Exhibit 10.4
RECKSON SERVICE INDUSTRIES, INC.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000-0000
November 9, 1998
RFIA, LLC
0000 Xxxxxxxx
Xxxxx 00000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxxx
Re: Interoffice Superholdings
Gentlemen:
Interoffice Superholdings Corporation, a Delaware corporation ("ISC"),
is currently negotiating the terms and conditions of the Agreement and Plan of
Merger (the "Merger Agreement") providing for, inter alia, the merger ("Merger")
of Alliance Holding, Inc., a Delaware corporation and a wholly owned subsidiary
of Alliance National Incorporated, a Nevada corporation ("Combined Alliance"),
with and into ISC. On the effective date of the Merger, the stockholders of ISC
will receive shares of Series C Preferred Stock of Combined Alliance and shall
contribute such securities to the capital of Interoffice Superholdings LLC, a
Delaware limited liability company ("Newco"), in exchange for units of Class A
membership interests therein ("Class A Units") pursuant to the terms and
conditions of Section 2 of the Limited Liability Company Agreement (the "Newco
Agreement") by and among Newco and the members named therein. Capitalized terms
used herein but not otherwise defined herein shall, unless the context otherwise
requires, have the respective meanings set forth in the Newco Agreement.
Pursuant to the terms and conditions of that certain Stockholders
Agreement (the "Stockholders Agreement") dated as of December 29, 1997 by and
among ISC, Reckson Management Group, Inc. ("RMG"), JAH I/O LLC and RFIA, LLC
("RFIA"), RMG loaned RFIA the principal amount of $2,228,217.94 as the Initial
Acquisition Loan (as defined by the Stockholders Agreement).
On or prior to the date hereof RMG has assigned all of its right, title
and interest in, to and under the investment in ISC, the Stockholders Agreement
and the Initial Acquisition Loan under the Stockholders Agreement to Reckson
Service Industries, Inc., a Delaware corporation ("RSI") and you hereby confirm
your consent to such assignment of the Initial Acquisition Loan.
The parties hereto agree as follows:
1. Purchase Price; Loan Option.
(a) Purchase Price. The net aggregate purchase price
("Purchase Price") to be paid hereunder as consideration for the RFIA Call
Option (as hereinafter defined) and the transactions contemplated hereby is
equal to THREE MILLION, FIVE HUNDRED THOUSAND and 00/100 ($3,500,000.00)
DOLLARS. The Purchase Price shall be paid to you as follows: On the Closing
Date, as defined below, RSI shall: (i) pay RFIA ONE MILLION and 00/100
($1,000,000) DOLLARS (the "Cash Portion") by wire transfer of immediately
available funds to the bank account designated by RFIA; and (ii) apply the sum
of TWO MILLION, FIVE HUNDRED THOUSAND and 00/100 ($2,500,000) DOLLARS (the "Loan
Offset") to the payment of the indebtedness of RFIA to RSI or any of its
affiliates, including without limitation, Reckson I/O Holdings, Inc., a Delaware
corporation which is a member in Newco ("RSI Sub") under the Initial Acquisition
Loan under the Stockholders Agreement and the Loan Option under the Stockholders
Agreement which such application shall be done automatically on the Closing Date
without any further action by, or any cost or expense of, any party. To the
extent that the aggregate amount owed by RFIA to RSI or any of its affiliates,
including without limitation RSI Sub, under such indebtedness on the Closing
Date is less than $2,500,000, then such excess shall be paid to RFIA on the
Closing Date.
(b) Exercise of Loan Options. On the effective date of the
Merger, for settlement immediately prior to the effective time of the Merger,
RFIA shall exercise each of its Loan Options under the Stockholders Agreement
for all, but not less than all, of the shares of common stock of ISC which RFIA
has a right to purchase from RSI pursuant to Section 10(h) of the Stockholders
Agreement. Included within the Loan Option is the purchase price for 11.875% of
the 1,467.89 additional shares of common stock of ISC issued and sold on August
7, 1998 in connection with the acquisition of substantially all of the assets of
Xebec Management Services, Inc. and XMS Greenhaven, Incorporated which own and
operate an aggregate of six (6) executive office suites in the Sacramento,
California area, in an aggregate amount equal to $999,880.44 ($5,730.00 per
share) plus the additional amount of the purchase price in accordance with the
terms and provisions of the Stockholders Agreement.
(c) Closing Date; Failure to Pay the Cash Portion. As used
herein, the term "Closing Date" shall mean the later of February 1, 1999 or the
effective date of the Merger. No interest shall accrue on the Initial
Acquisition Loan or on the Loan Option from the period of the effective date of
the Merger to February 1, 1998.
In the event that the Closing Date is after the effective date
of the Merger and RSI fails to pay the Cash Portion to RFIA on the Closing Date
after notice of default by RFIA and the failure to cure such default is not
cured within five (5) business days after receipt of such notice, then RSI shall
reduce the RFIA Loan Amount by $1,000,000 and RFIA shall have all other remedies
provided at law or in equity with respect such breach and default including
without limitation the right to receive the Cash Portion in addition to having
received the benefit of the Loan Offset.
2. Capital Call Loan on the Effective Date of the Merger.
(a) REC Capital Call. In connection with the Merger, ISC will
issue a Capital Call Notice for the contribution of cash to the capital of ISC
under the terms and conditions of Section 10 of the Stockholders Agreement (the
"REC Capital Call") for the purchase of specified assets of Reckson Executive
Centers, Inc., a Delaware corporation and an affiliate of RSI ("REC"). The
capital contributed to ISC by you for the REC Capital Call shall equal
$890,625.00, less RFIA's pro rata share of any offset or credit of the
Shareholder Contribution amount (as such term is defined by the Merger
Agreement).
(b) Alliance Merger Capital Call. Under the terms and
conditions of the Merger Agreement, the stockholders of ISC shall receive or be
obligated to pay an amount equal to the Shareholder Contribution (as defined by
the Merger Agreement). If the stockholders of ISC are obligated to pay the
Shareholder Contribution, then such payment shall be made by ISC issuing a
Capital Call Notice for the contribution of cash to the capital of ISC under the
terms and conditions of Section 10 of the Stockholders Agreement (the "Alliance
Merger Capital Call") in the amount of such obligation.
(c) Due Dates. Notwithstanding the terms and provisions of the
Stockholders Agreement to the contrary, the closing of the REC Capital Call and
the Alliance Merger Capital Call, if any, shall be immediately prior to the
effective time of the Merger.
(d) ISC Stockholder Payments. The aggregate amount of all
obligations of RFIA to (i) contribute cash to the capital of ISC and Newco
(which includes RFIA's pro rata share of the REC Capital Call and RFIA's pro
rata share of the Alliance Merger Capital Call, if any); (ii) pay RSI the
aggregate purchase price due upon the exercise of the Loan Option; (iii) pay the
principal amount of the Initial Acquisition Loan and the accrued and unpaid
interest thereon; and (iv) pay any other cash amounts to the capital of ISC
pursuant to any other Capital Call Notices for the contribution of cash to the
capital of ISC issued by ISC on or prior to the effective date of the Merger, in
all cases, as of the date such cash contributions are due and payable to ISC
less the amount of the Purchase Price applied to the payment of the indebtedness
of RFIA to RSI or any of its affiliates, including RSI Sub, as described in
Section 1(b); and (iv) pay any other amounts to ISC or RSI pursuant to the terms
and provisions of the Stockholders Agreement, the Merger Agreement, the REC
Capital Call or otherwise, is referred to herein as the "ISC Stockholder
Payments".
(e) Loan to RFIA. Immediately prior to the effective time of
the Merger, RSI shall lend you an amount equal to the ISC Stockholder Payments.
The amount of such loan together with all increases of such amount pursuant to
the loans made by RSI to RFIA in accordance with Section 6, less any payments of
such amounts by RFIA to RSI, including without limitation, the amount of Newco
distributions received in accordance with Section 2(h) is referred to herein as
the "RFIA Loan Amount". The RFIA Loan Amount shall accrue interest at a rate
equal to the Annual Cost of Funds (as defined below), compounded annually from
the date of the applicable loan through and including the date the Maturity Date
(as defined below); provided, that, if the RFIA Call Option is not exercised,
then on the date that such call option expires the interest rate on the RFIA
Loan Amount shall be reset to a rate equal to SIX PERCENT (6%), compounded
annually without any action by the parties hereto and without any cost, fee or
expense; provided, further, if the RFIA Put Option (as hereinafter defined) is
not exercised, then on the date that such put option expires the interest rate
on the RFIA Loan Amount shall be reset to a rate equal to the Annual Cost of
Funds compounded annually without any action by the parties hereto and without
any cost, fee or expense. The RFIA Loan Amount together with accrued and unpaid
interest thereon shall be due and payable by RFIA on the date (the "Maturity
Date") which is the earlier of: (i) the date the closing of the purchase and
sale of Class A Units pursuant to the RFIA Call Option; (ii) the date the
closing of the purchase and sale of Class A Units pursuant to the RFIA Put
Option; (iii) the date of a Bankruptcy Event (as hereinafter defined); or: (iv)
ten (10) years after the effective date of the Merger. As used herein, the term
"Annual Cost of Funds" means TWELVE PERCENT (12%), compounded annually.
(f) Security Interest. All obligations of RFIA under the RFIA
Loan Amount, the accrued interest thereon and any additional indebtedness
incurred by RFIA to RSI under the terms and conditions of this Agreement shall
be secured by a pledge by RFIA of one hundred percent (100%) of the Class A
Units in Newco now and hereafter owned by RFIA. RFIA does hereby grant to RSI a
security interest in one hundred percent (100%) of the Class A Units now and
hereafter owned by RFIA and this instrument shall constitute a security
agreement for purposes of the Uniform Commercial Code. RFIA shall execute and
deliver financing statements (Form UCC-1) in favor of RSI and such other
documents reasonably requested by RSI to evidence such pledge and security
interest in such Class A Units. RFIA shall deliver any certificate or
certificates representing the Class A Units to RSI and each such certificate
shall be endorsed with a legend to the effect that such securities are subject
to the Lien. RSI shall have all rights and remedies under the Uniform Commercial
Code with respect to such collateral.
(g) No Personal Liability. There shall be no personal
liability of RFIA (or its members, managers or employees) for any default in the
payment of the RFIA Loan Amount or accrued interest thereon. RSI's sole recourse
from any default shall be against the collateral held as security pursuant to
Section 2(f).
(h) Assignment of Distributions. RFIA hereby transfers,
conveys and assigns to RSI all of RFIA's right, title and interest to the amount
of any and all distributions receivable from Newco in the amount of the RFIA
Loan Amount, and hereby irrevocably directs the Company to pay any such amounts
to the order of RSI for the payment of such obligations: (i) first to the
payment of accrued and unpaid interest; and (ii) then to the payment of the
outstanding principal amount; provided, however, that there shall be deducted
from such distributions to be paid to RSI an amount sufficient to pay the
combined federal, state or local income tax liability of RFIA as a result of the
allocation of taxable income to RFIA under the terms and provisions of the Newco
Agreement (it being acknowledged and agreed that the state and local tax
liability is a deduction against federal taxable income) computed at the highest
marginal federal, state and local income tax rates assuming RFIA is an
individual taxpayer, its allocable share of Newco income or gain is its only
income or gain, and there are no losses, deductions or credits other than those
allocated to RFIA by Newco offsetting such income or otherwise reducing such tax
liability. Such amount shall be paid over to RFIA.
3. RFIA Call Option. Subject to the limitations set forth in this
Section 3, from and after the Closing Date, RSI shall have the right and option,
but not the obligation (the "RFIA Call Option"), to purchase all, but not less
than all, of the RFIA Beneficial Interest (as hereinafter defined) owned by RFIA
as follows:
(a) Exercise Period. RSI shall have the RFIA Call Option with
respect to all, but not less than all, of the RFIA Beneficial Interest owned by
RFIA at any time during the period (the "Call Option Period"):
(i) commencing on the date that is the earlier of (1) the
effective date of an initial public offering of the securities of
Combined Alliance (an "IPO"), (2) the closing date of the sale of
Combined Alliance whether by a merger, consolidation, recapitalization,
sale of assets or securities or otherwise, (3) the date of the
dissolution of Combined Alliance, (4) the date of the commencement of a
case under the Bankruptcy Act, as amended (Title 11 of the United
States Code), in which the debtor is either RFIA or any person with
whom RFIA may be consolidated with in a case under the Bankruptcy Act
(a "Bankruptcy Event"), (5) the date of any purported Transfer of Class
A Units which would violate or conflict with Section 5 of the Newco
Agreement or (6) thirty (30) months after the effective date of the
Merger; and
(ii) ending on the date that is thirty-six (36) months
after the effective date of the Merger.
(b) Manner of Exercise of the RFIA Call Option. The RFIA Call
Option shall be exercised by RSI delivering to RFIA a notice to such effect
which notice shall specify the date for the closing of the purchase and sale of
the RFIA Beneficial Interest which date shall be not less than ten (10) nor more
than fifteen (15) days after the date such notice is delivered to RFIA.
(c) Purchase Price. The aggregate purchase price at which the
RFIA Beneficial Interest shall be purchased pursuant to the RFIA Call Option
shall be the sum of: (i) SIX MILLION, SEVEN HUNDRED AND FIFTY THOUSAND and
00/100 ($6,750,000.00) DOLLARS; and (ii) the Additional Purchase Amount (as
hereinafter defined).
(d) Closing of the RFIA Call Option. On the closing date
specified in accordance with Section 3(b) at the offices of RSI: (i) RSI shall
pay the aggregate purchase price of the RFIA Beneficial Interest to be purchased
pursuant to the RFIA Call Option by wire transfer of immediately available
funds; (ii) RFIA shall deliver to RSI the stock certificate or certificates or
an assignment of such Class A Units or securities in form and substance
reasonably acceptable to RSI free and clear of any Liens (but, if the RFIA
Beneficial Interest is then Class A Units, then such Class A Units shall
continue to be subject to the terms and provisions of the Newco Agreement); and
(iii) RFIA shall pay in full the RFIA Loan Amount and all accrued and unpaid
interest thereon as of such closing date. RSI shall have the right to offset
from the payment of the aggregate purchase price of the RFIA Beneficial Interest
specified in Section 3(b) the aggregate RFIA Loan Amount and all accrued and
unpaid interest thereon as of such closing date.
(e) Survival. The provisions of this Section 3 shall survive
the termination, liquidation or dissolution of Newco.
4. RFIA Put Option. Subject to the limitations set forth in this
Section 4, from and after the Closing Date, RFIA shall have the right and
option, but not the obligation (the "RFIA Put Option"), to require RSI to
purchase all, but not less than all, of the RFIA Beneficial Interest owned by
RFIA as follows:
(a) Exercise Period. At any time during the period commencing
on the date that is three years and one day after the effective date of the
Merger and ending on the date that is six years after the effective date of the
Merger, RFIA shall have the RFIA Put Option with respect to all, but not less
than all, of the RFIA Beneficial Interest owned by RFIA.
(b) Termination of the RFIA Put Option. Notwithstanding the
terms of this Agreement, the RFIA Put Option shall terminate on the earlier of
the date that: (i) RSI sells all of its Class A Units in a bona fide transaction
or all of its beneficial ownership of equity securities in Combined Alliance;
provided that a notice of any such sale is delivered to RFIA at least fifteen
(15) business days prior to the closing of such purchase and sale (in the event
such sale is not consummated the RFIA Put Option shall continue) and provided,
further, that if RFIA has exercised its Tag-Along Rights under the Newco
Agreement with respect to such sale of Class A Units by RSI, then the Class A
Units of RFIA subject to the exercise of such Tag-Along Right are purchased and
sold on the date that RSI sells its Class A Units in such transaction; or (ii)
the date of the closing of the RFIA Call Option.
(c) Manner of Exercise of the RFIA Put Option. The RFIA Put
Option shall be exercised by RFIA delivering to RSI a notice to such effect
which notice shall specify the date for the closing of the purchase and sale of
the RFIA Beneficial Interest, which date shall be not less than sixty (60) days
after the date such notice is delivered to RSI, nor more than the later of (x)
ten (10) days after the date of the Fair Value of the RFIA Beneficial Interest
is determined in accordance with Section 4(g) or (y) sixty (60) days after the
date such notice is delivered to RSI.
(d) Purchase Price. The aggregate purchase price at which the
RFIA Beneficial Interest shall be purchased pursuant to the RFIA Put Option
shall be the sum of: (i) the Fair Value of the RFIA Beneficial Interest owned by
RFIA on the effective date of the Merger determined as set forth below; and (ii)
the Additional Purchase Amount for all RFIA Beneficial Interest purchased by
RFIA pursuant to Section 6.
(e) Closing of the RFIA Put Option. On the closing date
specified in accordance with Section 4(c) at the offices of RSI: (i) RSI shall
pay the aggregate purchase price of the RFIA Beneficial Interest to be purchased
pursuant to the RFIA Put Option by wire transfer of immediately available funds;
(ii) RFIA shall deliver to RSI the stock certificate or certificates or an
assignment of the RFIA Beneficial Interest to be purchased in accordance with
the RFIA Put Option in form and substance reasonably acceptable to RSI free and
clear of any Liens (but if the RFIA Beneficial Interest is then Class A Units,
such Class A Units shall continue to be subject to the terms and provisions of
the Newco Agreement); and (iii) RFIA shall pay in full the RFIA Loan Amount and
all accrued and unpaid interest thereon as of such closing date. RSI and RFIA
shall each have the right to offset from the payment of the aggregate purchase
price of the RFIA Beneficial Interest specified in Section 4(c) the aggregate
RFIA Loan Amount and all accrued and unpaid interest thereon as of such closing
date.
(f) Company Value. Means
(i) the fair market value of Combined Alliance as a going
concern determined by the mutual agreement of the parties hereto within
five (5) business days after the notice described in Section 4(c) is
received by RSI or
(ii) if there is no mutual agreement as to the fair market
value of Combined Alliance as a going concern within such five (5)
business day period, then
(1) if the date of determination is prior to
the date that the common stock of Combined Alliance is listed
on a national stock exchange or traded in the over-the-counter
markets with at least two market makers, then the fair market
value of Combined Alliance as a going concern shall be
determined by the mutual agreement of an investment banker,
accounting firm or appraiser listed on Schedule I hereto
(each, an "Appraiser") selected by RSI and an Appraiser
selected by RFIA. Each such Appraiser shall be selected within
five (5) business days after the date that the notice
described in Section 4(c) is received by RSI. If a party fails
to so select an Appraiser, the Appraiser selected by such
party shall be deemed to be the first Appraiser in order of
appearance on Schedule I which was not selected by the other
party. If such Appraisers do not mutually agree on such value
within thirty (30) days (the "Appraiser Period"), then RSI and
RFIA shall enter into good faith negotiations to mutually
determine such value; provided, however, if the difference
between such values is equal to ten (10%) percent or less of
the lesser of such values, then the fair market value of
Combined Alliance as a going concern shall be the average of
such values. If the difference between such values is greater
than 10% of the lesser of such values and the parties do not
mutually agree on such value within fifteen (15) days after
the Appraiser Period, then within five (5) business days the
Appraiser selected by RSI and the Appraiser selected by RFIA
shall select a third Appraiser. If such Appraisers do not
mutually agree on the selection of such third Appraiser within
such five (5) business day period, then the third Appraiser
shall be the first Appraiser in order of appearance on
Schedule I which has not been selected by RSI or RFIA. Within
twenty (20) days after the selection (or deemed selection) of
such third Appraiser, such third Appraiser shall select one of
the two valuations by the Appraisers selected (or deemed to be
selected) by RSI and RFIA and the value of the equity
interests of Combined Alliance attributable to RFIA shall
equal such selected value.
It is acknowledged and agreed that the procedures described
above are to determine the specified valuation with
administrative efficiency and expediency. Accordingly, no
party hereto shall have a right, and no Appraiser shall be
required to, or shall, hold any hearing, presentation or other
advocacy proceeding with respect to the preparation of such
valuation and the determination of such value in accordance
with the terms hereof shall be final and binding on the
parties hereto. Each of RSI and RFIA shall pay all fees and
disbursement of the Appraiser selected by such party. The fees
and disbursement of the third Appraiser shall be paid equally
by RSI and RFIA.
(2) if the date of determination is on or subsequent
to the date that the common stock of Combined Alliance is
listed on a national stock exchange or traded in the
over-the-counter markets with at least two market makers, the
fair market valuation of Combined Alliance as a going concern
shall equal the average of the closing bid and ask prices of
the publicly traded common stock for the ten (10) business
days immediate preceding the date of such determination
multiplied by the number of shares of common stock issued and
outstanding at the time of determination.
(iii) The parties hereto will deliver all financial
information reasonably requested by any Appraiser for the purpose of
determining the "Company Value" hereunder and take such other actions
reasonably requested by any such Appraiser for such purpose.
(g) Fair Value.
(i) if the RFIA Beneficial Interest is represented by the
Class A Units in Newco, then the "Fair Value" shall equal (x) the
Company Value plus or minus the Net Asset Value, if any, plus or minus
the Employee Option Value Adjustment, if any, (y) multiplied by the A
Percentage Interest of RFIA at the time of determination as such
percentage interest is adjusted by the Employee Option Ownership
Adjustment, if any, and as such percentage interest is reduced by the A
Percentage Interest represented by all of the Class A Units purchased
by RFIA after the Effective Date and/or the Class A Units Transferred
by RFIA after the Effective Date.
(ii) if the RFIA Beneficial Interests is represented by
securities distributed to RFIA in accordance with Section 20 of the
Newco Agreement, then the "Fair Value" shall equal (x) the Company
Value (y) multiplied by a fraction, (x) the numerator of which is the
number of Common Stock Equivalents held by RFIA on the date of
determination which were distributed to RFIA in accordance with Section
20 of the Newco Agreement on account of the Class A Units held by RFIA
on the Effective Date (that is, excluding the Common Stock Equivalents
represented by the Class A Units purchased by RFIA after the Effective
Date and any of the Class A Units held on the Effective Date
Transferred by RFIA) and (y) the denominator of which is the Fully
Diluted Capitalization at the time of determination.
(h) Deposit of Put Purchase Price. If the Company Value used
in determining the Fair Value of the RFIA Beneficial Interest was determined in
accordance with Section 4(f)(ii)(1), RSI shall pay ninety (90%) percent of the
Fair Value of the RFIA Beneficial Interest calculated on the basis of the
Company Value proposed by the Appraiser selected by RSI pursuant to Section 4(f)
within five (5) business days after the date such value is proposed to an escrow
agent selected by RSI and approved by RFIA, which approval shall not be
unreasonably withheld, delayed or conditioned. Within such five (5) business day
period, RFIA shall deposit with such escrow agent the stock certificate or
certificates or an assignment of the RFIA beneficial to be purchased pursuant to
the RFIA Put Option. Such escrow agent shall hold such payment, the stock
certificate or certificates and assignment pursuant to the terms and conditions
of an escrow agreement proposed by RSI and approved by RFIA, which approval
shall not be unreasonably withheld, delayed or conditioned, it being
acknowledged and agreed that such escrow agreement shall provide at a minimum
the exculpation and indemnification of the escrow agent, the application of the
deposit by RSI to the principal and accrued and unpaid interest of the RFIA Loan
Amount, the payment of all distributions paid on the account of the RFIA
beneficial interest to RFIA promptly upon the receipt thereof, the payment of
all dividends and interest accruing on the amount of cash deposited by RSI which
is not used to pay the principal balance and accrued and unpaid interest on the
RFIA Loan Amount to RFIA promptly upon the receipt thereof and the release of
all other escrowed documents and funds to RSI and to RFIA on the closing date of
the purchase and sale of the RFIA beneficial interest pursuant to the RFIA Put
Option.
(i) Termination Date. The provisions of this Section 4
shall survive the termination, liquidation or dissolution of Newco.
5. Transfer Restrictions.
(a) The RFIA Call Option and the obligation to repay the
RFIA Loan Amount and the security interest on the RFIA Beneficial Interest
granted hereunder are a Lien on the RFIA Beneficial Interest held by RFIA. Any
transferee or assignee of such RFIA Beneficial Interest and any successor to
RFIA shall own and hold such RFIA Beneficial Interest subject to the terms and
conditions of the RFIA Call Option. RFIA shall not effect any Transfer of
Interests of any RFIA Beneficial Interest or owned or held by RFIA other than a
Transfer of Interest by gift, distribution, will or the laws of descent and
distribution to any Family Group Member of RFIA at any time prior to the
expiration or termination of the RFIA Call Option without the prior written
consent of RSI, which consent may be withheld for any reason or no reason. As
used herein, the term "Family Group Member" shall mean Xxxxxx X. Xxxxxxxxxx;
(ii) the parents grandparents, brothers, sisters, spouse and descendants
(whether natural or adopted) of the person described in clause (i) above; (iii)
any spouse or descendant of any person described in clauses (i) and (ii) above;
(iv) any trust created solely for the benefit of one or more of any persons
described in clauses (i) through (iii) above; (v) any executor or administrator
for any of the persons described in clauses (i) through (iv) above; (vi) any
partnership solely of persons described in clauses (i) through (v) above; and
(vii) any corporate foundation created by any of the persons described in
clauses (i) through (v) above for charitable purposes.
(b) The restrictions on a Transfer of Interest herein have
been purchased for good and valuable consideration hereunder and are for the
benefit of RSI and its successors and assigns. The provisions of this Section
are in addition to, and not superseded by, the right to effect a Transfer of
Interest of Class A Units pursuant to the Newco Agreement.
6. Exercise of Preemptive Rights. RFIA shall purchase all Additional
Shares it has a right to purchase under the terms and conditions of the Newco
Agreement as directed by RSI by a notice to RFIA provided that on or prior to
the Subscription Due Date RSI shall loan RFIA an amount equal to the aggregate
purchase price of such Additional Shares to be paid by RFIA to Newco. The
principal amount of each loan made under this Section 6 shall increase the RFIA
Loan Amount and be non-recourse loans that bear interest, have the maturity date
and be subject to the other terms and conditions of the loan described in
Section 2. The principal amount of each loan made under this Section 6 and the
accrued interest thereon is referred to herein, collectively, as the "Additional
Purchase Amount". RFIA shall not have any obligation to purchase any Additional
Shares to the extent that it will not receive the amount of cash needed to fund
such purchase pursuant to the loan described in this Section 6.
7. Proxy. Simultaneously with the execution and deliver of this
Agreement, RFIA shall deliver to RSI its irrevocable proxy in the form attached
hereto as Exhibit A approving the proposed Merger, the execution, delivery and
performance by ISC and Newco of the terms and conditions of the Merger Agreement
and all agreements, documents and instruments related thereto which such entity
is a party thereto.
8. Newco Agreement.
(a) Simultaneously with the execution and deliver of this
Agreement, RFIA shall deliver to RSI a duly authorized and executed counterpart
of the Newco Agreement. RSI hereby grants RFIA a Tag-Along Right with respect to
the membership interest owned by RFIA in Reckson Office Centers LLC, a Delaware
limited liability company, owned by RSI through any of its subsidiaries and the
beneficial ownership of RSI in the Series C Preferred Stock of Combined Alliance
owned by Reckson Office Centers to the full extent, and subject to the same
terms, conditions and limitations, provided under Section 7 of the Newco
Agreement as if such membership interest in Reckson Office Centers or such
beneficial interest in the Series C Preferred Stock were Class A Units in Newco.
(b) RSI acknowledges a duty of loyalty to Newco during the
period of time that RSI (or any of its affiliates) is the Manager of Newco or
has the right to designate the Manager in Newco for actions taken on behalf of
Newco; provided such duty of loyalty shall not apply to actions (including
votes) taken by RSI in furtherance of RSI's and/or its affiliates' rights (as
opposed to Newco's rights) under the Newco Agreement, CA Agreement, Merger
Agreement, Intercompany Agreement, Product Agreements and any similar agreements
which may be entered into from time to time.
(c) RSI shall not cause Newco to incur any indebtedness,
recapitalize the Class A Units, change the tax allocations as provided in
Section 19 of the Newco Agreement or pay any salary or wages to any Manager
without the prior consent of RFIA which consent shall not be unreasonably
withheld, delayed or conditioned. RSI shall not cause Newco to conduct any
business activity not related to its business purposes described in Section 1(b)
of the Newco Agreement without the prior consent of RFIA which consent may be
withheld for any reason or no reason.
9. Legal Opinion. Counsel to RFIA shall deliver to Xxxxxxx, Xxxxxxxxx
LLP, counsel for ISC, the legal opinions reasonably requested by Xxxxxxx,
Xxxxxxxxx LLP with respect to the due authorization of the Merger by RFIA for
the purposes of Xxxxxxx, Xxxxxxxxx LLP delivering its legal opinion pursuant to
the terms and conditions of the Merger Agreement.
10. Obligations Contingent Upon the Merger. If the effective date of
the Merger is not on or prior to the Outside Date, then neither this Agreement
nor any document or instrument delivered pursuant to this Agreement shall be
effective and no party hereto shall have any liability or obligation to the
other party hereto arising from or in connection with this Agreement.
11. RFIA Beneficial Interest. As used herein, the term "RFIA Beneficial
Interest" shall mean the Class A Units held by RFIA on the Effective Date and
the Class A Units purchased by RFIA in accordance with Section 6 or other
successor membership interest in Newco during the Term of Newco and, after the
Term, shall mean the securities issued by Combined Alliance owned by Newco
distributed by Newco to RFIA in connection with the liquidation and termination
of Newco with respect to the Class A Units held by RFIA on the Effective Date
and the Class A Units purchased by RFIA in accordance with Section 6. For
avoidance of doubt, the right to purchase or sell RFIA Beneficial Interest
pursuant to the RFIA Call Option and the RFIA Put Option includes the right to
purchase or sell the securities issued by Combined Alliance owned by Newco and
distributed by Newco to RFIA attributable to the Class A Units held by RFIA on
the Effective Date and the Class A Units purchased by RFIA in accordance with
Section 6 (or other successor membership interest in Newco) in connection with
the liquidation and termination of Newco or otherwise. In the event that the
RFIA Beneficial Interest is represented by an certificated equity interest
(e.g., a stock certificate), then RFIA shall endorse each such certificate with
a legend stating that "the equity interests represented by this certificate are
subject to a call option of Reckson Service Industries, Inc. pursuant to the
terms and conditions of that certain letter agreement between such person and
RFIA, LLC dated as of November __, 1998 and any assignee or transferee takes
such equity interests subject to the terms and provisions of such call option. A
copy of such agreement is available without charge upon request to Reckson
Service Industries, Inc., 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000-0000,
ATTN: Secretary.
12. Effect of the Xxxx Xxxxx Xxxxxx Act.
(a) Applicability. Each party hereto acknowledges and agrees
that the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act") may be
applicable to the purchase and sale of the RFIA Beneficial Interest as
contemplated by this Agreement.
(b) Covenant to File all Necessary Documents. Each party
hereto covenants and agrees that if and when the HSR Act is applicable to a the
purchase and sale of the RFIA Beneficial Interest, it will use its commercially
reasonable efforts to: (i) promptly and timely file the Notification and Report
Form For Certain Mergers and Acquisition as required under the HSR Act; (ii)
request early termination of the waiting period under the HSR Act; (iii) take
all other actions necessary or desirable to obtain a termination of the waiting
period under the HSR Act; (iv) provide a copy, subject to an appropriate
agreement regarding confidentiality, of all documents submitted in connection
with the HSR Act; and (v) coordinate and consult with each other party with
respect to such filing. RSI shall pay the HSR Act filing fee.
(c) Amendment of Timing Periods. If the HSR Act is applicable
to the purchase and sale of the RFIA Beneficial Interest, the specified period
of time provided herein for the closing of such transaction shall be extended
for the waiting period of the HSR Act.
13. Notices. All notices given pursuant to this Agreement shall be in
writing and shall be made by hand-delivery, first-class mail (registered or
certified, return receipt requested), telex, telecopier, or overnight air
courier guaranteeing next business day delivery: (i) if to RSI, then to Reckson
Service Industries, Inc., 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000,
Attention: Xxxxx Xxxxxxx, Xxxxxx XxXxxx and Xxxxx Xxxxxxx, Esq. fax: (516)
000-0000 with a copy to Xxxxxxx, Xxxxxxxxx LLP, 0 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, attention: Xxxxxxx X. Xxxxxx, Esq., fax: (000) 000-0000; and (ii) to
RFIA, then to RFIA, LLC c/o Xxxxxx Xxxxxxxxxx, 0000 Xxxxxxxx, Xxxxx 00000, Xxx
Xxxx, Xxx Xxxx 00000, fax: (000) 000-0000 with a copy to Pryor, Cashman, Xxxxxxx
& Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, attention Xxxx
Xxxxxxxxxx, Esq., fax: (000) 000-0000; or (iii) as the party hereto shall
designate to the other party hereto by a notice. Except as otherwise provided in
this Agreement, each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next business day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next business day
delivery.
14. Amendment and Modification. No change or modification of this
Agreement shall be valid, binding or enforceable as a party hereto unless the
same shall be in writing and signed by such party.
15. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
16. Entire Agreement; Non-Waiver. This Agreement supersedes and
terminates all prior agreements between any of the parties hereto with respect
to the subject matter contained herein and supplements the terms and provisions
of the Newco Agreement with respect to the parties hereto. To the extent there
is any conflict with respect to the express terms of this Agreement and the
Newco Agreement, the terms of each agreement shall be interpreted in a manner
consistent with this Agreement and to implement the intention of the parties
hereto under this Agreement. No delay on the part of any party in exercising any
right hereunder shall operate as a waiver thereof, nor shall any waiver, express
or implied, by any party of any right hereunder or of any failure to perform or
breach hereof by any other party constitute or be deemed a waiver of any other
right hereunder or of any other failure to perform or breach hereof by the same
or any other party, whether of a similar or dissimilar nature thereof.
17. Specific Performance and Injunctive Relief. The parties recognize
and acknowledge that in the event of a breach or default by one or more of the
parties hereto of the terms and conditions of Sections 3, 4 6 or 8 of this
Agreement, the damages to the other party to this Agreement, may be impossible
to ascertain and such parties will not have an adequate remedy at law. In the
event of any such breach or default in the performance of such terms and
provisions of this Agreement, any party aggrieved thereby 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 such 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 any party may have under this Agreement or at law. Each party hereto
hereby waives any requirement for security or the posting of any bond or other
surety and proof of damages in connection with any temporary or permanent award
of injunctive, mandatory or other equitable relief and, unless the breach is
with respect to the payment of money by RSI to RFIA further agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
18. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees and all disbursements in addition to any other available remedy.
19. Severability. If any provision of this Agreement or the application
thereof to any party or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provisions to the other parties or circumstances shall not be e affected thereby
and shall be enforced to the greatest extent permitted by applicable law.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York governing agreements made
wholly within the State of New York.
21. Miscellaneous.
(a) Section headings are for convenience of
reference only and shall not be used to construe the meaning of any
provision of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one agreement.
(c) Any word or term used in this Agreement in any form shall
be masculine, feminine, neuter, singular or plural, as proper reading requires.
The words "herein", "hereof", "hereby" or "hereto" shall refer to this Agreement
unless otherwise expressly provided. Any reference herein to a Section or any
exhibit or schedule shall be a reference to a Section of, and an exhibit or
schedule to, this Agreement unless the context otherwise requires. Any reference
herein to a "business day" shall mean a day in which the New York branch of the
Federal Reserve Bank is open for business during its normal hours of operation.
If you agree to the terms of this letter (this "Agreement"), kindly
execute a counterpart of this Agreement and return it to the undersigned.
Sincerely,
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxx
____________________________
Name:
Title:
ACCEPTED AND AGREED
as of the date first written above
RFIA, LLC
By: /s/ Xxxxxx X. Xxxxxxxxxx
_____________________________
Name:
Title:
SCHEDULE I
List of Appraisers
1. Xxxxxx Xxxxxxx Xxxx Xxxxxx Inc.
2. Bear, Xxxxxxx & Co. Inc.
3. BancAmerica XXXXXXXXX XXXXXXXX
4. Xxxxxxx Sachs & Co.
5. BT Xxxx Xxxxx Incorporated
6. Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
7. Xxxxxxx Xxxxx Barney
8. Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated
9. Lazard Freres & Co. LLC
[End of List]
