AGREEMENT
Agreement dated as of October 29, 1999 ("Agreement") among Xxxxx X.
Xxxxx, an individual residing at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000
(the "Employee"), Reckson Service Industries, Inc., a Delaware corporation
("RSI"), and VANTAS Incorporated, a Nevada corporation ("VANTAS"). Unless
otherwise defined, capitalized terms used herein shall have the meaning ascribed
to such terms in the Stockholders' Agreement (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Employee and VANTAS (f/k/a ALLIANCE National
Incorporated) are parties to an employment agreement dated November 15, 1996
(the "Employment Agreement");
WHEREAS, the Employee is a significant stockholder of VANTAS and
party to a Fifth Amended and Restated Stockholders' Agreement dated as of July
29, 1999 (the "Stockholders' Agreement") by and among VANTAS and the other
Securityholders identified therein;
WHEREAS, the Employee, in (i) further consideration of his continued
employment with VANTAS and (ii) consideration of maintaining a significant
equity position in VANTAS, has requested that RSI and VANTAS enter into this
Agreement; and
WHEREAS, each of RSI and VANTAS is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of VANTAS Equity Securities.
(a) Schedule A to this Agreement sets forth the number of (i) shares
of Common Stock and Preferred Stock (the "Outstanding Shares"), (ii) shares of
Common Stock issuable under Warrants (the "Warrant Shares") and (iii) shares of
Common Stock issuable under vested and unvested Options granted under the VANTAS
1996 Stock Option Plan beneficially owned (as such term is defined under Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) by the
Employee as of October 14, 1999 (collectively, the "Employee Securities"). The
Employee hereby represents to RSI that the information set forth on Schedule A
to this Agreement is true, correct and complete. The Employee hereby further
represents and warrants to RSI that he has not made any Transfer of any of his
Shares, Warrants or Options to a Permitted Transferee or otherwise.
(b) The Employee hereby acknowledges that in the event he shall
Transfer any of the Employee Securities to one or more Permitted Transferees,
the Employee Securities so Transferred shall continue to be subject to the terms
and conditions of this Agreement. The Employee hereby covenants, for the benefit
of RSI and VANTAS, that he shall cause each of his Permitted Transferees to take
all such action as shall be necessary in order to enable the Employee to fully
perform his obligations with respect to the Employee Securities hereunder.
2. Exchange Transaction; Amendments to Employment Agreement and
Stockholders' Agreement.
(a) At the Exchange Closing (as hereinafter defined), RSI shall
issue the RSI Shares (as hereinafter defined) to the Employee in exchange (the
"Exchange Transaction") for the Exchange Securities (as hereinafter defined).
For purposes of this Agreement, the term "Exchange Securities" means that number
(which if not a whole number shall be rounded up to the nearest whole number) of
Option Shares (as hereinafter defined) equal to the product obtained by
multiplying (i) the number of shares of the Employee Securities by (ii) thirty
percent (30%); provided, however, that in the event the number of Option Shares
is insufficient to constitute all of the Exchange Securities, the balance (but
only the balance) of the Exchange Securities shall be comprised of Outstanding
Shares. For purposes of this Agreement, the term "Option Shares" means shares of
Common Stock issued as a result of the exercise, at or prior to the effective
time of the Exchange Closing, of Options included within the Employee
Securities. For purposes of this Agreement, the term "RSI Shares" means that
number (which if not a whole number shall be rounded up to the nearest whole
number) of shares of RSI's common stock, $0.01 par value per share ("RSI Common
Stock"), equal to the quotient obtained by dividing (i) the Exchange Amount (as
hereinafter defined) by (ii) $19.00. For purposes of this Agreement, the term
"Exchange Amount" means thirty percent (30%) of the sum of the (i) product
obtained by multiplying (A) $8.00 by (B) the number of Outstanding Shares and
Option Shares and (ii) difference between the (A) product obtained by
multiplying (1) $8.00 by (2) the number of Warrant Shares and shares of Common
Stock issuable under Options included within the Employee Securities, if any,
which have not been exercised at or prior to the effective time of the Exchange
Closing and (B) aggregate exercise price of the Warrants included within the
Employee Securities and Options, if any, included within the Employee Securities
which have not been exercised at or prior to the effective time of the Exchange
Closing. The Employee hereby acknowledges that in order to receive the RSI
Shares at the Exchange Closing, he must first take all necessary action
(including, without limitation, delivery of the exercise price therefor and all
required exercise documentation to VANTAS) to exercise all or a portion of his
Options included within the Employee Securities at or prior to the effective
time of the Exchange Closing.
(b) Subject to the closing of the purchase of the equity securities
of VANTAS covered by the Transfer Offer (as such term is defined in the
Stockholders' Agreement) made by Xxxxxx, Xxxxxxx Strategic Partners Fund L.P.,
Strategic Associates L.P. and Xxxxx X. Xxxxxxx, the closing (the "Exchange
Closing") for the Exchange Transaction shall be held at the offices of Xxxxxxx,
Xxxxxxxxx LLP, 0 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 11:00 a.m. (New York
City time) on such date (which shall in no event be later than December 31,
1999) as shall be designated in writing by RSI to the Employee. At the Exchange
Closing, RSI shall deliver to the Employee the stock certificate evidencing the
RSI Shares registered in the name of the Employee, which shares shall have been
duly authorized and validly issued, and shall be fully paid and non-assessable
and free of preemptive rights. At the Exchange Closing, the Employee shall
deliver to RSI the stock certificate(s) evidencing the Exchange Securities, duly
endorsed in blank or accompanied by stock
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powers duly executed in blank in proper form for transfer and with all required
stock transfer stamps attached, free and clear of any title defect, objection,
security interest, pledge, encumbrance, mortgage, lien, charge, claim, option,
preferential arrangement or restriction of any kind, including, but not limited
to, any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership (collectively, "Liens"), other than
those Liens, if any, existing under the Stockholders' Agreement. At the Exchange
Closing, VANTAS, subject to (i) the proviso contained in Section 3(a) hereof and
(ii) Section 3(c) hereof, shall deliver to the Employee a check payable to the
order of the Employee in an amount equal to the Additional Compensation (as
hereinafter defined).
(c) In connection with each registration statement filed by RSI
under the Securities Act of 1933, as amended (the "Securities Act"), after the
date of the Exchange Closing registering a secondary offering ("Offering") of
equity securities of RSI, RSI shall use commercially reasonable efforts to
afford the Employee "piggy back" registration rights with respect to the RSI
Shares issued to the Employee pursuant to this Agreement. Notwithstanding the
foregoing, in connection with each such Offering effected pursuant to the terms
of a registration rights or underwriting agreement ("Offering Agreement"), RSI
shall not be obligated to provide the aforesaid "piggy back" registration rights
unless the Employee shall have entered into a registration rights or
underwriting agreement with RSI containing terms and conditions similar to those
contained in the Offering Agreement.
(d) Effective upon the date of the Exchange Closing:
(i) Paragraph 7(d) of the Employment Agreement shall be
deleted in its entirety and be of no further force and
effect.
(ii) The Employee shall unconditionally and irrevocably
refrain from exercising and otherwise relinquish for the
benefit of each of VANTAS and RSI, any and all rights
afforded to him under Section 4.7 of the Stockholders'
Agreement, except as relates to options under the 1999
VANTAS Option Plan not vested at the time of
termination.
(iii) For so long as the Employee shall have the right under
Section 2.1 of the Stockholders' Agreement to nominate
three individuals (each a "Nominee") to serve on the
VANTAS board of directors, the Employee shall take all
action as may be requested from time to time by RSI to
nominate two (2) Nominees designated by RSI in its sole
and absolute discretion (the "RSI Nominees").
(iv) The Employee shall vote, and shall cause each of his
Permitted Transferees to vote, at all meetings of
stockholders of VANTAS and in all proceedings regarding
VANTAS where the vote or written
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consent of stockholders may be required or authorized by
law, all of the Shares of which he or any of his
Permitted Transferees may from time to time possess
nominal or beneficial ownership in favor of the RSI
Nominees. To the extent the Employee or any of his
Permitted Transferees shall acquire additional Shares
after the date hereof, the Employee shall promptly give
written notice thereof to RSI. In order to provide for a
non-exclusive method to effectuate the voting agreement
set forth in this Section 2(d)(iv), the Employee
irrevocably appoints, and shall cause each of his
Permitted Transferees which may hereafter acquire
nominal or beneficial ownership of any Shares to
irrevocably appoint, RSI as the attorney and proxy for
the Employee or such Permitted Transferee, as the case
may be, with full power of substitution, to vote and
take such other actions contemplated by this Section
2(d)(iv) with respect to the Shares covered by this
Section 2(d)(iv) in such manner as RSI shall in its sole
and absolute discretion determine. On the date of the
Exchange Closing, the Employee shall execute and deliver
to RSI an irrevocable proxy ("Irrevocable Proxy"),
substantially in the form of Exhibit A attached hereto,
for all Shares nominally or beneficially owned by the
Employee on the date of the Exchange Closing.
Concurrently with each acquisition, if any, of nominal
or beneficial ownership of any Shares after the date
hereof by the Employee or any of his Permitted
Transferees, the Employee shall execute and deliver or
shall cause such Permitted Transferee to execute and
deliver, as the case may be, to RSI an Irrevocable Proxy
with respect to such Shares. The Employee acknowledges
for himself and each Permitted Transferee that executes
and delivers an Irrevocable Proxy pursuant hereto that
each such Irrevocable Proxy is coupled with an interest
granted for value.
(e) Except as expressly amended by this Agreement, all of the terms
and conditions of the Employment Agreement shall remain in full force and
effect.
(f) The Employee acknowledges that RSI and certain affiliates of RSI
party to the Stockholders' Agreement will in the future seek to amend the
Stockholders' Agreement. The Employee shall consent to and take all other action
as may be requested by RSI in order to amend the Stockholders' Agreement in a
manner consistent with the terms and provisions of this Section 2.
3. Additional Compensation.
(a) In connection with the Employee's receipt of the Exchange
Securities at the Exchange Closing, VANTAS shall make a cash payment (the
"Additional Compensation") to the
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Employee, in the manner provided for in Section 2(b) hereof, in an amount that
after reduction for federal, state and local personal income taxes owed by the
Employee with respect to the Additional Compensation is sufficient to pay the
federal, state and local personal income taxes of the Employee arising from his
(i) exercise of the Options underlying the Option Shares and (ii) receipt of the
Exchange Securities; provided, however, that VANTAS' obligation to pay the
Additional Compensation is expressly conditioned upon the Employee having
demonstrated to VANTAS' reasonable satisfaction (prior to the date of the
Exchange Closing) the basis for the calculation of the Additional Compensation.
In the event that the Employee shall receive a refund ("Refund") from any
federal, state or local taxing authority on account of the taxes associated with
the Additional Compensation, the Employee shall promptly remit the full amount
of such Refund to VANTAS and, following VANTAS' receipt thereof, the amount of
the Additional Compensation for all purposes of this Agreement shall be reduced
by the amount of such Refund.
(b) In the event that either the (i) employment of the Employee is
terminated for "cause" as such term is defined in the VANTAS 1999 Stock Option
Plan or (ii) Employee voluntarily terminates his employment, in either case,
prior to the second anniversary of the date of the Exchange Closing (each a
"Repayment Event"), then the Employee shall be obligated to repay the Additional
Compensation to VANTAS within ninety (90) days after the date of the Repayment
Event. The Employee's obligation to repay the Additional Compensation pursuant
to this Section 3(b) shall be recourse only to the VANTAS equity securities
owned by the Employee and his Permitted Transferees on the date of the
occurrence of the Repayment Event and any proceeds realized from the sale of any
VANTAS equity securities pursuant to any long term incentive program hereafter
adopted by VANTAS, unless the Employee has transferred such securities in
violation of the Company's policy governing the Employee's right to transfer
such securities or in contravention of any agreement between the Employee and
the Company or RSI, in which event(s) the Employee's obligation to repay the
Additional Compensation shall be full personal recourse against the Employee.
(c) To secure the prompt payment to VANTAS of the Additional
Compensation in the event that a Repayment Event shall occur, the Employee
shall, at the Exchange Closing, execute and deliver to VANTAS UCC-1 financing
statements and a pledge agreement, in each case in form and substance
satisfactory to VANTAS, pursuant to which the Employee shall pledge and
otherwise grant to VANTAS a security interest in all of his right, title and
interest in the Employee Securities (other than the Exchange Securities).
Concurrently with the Employee's execution and delivery of the aforesaid pledge
agreement, the Employee shall also deliver to VANTAS the certificates and other
instruments representing the Employee Securities (other than the Exchange
Securities) required to be pledged thereunder.
4. Accredited Investor. Each of the Employee and RSI represents and
warrants to the other that he or it, as the case may be (i) is an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act); (ii) has requested and received all information he or it, as
the case may be, considers necessary or appropriate for deciding whether to
engage in the Exchange Transaction; (iii) has such knowledge and experience in
financial or business matters that
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he or it, as the case may be, is capable of evaluating the merits and risks of
engaging in Exchange Transaction; (iv) has the ability to protect his or its, as
the case may be, own interests in the Exchange Transaction; and (v) is
financially capable of bearing the total loss of his or its, as the case may be,
investment in any securities acquired pursuant to the Exchange Transaction. Each
of the Employee and RSI shall not transfer or otherwise dispose of any of the
securities subject to the Exchange Transactions, except in accordance with
applicable federal and state securities laws or the rules and regulations
promulgated thereunder.
5. Adjustments. In the event of any change in the number of shares
representing the shares of RSI Common Stock or any of the Employee Securities by
reason of any stock dividend, stock split, subdivision, merger,
recapitalization, consolidation, reorganization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
RSI or VANTAS (including, without limitation, the declaration or payment of an
extraordinary dividend of securities) which would have the effect of increasing
or decreasing the number of shares comprising the RSI Common Stock or the
Employee Securities, the number and kind of the shares subject to the Exchange
Transaction and the valuation and consideration payable in respect of such
shares shall be appropriately adjusted to restore to the parties hereto their
rights and privileges under this Agreement.
6. Specific Performance. The Employee recognizes and acknowledges
that the market for the Shares is limited and that, accordingly, in the event of
a breach or default by the Employee of the terms and conditions of this
Agreement involving any of the Employee Securities, the damages to RSI may be
impossible to ascertain and RSI will not have an adequate remedy at law. In the
event of any such breach or default, RSI shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction, either at law or
in equity, to enforce the specific performance of the terms and conditions of
this Agreement, to enjoin further violations of the provisions of this Agreement
and/or to obtain damages. Such remedies shall however be cumulative and not
exclusive and shall be in addition to any other remedies which RSI may have
under this Agreement or at law.
7. Legend. Each certificate, instrument or agreement representing
Employee Securities shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN AN AGREEMENT DATED AS OF OCTOBER 29, 1999, A COPY OF WHICH
MAY BE OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES SHALL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
8. Consent of VANTAS and RSI. VANTAS hereby covenants for the
benefit of the Employee that it shall take all such necessary action to adopt
the long term incentive program (the "Program") substantially in the form
described on Schedule B to this Agreement no later than
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February 28, 2000. RSI hereby covenants for the benefit of the Employee that it
shall recommend to the individuals nominated by RSI and who are serving on the
VANTAS board of directors that they vote in favor of the adoption of the
Program.
9. Miscellaneous.
(a) This Agreement contains, and is intended as, a complete
statement of all of the terms of the arrangements and understandings among the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings among the parties with respect to those
matters.
(b) This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of New York without regard to its
principles of conflicts of law. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New York, New York. In the event of any dispute as to
the terms of this Agreement, the prevailing party in any litigation or other
proceeding shall be entitled to its reasonable attorneys' fees, costs and
expenses in connection therewith.
(c) All notices and other communications under this Agreement shall
be in writing and shall be hand delivered, mailed by registered or certified
mail, return receipt requested (with a copy simultaneously by ordinary mail), or
recognized overnight delivery service to the parties at the following addresses
(or to such other address as a party may have specified by notice given to the
other parties pursuant to this provision):
If to RSI, to:
Reckson Service Industries, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxx, Esq.
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
Xxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
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If to VANTAS, to:
VANTAS Incorporated
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Employee, to:
Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five (5) business days after being deposited in
the mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
(d) No provision of this Agreement may be amended or modified except
by an instrument or instruments in writing signed by the parties hereto. The
failure of a party at any time or times to require performance of any provision
hereof shall in no manner be deemed to affect the party's right at a later time
to enforce the same. No waiver by any party of the breach of any term contained
in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such breach or of the breach of any other term or provision of this
Agreement.
(e) This Agreement shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns. The rights and obligations of any party hereto may not be assigned or
transferred without the prior written consent of the other parties hereto.
(f) From and after the date hereof, each of the parties hereto
agrees to execute and deliver such further documents and instruments and to do
such other acts and things any of them, as the case may be, may reasonably
request in order to effectuate the transactions contemplated by this Agreement.
(g) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires.
(h) Time shall be of the essence with respect to all notices
required to be given, all payments and other deliveries required to be made and
all conditions required to be satisfied under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
VANTAS INCORPORATED
By: /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
Title: Chief Financial Officer
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Name: Xxxxx X. Xxxxx
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