SALE PARTICIPATION AGREEMENT [], 2016
Exhibit 10.3
SALE PARTICIPATION AGREEMENT
[●], 2016
To: | The Person whose name is |
set forth on the signature page hereof
Dear Sir or Madam:
You have entered into a Management Stockholders Agreement, dated as of the date hereof, between USF Holding Corp., a Delaware corporation (the Company), and you (the Stockholders Agreement) relating to, among other things, shares of common stock, par value $0.01 per share, of the Company (the Common Stock), that may be held by you. The undersigned, Clayton, Dubilier & Rice Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CD&R Parallel Fund VII, L.P., CDR USF Co-Investor L.P. and CDR USF Co-Investor No. 2, L.P. (collectively, the CD&R Investors) and KKR 2006 Fund L.P., KKR PEI Investments, L.P., KKR Partners III, L.P., OPERF Co-Investment LLC and ASF Walter Co-Invest L.P. (collectively, the KKR Investors and together with the CD&R Investors, each an Investor and together the Investors), hereby agrees with you as follows, effective as of the Effective Date (as defined in the Stockholders Agreement):
1. (a) In the event that at any time on or after the Effective Date any of the Investors or their Affiliates (as defined in the Stockholders Agreement) (the Selling Investors) proposes to sell for cash or any other consideration any shares of Common Stock owned by the Selling Investors, in any transaction other than a Public Offering (as defined in the Stockholders Agreement) or a sale, directly or indirectly, to a Permitted Transferee (as defined in the Investor Stockholders Agreement (as defined below)) of a Selling Investor, then, unless the Selling Investors exercise the drag-along rights pursuant to paragraph 7 below and the Drag Transaction is consummated, the Selling Investors will notify you or your Management Stockholders Estate or Management Stockholders Trust (as such terms are defined in the Stockholders Agreement, and collectively with you, the Management Stockholder Entities), as the case may be, promptly, and in any event not less than ten (10) business days prior to the consummation of a proposed sale (the Proposed Sale), in writing (a Notice) of such Proposed sale specifying the principal terms and conditions of the Proposed Sale.
(b) If, within ten (10) business days after the delivery of the Notice, the Selling Investors are given written notice from a Management Stockholder Entity requesting (a Request) to include Common Stock held by such Management Stockholder Entity in the Proposed Sale (which Request shall be irrevocable except as otherwise mutually agreed to in writing by such Management Stockholder Entity and the Selling Investors), the Common Stock held by such Management Stockholder Entity (not in any event to exceed the total number of shares of Common Stock permitted to be included in a Proposed Sale pursuant to Section 2) will be so included as provided herein, subject to compliance by the Management Stockholder Entity with the terms and conditions set forth herein. Promptly after the execution of the definitive sale agreement pursuant to which the shares of Common Stock are sold (the Sale Agreement), the Selling Investors will furnish each such Management Stockholder Entity with a copy of the Sale Agreement, if any.
2. (a) The number of shares of Common Stock that a Management Stockholder Entity will be permitted to include in a Proposed Sale pursuant to a Request will be the product of (i) the sum of the number of shares of Common Stock held by such Management Stockholder Entity plus all shares of Common Stock which such Management Stockholder Entity is then entitled to acquire under any unexercised Option or portion thereof, to the extent such Option (or portion thereof) is then exercisable or would become exercisable as a result of the consummation of the Proposed Sale, multiplied by (ii) a fraction (such fraction, expressed as a percentage, the Tag-Along Sale Percentage) (A) the numerator of which is the number of shares of Common Stock proposed to be purchased by the buyer in the Proposed Sale and (B) the denominator of which is the total number of shares of Common Stock owned, directly or indirectly, or which would be owned upon exercise of any exercisable Options (to the extent any such Options are then exercisable or would become exercisable as a result of the consummation of the Proposed Sale), by the Investors, the Management Stockholder Entities and other holders of shares of Common Stock who have been granted the same rights granted to the Management Stockholder Entities to participate in the Proposed Sale (such other holders, together with the Management Stockholder Entities, the Eligible Holders).
(b) If one or more Eligible Holders elect not to include the maximum number of shares of Common Stock which such holders would have been permitted to include in a Proposed Sale pursuant to Paragraph 2(a) (such non-included shares, the Eligible Shares), then each of the Selling Investors, or the remaining Eligible Holders, or any of them, will have the right to sell in the Proposed Sale a number of additional shares of their Common Stock equal to their pro rata portion of the number of Eligible Shares, based on the relative number of shares of Common Stock then held by each such holder plus all shares of Common Stock which such holder is then entitled to acquire under any unexercised Option or portion thereof, to the extent such Option (or portion thereof) is then exercisable or would become exercisable as a result of the consummation of the Proposed Sale. The Selling Investors will have the right to sell in the Proposed Sale additional shares of Common Stock owned by them equal to the number, if any, of remaining Eligible Shares which will not be included in the Proposed Sale pursuant to the foregoing.
3. Except as may otherwise be provided herein, shares of Common Stock subject to a Request will be included in a Proposed Sale pursuant hereto and in any agreements with purchasers relating thereto on the same terms and subject to the same conditions applicable to the shares of Common Stock which the Selling Investors propose to sell in the Proposed Sale. Such terms and conditions shall include, without limitation: the pro rata reduction of the number of shares of Common Stock to be sold by the Selling Investors, the Management Stockholder Entities and any Eligible Holders to be included in the Proposed Sale if required by the party proposing such Sale; the sale price; the payment of fees, commissions and expenses (which shall not include any such amounts as may be payable by the selling stockholders to an Investor or an Affiliate of an Investor); the provision of, and representation and warranty as to, information reasonably requested by the Selling Investors covering matters regarding the Management Stockholder Entities ownership of shares; and the provision of requisite indemnification; provided that any indemnification provided by the Management Stockholder Entities shall be pro
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rata in proportion with the number of shares of Common Stock to be sold and liability thereunder shall be limited to the after-tax proceeds received by such Management Stockholder Entity for such Common Stock to be sold. Notwithstanding anything to the contrary in the foregoing, if the consideration payable for shares of Common Stock is securities and the acquisition of such securities by a Management Stockholder Entity would reasonably be expected to be prohibited under U.S., foreign or state securities laws, such Management Stockholder Entity shall be entitled to receive an amount in cash equal to the value of any such securities such Person would otherwise be entitled to receive.
4. Upon delivering a Request, the Management Stockholder Entities will, if requested by the Selling Investors, execute and deliver a custody agreement and power of attorney in form and substance reasonably satisfactory to the Selling Investors and the Designated Employee Representative (as defined below) with respect to the shares of Common Stock which are to be sold by the Management Stockholder Entities pursuant hereto (a Custody Agreement and Power of Attorney). The Custody Agreement and Power of Attorney will contain customary provisions and will provide, among other things, that the Management Stockholder Entities will deliver to and deposit in custody with the custodian and attorney-in-fact named therein a certificate or certificates (if such shares are certificated) representing such shares of Common Stock (duly endorsed in blank by the registered owner or owners thereof) and irrevocably appoint said custodian and attorney-in-fact as the Management Stockholder Entities agent and attorney-in-fact with full power and authority to act under the Custody Agreement and Power of Attorney on the Management Stockholder Entities behalf with respect to the matters specified therein, subject to the obligations of Investors and the Company under this Agreement. For purposes hereof, the term Designated Employee Representative means: the Chief Executive Officer of the Company at the relevant time (or his or her designee) so long as such person is a Management Stockholder and if such person is not a Management Stockholder, then the Management Stockholder or Other Stockholder (as defined in the Stockholders Agreement), as applicable, whose Management Stockholder Entities hold the largest number of shares of Common Stock, relative to all Other Stockholders.
5. The Management Stockholder Entities right pursuant hereto to participate in a Proposed Sale shall be contingent on the Management Stockholder Entities strict compliance with each of the provisions hereof and the Management Stockholder Entities respective willingness to execute such documents in connection therewith as may be reasonably requested by the Selling Investors.
6. If the consideration to be paid in exchange for shares of Common Stock in a Proposed Sale pursuant to Section 1 includes any securities, and the receipt thereof by the Selling Investors and a Management Shareholder Entity would require under applicable law (a) the registration or qualification of such securities or of any Person as a broker or dealer or agent with respect to such securities or (b) the provision to any selling Management Stockholder Entity of any information regarding the Company, its subsidiaries, such securities or the issuer thereof that would not be required to be delivered in an offering solely to a limited number of accredited investors under Regulation D promulgated under the Securities Act of 1933, as amended, and the rules and regulations in effect thereunder, the Selling Investors shall have the right to cause to be paid to such selling Management Stockholder Entity in lieu thereof, against surrender of the shares of Common Stock which would have otherwise been sold by such selling Management
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Stockholder Entity to the prospective buyer in the proposed sale, an amount in cash equal to the Fair Market Value (as defined in the Stockholders Agreement) of such shares of Common Stock as of the date such securities would have been issued in exchange for such shares of Common Stock.
7. (a) If an Investor or group of Investors (including any Investors selling shares of Common Stock as a result of the exercise by another Investor of the rights set forth in Section 3.5 of the Stockholders Agreement, dated July 3, 2007, between the Company and the Investors (the Investor Stockholders Agreement) (the Initiating Investors)) proposes to transfer, directly or indirectly, a number of shares of Common Stock to a non-Affiliate of the Initiating Investors (such Person, the Drag-Along Purchaser), such that the transaction (a Drag Transaction) would result in a Change of Control (taking into account all interests (including pursuant to this Section 7(a) and Section 3.5 of the Investor Stockholders Agreement) being dragged), then if requested by the Initiating Investors, each Management Stockholder Entity shall be required to sell a number of shares of Common Stock equal to the aggregate number of shares of Common Stock held by such Management Stockholder Entity plus all shares of Common Stock which such Management Stockholder Entity is then entitled to acquire under any unexercised Option or portion thereof, to the extent such Option (or portion thereof) is then exercisable or would become exercisable as a result of the consummation of the Drag Transaction, multiplied by the Tag-Along Sale Percentage.
(b) Shares of Common Stock held by the Management Stockholder Entities included in a Drag Transaction will be included in any agreements with the Drag-Along Purchaser relating thereto on the same terms and subject to the same conditions applicable to the shares of Common Stock which the Initiating Investors propose to sell in the Drag Transaction. Such terms and conditions shall include, without limitation: the pro rata reduction of the number of shares of Common Stock to be sold by the Initiating Investors and the Management Stockholder Entities to be included in the Drag Transaction if required by the Drag-Along Purchaser; the sale price; the payment of fees, commissions and expenses (which shall not include any such amounts as may be payable by the selling stockholders to an Investor or an Affiliate of an Investor); the provision of, and representation and warranty as to, information reasonably requested by the Company covering matters regarding the Management Stockholder Entities ownership of shares; and the provision of requisite indemnification; provided that any indemnification provided by the Management Stockholder Entities shall be pro rata in proportion with the number of shares of Common Stock to be sold and liability thereunder shall be limited to the after-tax proceeds received by such Management Stockholder Entity for such Common Stock to be sold.
(c) Your pro rata share of any amount to be paid pursuant to Paragraph 3 or 7(b) shall be based upon the number of shares of Common Stock intended to be transferred by the Management Stockholder Entities plus the number of shares of Common Stock you would have the right to acquire under any unexercised portion of the Option which is then vested or would become vested as a result of the Proposed Sale or Drag Transaction, assuming that you receive a payment in respect of such Option.
(d) Notwithstanding anything to the contrary in the foregoing, if the consideration payable for shares of Common Stock is securities and the acquisition of such
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securities by a Management Stockholder Entity would reasonably be expected to be prohibited under U.S., foreign or state securities laws, such Management Stockholder Entity shall be entitled to receive an amount in cash equal to the value of any such securities such Person would otherwise be entitled to receive.
8. The obligations of the Investors hereunder shall extend only to you and your transferees (Permitted Transferees) who (a) are Other Stockholders (as defined in the Stockholders Agreement), (b) are party to a Management Stockholders Agreement with the Company or Other Stockholders Agreement (as defined in the Stockholders Agreement) and (c) have acquired Common Stock pursuant to a Permitted Transfer (as defined in the Stockholders Agreement), and none of the Management Stockholder Entities successors or assigns, with the exception of any Permitted Transferee and only with respect to the Common Stock acquired by such Permitted Transferee pursuant to a Permitted Transfer, shall have any rights pursuant hereto.
9. This Agreement shall terminate and be of no further force and effect on the occurrence of the earlier of the consummation of a Qualified IPO (as defined in the Investor Stockholders Agreement) or a Change in Control (as defined in the Stockholders Agreement).
10. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, provided that a copy of such notice is also sent via nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to such partys address as set forth below or at such other address or to such other person as the party shall have furnished to each other party in writing in accordance with this provision:
If to the Company, to:
USF Holding Corp.
c/o US Foods, Inc.
9399 West Higgins Road
Rosemont, IL 60018
Attention: Juliette Pryor
Facsimile: (480)  ###-###-####
with a copy (which shall not constitute notice) to:
Jenner & Block LLP
919 Third Avenue
New York, New York 10022
Attention: Kevin T. Collins, Esq.
Fax: (212)  ###-###-####
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and
Kohlberg Kravis Roberts & Co. L.P.
2800 Sand Hill Road, Suite 94025
Menlo Park, California 94025
Attention: Michael Calbert
Fax: (650)  ###-###-####
and
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
18th Floor
New York, New York 10152
Attention: Richard J. Schnall
Fax: (212)  ###-###-####
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Marni Lerner, Esq.
Fax: (212)  ###-###-####
and
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention: Steven J. Slutzky, Esq.
Fax: (212)  ###-###-####
if to a KKR Investor, to:
Kohlberg Kravis Roberts & Co. L.P.
2800 Sand Hill Road, Suite 94025
Menlo Park, California 94025
Attention: Michael Calbert
Fax: (650)  ###-###-####
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Marni Lerner, Esq.
Fax: (212)  ###-###-####
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if to a CD&R Investor, to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
18th Floor
New York, New York 10152
Attention: Richard J. Schnall
Fax: (212)  ###-###-####
with a copy (which shall not constitute notice) to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention: Steven J. Slutzky, Esq.
Fax: (212)  ###-###-####
If to you, to you at the address set forth in the Stockholders Agreement to which you are a party.
If to your Management Stockholders Estate or Management Stockholders Trust, to the address provided to the Company by such entity.
11. The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement. In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator. Such arbitration process shall take place in New York, New York. The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrators reasoning. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. The Company shall pay all fees and costs of such arbitration; provided, each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator. Each party hereto hereby irrevocably waives any right that it may have had to bring an action in any court, domestic or foreign, or before any similar domestic or foreign authority with respect to this Agreement, except for enforcement of the arbitration award hereunder or for vacation or modification thereof as provided under the Federal Arbitration Act, Title 9 U.S. Code Chapter 1.
12. This Agreement may be executed in counterparts, and by different parties on separate counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.
13. It is the understanding of the undersigned that you are aware that no Proposed Sale is contemplated and that such a sale may never occur.
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14. This Agreement may be amended by the Company and the Investors at any time upon notice to the Management Stockholder thereof; provided that any amendment (i) that materially disadvantages the Management Stockholder shall not be effective unless and until the Management Stockholder has consented thereto in writing and (ii) that disadvantages a class of stockholders in more than a de minimis way but less than a material way shall require the consent of a majority of the equity interests held by such affected class of stockholders.
15. Capitalized terms used by not defined herein shall have the meaning ascribed to such terms in the Stockholders Agreement.
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If the foregoing accurately sets forth our agreement, please acknowledge your acceptance thereof in the space provided below for that purpose.
Very truly yours, | ||
USF HOLDING CORP. | ||
By: |
| |
Name: | ||
Title: | ||
US FOODS, INC. | ||
By: |
| |
Name: | ||
Title: | ||
KKR 2006 FUND, L.P. | ||
By: | KKR Associates 2006 L.P., | |
its General Partner | ||
By: | KKR 2006 GP LLC, | |
its General Partner | ||
By: |
| |
Name: | ||
Title: |
KKR PEI INVESTMENTS, L.P. | ||
By: | KKR PEI Associates, L.P., | |
its General Partner | ||
By: | KKR PEI GP Limited, the General Partner of KKR PEI Associates, L.P. | |
By: |
| |
Name: | ||
Title: | ||
KKR PARTNERS III, L.P. | ||
By: | KKR III GP LLC, | |
its General Partner | ||
By: |
| |
Name: | ||
Title: | ||
OPERF CO-INVESTMENT LLC | ||
By: | KKR Associates 2006 L.P., | |
its Manager | ||
By: | KKR 2006 GP LLC, | |
its General Partner | ||
By: |
| |
Name: | ||
Title: | ||
ASF WALTER CO-INVEST L.P. | ||
By: | ASF Walter Co-Invest GP Limited, | |
its General Partner | ||
By: |
| |
Name: | ||
Title: |
[Signature page to Sale Participation Agreement]
CLAYTON, DUBILIER & RICE | ||
FUND VII, L.P. | ||
By: | CD&R Associates VII, Ltd., | |
its General Partner | ||
By: |
| |
Name: | ||
Title: | ||
CLAYTON, DUBILIER & RICE FUND VII (CO-INVESTMENT), L.P. | ||
By: | CD&R Associates VII (Co-Investment), Ltd., its General Partner | |
By: |
| |
Name: | ||
Title: | ||
CD&R PARALLEL FUND VII, L.P. | ||
By: | CD&R Parallel Fund Associates VII, Ltd., its General Partner | |
By: |
| |
Name: | ||
Title: | ||
CDR USF CO-INVESTOR L.P. | ||
By: | CDR USF Co-Investor GP Limited, | |
its General Partner | ||
By: |
| |
Name: | ||
Title: |
[Signature page to Sale Participation Agreement]
CDR USF CO-INVESTOR NO. 2, L.P. | ||
By: | CDR USF Co-Investor GP No. 2 Limited, its General Partner | |
By: |
| |
Name: | ||
Title: |
Accepted and agreed this day of | ||
, 2016. | ||
MANAGEMENT STOCKHOLDER: | ||
| ||
Name: | ||
Address: | ||
| ||
| ||
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[Signature page to Sale Participation Agreement]