EXHIBIT 10.5
INVESTOR'S AGREEMENT
This Investor's Agreement (the "Agreement") is made and entered into
on July 16, 1998, by and between Xxxxxxx-Xxxxxx, Inc., a Delaware corporation
(the "Company"), and Colony Investors III, L.P., a Delaware limited partnership
(the "Purchaser").
RECITALS
The Purchaser has, upon the terms and subject to the conditions of a
Stock Purchase Agreement, dated the date hereof (the "Stock Purchase
Agreement"), by and between the Company and the Purchaser, agreed to acquire
440,085shares of Common Stock, $0.01 par value per share, of the Company
("Common Stock"), and warrants (the "Warrants") to purchase an additional
132,026 shares of Common Stock.
The Purchaser and the Company each desire to enter into this Agreement
for the purpose of regulating certain aspects of their relationship with regard
to the Company.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Purchaser and the
Company agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following meanings. Any
such term, unless the context otherwise requires, may be used in the singular or
plural, depending upon reference.
"Affiliate" shall mean, with respect to any Person, (i) any Person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, (ii) any spouse or non-adult child
(including by adoption) of any natural person described in clause (i) above,
(iii) any relative other than a spouse or non-adult child (including by
adoption) who has the same principal residence of any natural person described
in clause (i) above, (iv) any trust in which any such Persons described in
clause (i), (ii) or (iii) above has a beneficial interest and (v) any
corporation, partnership, limited liability company or other organization of
which any such Persons described in clause (i), (ii) or (iii) above collectively
own more than fifty percent (50%) of the equity of such entity. For purposes of
this definition, beneficial ownership of more than ten percent (10%) of the
voting common equity of a Person shall be deemed to be control of such Person.
"Fully Diluted Common Stock" shall mean all of the Common Stock of the
Company, assuming conversion, exercise or exchange of all outstanding
convertible or exchangeable securities, options, rights, warrants and similar
instruments into or for Common Stock (regardless of whether such convertible
securities, options, warrants or similar securities are then convertible or
exercisable), except for compensatory stock options which shall not be deemed
outstanding unless they have vested. As provided in Section 4.4, all such
calculations shall be appropriately adjusted for stock splits, stock dividends
and other similar events as described therein.
"Person" shall mean an individual, partnership, limited liability company,
joint venture, corporation, trust or unincorporated organization or any other
similar entity.
"Restricted Securities" shall mean any securities of the Company issued and
sold to the Purchaser pursuant to the Stock Purchase Agreement.
ARTICLE II
CORPORATE GOVERNANCE
2.1 Board of Directors. Upon the execution of this Agreement, and
until such time as the Purchaser and its Affiliates no longer collectively
beneficially own at least 50% of the Restricted Securities, the Company hereby
agrees (a) to take all action necessary such that from and after the date hereof
until the regularly scheduled 2001 annual meeting of the Company's stockholders,
the Board of Directors of the Company (the "Board") shall include one Class III
director designated by the Purchaser, and (b) thereafter to use its best efforts
to cause a person designated by the Purchaser to be included in each slate of
proposed Class III directors put forth by the Company to its stockholders and
recommended for election in any proxy solicitation materials disseminated by the
Company; provided, however, that the identity of any nominee so designated by
the Purchaser other than Xxxxxx X. Xxxxxxx, Xx. and Xxxxxx X. Xxxxx shall be
reasonably acceptable to the Company; and provided, further, that if at any time
the nominee so designated by the Purchaser shall not be serving on the Board,
(i) the Purchaser shall have the continuing right to receive copies of all
materials distributed to members of the Board, (ii) the nominee designated by
the Purchaser shall have the right to participate substantially in all meetings
of the Board on a non-voting basis, and (iii) the Company shall grant the
Purchaser such other rights as may be necessary for the Purchaser's investment
in the Restricted Securities to continue to qualify as a "venture capital
investment" within the meaning of 29 C.F.R. ' 2510.3-101(d). The Company further
agrees to cause the nominee designated by the Purchaser in accordance with the
foregoing to serve on the Board of Directors of each subsidiary of the Company
as the Purchaser may from time to time request. Upon the death, resignation or
removal of a nominee designated by the Purchaser, the Company will use its best
efforts to have the vacancy filled by a person designated by the Purchaser.
Board members designated by the Purchaser shall be fully covered by any
directors' and officers' liability insurance maintained from time to time on the
same terms as the other members, shall be entitled to the benefit of any
indemnification arrangements applicable to the other members and shall have the
right to receive all fees paid and options and other awards granted and expenses
reimbursed to non-employee directors generally.
ARTICLE III
CERTAIN PURCHASE RIGHTS AND RESTRICTIONS
3.1. General. If, at any time when the Purchaser and its Affiliates
collectively own in excess of 5% of the Fully Diluted Common Stock, the Company
proposes to issue for cash any of its Common Stock or other securities
exercisable for, or convertible or exchangeable into, Common Stock
(collectively, the "Securities"), other than as provided in Section 3.2, then
the Company shall, no later than 30 days prior to the consummation of such
issuance, give written notice to the Purchaser of such proposed issuance. Such
notice shall describe the proposed issuance, and contain an offer to sell to the
Purchaser, at the same price and for the same consideration to be paid by the
proposed purchasers (but net of any underwriting or similar fees, discounts or
commissions), up to the Purchaser's pro rata portion (which shall be a
percentage equal to the percentage of the Fully Diluted Common Stock held by the
Purchaser and its Affiliates) of the Securities to be sold. Subject to the
foregoing, if Common Stock is being issued with other Securities as a unit and
such Common Stock may only be purchased in connection therewith as a part of
such unit, the Purchaser must purchase such unit in order for such acceptance to
be valid. If the Purchaser fails to accept such offer by written notice within
20 days after its receipt of the Company's notice, the Company may proceed with
such proposed issuance, free of any right on the part of the Purchaser under
this Section 3.1 in respect thereof.
3.2. Exceptions. The purchase right granted by Section 3.1 shall not
apply to: (i) compensatory issuances to employees, directors or consultants or
pursuant to related employee benefit or stock option plans approved by the Board
of Directors; (ii) Securities distributed or set aside to all holders of Common
Stock on a per share equivalent basis; (iii) derivative securities (e.g.,
warrants) issued as customary "yield enhancement" in connection with (a) the
arrangement of bank credit or (b) the issuance of debt securities or redeemable,
non-convertible preferred stock; (iv) any issuance of Securities upon the
conversion, exercise or exchange of derivative equity securities contemplated by
or issued in accordance with this Agreement; and (v) any issuance of Common
Stock to the Purchaser on the date hereof and any subsequent issuance of
Additional Warrants (as hereinafter defined).
3.3 Warrant Adjustment. In the event that, prior to January 16, 1999,
(a) the Company completes an offering of its Common Stock or (b) announces (by
the filing of any registration statement with the Securities and Exchange
Commission, by press release or otherwise) an offering of its Common Stock and
completes such an offering prior to July 16, 1999 (any such offering a
"Subsequent Equity Offering"), the Company shall, upon each Subsequent Equity
Offering, issue warrants to the Purchaser (the "Additional Warrants") initially
exercisable for the number of shares necessary to maintain the aggregate amount
of Common Stock issuable pursuant to the Warrants and the Additional Warrants at
3.0% of the Fully Diluted Common Stock. The Additional Warrants shall have terms
substantially identical to the Warrants and shall have the same registration
rights.
3.4. Standstill Agreement. After acquiring the Restricted Securities
and except as further permitted under Section 3.1 or 3.3, the Purchaser agrees
not to acquire beneficial ownership of any other Securities prior to July 15,
2001, without the prior written consent of the Company, unless (after giving
effect to such additional beneficial ownership) Purchaser and its Affiliates do
not collectively own in excess of 20% of the Fully Diluted Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1. Transfer Restrictions. The Purchaser agrees that it will not
transfer, sell or assign (other than transfers, sales or assignments to an
Affiliate of the Purchaser) any of the Restricted Securities prior to July 15,
1999 without the express written consent of the Company. Restricted Securities
sold to the public pursuant to an effective registration statement or pursuant
to Rule 144 promulgated under the Securities Act of 1933 shall no longer be
subject to any of the provisions of this Agreement.
4.2. Successors, Assigns and Transferees. This Agreement shall be
binding upon and all rights hereto shall inure to the benefit of the parties
hereto and their respective legal representatives, heirs, legatees, successors
and permitted assigns subject to the terms of this Agreement.
4.3. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another party hereto shall be in writing,
shall be deemed to have been duly given or delivered when delivered personally
or telecopied (receipt confirmed, with a copy sent by reputable overnight
courier), or one business day after delivery to a reputable overnight courier,
postage prepaid, to the address of the party set forth below such person's
signature on this Agreement or to such address as the party to whom notice is to
be given may provide in a written notice to each of the other parties to this
Agreement, a copy of which written notice shall be on file with the Secretary of
the Company.
4.4. Recapitalizations, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, except to the extent
specifically set forth herein with respect to the Restricted Securities, to any
and all shares of capital stock of the Company or any capital stock, partnership
units or any other security evidencing ownership interests in any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for, or in substitution
of the Common Stock by reason of any stock dividend, split, reverse split,
combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise.
4.5. Inspection and Compliance with Law. Copies of this Agreement will
be available for inspection or copying by any holder of Restricted Securities at
the offices of the Company through the Secretary of the Company. The Company
shall take all reasonable action to insure that the provisions of Delaware law
relating to agreements similar to this Agreement are promptly complied with.
4.6. Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF).
4.7. Entire Agreement; Amendments and Waivers. This Agreement and the
Other Documents (as defined in the Stock Purchase Agreement) embody the entire
agreement and understanding of the parties hereto pertaining to the subject
matter hereof. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
4.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.9. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
4.10. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.11. Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
4.12. Term. Unless earlier terminated by an instrument in writing
amending this Agreement pursuant to Section 4.7, this Agreement shall terminate
upon the tenth anniversary of the effective date of this Agreement.
Notwithstanding the foregoing, this Agreement shall in any event terminate with
respect to the Purchaser when the Purchaser and its Affiliates no longer own any
shares of Restricted Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Investor's
Agreement to be duly executed as of the date first above written.
XXXXXXX-XXXXXX, INC.
By: __________________________
Name:
Title:
Address: 000 Xxxxxxxx Xxxx., #000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: __________________________
Name:
Title:
Address: c/o Colony Capital, Inc.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
