Exhibit 10.08
ROOMSYSTEMS, INC. SHAREHOLDERS' AGREEMENT AND PROXY
This Shareholders' Agreement and Proxy ("Agreement") is entered into as of
August 17, 1999, by and among Ash Capital, LLC ("Ash"), RoomSystems, Inc. (the
"Company"); Xxxxxx Xxxxxxx, individually, as trustee of the McCagno Family IRR
Trust and the WRS Family Trust, and as general partner of the following limited
partnerships: Sunyich family LTD Partnership, Xxxxx Family Limited Partnership,
Xxxxx Family LTD Partnership, and SBD Partnership; Xxx Xxxxxxx; Xxxxxxx X.
Xxxxx, individually, as trustee for the Sunyich Family IRR Trust, the Toleman
Family Trust, the DM Trust and the Xxxxxx Family Trust, and as general partner
of the Xxxxx Family Limited Partnership and SBD Partnership; Xxxxx X. Xxxxx
individually and as general partner of SBD Partnership Xxxxx Xxxxxxxx, LLC,
Xxxxx Xxxxxx, manager of Brynwood, LLC, and Xxxxxx Xxxxxxx (all parties except
Ash and the Company shall be together referred to herein as the "Shareholders").
RECITALS:
WHEREAS, as a material inducement to enter into that certain Subscription
Agreement between Ash and the Company of even date herewith related to the
purchase by Ash of Series B. Preferred Stock issued by the Company, (which
Subscription Agreement together with all ancillary agreements entered into
simultaneously therewith shall be referred to herein as the "Subscription
Agreement"), and the purchase of Series B Preferred Stock thereunder, the
Shareholders, which presently hold more than 50% of the outstanding capital
stock of the Company on a fully-diluted basis, desire to enter into this
Shareholders' Agreement and Proxy with Ash and the Company, intending that such
shall be binding upon the Shareholders and upon the partners, shareholders,
officers, directors or trustees of the Shareholders who may receive distribution
of Company stock from the Shareholders.
WHEREAS, each of the Shareholders desires to enter into this Shareholders'
Agreement and Proxy as set forth herein in order to elect a representative of
Ash as a member of the Company's board of directors, to elect a majority of the
board who are outside directors, to provide for certain first offer and co-sale
rights to Ash, and to vote in favor of a reverse split of the common (but not
the Series B Preferred) shares of the Company.
NOW, THEREFORE, in consideration of the foregoing recitals which are
incorporated herein by this reference, and of the mutual covenants and
agreements contained herein, the parties hereto hereby agree as follows:
1. Agreement to Vote and Proxy.
1.1 Share Voting. Each of the Shareholders agrees to cause all voting
securities in the Company now held or hereafter acquired by such
Shareholders (the "Voting Shares") to be voted:
1.1.1 for the election of one nominee of Ash to serve as a
director on the company's board of directors, which initially Ash
agrees shall be Xxxx X. Xxxxxx,
such that Ash shall have its designated representative elected to the
Company's board of directors ("Ash Representative"). Xxxx of the
Shareholders hereby grants a proxy, coupled with an interest, to Ash,
or such substitute as Ash may appoint (the "Proxy Holder"). This
irrevocable proxy is given by the Shareholders to the Proxy Holder to
nominate the Ash Representative and vote the Voting Shares to elect the
Ash Representative to the Company's board of directors:
1.1.2 to maintain the size of the board at five (5) members, a
majority of whom shall at all times consist of individuals who are not
employees or paid consultants of the Company; and
1.1.3 in favor of a 2 to 1 reverse split of the common (but not
the Series B Preferred) shares of the Company.
1.2 Vacancy. If the Ash Representative should cease to serve on the
Company's board of directors for any reason, including but not limited to
removal by the Shareholders, Ash will be entitled to nominate and elect a
new Ash Representative to the Company's board of directors. Ash shall have
the right to direct the removal of the Ash Representative by the
Shareholders, with or without cause, at any time in its sole discretion.
The parties acknowledge that Ash shall have the sole authority to nominate
the successor to the Ash Representative, except as otherwise specifically
provided in Section 1.4 with respect to the conditional nomination rights
of the Shareholders.
1.3 Reservation of Rights. All other voting rights and powers of the
Shareholders with respect to such Voting Shares, specifically including the
election of members of the board other than the Ash Representative (subject
to the provisions of paragraph 1.1.2 above), the right to vote, assent, or
consent with respect thereto and to take part in and to consent to any
corporate or shareholder's action of any kind whatsoever, and to receive
distributions with respect to said Voting Shares, are expressly reserved to
the Shareholders separately.
1.4 Designation of Nominees. In any election of directors of the
Company, the Proxy Holder shall vote all of the Voting Shares in favor of
the Ash Representative. Ash agrees that it will select the Ash
Representative for election to the Company's board of directors, (1) within
thirty (30) days after receiving notice from the Company that the Company
wishes to select nominees for the board of directors for the Company's next
annual shareholders meeting, (2) within five (5) days after receiving
notice from the Company of a special meeting of shareholders or notice of a
meeting of the board of directors convened for the purpose of filling a
seat or seats on the board of directors vacated by an Ash Representative,
or (3) within five (5) days after receiving notice and a copy of a
shareholder action by written consent, without a meeting, to elect
directors or to fill a vacancy on the board of directors. In the event Ash
should fail to make a selection of the Ash Representative in the time
period specified above, the seat left open by such failure to timely make a
selection shall be filled by a nomination and election by the Shareholders
conducted in accordance with the ordinary election procedures of the
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Company, without prejudice to Ash's right to nominate and elect future
representatives to the Company's board of directors.
1.5 Legend. Any Voting Shares, whether now held or hereafter acquired
by any of the Shareholders, if sold or otherwise transferred by any of them
during the term of this Agreement, will continue to be subject to the terms
hereof, and it will be a condition of any such transfer that the
transferring shareholder obtains from such transferee(s) a consent to be
bound by the terms hereof. To effectuate this provision, each certificate
representing the Voting Shares now held or hereafter acquired by any
Shareholder will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
RESTRICTIONS AND AN IRREVOCABLE PROXY CONTAINED IN THE ROOMSYSTEMS, INC.
SHAREHOLDERS' AGREEMENT AND PROXY DATED AUGUST 17, 1999, A COPY OF WHICH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF
ROOMSYSTEMS, INC.
1.6 Injunctive Relief. Each Shareholder acknowledges and agrees that
any breach of this Agreement by any of them will cause irreparable harm to
the other parties hereto that may not be adequately compensated by money
damages. Accordingly, in the event of a breach or threatened breach by the
Proxy Holder or by any Shareholder of any provision of this Agreement, the
other party or parties will be entitled to injunctive or other preliminary
or equitable relief, including the right to compel the Proxy Holder or any
Shareholder to vote shares in accordance with the provisions of this
Agreement, in addition to such other remedies as may be available for any
such breach or threatened breach, including but not limited to, the
recovery of damages.
The Shareholders further agree that, notwithstanding any failure of the
proxy given in paragraph 1 above, they will each jointly and severally be bound
to vote any Voting Shares of the Company in accordance with the provisions of
paragraph 1 hereof, except as otherwise expressly permitted by this Agreement;
and further that they will take no actions and will not enter any agreements
inconsistent with or that conflict with the provisions of this Agreement or
their obligations hereunder.
2. Certain Defined Terms. As used in this Agreement, the following terms shall
have the respective meanings:
2.1 "Shareholders Stock" shall mean and include all shares of Common
Stock, Series A Preferred Stock, Series B Preferred Stock, and all other
securities of the Company which may be exercised, converted into or issued
in exchange for, or in respect of, shares of Common Stock (whether by way
of stock split, stock dividend, combination, conversion, reclassification,
reorganization, or any other means) now owned by the Shareholders or its
assignees or as may be distributed to persons holding ownership interests
in any Shareholder.
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2.2 A "Selling Holder" shall mean the Shareholders, or any assignee
thereof desiring to sell shares of Shareholders Stock.
2.3 "Shares" shall mean and include all shares of the Shareholders
Stock to be sold by a Selling Holder.
3. Right of First Offer on Dispositions by the Shareholders and its Assignees.
3.1 First Offer.
(a) The Selling Holder shall, prior to any proposed sale, transfer, or
conveyance of any of its Shares, offer to Ash by written notice the right
to purchase such Shares (the "Offered Shares") for cash at an amount equal
to the price or other consideration for which such Shares are to be offered
(the "First Offer"). If the consideration for such proposed sale was other
than cash, the cash equivalent of such non-cash consideration shall be
determined by the Company's Board of Directors in good faith. The Selling
Holder's written notice to Ash shall describe the Offered Shares and
specify the number, price, payment terms for the Offered Shares, a true and
complete copy of any offer and all other material terms and conditions of
the transfer.
(b) Ash may elect to purchase all of the Offered Shares or any lesser
number by written notice thereof given by it to the Selling Holder within
thirty (30) days delivery of the First Offer (the " Initial First Offer
Period").
3.2 Election to Purchase. If Ash elects to purchase all or any part of
the Offered Shares pursuant to Section 3.1 hereof, the written notice
provided to the Selling Holder shall set forth the number of Offered Shares
Ash desires to purchase and shall be given to the Selling Holder in
accordance with Section 7.5 below within the Initial or Second First Offer
Period, as applicable. Such communication shall, when taken in conjunction
with the First Offer, be deemed to constitute a valid, legally binding and
enforceable agreement for the sale and purchase of such Offered Shares.
Sales of the Offered Shares pursuant to this Section 3 shall be made at the
offices of the Company the forty-fifth (45th) day following the date the
First Offer was made (or if any such forty-fifth (45th) day is not a
business day, then on the next succeeding business day). Such sales shall
be effected by the Selling Holder's delivery to Ash electing to purchase
Offered Shares of a certificate or certificates evidencing the Offered
Shares to be purchased by it, duly endorsed for transfer to Ash against
payment to the Selling Holder of the purchase price therefor by Ash.
3.3 Sale Upon Failure to Purchase. If Ash does not purchase all of the
Offered Shares, the Offered Shares not so purchased may be sold by the
Selling Holder at any time within one hundred twenty (120) days after the
date the First Offer was made, subject to the provisions of Section 4. Any
such sale shall be at a price and upon terms and conditions not more
favorable to the purchaser than those specified in the First Offer. Any
Offered Shares not sold within such one hundred twenty (120)-day period
shall continue to be subject to the requirements of this Section 3. If
Offered Shares are sold
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pursuant to this Section 3 to a purchaser who is not a party to this
Agreement, the Offered Shares so sold shall no longer be subject to this
Agreement.
4. Right of Partici pation in Sales.
4.1 Co-Sale Rights. If at any such time a Selling Holder desires to
sell, assign, transfer, or otherwise convey Shares owned by such holder to
any person or entity other than Ash (the "Buyer") after complying with the
requirements of Section 3 hereof, such Selling Holder shall provide written
notice to Ash, in accordance with Section 7.5 hereof, setting forth the
name of the Buyer, the aggregate number of Shares desired to be sold (the
"Co-Sale Securities") and the terms and conditions for the sale (the
"Co-Sale Offer"). As a condition to the sale of any Co-Sale Securities by
the Selling Holder, Ash shall have the right to participate in the Co-Sale
Offer, at the same price per share and on the same terms and conditions as
set forth in the Co-Sale Offer, that portion of the Co-Sale Securities
equal to the product obtained by multiplying (i) the aggregate number of
Co-Sale Securities to be offered, by (ii) twenty-five percent (25%).
4.2 Notice of Participation. Ash wishing to so participate in any sale
under this Section 4 shall notify the Company and selling Holder in writing
of such intention as soon as practicable after Ash' receipt of the Co-Sale
Offer made pursuant to Section 4.1. and in any event within twenty (20)
days after the date the Co-Sale Offer was made. Such notification shall be
given to such Shareholders in accordance with Section 7.5 below.
4.3 Terms of Co-Sale. The Selling Holder and Ash shall sell to the
Buyer all, or at the option of the Buyer, any part of the Co-Sale
Securities proposed to be sold by them at the price and upon other terms
and conditions not more favorable to the Buyer than those in the Co-Sale
Offer provided by the Selling Holder under Section 4.1 above; provided,
however, that any purchase of less than all of such Shares by the Buyer
shall be made from the Selling Holder and Ash pro rata based upon the
relative amount of the Shares that the Selling Holder and Ash are otherwise
entitled to sell pursuant to Section
4.4 Co-Sale Shares Released. Any Shares sold pursuant to this Section 4
shall no longer be the subject to this Agreement.
5. Permitted Transfers
5.1 Certain Transactions. Sections 3 and 4 of this Agreement shall not
apply to any transfer or disposition of Shares described in this Section
5.1, provided, however, that any transferee shall receive and hold such
Shares subject in all respects to the provisions of this Agreement, and
that there shall be no further transfer of such Shares except in accordance
herewith.
(a) A Selling Holder shall be permitted to sell, assign, transfer,
or otherwise convey Shares to such Selling Holder's spouse, parents, or
children, or other members of the founder's family (including relatives by
marriage), or to a custodian,
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trustee, or other fiduciary for the account of the Selling Holder or
members of his family in connection with a bona fide estate planning
transaction or estate administration;
(b) A Selling Holder shall be permitted to sell, assign, transfer,
or otherwise convey Shares when such disposition, combined with all prior
sales, assignments, transfers, or other conveyances of such Selling Holder
that occurred in the same calendar year, amounts to less than 10,000
Shares.
(c) The provisions shall not apply to transfers by operation of
law.
6. Prohibited Transfers
6.1 Prohibited Transfer. In the event a Selling Holder sells any Shares
of the Company in contravention of the participation rights of Ash under
paragraph 4 of this Agreement (a "Prohibited Transfer"), Ash, in addition
to such other remedies as may be available at law, in equity or hereunder,
shall have the put option provided below, and the Selling Holder shall be
bound by the applicable provisions of such put option.
6.2 Put Option. In the event of a Prohibited Transfer by a Selling
Holder, Ash shall have the right to sell to such Selling Holder, and, if
such right is exercised, such Selling Holder shall have the obligation to
purchase from Ash a number of shares of common stock (including preferred
stock convertible into common stock) equal to the number of shares Ash
would have been entitled to transfer to the Buyer in the Prohibited
Transfer pursuant to the terms hereof. Such sale shall be made on the
following terms and conditions:
(a) The price per share at which the shares are to be sold to such
Selling Holder shall be equal to the price per share paid by Buyer to
such Selling Holder in the Prohibited Transfer. Such Selling Holder
shall also reimburse Ash for any and all fees and expenses, including
legal fees and expenses, promptly following demand therefor, incurred
pursuant to the exercise or the attempted exercise of Ash's rights
under this Section.
(b) Within 20 days after the later of the dates on which Ash (i)
received notice from such Selling Holder of the Prohibited Transfer, or
(ii) otherwise become aware of the Prohibited Transfer, Ash shall, if
exercising the put option created hereby, deliver to such Selling
Holder the certificate or certificates representing shares to be sold,
each certificate to be properly endorsed for transfer.
(c) Such Selling Holder shall, upon receipt of the certificate or
certificates for the shares to be sold by Ash, immediately pay the
aggregate purchase price thereof and the amount of reimbursable fees
and expense, as specified above, by certified check or bank draft made
payable to the order of Ash.
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Notwithstanding the foregoing, any attempt to transfer shares of the
Company in violation hereof shall be void and the Company agrees it will not
effect such a transfer nor will it treat any alleged transferee as the holder of
such shares.
7. Miscellaneous
7.1 Term. This Agreement shall terminate (a) immediately prior to the
consummation of the first firm commitment underwritten public offering of not
less than $12,000,000 in gross proceeds pursuant to any effective registration
statement on Form S-1 (or its then equivalent) under the Securities Act of 1933,
as amended, or (b) the tenth anniversary of the date of this Agreement,
whichever occurs first.
7.2 Failure to Deliver Shares. If any party becomes obligated to sell any
shares to another party under this Agreement and fails to deliver such shares in
accordance with the terms of this Agreement, the non-selling party may, at its
option in addition to all other remedies it may have, send to such other party
the purchase price for such share as is herein specified. Thereupon, the
Company, upon written notice to the party who failed to deliver the shares, (a)
shall cancel on its books the certificate or certificates representing the
shares to be sold, and (b) shall issue, in lieu thereof, in the name of the
non-selling party, a new certificate or certificates representing such shares,
and thereupon all of the selling party's rights in and to such shares shall
terminate.
7.3 Specific Enforcement. The parties hereto expressly agree that they will
be irreparably damaged if this Agreement is not specifically enforced. Upon a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any party, the non-selling or non-defaulting party shall, in
addition to all other remedies, be entitled to a temporary or permanent
injunction, without showing any actual damage, and/or a decree for specific
performance, in accordance with the provisions hereof.
7.4 Legend. Each certificate evidencing any of the Shareholders Stock shall
bear the legends substantially as follows (and within a reasonable time from the
execution of this Agreement, each such holder shall submit their certificate(s)
to the Company for the placement of the following legends, if necessary):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN
ROOMSYSTEMS, INC. SHAREHOLDERS' AGREEMENT AND PROXY, DATED AS OF AUGUST 17,
1999, A COPY OF WHICH IS AVAILABLE FOR
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INSPECTION AT THE GENERAL OFFICES OF ROOMSYSTEMS, INC. CONTAINING RIGHTS OF
FIRST REFUSAL AND CO-SALE RIGHTS. NONE OF THE SHARES EVIDENCED HEREBY OR BY ANY
SUBSEQUENT CERTIFICATE MAY BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED
OF EXCEPT IN STRICT COMPLIANCE WITH THE TERMS AND CONDITIONS OF SUCH
SHAREHOLDERS' AGREEMENT AND PROXY. ROOMSYSTEMS, INC. WILL NOT REGISTER THE
TRANSFER OF THE WITHIN SECURITIES ON ITS CORPORATE RECORDS NOR WIILL IT TREAT
ANY PURPORTED TRANSFEREES AS THE HOLDER THEREOF WITHOUT THE PRIOR WRITTEN
CONSENT OF THOSE PERSONS IDENTIFIED IN SUCH AGREEMENT.
7.5 Notices. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery, on the date of postmark if mailed by
certified or registered mail, return receipt requested, or on the date sent by
telecopier or telex to the party being notified at his or its address specified
on the applicable signature page hereto or such other address as the addressee
may subsequently notify the other parties of in writing.
7.6 Entire Agreement and Amendments. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and neither
this Agreement nor any provision hereof may be waived, modified, amended or
terminated except by a written agreement signed by (a) the Company, (b)
Shareholders or Selling Holders holding more than 50% of the Shareholders Stock,
and (c) Ash. To the extent any term or other provision of any other indenture,
agreement, or instrument by which any party hereto is bound conflicts with this
Agreement, this Agreement shall have precedence over such conflicting term or
provision.
7.7 Governing Law; Successors and Assigns. This Agreement shall be governed
by the laws of Utah and shall be binding upon the heirs, personal
representatives, executors, administrators, successors, and assigns of the
parties.
7.8 Waivers. No waiver of any breach or default hereunder shall be
considered valid unless writing, and no such waiver shall be deemed a waiver of
any subsequent breach or default of the same or similar nature.
7.9 Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity, or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid, or unenforceable provision were not contained herein.
7.10 Captions. Captions are for convenience only and are not deemed to be
part of this Agreement.
7.11 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.
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IN WITNESS WHEREOF, each of the parties has executed or caused this
Shareholders' Agreement and Proxy to be executed by its duly authorized
representative, as of the day and year first above written.
ASH CAPITAL, LLC
By Providence Management, LLC
By /s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx or Xxxx Xxxxxxxx, Managers
ROOMSYSTEMS, INC.
By /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx, Chief Executive Officer
SHAREHOLDERS
/s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx, Individually, as
trustee of The McCagno Family IRR
Trust and the WRS Family Trust, and as
general partner of the following
limited partnerships: Sunyich Family
LTD Partnership, Xxxxx Family Limited
Partnership, Xxxxx Family LTD
Partnership, and SBD Partnership
Xxxxx Xxxxxxxx, LLC
-------------------
By: , Manager
----------------
/s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx, Individually, as
trustee for the Sunyich Family IRR
Trust, the Toleman Family Trust, the
DM Trust and as general partner of the
Xxxxx Family Limited Partnership and
SBD Partnership
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/s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx, Individually and as general
partner of the SBD Partnership
/s/ K. Xxx Xxxxxxx
------------------
Xxx Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx
---------------------
Xxxxx Xxxxxx, Manager of Brynwood, LLC
/s/ Xxxxxx X. Xxxxxxx
----------------------
Xxxxxx Xxxxxxx
