Each
proxy granted hereby is irrevocable and is coupled with an interest. To
effectuate the provisions of Section 2.1(a), (b), (c), (d) and (e), the
Secretary of each of the Company and its Subsidiaries, or if there is no
Secretary, such other officer of the Company or its Subsidiary, as the case may
be, as the Board of the Company or its Subsidiary, as the case may be, may
appoint to fulfill the duties of the Secretary (the "Secretary"), shall not
record any vote or consent or other action contrary to the terms of Section
2.1(a), (b), (c), (d) or (e).
- 10 -
ARTICLE 4.
RESTRICTIONS ON TRANSFER OF SHARES
4.1 LIMITATIONS ON TRANSFER OF SHARES. (a) Except as provided in this
Agreement and except for transfers contemplated or permitted by the Purchase
Agreement, each Shareholder hereby agrees that such Shareholder will not,
directly or indirectly, Transfer any Shares or Voting Trust Certificates (or any
interest therein).
(b) Each Shareholder hereby agrees that: (i) any Transfer in
violation of this Agreement shall not be recognized on the books of the Company
and shall be void and (ii) no Transfer shall occur unless the transferee shall
agree pursuant to Article 7 to become a party to and be bound by the terms of
this Agreement, and, with respect to Employee Shareholders, the Voting Trust
Agreement and an Employee Stock Agreement.
4.2 RIGHTS OF FIRST REFUSAL. (a) Subject to the provisions of this
Article 4 and Section 2 of the Employee Stock Agreement, at least 60 days prior
to making any Transfer of any interest in any Shares or Voting Trust
Certificates (other than pursuant to Rule 144 promulgated under the Securities
Act ("Rule 144") or an underwritten Public Offering or as provided in the
proviso in paragraph 4.2 (c) below), the transferring Shareholder (the
"Transferring Shareholder") shall deliver a written notice (the "Offer Notice")
to the Company and the other Shareholders. The Offer Notice shall set forth in
reasonable detail the name of the Transferring Shareholder, the number of Shares
or Voting Trust Certificates proposed to be so Transferred (the "Offered
Securities"), the name and address of the proposed transferee (in the case of a
Transfer other than pursuant to a Public Offering which is not underwritten),
the proposed amount of consideration (which shall be payable solely in cash and
which, in the case of a Transfer pursuant to a Public Offering which is not
underwritten, shall be based on the average daily trading price of the Common
Stock over the 30-day period ending on the business day immediately preceding
the date of the Offer Notice) and the other terms and conditions of payment
offered by the proposed transferee.
(b) If the Transferring Shareholders (in whole or in part) consist of
any Executive Shareholder, Ahalt or any Other Company Shareholder (the "Employee
Group"), the non-selling members of the Employee Group may elect to purchase all
(but not less than all) of their Pro Rata Share (as defined below) of the
Offered Securities being sold by members of the Employee Group at the price and
on the other terms specified in the Offer Notice by delivering written notice of
such election to the Transferring Shareholder and the other members of the
Employee Group (or the Company's Secretary) as soon as practicable but in no
event later than 10 days after the delivery of the Offer Notice. If any members
of the Employee Group did not elect to purchase their Pro Rata Share of the
Offered Securities within such 10-day period, each of the other members of the
Employee Group who has so elected may elect to purchase all or part of the
remaining Offered Securities at the price and on the other terms specified in
the Offer Notice by delivering written notice of such election to the
transferring Shareholder and the other members of the Employee Group (or the
Company's secretary) as soon as practicable but in no event later than 20 days
- 11 -
after initial delivery of the Offer Notice; PROVIDED, that, in case there are
more elections than there are Offered Securities, such additional Shares shall
be allocated to such members of the Employee Group in accordance with their Pro
Rata Share; it being the intention of the parties that the Offered Securities
that are proposed to be Transferred by the members of the Employee Group be
offered first to non-selling members of the Employee Group.
(c) If the Transferring Shareholders consist of one or more of the
Fund Shareholders (the "Fund Group") and the proposed transferee is not another
Fund Shareholder, or an Affiliate of any of the Fund Shareholders, such Transfer
is subject to this Article 4; PROVIDED, HOWEVER, that the rights of first
refusal provided in this Section 4.2 shall not apply to a Transfer by any member
of the Fund Group or any Permitted Transferee thereof (as defined in Section
4.6) to a financial or other similar institutional investor or investment fund
which is not a Competitor and which, in connection with such Transfer, is
expressly not assigned, and is expressly prohibited from succeeding to, any of
the rights of the Fund Shareholders or their Permitted Transferees to designate
Directors under Article 2.
(d) If the Transferring Shareholders consist of CSO or a CSO
Affiliate (the "CSO Group") and the proposed transferee is not another CSO
Affiliate, such transfer is subject to this Article 4.
(e) If the Employee Group as a whole, in the case of paragraph 4.2
(b), has not elected to purchase all of the Offered Securities within the
first-offer periods specified therein, or if the Fund Group or CSO Group
proposes a Transfer that is subject to this Article 4, any Offered Securities
shall be offered during the following 10-day period to the Company. If the
Company does not elect to purchase all of the Offered Securities within such
10-day period pursuant to a Supermajority Vote of the Board in accordance with
Article 8, any remaining Offered Securities shall then be offered during the
following 10-day period to all other Shareholders in accordance with their Pro
Rata Share. If any such other Shareholders do not elect to purchase all of their
respective Pro Rata Share of such Offered Securities within such 10-day period,
any remaining Offered Securities shall then be offered to all those Shareholders
electing to purchase Offered Securities during the next succeeding 10-day
period, in accordance with their respective Pro Rata Share or as the
Shareholders electing to purchase at that time may otherwise agree. The offering
periods referred to in this Section 4.2 are collectively referred to as the
"Election Period". Each Shareholder agrees not to consummate any Transfer until
expiration of the Election Period unless the parties to the Transfer have been
finally determined pursuant to this Section at any time prior to the expiration
of such Election Period.
(f) If, but only if, the other Shareholders and/or the Company, as
the case may be, have elected to purchase all of the Offered Securities from the
Transferring Shareholder, the Transfer of such Offered Securities shall be
consummated as soon as practicable after the delivery of the election notices,
but in no event later than 30 days after the expiration of the Election Period.
(g) If the other Shareholders and/or the Company, as the case may be,
have not elected to purchase all of the Offered Securities, the Transferring
Shareholder may, within 90 days after the
- 12 -
expiration of the Election Period and subject to the provisions of Section 4.3,
Transfer such Offered Securities to the Person(s) named in the Offer Notice at a
price not less than the price per Share specified in the Offer Notice and on
other terms no more favorable to the transferee than offered to the Company and
the other Shareholders in the Offer Notice. If such Transfer does not occur
within such 90-day period, this Section 4.2 shall be applicable with respect to
all future Transfers of such Offered Securities.
(h) The purchase price specified in any Offer Notice shall be payable
solely in cash at the closing of the transaction; PROVIDED, that, with respect
solely to Transfers among Shareholders of the Company pursuant to the provisions
of this Section 4.2, other bona fide arrangements and terms which are acceptable
to the Transferring Shareholder can be considered. For purposes hereof, each
Shareholder's "Pro Rata Share" shall be based upon such Shareholder's percentage
ownership of Shares on a fully-diluted basis relative to other Shareholders to
whom an offer has been made pursuant to this Section 4.2.
4.3 TAG-ALONG RIGHTS. (a) Subject to the provisions of Article 5 and
limitations in Section 4.1 and the procedures of Section 4.2, at least 10 days
prior to a Transfer by a Shareholder that is subject to this Article 4 (other
than pursuant to a Public Offering or Rule 144), the Shareholder desiring to
make such Transfer shall deliver a written notice (the "Sale Notice") to the
Company and the other Shareholders, setting forth the name of the Transferring
Shareholder, the number of Shares proposed to be so Transferred, the name and
address of the proposed transferee, the proposed amount and form of
consideration and other terms and conditions of payment offered by the proposed
transferee, and a representation that the proposed transferee has been informed
of the tag-along rights provided for in this Section 4.3 and has agreed to
purchase Shares in accordance with the terms hereof.
(b) The other Shareholders may elect to participate in the
contemplated Transfer by delivering written notice indicating their desire to
exercise their rights pursuant to this Section to the Transferring Shareholder
at any time within 10 days after delivery of the Sale Notice. If any other
Shareholder has elected to participate in such Transfer (a "Tagging
Shareholder"), the Transferring Shareholders and the Tagging Shareholders shall
be entitled to sell in the contemplated Transfer, at the same price and on the
same terms, a number which is the product of (i) the quotient determined by
dividing the percentage of Shares beneficially owned on a fully diluted basis by
such Person by the aggregate percentage of Shares owned by the Transferring
Shareholders and the Tagging Shareholders participating in such Transfer and
(ii) the number of shares to be sold in the contemplated Transfer.
FOR EXAMPLE, if the Sale Notice contemplated a sale of 10,000 Shares
by the Transferring Shareholder, and if the Transferring Shareholder
at such time beneficially owns 20% of all Shares and if one other
Shareholder elects to participate and beneficially owns 5% of all
Shares, the Transferring Shareholder would be entitled to sell 8,000
shares (20% divided by 25% x 10,000 shares) and the Tagging
Shareholder would be entitled to sell 2,000 shares (5% divided by
25% x 10,000 shares).
- 13 -
(c) In order to be entitled to exercise its right to sell Shares to
the proposed transferee pursuant to Section 4.3(b), a Tagging Shareholder must
agree to make to the transferee substantially the same representations,
warranties, covenants, indemnities and agreements as the Transferring
Shareholder agrees to make in connection with the proposed Transfer (except that
in the case of representations and warranties pertaining specifically to the
Transferring Shareholder, a Tagging Shareholder shall make the comparable
representations and warranties pertaining specifically to itself); PROVIDED that
all representations and warranties shall be made by Tagging Shareholders
severally and not jointly and that the liability of the Transferring
Shareholders and the Tagging Shareholders (whether pursuant to a representation,
warranty, covenant, indemnification provision or agreement) for liabilities in
respect of the Company shall be evidenced in writings executed by them and the
transferee and shall be borne by each of them on a pro rata basis.
(d) If the proposed transferee fails to purchase Shares from any
Tagging Shareholder that has properly exercised its tag-along rights pursuant to
this Section 4.3, then the Transferring Shareholder shall not be permitted to
make the proposed Transfer, and any such attempted Transfer shall be void and of
no effect, as provided in Article 7.
(e) Each Transferring Shareholder agrees not to consummate any such
Transfer until 10 days after delivery to the other Shareholders of the Sale
Notice, unless the parties to the Transfer have been finally determined pursuant
to this Agreement prior to the expiration of such period. If any of the Tagging
Shareholders exercise their rights under this Section 4.3, the closing of the
sale of the Shares or Voting Certificates, as the case may be, by such Tagging
Shareholder with respect to which such rights have been exercised shall take
place concurrently with the closing of the sale of the Shares or Voting Trust
Certificates, as the case may be, by the Transferring Shareholder with respect
to which the Sale Notice was given. No Transfer shall occur pursuant to this
Section 4.3 unless the transferee shall agree to become a party to, and be bound
to the same extent as its transferor by the terms of, this Agreement pursuant to
the provisions of Article 7.
4.4 DRAG-ALONG RIGHTS. Subject to the provisions of Section 5.3 and
notwithstanding, in the case of the CSO Shareholders, the provisions of Section
10.2, each Shareholder hereby agrees that, in connection with any Sale of the
Company in accordance with Article 5 or, in the case of all Shareholders other
than the CSO Shareholders, in accordance with, Section 10.1 it will Transfer all
of its Shares to such Third Party Purchaser or to CSO and/or its Affiliate(s),
as applicable, in any such transaction; PROVIDED that the terms of such offer
applicable to any Shares owned by the Transferring Shareholder or CSO
Shareholders, as applicable, and its Permitted Transferees are not more
favorable than the terms of such offer applicable to the Shares owned by the
other Shareholders (including, without limitation, with respect to the amount
and nature of consideration and the time of receipt thereof).
- 14 -
4.5 TRANSFER TO COMPETITORS. No Shareholder shall, directly or
indirectly, Transfer in any transaction or series of transactions (related or
not) any Shares or Voting Trust Certificates to any Competitor other than
pursuant to a Sale of the Company or a Public Offering.
4.6 PERMITTED TRANSFERS. The restrictions and procedures contained in
this Article 4 shall not apply with respect to any Transfer of Shares or Voting
Trust Certificates by any Shareholder (i) in the case of the Executives, Ahalt
and the Other Company Shareholders, pursuant to applicable laws of descent and
distribution or to an Immediate Family Member or to the Company pursuant to the
Employee Stock Agreement or to any Other Company Shareholder or Executive
Shareholder, (ii) in the case of the Fund Shareholders, to any other Fund
Shareholder or to any Affiliate thereof, or (iii) in the case of any CSO
Shareholder, to any Affiliate of CSO; provided that the restrictions contained
in this Article 4 shall continue to be applicable to the Shares after any such
Transfer; and PROVIDED, FURTHER that the transferees of such Shares (each such
permitted transferee in accordance with this Section 4.6 being referred to as a
"Permitted Transferee"), shall, prior to any such Transfer, agree to become a
party to, and be bound to the same extent as its transferor by the terms of,
this Agreement pursuant to the provisions of Article 7.
ARTICLE 5.
RIGHTS TO CAUSE A SALE OF THE COMPANY
5.1 RIGHTS OF THE CSO OR FUND SHAREHOLDERS. In the event that no Sale
of the Company or Public Offering has occurred prior to December 31, 1999,
either the Fund Shareholders holding a majority of the Fund Shares or the
holders of a majority of the CSO Shares shall have the right to cause a Sale of
the Company pursuant to the provisions of Section 5.3.
5.2 RIGHTS OF THE EXECUTIVE SHAREHOLDERS. If no Sale of the Company
or Public Offering has occurred prior to December 31, 1999, the holders of
two-thirds (66-2/3%) of the Executive Shares shall have the right to cause a
Sale of the Company pursuant to the provisions of Section 5.3; PROVIDED, at such
time, all holders of Executive Shares own at least 10% of the total outstanding
shares of Common Stock of the Company; and, PROVIDED, FURTHER, that such Third
Party Transaction (as defined below) does not provide for or contemplate, and
does not result in, any Executive Shareholder receiving compensation or other
consideration at any time within two years thereafter, whether as an employee,
director, consultant or agent or in any other capacity other than as a
shareholder, materially in excess of such Executive's then current per annum
compensation from the Company.
5.3 PROCEDURES FOR SALE OF THE COMPANY. (a) Notwithstanding anything
to the contrary contained in any Employee Stock Agreement, if the Fund
Shareholders, the CSO Shareholders or the Executive Shareholders shall have the
right to cause a Sale of the Company pursuant to Section 5.1 or 5.2, such
Shareholder group (collectively, the "Proposing Shareholder") shall request the
Company to take all steps necessary or desirable to consummate a Sale of the
Company within 180 days following the date
- 15 -
such request was delivered by the Proposing Shareholder to the Company. Promptly
after receipt of such request, the Company will give written notice of such
requested Sale to all other Shareholders and will, as expeditiously as possible,
use its best efforts to (i) retain a nationally recognized investment banking
firm to assist in such Sale of the Company and to render an opinion as to the
fairness, from a financial point of view, of the consideration to be received by
the Shareholders in any Sale of the Company (a "Fairness Opinion"); (ii) seek
and produce a Third Party (a "Third Party Purchaser") to acquire (x) all of the
issued and outstanding capital stock of the Company (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (y) all or
substantially all of the Company's assets on a consolidated basis (a transaction
of the type referred to in clause (x) or (y) above shall be referred to herein
as a "Third Party Transaction"); and (iii) negotiate the terms of such Third
Party Transaction with a view to reaching an agreement in principle documented
in a writing between such parties as soon as practicable. Except as required by
law, the Company shall not be obligated to seek the consent of the Shareholders
prior to commencing any of the foregoing actions in connection with a Sale of
the Company.
(b) If the Company identifies and reaches an agreement in principle
with a potential Third Party Purchaser, then the Company shall deliver written
notice to the Shareholders setting forth in reasonable detail the terms of the
proposed Third Party Transaction (the "Company Sale Notice"), together with the
Fairness Opinion. Within 30 days following receipt of the Company Sale Notice
(the "Sale Election Period"), any of the Shareholders shall deliver to the
Company and the other Shareholders written notice setting forth such holders'
election, if any, to deliver a written offer (a "Shareholder Offer"), upon
substantially the same terms as described in the Company Sale Notice, to acquire
the Company (a "Shareholder Transaction"). In addition, upon receipt of the
Company Sale Notice, the CSO Shareholders shall have the rights provided in
Section 10.2.
(c) If the Fund Shareholders, the CSO Shareholders or and the
Executive Shareholders have not delivered a Shareholder Offer within the Sale
Election Period, the Company shall consummate the Third Party Transaction on the
terms specified in the Company Sale Notice as soon as practicable following such
Sale Election Period and in any event within 45 days thereafter. If for any
reason the Third Party Transaction is not consummated within such 45 day period,
or the Company does not take steps to or is otherwise unable to effect a Sale of
the Company in accordance with Section 5.3, the Proposing Shareholders shall
have the right to take all steps which the Company was required to take to
effect a Sale of the Company in accordance with the provisions of this Section
5.3 (including the requirement to obtain a Fairness Opinion). If any of the
Shareholders has delivered a Shareholder Offer within the Sale Election Period,
the Company and the other Shareholders shall consummate the Shareholder
Transaction within 90 days of receipt by the Proposing Shareholder of the
Shareholder Offer. If the Shareholder Transaction is not consummated within such
90 day period, the other Shareholders must again comply with the provisions of
this Section 5.3. Subject to the provisions of Sections 4.4 and 5.3(d) and, in
the case of the CSO Shareholders, the provisions of Section 10.2, (i) in the
case of a Third Party Transaction, the Proposing Shareholders and all other
Shareholders shall be required to sell all of their Shares in such transaction
and (ii) in the case of a Shareholder Transaction, the Proposing Shareholder
shall and all other Shareholders
- 16 -
other than the Shareholder that made the Shareholder Offer shall be required to
sell all of their Shares in such transaction.
(d) The other Shareholders or the Proposing Shareholder, as the case
may be, shall not be obligated to participate in a Third Party Transaction or a
Shareholder Transaction, respectively, if upon consummation of the Third Party
Transaction, all holders of Common Stock do not receive the same form and amount
of consideration per share of Common Stock (including for this purpose amounts
allocated to noncompetition, consulting and other arrangements), or if certain
holders of Common Stock are given an option as to the form and consideration to
be received, and the other holders of Common Stock have not been given the same
option.
ARTICLE 6.
LEGEND
Each certificate evidencing Shares and each certificate issued after
the date hereof in exchange for or upon the Transfer of any Shares (if such
shares remain Shares as defined herein after such Transfer) shall bear the
following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THE RULES AND REGULATIONS THEREUNDER AND THAT CERTAIN 1997
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF APRIL 11,
1997, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE
COMPANY'S SHAREHOLDERS. A COPY OF SUCH SHAREHOLDERS AGREEMENT SHALL
BE FURNISHED WITHOUT CHARGE BY THE COMPANY UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Shares
outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any securities which cease to be
Shares.
ARTICLE 7.
TRANSFERS
In the event of any purported Transfer of any Shares in violation of
the provisions of this Agreement, such purported Transfer shall be void and of
no effect and the Company will give no effect to such Transfer. As a condition
to any Transfer of Shares permitted pursuant to Article 4 (other than
- 17 -
pursuant to Rule 144 or a Public Offering), the Transferring Shareholder shall
cause the prospective transferee to execute and deliver to the Company and to
the Shareholders a counterpart of this Agreement in form reasonably acceptable
to the Company pursuant to which such transferee shall be bound by all the terms
and provisions hereof to the same extent as the Transferring Party except, in
the case of a Transfer pursuant to the proviso in paragraph 4.2 (c), the terms
and provisions of Article 2 hereof shall be excluded therefrom.
ARTICLE 8.
SUPERMAJORITY VOTE ON BOARD LEVEL DECISION
(a) The parties agree that, unless such action is approved by a
Supermajority Vote of the Board or, in the case of clause 8(a)(iii) below,
a unanimous vote of the Board, or this Agreement is amended by a
Supermajority Vote of Shareholders, the Company shall not:
(i) subject to 8(a)(iii) hereof, pursue or effect a Sale of the
Company or similar transaction with respect to any of its
Subsidiaries;
(ii) except as provided in 8(a)(x) hereof, acquire in any
transaction or series of related transactions any one asset of any
other Person and/or securities of any other Person or the Company
(whether debt, equity or convertible, other than investment of cash
in the ordinary course of business) for an individual or aggregate
purchase price in excess of $3 million in any year;
(iii) voluntarily dissolve, wind up, or liquidate the Company or any
of its Subsidiaries;
(iv) sell, lease, exchange or otherwise dispose of in any
transaction or series of related transactions a significant portion
(defined as $5 million or more of book value at the time) of the
assets of the Company or any of its Subsidiaries, other than in the
ordinary course of business (such as sales of assets or properties
by the Company's Subsidiary, Energy Resource Technology Inc.);
(v) change the compensation payable to or amend the employment
agreement or, except as provided in clause (xii) below, enter into
any other agreement with, Messrs, Reuhl, Kratz or Nelson;
(vi) except as provided in this Agreement, (a) commence any Public
Offering (other than pursuant to the 1995 or 1997 Registration
Rights Agreements), (b) authorize any increase in the capital of the
Company or any of its Subsidiaries, (c) issue any capital stock,
notes or other securities (including, without limitation, options,
warrants, preferred stock or convertible securities) of the Company
or any of its Subsidiaries, except pursuant to a Stock
- 18 -
Option Plan existing from time to time and approved by the Board, or
(d) increase the number of shares of capital stock of the Company
available for issuance under any Stock Option Plan or similar stock
related compensation arrangement;
(vii) enter into any new credit facility or financing arrangement or
amend, supplement or modify in any material respect the Company's
Loan and Amended and Restated Security Loan Agreement dated as of
May 23, 1995 with Fleet Capital Corporation (formerly known as
Shawmut Capital Corporation), except for Amendment No. 5 thereto
which the Company expects to enter into within a reasonable period
of time after the date hereof;
(viii) change the scope or nature of the business of the Company
outside of the oil and gas service and oil and gas exploration and
production industries;
(ix) adopt or change a dividend policy or declare any dividend or
distribution in respect thereof;
(x) except as provided in Section 8 (a) (ii) hereof, make any
capital expenditure in any transaction or series of related
transactions in any year (except such expenditures on vessels during
dry dockings which are mandated by governmental or industry
standards OR regulations) of more than $3 million in the aggregate;
(xi) approve a Shareholders Rights Plan, "poison pill" or similar
plan designed to provide take-over defense under U.S. law
(collective, a "Shareholder Rights Plan"); and
(xii) approve any transaction between the Company and any Affiliate
outside the ordinary course of business involving the commitment or
payment in excess of $50,000.
(b) The parties agree that the Company shall not adopt a Shareholder
Rights Plan unless provision, reasonably satisfactory to the CSO
Shareholders, is made in such Shareholder Rights Plan to exempt the CSO
Shareholders and their Affiliates and their respective acquisition,
holding, voting and beneficial ownership of, and any exercise of power
derived from their ownership, of Shares and securities exercisable,
convertible or exchangeable into or for such Shares from triggering
provisions of such Shareholders Rights Plan (e.g., CSO Shareholders and
their Affiliates would be exempted from the definition of "acquiring
person" customarily contained in a Shareholder Rights Plan).
ARTICLE 9.
9.1 LIMITED PREEMPTIVE RIGHTS. (a) Except for issuances of capital
stock of the Company (i) in accordance with any Stock Option Plan, (ii) solely
to the extent provided in to the last sentence of this
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Section 9.1(a), pursuant to a Public Offering, or (iii) in connection with an
acquisition of another Person (subject to the provisions of Section 10.1) by the
Company or any of its Subsidiaries, or in settlement of indebtedness of the
Company or any of its Subsidiaries or in settlement of a lawsuit or other claim
involving the Company or any of its Subsidiaries, if at any time the Company
authorizes the issuance or sale of any shares of capital stock of the Company or
any securities that, directly or indirectly, are convertible into or
exchangeable for capital stock of the Company or any securities containing
options, rights or warrants to acquire any shares of capital stock of the
Company or any securities that, directly or indirectly, are convertible into or
exchangeable for capital stock of the Company (other than as a dividend on the
outstanding Common Stock) the Company shall first offer to sell, on a pro rata
basis, to the Fund Shareholders and the CSO Shareholders (collectively, the
"Purchaser Parties") and the Executive Shareholders a portion of such stock or
securities equal to the quotient determined by dividing (1) in the case of the
Fund Shareholders or the CSO Shareholders, the number of shares of Common Stock
Beneficially Owned by the Fund Shareholders or the CSO Shareholders, as
applicable (collectively the "Purchaser Common Stock") and (2) in the case of
Executive Shareholders, the number of shares of Common Stock held by the
Executive Shareholders ("Employee Stock") divided by the total number of shares
of Common Stock outstanding. Each holder of Purchaser Common Stock and Employee
Stock shall be entitled to purchase such stock or securities at the most
favorable price and on the most favorable terms as such stock or securities are
to be offered to any other Person. The purchase price for all stock and
securities offered to the holders of the Purchaser Common Stock or Employee
Stock shall be payable in cash unless other suitable terms are offered to such
Shareholders. In addition to the foregoing, the Company shall afford the
Purchaser Parties the opportunity to purchase their pro rata portion of any
stock or securities (as determined above) to be offered by the Company pursuant
to a Public Offering (other than the initial Public Offering of the Company),
unless the managing underwriter(s) for such offering state in writing that, in
their opinion, such set-aside would materially adversely affect the
marketability of such offering.
(b) In order to exercise its purchase rights hereunder, a holder of
Purchaser Common Stock or Employee Stock must within 15 days after receipt of
written notice from the Company describing in reasonable detail the stock or
securities being offered, the purchase price thereof, the payment terms and such
holder's percentage allotment, deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities offered to
the holders of Purchaser Common Stock or Employee Stock is not fully subscribed
by such holders, the remaining stock and securities shall be reoffered by the
Company to the holders purchasing their full allotment upon the terms set forth
in this paragraph, except that such holders must exercise their purchase rights
within five days after receipt of such re-offer. This Section 9.1 shall not be
applicable to any transactions to be consummated under any other provision of
this Agreement.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Purchaser Common Stock or Employee Stock have not elected to purchase, during
the 90 days following such expiration on terms and conditions no more
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favorable to the purchaser thereof than those offered to such holders. Any stock
or securities offered or sold by the Company after such 90-day period must be
re-offered to the holders of Purchaser Common Stock or Employee Stock pursuant
to the terms of this Section 9.1.
ARTICLE 10
CERTAIN RIGHTS OF CSO
10.1 CSO RIGHTS TO PURCHASE COMPANY. Except as otherwise provided in
Article 5 with respect to the rights of the Fund, CSO and Executive Shareholders
to cause a Sale of the Company, in the event that the CSO Shareholders own at
least 5% of the total outstanding shares of Common Stock of the Company and the
Board approves by Supermajority Vote in accordance with the provisions of
Article 8 and without the approval of any of the CSO Directors: (a) a bona fide
agreement in principle for a Sale of the Company (an "Agreed Sale of the
Company"), the CSO Shareholders and/or their Affiliates shall have the right to
acquire the Company upon substantially the same terms as set forth in such
agreement by delivering written notice of such election to the Company within 15
days after the date of such Board approval; or (b) (i) the commencement of
efforts to seek or solicit in any manner a Sale of the Company with or without
the assistance of an investment banking firm or other financial advisor through
a Third Party Transaction or pursuant to a transaction with any one or more
Shareholders and/or their Affiliates (a "Solicited Sale of the Company") or (ii)
a bona fide agreement in principle for an acquisition by the Company of any
other Person or assets or group of assets which at the time of such acquisition
has a market value (based on the purchase price to be paid by the Company) in
excess of 50% of the market value of the Company (based on the average daily
trading price of the Common Stock over the 30 day period immediately preceding
such transaction, if the initial Public Offering of the Company shall then have
been completed or, if such initial Public Offering shall not have then been
completed, based on the valuation of the Company prepared by an Independent
Appraiser (as defined below)) (a "Significant Acquisition"), the CSO
Shareholders and/or their Affiliates shall have the right to acquire the Company
subject to applicable law at a purchase price equivalent to the fair market
value thereof based on a valuation of the Company prepared by a nationally
recognized investment banking firm with expertise in the oil and gas service and
oil and gas exploration and production industries who has not been previously
retained by the Company (or any of its Affiliates) or any of the Shareholders
(or any of their Affiliates) and is selected by a majority of the Independent
Directors or as otherwise mutually agreed by the Fund Directors, the CSO
Directors and the Executive Directors (an "Independent Appraiser") by delivering
written notice of such election to the Company within 15 days after the date of
such Board approval and, in the case of any election by the CSO Shareholders
and/or their Affiliates to acquire the Company pursuant to clause (a) or clause
(b), each Shareholder (other than the CSO Shareholders) agrees to Transfer all
of his or its Shares to the CSO Shareholders and/or their Affiliates (regardless
of whether or not the acquisition of the Company by the CSO Shareholders and/or
their Affiliates shall have been approved by the requisite shareholders of the
Company) and provide its or their approvals as a shareholder of the Company as
may be required in connection with any acquisition of the Company by the CSO
Shareholders and/or their Affiliates pursuant to this Section 10.1. In the event
the CSO Shareholders and/or their
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Affiliates shall have notified the Company of its or their election to acquire
the Company pursuant to this Section 10.1, the Company shall not complete or
take any further action with respect to any Agreed Sale of the Company,
Solicited Sale of the Company or Significant Acquisition, referred to in such
election notice for one hundred twenty (120) days after delivery of such notice.
10.2 CSO RIGHTS TO PURCHASE JOINT VENTURE. At the sole election of the CSO
Shareholders, in lieu of the rights of the CSO Shareholders to acquire the
Company pursuant to the provisions of Section 10.1 or in a Shareholder
Transaction pursuant to the provisions of Section 5.3, in the event that the
Board approves by Supermajority Vote in accordance with the provisions of
Article 8 and without the approval of any of the CSO Directors an Agreed Sale of
the Company, a Solicited Sale of the Company or a Significant Acquisition, or in
the event that the Fund Shareholders or the Executive Shareholders elect to
cause a Sale of the Company pursuant to Section 5.3, the CSO Shareholders and/or
their Affiliates shall have the right to acquire all of the Company's ownership
interest in the joint venture entity formed by the Company and Coflexip Stena
Offshore, Inc., an Affiliate of CSO ("CSO, Inc."), pursuant to that certain
Business Cooperation Agreement dated as of the date hereof between the Company
and CSO, Inc., as the same may be amended, supplemented or otherwise modified
from time to time (the "Joint Venture"), at a purchase price equivalent to the
fair market value of the Company's interest in the Joint Venture based on a
valuation prepared by an Independent Appraiser in which the fair market value of
the Joint Venture is defined as the fair market value of the Company (including
the fair market value of the Joint Venture) less the fair market value of the
Company without the fair market value of Joint Venture, by delivering written
notice of such election to the Company within 15 days after the date of such
Board approval or the date of the Company Sale Notice, as applicable, provided
that at such time the CSO Shareholders own in the aggregate at least 5% of the
total outstanding shares of Common Stock of the Company.
10.3 CSO ANTI-DILUTION PROTECTION. It is currently the Company's
expectation (without any obligation) that it may, subject to and in the
discretion of its Board, undertake to effect an initial Public Offering of its
Common Stock under the Securities Act pursuant to which the Company will raise
capital to be used for future company development. Notwithstanding the
foregoing, in the event of any such initial Public Offering, the CSO
Shareholders shall not be diluted to less than 24% of the issued and outstanding
Common Stock on a fully diluted basis as a result of such initial Public
Offering (including any over-allotment option relating thereto).
ARTICLE 11
MISCELLANEOUS
11.1 TERM. The term of this Agreement shall run until the effective
date of an initial Qualified Public Offering, after which time all provisions
hereof except Articles 1 (to the extent
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applicable), 2, 3, 6, 7, 8, 9, 10 and 11 (other than Section 11.4) and Sections
4.1, 4.2, and 4.6 shall be void and of no further effect. Articles 1 (to the
extent applicable), 2, 3, 6, 7, 8, 9, 10 and 11 (other than Section 11.4) and
Sections 4.1, 4.2 and 4.6 shall thereafter only continue to be effective as to
holders of the Fund Shares, CSO Shares and/or Executive Shares, respectively, so
long as each such group of Shareholders continue to own as a group at least 5%
of the outstanding Common Stock (after which this Agreement shall no longer
apply to any such Shareholder group which does not own as a group at least 5% of
the outstanding Common Stock but shall continue to apply to each such other
Shareholder group which does own as a group at least 5% of the outstanding
Common Stock).
11.2 ADDITIONAL SECURITIES SUBJECT TO AGREEMENT. Each Shareholder
agrees that any other equity securities of the Company which it shall hereafter
acquire by means of a stock split, stock dividend, distribution, purchase,
exercise of an option or otherwise (other than pursuant to a Public Offering)
shall be subject to the provisions of this Agreement to the same extent as if
held on the date hereof.
11.3 INJUNCTIVE RELIEF. Each Shareholder acknowledges and agrees that
a violation of any of the terms of this Agreement will cause the other
Shareholders irreparable injury for which adequate remedy at law is not
available. Accordingly, it is agreed that holders of seventy percent (70%) of
the Fund Shares and/or the holders of seventy percent (70%) of the Executive
Shares and/or the holders of seventy percent (70%) of the CSO Shares together
(so long as the Executive Shareholders, the Fund Shareholders, or the CSO
Shareholders, as the case may be, owns more than 5%, in the aggregate, of the
outstanding shares of Common Stock of the Company), shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
11.4 NO OTHER SHAREHOLDERS AGREEMENTS. Except for the Purchase
Agreement, Company Stock Option agreements from time to time outstanding, the
Voting Trust Agreement, the 1995 Registration Agreement and the 1997
Registration Agreement, none of the Shareholders shall enter into any other
stockholder agreement or other arrangement of any kind with any Person with
respect to the Shares or any other securities of the Company, unless otherwise
provided for herein or permitted hereby.
11.5 AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver or any provision of this Agreement shall be
effective against the Company or the Shareholders unless such modification,
amendment or waiver is approved in writing by the holders of eighty percent
(80%) of the combined number of shares of Common Stock held by each of the Fund
Shareholders, Executive Shareholders and CSO Shareholders. The failure of any
party to enforce any of the provisions of this Agreement shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
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11.6 SUCCESSORS, ASSIGNS AND TRANSFEREES. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; PROVIDED that no Shareholder
may assign to any transferee any of its rights hereunder other than in
connection with a Transfer to such transferee of Shares in accordance with the
provisions of this Agreement.
11.7 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and shall be
either personally delivered or sent by reputable overnight courier service
(charges prepaid) or by confirmed facsimile transmission to the recipient at the
address indicated on Schedule 1 attached hereto and to any subsequent holder of
Shares subject to this Agreement at such address as indicated by the Company's
records or at such address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
Notices shall be deemed to have been given hereunder when delivered personally
or by confirmed facsimile transmission and one day after deposit with a
reputable overnight courier service.
11.8 INTEGRATION. This Agreement and the documents referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof and thereof other than those expressly set forth herein
and therein. This Agreement supersedes and preempts all prior agreements,
understandings and representations, written or oral, between the parties with
respect to such subject matter.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
agreement.
11.11 REPORTING. The Company shall send copies of all documents
filed by it with the Securities and Exchange Commission and any applicable stock
exchange and all minutes of any director' or shareholders' meetings (including
Board committees), or any consent in lieu of meeting to Coflexip, 23 Avenue de
Neuilly 75116, Paris, France, Attention: General Counsel.
11.12 INTERPRETATION. The parties acknowledge and agree that: (i)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its
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revision; (ii) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement; and (iii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto, regardless of which party was
generally responsible for the preparation of this Agreement.
11.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MINNESOTA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
11.14 SECTION HEADINGS. The Section headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
CAL DIVE INTERNATIONAL, INC.
By:
Name: Gerald G. Reuhl
Title: Chief Executive Officer
COFLEXIP
By:
Name: Pierre Marie Valentin
Title: Chairman and Chief Executive Officer
- 26 -
FIRST RESERVE SECURED ENERGY ASSETS FUND, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: David H. Kennedy
Title: Managing Director
FIRST RESERVE FUND V, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
FIRST RESERVE FUND V- 2, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
- 27 -
Gordon Ahalt
EXECUTIVES
Gerald Reuhl
Owen Kratz
S. James Nelson
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