EXHIBIT A
SUBSCRIPTION AGREEMENT
Ladies and Gentlemen:
1. PURCHASE. Subject to the terms and conditions hereof, the
undersigned hereby irrevocably subscribes to purchase 333,334 (333,334) shares
of 6% Series B Convertible Preferred Stock (the "Shares" of "Securities") of
RoomSystems, Inc., a Nevada corporation (the "Company") at a price of $3.00 per
Share, for an aggregate purchase price of One Million dollars ($1,000,000). All
dividends on the Shares are payable in the form of common stock ("Common
Stock"). The Shares are automatically convertible into Common Stock of the
Company upon the closing of the Company's initial public offering at the lesser
of (i) $3.00 per share or (ii) 50% of the initial public offering price per
share; provided, however, in the event the Company does not close its initial
public offering by June 30, 2000, each Share shall automatically convert into
1.5 Shares of Common Stock on July 1, 2000.
The undersigned understands that the Securities will not be registered
or qualified under any federal or state securities laws in reliance upon
exemptions therefrom. The undersigned acknowledges and agrees that in order to
ensure that the offer and sale of the Securities are exempt from registration or
qualification, the Company will rely on the covenants, representations and
warranties which the undersigned has made in this Subscription Agreement (the
"Agreement"), the Confidential Investor Questionnaire attached as Section C to
these Subscription Documents, the Offering Materials (as defined below) and
related documentation. Accordingly, the undersigned makes the following
covenants, representations and warranties for the purpose of inducing the
Company to permit the undersigned to acquire the Securities for which the
undersigned hereby subscribes.
The undersigned acknowledges that the Company reserves the right to
accept or reject any subscription in its sole discretion, in whole or in part.
2. REVIEW OF OFFERING MATERIALS. By execution of this Agreement, the
undersigned acknowledges having read, understood and agreed to each and every
provision contained herein and in (i) the Confidential Private Placement
Memorandum (the "Memorandum"); (ii) the Risk Factors section included in the
Memorandum; and (iii) the definition of an "Accredited Investor" under the Act,
attached hereto as Exhibit "1" (all collectively referred to herein as the
"Offering Materials"). All Offering Materials and exhibits thereto are hereby
incorporated in full in this Agreement by this reference.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The undersigned hereby
makes the following representations and warranties to the Company:
3.1 The undersigned hereby represents and warrants that they
are an "Accredited Investor" as defined in Regulation D promulgated under the
Act and set forth on Exhibit "1" hereto. The specific category or categories of
Accredited Investor applicable to the undersigned are as follows:
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(PLEASE INITIAL APPLICABLE BLANKS)
A. _________ I am a natural person and have a net worth, either alone
or with my spouse, in excess of $1,000,000.
B. _________ I am a natural person and had individual income in excess of
$200,000 (or joint income in excess of $300,000 including income of my spouse)
during each of the previous two calendar years and expect to have individual
income in excess of such amount during the current calendar year.
C. _________ The undersigned is an authorized signatory for a partnership,
trust, corporation or other entity with a net worth of more than $5,000,000, or
of which all the equity owners are Accredited Investors.
D. _________ The Securities are being purchased through an employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974
("ERISA") that either (i) has its investment decisions made by a plan fiduciary,
as defined in Section 3(21) of ERISA, which is a bank, savings and loan
association, insurance company or a registered investment advisor, (ii) has
total assets in excess of $5,000,000 or (iii) if a self-directed plan, with its
investment decisions made solely by Accredited Investors as described herein
(please check either A, B or C above with respect to Accredited Investors making
investment decisions for self-directed plans). The name and description of the
employee benefit plan are as follows: __________________________________________
________________________________________________________________________________
________________________________________________________________________________
E. _________ The undersigned is a director and/or executive officer of the
Company.
3.2 Intentionally left blank.
3.3 The undersigned has received all the Offering Materials
and has carefully reviewed each and every provision of the Offering Materials.
3.4 The undersigned has had a reasonable opportunity to ask
questions of and receive answers from the Company and all such questions have
been answered to the full satisfaction of the undersigned. No oral
representations have been made or oral information furnished to the undersigned,
in connection with the offering of the Securities which was in any way
inconsistent with any information contained in the Offering Materials.
3.5 The undersigned recognizes that an investment in the
Securities involves special risks, including those in the "Risk Factors" set
forth in the Memorandum and incorporated herein by this reference.
3.6 The undersigned is acquiring the Securities solely for the
undersigned's own account, or for one or more fiduciary accounts for which the
undersigned has sole investment discretion. The undersigned is acquiring such
Securities without a view to, and not for resale in connection with, a
distribution of the Securities within the meaning of the Act. The undersigned
hereby covenants and agrees that the undersigned shall not sell any of the
Securities in violation of the Act.
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3.7 The undersigned is not relying on the Company or the
information in the Offering A-2
Materials for advice with respect to tax considerations, the suitability of
their investment in the Company or legal or economic considerations.
3.8 The undersigned understands that the Securities have not
been registered under the Act or qualified under the securities laws of any
states and therefore cannot be transferred, resold, pledged, hypothecated,
assigned or otherwise disposed of unless such Securities are subsequently
registered or qualified under the Act and under applicable state securities
laws, or an exemption from registration and/or qualification is available. The
undersigned will not sell or otherwise transfer the Securities without
registration under the Act or pursuant to an exemption therefrom, and the
undersigned understands and agrees that the Company is not obligated to register
or qualify the Shares or to assist the undersigned in complying with any
exemption from such registration or qualification.
3.9 If the undersigned is a corporation, partnership, trust or
other entity, the undersigned represents and warrants that the signatory hereto
is authorized and qualified to become a Share Holder in the Company; and such
entity and the undersigned signatory hereto for such Share Holder further
represents and warrants that such signatory has been duly authorized by the
prospective Share Holder to execute this Agreement.
3.10 If the prospective Share Holder is an employee benefit
plan (a "Plan"), the person signing this Agreement on behalf of such Plan
represents and warrants that (i) he or she is a fiduciary of the Plan, (ii) he
or she understands the investment objectives, strategies and policies of the
Company, (iii) he or she acknowledges that he or she is aware of the provision
of Section 404 of ERISA relating to the requirements for investment and
diversification of assets of ERISA-governed Plans, (iv) he or she has given
appropriate consideration to such Plan's investment in the Company and has
determined that such investment furthers the purposes of such Plan and (v) he or
she has determined that, taking into account other investments in such Plan's
portfolio, the Plan's investment in the Company is consistent with the
requirements of Section 404 and other provisions of ERISA and is consistent with
such Plan's cash flow requirements and funding objectives.
3.11 The undersigned understands the Company is closely held
and that there is no public market for resale of the Shares. The undersigned
understands that it is possible that no market will ever develop. As a
consequence, the undersigned understands that the undersigned may not be able to
liquidate the undersigned's investment in the Securities, even in the event of
an emergency. The undersigned also understands that, for the foregoing reasons,
the Securities may not be readily accepted as collateral for a loan.
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3.12 The undersigned further certifies and acknowledges as
follows:
(a) The undersigned has adequate means of providing for
the undersigned's current needs and possible personal or other contingencies,
and the undersigned has no need for liquidity of the undersigned's investment in
the Securities;
(b) The undersigned has a net worth sufficient to bear
the economic risk of losing the undersigned's entire investment in the
Securities;
(c) Each and every representation set forth herein is
true and correct; and
(d) The undersigned does not have an overall commitment
to non-readily
marketable investments which is disproportionate to the undersigned's net worth
and the investment subscribed for herein will not cause such overall commitment
to become excessive.
3.13 The address set forth below is the undersigned's true and
correct residence and/or principal place of business, and the undersigned has no
present intention of becoming a resident of any other state or jurisdiction.
3.14 The undersigned acknowledges and is aware that the
Securities are speculative investments which involve a high degree of risk of
loss by the undersigned of his, her or its entire investment in the Company.
3.15 It has never been guaranteed or warranted to the
undersigned by the Company or by any other person, expressly or by implication,
that:
(a) The undersigned will be required to remain an owner
of Securities any approximate or exact length of time;
(b) The undersigned will receive any approximate or
exact amount of return or other type of consideration, profit or loss as a
result of an investment in the Securities; or
(c) The past performance or experience on the part of
the Company, any director, officer or any affiliate thereof, will in any way
indicate or predict future operating results of the Company or the overall
success of the Company.
3.16 The undersigned understands that the Company is
soliciting only "Accredited Investors" with respect to the sale of the
Securities. The undersigned has not and will not, except at the express written
request of the Company, permit any person, other than the undersigned's spouse,
attorney or accountant to review any documents which have been presented in
connection with the sale of Securities.
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3.17 If the undersigned is more than one person, the
obligations of the undersigned shall be joint and several, and the
representations and warranties herein contained shall be deemed to be made by
and be binding upon such person, and ownership of the Securities subscribed for
by the undersigned shall be as set forth on the signature page attached hereto.
3.18 If there should be any adverse change in the
representations and information set forth herein prior to the Company's
acceptance or rejection of this subscription, the undersigned will immediately
notify the Company of such change in writing.
3.19 The undersigned realizes that this Agreement does not
constitute an offer by the Company to sell Securities, but is merely a request
for information. The undersigned understands that the Company reserves the right
to reject subscriptions in whole or in part.
3.20 At the request of the Company, the undersigned will
promptly execute such other instruments or documents as may be reasonably
required in connection with the purchase of the Securities. The undersigned
hereby agrees that the representations and warranties set forth in this
Agreement shall be binding upon the heirs, executors, administrators, successors
and assigns of the undersigned, but this subscription is not voluntarily
transferable or assignable by the undersigned. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Nevada.
3.21 The undersigned acknowledges and agrees that all
representations, warranties and covenants made by the undersigned to the Company
in this Agreement shall survive the issuance of their Securities. The
undersigned agrees to protect, defend, indemnify and hold harmless the Company
from all losses, costs, expenses (including, without limitation, reasonable
attorney's fees and expenses) or liabilities for any breach of the undersigned's
representations, warranties or covenants.
3.22 The undersigned acknowledges and agrees that the Shares
will bear a legend restricting transferability, in substantially the form as
follows, and agrees to comply in all respects with the terms of such legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
3.23 The undersigned agrees and acknowledges that the
undersigned is solely responsible for the undersigned's "due diligence"
investigation of the Company.
4. ACCEPTANCE. This subscription is subject to final acceptance by
the Company, to be evidenced by the signature of an officer of the Company to
this Agreement as set forth on Signature Page No. 2 to this Agreement.
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5. SUBSCRIPTION PROCEDURE. Each investor who wishes to purchase
Securities must complete, execute, acknowledge and deliver to the Company this
Agreement. The price for the Securities is to be paid by check made payable to
"RoomSystems, Inc. Escrow 152032." Any checks received that are not made payable
as described above shall be returned to the appropriate Investor. The agreement
to subscribe evidenced by the execution of this Agreement will not be revocable
by the investor, and unless the subscription is rejected by the Company, the
investor will become an equity holder of the Company. The Company reserves the
right to reject or refuse any subscription for any reason whatsoever. As a
condition to closing, the undersigned further agrees to execute and deliver a
Confidential Investor Questionnaire.
6. PAYMENT OF DIVIDENDS. All investors in the Offering who desire to
have his, her or its cash dividend payment (if applicable) forwarded to an
account of his, her or its choice, shall provide the specifics of such account
below:
A. Name of Investment or Commercial Bank ___________________
B. Address _________________________________________________
C. Name of Account _________________________________________
D. Account Number___________________________________________
E. Custodian or Broker Overseeing Account___________________
F. Phone Number of Custodian or Broker______________________
7. REGISTERED NAME FOR THE SHARES. The certificate(s) representing the
Shares should be registered in the following name(s) and denomination(s):
NAME NUMBER OF SHARES
ASH Capital, LLC 333,334
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[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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SIGNATURE FOR INDIVIDUAL INVESTOR:
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement as
of this ______ day of ________________, 1999.
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(Signature)
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(Print Name)
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Address:
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(U.S. Taxpayer Identification Number)
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(Signature of Spouse, If Applicable)
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(Print Name of Spouse, If Applicable)
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Address:
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(U.S. Taxpayer Identification Number)
IF JOINT OWNERSHIP, CHECK ONE:
_________ Husband and Wife, as Community Property
_________ Joint Tenants with Right of Survivorship
_________ Tenants-in-Common
Share: The address given above must be the residence address of the investor.
Post office boxes and other addresses will not be accepted.
[SIGNATURE PAGE NO. 1 TO SUBSCRIPTION AGREEMENT]
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SIGNATURE FOR PARTNERSHIP, TRUST, LLC, CORPORATION OR OTHER ENTITY:
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement as
of this 19th day of August, 1999.
Ash Capital, LLC
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(Print Name of Share Holder)/
/s/ Xxxxx X. Xxxxx
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(Signature)
Xxxxx X. Xxxxx
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(Print Name of Person Signing)
Manager
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(Title)
Limited Liability Company
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(Print Type of Entity and Jurisdiction)
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(U.S. Taxpayer Identification Number)
ACCEPTANCE:
The subscription of the above-named investor is hereby accepted by the
Company as of this 19th day of August, 1999.
RoomSystems, Inc.,
a Nevada corporation
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Chief Executive Officer
[SIGNATURE PAGE NO. 2 TO SUBSCRIPTION AGREEMENT]
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EXHIBIT B
CERTIFICATE OF DESIGNATION
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES B PREFERRED STOCK OF
ROOMSYSTEMS, INC.
RoomSystems, Inc. (the "CORPORATION"), a corporation organized and
existing under the laws of the State of Nevada, does hereby certify that:
Pursuant to authority vested in the Board of Directors (the "BOARD") by
Article IV of the Corporation's Certificate of Incorporation, as amended, the
Board has duly adopted the following recitals and resolutions:
WHEREAS, this corporation is authorized by its Certificate of
Incorporation, as amended, to issue 5,000,000 shares of Preferred Stock,
issuable from time to time in one or more series; and
WHEREAS, this Board is authorized to determine the rights, preferences,
privileges, and restrictions granted to or imposed upon any such series, to fix
the number of shares constituting such series, and to determine the designation
thereof, or any of them; and
WHEREAS, the Board desires, pursuant to its authority as aforesaid, to
issue and to determine and fix the rights, preferences, privileges and
restrictions relating to the second series of said Preferred Stock, and the
number of shares constituting and the designation of said series;
NOW, THEREFORE, BE IT RESOLVED, that the Board hereby fixes and
determines the designation of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to the second series
of Preferred Stock, as follows:
1. DESIGNATION. The series of Preferred Stock provided for by
this resolution shall be designated "6% Series B Convertible Preferred Stock"
(hereafter referred to as "SERIES B STOCK").
2. AUTHORIZATION. The number of authorized shares constituting the
Series B Stock shall be 3,000,000 shares.
3. RANK. The Series B Stock shall, with respect to dividend
rights, rights on redemption, rights on conversion and rights on liquidation,
winding up and dissolution, rank senior to all common stock, warrants and
options to purchase Common Stock established by the Board or the Stockholders
(all of such equity securities of the Corporation to which the Series B Stock
ranks senior are collectively referred to herein as "JUNIOR Stock"). Series B
Stock shall rank with Series A Preferred Stock on a pari passu basis.
4. DIVIDENDS. The holders of Series B Stock are entitled to an
annual cumulative dividend of six percent (6%), payable in the form of Common
Stock based upon the Conversion Price, defined hereinafter, and subject to the
Corporation's ability to pay such dividends as limited by Nevada law.
5. LIQUIDATION PREFERENCE. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of Series B Stock shall be entitled to receive,
1
out of the assets of the Corporation, whether those assets are capital or
surplus of any nature, an amount equal to $10.00 per share of Series B Stock,
plus all accrued and unpaid dividends on the date of that distribution, and no
more, before any payment shall be made or any assets distributed to the holders
of Junior Stock, and the remaining assets shall be distributed ratably to the
holders of Junior Stock. If upon liquidation, dissolution, or winding up of the
Corporation the assets thus distributed among the holders of Series B Stock
shall be insufficient to permit the payment to those stockholders of the full
preferential amounts, then the entire assets of the Corporation to be
distributed shall be distributed ratably among the holders of Series B Stock.
A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation, dissolution or
winding up, within the meaning of this paragraph.
6. VOTING RIGHTS. Only shares of the Corporation's common stock shall
entitle the holder thereof to vote on matters requiring approval of the
stockholders of the Corporation. Series B Stock shall not, except as otherwise
may be provided by law or except as such matters affecting the rights of the
Series B Stock holders, be entitled to vote on the election of directors or any
other matter. Notwithstanding the foregoing, if the Corporation has not
completed an Initial Public Offering ("IPO") on or before September 28, 2000
(the "EFFECTIVE VOTING DATE"), holders of the Series B Stock shall be accorded
voting rights. Each share of Series B Stock shall be entitled to one (1) vote
after the Effective Voting Date.
7. CONVERSION RIGHTS.
(a) Each holder of Series B Stock shall automatically,
following the earlier of (i) the effective date of the Corporation's IPO, if the
same is completed on or before September 28, 2000, upon surrender of the
certificates therefor, convert all of such holder's Series B Stock into fully
paid and non-assessable shares of Common Stock (the "COMMON STOCK") of the
Corporation, at the rate of the lesser of $3.00 per share or fifty percent (50%)
of the IPO price per share (the "CONVERSION PRICE"); or in other words, the
Series B Stock shall be converted into Common Stock on a 1:1 basis, provided
that the IPO price (the "IPO PRICE") is $6 per share. If the IPO Price is less
than $6 per share, the conversion rate shall be $6 divided by the IPO Price.
However, if the Corporation has filed a registration for an IPO by March 31,
2000, but the same is not completed by June 30, 2000, because of conditions or
circumstances outside the control of the Corporation, then the Corporation shall
have an additional ninety (90) days to complete its IPO. If the IPO is not
completed by September 28, 2000, each holder of Series B Stock shall have the
option to convert such shares to
Common Stock or remain a Series B Stock holder. At any time after September 28,
2000, if the Corporation has not completed its IPO, the conversion of each share
of Series B Stock shall be converted into one and one half (1.5) shares of the
Corporation's Common Stock, irrespective of the time such post September 28,
2000 conversion.
The conversion of Series B Stock described herein, whether it is
automatic or elective shall be exercised by surrendering for such purpose to the
Corporation, at any place where the Corporation shall maintain a transfer agent
for its Common Stock or Series B Stock, certificates representing the shares to
be converted, duly endorsed in blank or accompanied by proper instruments of
transfer, and at the time of such surrender, the person exercising such option
to convert shall be deemed to be the holder of record of Common Stock issuable
on such conversion, notwithstanding that the share register of the Corporation
shall then be closed.
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(b) The number of shares of Common Stock into which Series B
Stock may be converted shall be subject to adjustment from time to time
in certain cases as follows:
(i) The Corporation shall be entitled to make such
further adjustments as it considers advisable in order that any event treated
for federal income tax purposes as a dividend or other distribution of stock or
stock rights will not be taxable, so far as practicable, to the recipient of
such dividends or distributions.
(c) Whenever the amount of Common Stock deliverable upon the
conversion of Series B Stock shall be adjusted pursuant to the provisions
hereof, the Corporation shall forthwith file, at its principal executive office
and with any transfer agent or agents for Series B Stock and for its Common
Stock, a statement stating the adjusted amount of its Common Stock or other
securities deliverable per Series B Stock and setting forth in reasonable detail
the method of calculation and the facts requiring such adjustment and upon which
such calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
(d) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares of Common Stock, the full
number of shares of Common Stock deliverable upon the conversion of all the then
outstanding shares of Series B Stock and shall take all such action and obtain
all such permits or orders as may be necessary to enable the Corporation
lawfully to issue such shares of Common Stock upon the conversion of shares of
Series B Stock.
(e) No fractional shares of Common Stock shall be issued upon
conversion of Series B Stock. In lieu of any fractional shares to which
the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market
value of one share of the Corporation's Common Stock on the date of
conversion, as determined in good faith by the Board.
8. EXCLUSION OF OTHER RIGHTS. Except as herein provided or as may
otherwise be required by law, the shares of Series B Stock shall not have any
preferences or relative, participating, optional or other special rights other
than those specifically set forth in this resolution and in the Certificate of
Incorporation, as amended from time to time, of the Corporation.
IN WITNESS WHEREOF, RoomSystems, Inc. has caused this Certificate of
Designation to be signed by its President and Secretary this 24th day of August,
1999.
ROOMSYSTEM, INC.
/s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXXXX
CHIEF EXECUTIVE OFFICER, PRESIDENT
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EXHIBIT C
INDEMNIFICATION AGREEMENT
See Exhibit 10.07 to Form SB-2 filed April 14, 2000
EXHIBIT D
ROOMSYSTEMS, INC. SHAREHOLDERS' AGREEMENT AND PROXY
See Exhibit 10.08 to Form SB-2 filed April 14, 2000
EXHIBIT E-1
ROOMSYSTEMS, INC.
OPTION TO PURCHASE COMMON STOCK
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
OPTION TO PURCHASE COMMON SHARES
OF
ROOMSYSTEMS, INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, Ash Capital, LLC or its
assigns ("OPTIONEE") are together entitled to purchase, subject to the
provisions of this Option, from RoomSystems, Inc., a Nevada corporation
("CORPORATION"), at a price per Share described more particularly on Exhibit
"A," attached hereto and incorporated herein by reference, up to Ninety-three
Thousand Seven Hundred Fifty (93,750) common shares of the Corporation (the
"SHARES") at any time during the period commencing October 1, 1999 and
terminating at 5:00 p.m., St. Xxxxxx, Utah, two (2) years subsequent to the
declaration of effectiveness of the Corporation's registration statement for an
"Initial Public Offering" ("IPO"). The Shares deliverable upon the exercise of
this Option are hereinafter sometimes referred to as the "UNDERLYING SHARES" and
the exercise price of this Option to purchase one Share is hereinafter sometimes
referred to as the "EXERCISE PRICE." The Shares deliverable upon the exercise of
the Options are hereinafter sometimes referred to as the "OPTION SHARES."
1. EXERCISE OF OPTION. Subject to the provisions hereof, this Option
may be exercised as described herein, during the period commencing October 1,
1999 and terminating at 5:00 p.m., St. Xxxxxx, Utah, two (2) years subsequent to
the declaration of effectiveness of the Corporation's registration statement for
an IPO, by presentation and surrender hereof to the Corporation at its principal
office, or at the office of its stock transfer agent, if any, with the purchase
form annexed hereto as Exhibit B, duly executed and accompanied by payment of
the Exercise Price for the number of shares specified in such form. Upon receipt
by the Corporation of this Option at its principal office, or by the stock
transfer agent of the Corporation, if any, at its office, in proper form for
exercise, the Optionee shall be deemed to be the holder of record of the Option
Shares issuable upon such exercise, notwithstanding that the shares transfer
books of the Corporation shall then be closed or that certificates representing
such Option Shares shall not then be actually delivered to the Optionee.
2. RESERVATION AND STATUS OF SHARES. The Corporation hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Option such number of its common shares as shall be required for issuance
and delivery upon exercise of this Option, and that such shares, when issued in
accordance with the terms of this Option, shall be validly issued, fully paid,
and non-assessable.
(a) FRACTIONAL SHARES. Fractional Shares or script representing
fractional Shares may be issued upon the exercise of this Option.
(b) ASSIGNMENT, EXCHANGE, OR LOSS OF OPTION.
Subject to the restrictions appearing at the start of this Option, upon
presentation and surrender of this Option to the Corporation at its principal
office or at the office of its stock
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transfer agent, if any, with an assignment duly executed and funds sufficient to
pay, any transfer tax, the Corporation shall, without charge, execute and
deliver a new Option in the name of the assignee named in such instrument of
assignment and this Option shall promptly be canceled.
This Option is exchangeable, without expense, at the option of the
Optionee, upon presentation and surrender hereof to the Corporation at its
principal office, or at the office of its stock transfer agent, if any, for
other Options of different denominations entitling the Optionee to purchase, in
the aggregate, the same number of Shares purchasable hereunder.
Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Option, and (in the case of
loss, theft, or destruction) of reasonably satisfactory indemnification, and (in
the case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, which shall constitute an
additional contractual obligation on the part of the Corporation, whether or not
this Option so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
3. RIGHTS OF THE OPTIONEE. Except as provided in the last sentence of
Section 1, the Optionee shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Corporation, either at law or equity. The rights of the
Optionee are limited to those expressed in this Option and are not enforceable
against the Corporation except to the extent set forth herein.
4. OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon the exercise of this Option or the Exercise Price shall be
adjusted as required by the provisions of this option agreement, the Corporation
shall forthwith file with its Secretary or Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise of
this Option and the adjusted Exercise Price determined as herein provided and
setting forth in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustments. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the Optionee and the Corporation shall, forthwith after each such adjustment,
mail by certified mail a copy of such certificate to the Optionee.
5. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK:
(a) In the event that a share dividend shall be declared upon the
common stock of the Corporation, the number of shares of Common Stock then
subject to this Option shall be adjusted by adding to each such share the number
of shares which would be distributable in respect thereof if such Common Stock
had been outstanding on the date fixed for determining the shareholders of the
Corporation entitled to receive such share dividend.
(b) In the event that the outstanding shares of the Corporation shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Corporation or of another corporation, whether through
reorganization, recapitalization, split-up, combination of shares, merger,
consolidation, or otherwise, then there shall be substituted for each share of
Common Stock subject to this Option the number and kind of shares or other
securities into which each outstanding share of the Corporation shall have been
so changed or for which each such share shall have been exchanged. Under no
circumstances shall any such reorganization,
3
recapitalization, split-up, combination of shares, merger, consolidation, or
other exchange be accomplished without a comparable share option being
substituted pursuant to the foregoing.
(c) In the event there shall be any change, other than as specified
elsewhere in this paragraph, in the number of kind of outstanding shares or of
any shares or other securities into which such shares shall have been changed or
for which they shall have been exchanged, then the board of directors of the
Corporation shall, in its sole discretion, determine whether such change
equitable requires an adjustment in the number or kind of Common Stock to be
issued on the exercise of this Option. Such adjustment shall be made by the
Corporation's board of directors and shall be binding and effective for all
purposes of this Option.
(d) In the case of any such substitution or adjustment as provided for
in this paragraph, the option price set forth in this Option for each share of
Common Stock covered hereby prior to such substitution or adjustment shall be
the option price for all shares or other securities which shall have been
substituted for such Common Stock or to which such Common Stock shall have been
adjusted pursuant to this paragraph. No adjustment or substitution provided for
in this paragraph shall require the Corporation to sell a fractional share of
Common Stock, and the substitution or adjustment with respect to this Option
shall be limited accordingly; PROVIDED, HOWEVER, that the aggregate option price
paid shall be appropriately reduced on account of any fractional share of Common
Stock not issued. Upon any adjustment made pursuant to this paragraph, the
Corporation shall, upon request, deliver to the Optionee a certificate of the
Corporation's treasurer setting forth the option price thereafter in effect and
the number and kind of shares or other securities thereafter purchasable on the
exercise of this Option.
(e) If at any time:
(i) The Corporation proposes to pay any dividend or make any
distribution, including cash or property dividend payable
out of earnings, earned surplus, or assets of the
Corporations; or
(ii) The Corporation proposes to effectuate any plan of
reorganization or reclassification of the Common Stock; or
(iii) The Corporation proposes to merge, consolidate or encumber
or sell all or substantially all of its assets other than in
the ordinary course of business;
then, and in any one of such events, the Corporation shall cause a notice to be
mailed to the registered holder(s) of this Option at the address of such
holder(s) set forth in the registration records of the Corporation. Such notice
shall be solely for the convenience of such registered holders and shall not be
a condition precedent to nor shall any defect therein or failure in connection
therewith affect the validity of, the action proposed to be taken by the
Corporation. Such notice shall be mailed at least twenty (20) days prior to the
date on which the books of the Corporation shall close or a record date shall be
taken for such dividend, share split, reclassification, consolidation, merger or
sale of properties and assets, as the case may be. Such notice shall specify the
record date for closing of the Corporation's shareholder records.
6. NOTICES TO OPTION OPTIONEE. So long as this Option shall be
outstanding, if the Corporation shall propose to take any action that would
cause an adjustment to be made pursuant
4
to this option agreement, the Corporation shall mail by certified mail to the
Optionee, before, or no later than 15 days after, the day on which such
adjustment would become effective, a notice setting forth in reasonable detail
the action so taken.
7. NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Optionee, to
Optionee's last known address, and if to the Corporation, at its principal
office, or such other addresses as a party shall so notify the other party in
writing. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which shall be deemed given at the time of receipt thereof.
8. BINDING EFFECT. The provisions of this Option shall be binding
upon and inure to the benefit of (a) the parties hereto, (b) the successors and
assigns of the Corporation, (c) if the Optionee is a corporation, partnership,
or other business entity, the successors and assignee of the Optionee, and (d)
if the Optionee is a natural person, the assignees, heirs, and personal
representative of the Optionee.
9. PRONOUNS. Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, as the context
requires.
10. LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, United States of America.
11. TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
12. COMPUTATION OF TIME. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday,
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
13. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
14. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
15. PARTIES IN INTEREST. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
5
Dated: October 1, 1999
ROOMSYSTEMS, INC.,
A NEVADA CORPORATION
BY: /s/ Xxxxxx X. Xxxxxxx
------------------------------
XXXXXX X. XXXXXXX
PRESIDENT
6
EXHIBIT "A"
THE OPTION PRICE IS AS FOLLOWS:
The purchase price of the option granted under that certain "Option to
Purchase Common Shares" is $3.60 per share.
7
EXHIBIT "B"
ROOMSYSTEMS, INC.
NOTICE OF EXERCISE OF SHARE OPTION
I, ___________________, hereby exercise my Share Option granted by Room
Systems, Inc. (the "Corporation") and seek to purchase _____ of common shares of
the Corporation pursuant to said Option. I understand that this exercise is
subject to all the terms and provisions of my Stock Option Agreement referred to
therein.
Check and complete as appropriate:
______ Enclosed is my check in the sum of $__________ in payment for
such shares.
______ Enclosed are _______ common shares of the Corporation owned by
me which I hereby transfer to the ______ Corporation in payment for
such shares.
I hereby represent that the _________ shares of common shares to be delivered to
me pursuant to the above-mentioned exercise of said Option are being acquired by
me as an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
Dated:
---------------------------------------------------
Optionee's Signature
Receipt is hereby acknowledged of the delivery to me by RoomSystems, Inc. of
certificates for _______ common shares of the Corporation purchased by me
pursuant to the terms and conditions of the Stock Option Agreement referred to
above.
Dated:
---------------------------------------------------
Optionee's Signature
8
EXHIBIT E-2
ROOMSYSTEMS, INC.
OPTION TO PURCHASE COMMON STOCK
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER
THIS OPTION OR THE UNDERLYING COMMON SHARES UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL
APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933.
OPTION TO PURCHASE COMMON SHARES
OF
ROOMSYSTEMS, INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, Ash Capital, LLC or its
assigns ("OPTIONEE") are together entitled to purchase, subject to the
provisions of this Option, from RoomSystems, Inc., a Nevada corporation
("CORPORATION"), at a price per Share described more particularly on Exhibit
"A," attached hereto and incorporated herein by reference, up to Seventy-five
Thousand (75,000) common shares of the Corporation (the "SHARES") at any time
during the period commencing October 1, 1999 and terminating at 5:00 p.m., St.
Xxxxxx, Utah, two (2) years subsequent to the declaration of effectiveness of
the Corporation's registration statement for an "Initial Public Offering"
("IPO"). The Shares deliverable upon the exercise of this Option are hereinafter
sometimes referred to as the "UNDERLYING SHARES" and the exercise price of this
Option to purchase one Share is hereinafter sometimes referred to as the
"EXERCISE PRICE." The Shares deliverable upon the exercise of the Options are
hereinafter sometimes referred to as the "OPTION SHARES."
1. EXERCISE OF OPTION. Subject to the provisions hereof, this Option
may be exercised as described herein, during the period commencing October 1,
1999 and terminating at 5:00 p.m., St. Xxxxxx, Utah, two (2) years subsequent to
the declaration of effectiveness of the Corporation's registration statement for
an IPO, by presentation and surrender hereof to the Corporation at its principal
office, or at the office of its stock transfer agent, if any, with the purchase
form annexed hereto as Exhibit "B," duly executed and accompanied by payment of
the Exercise Price for the number of shares specified in such form, so long as
Xxxx X. Xxxxxx, or his duly appointed designee, serves a second term of one (1)
year on the Corporation's board of directors. Upon receipt by the Corporation of
this Option at its principal office, or by the stock transfer agent of the
Corporation, if any, at its office, in proper form for exercise, the Optionee
shall be deemed to be the holder of record of the Option Shares issuable upon
such exercise, notwithstanding that the shares transfer books of the Corporation
shall then be closed or that certificates representing such Option Shares shall
not then be actually delivered to the Optionee.
2. RESERVATION AND STATUS OF SHARES. The Corporation hereby agrees
that at all times there shall be reserved for issuance and delivery upon
exercise of this Option such number of its common shares as shall be required
for issuance and delivery upon exercise of this Option, and that such shares,
when issued in accordance with the terms of this Option, shall be validly
issued, fully paid, and non-assessable.
(a) FRACTIONAL SHARES. Fractional Shares or script representing
fractional Shares may be issued upon the exercise of this Option.
(b) ASSIGNMENT, EXCHANGE, OR LOSS OF OPTION.
Subject to the restrictions appearing at the start of this Option, upon
presentation and surrender of this Option to the Corporation at its principal
office or at the office of its stock transfer agent, if any, with an assignment
duly executed and funds sufficient to pay, any transfer
2
tax, the Corporation shall, without charge, execute and deliver a new Option in
the name of the assignee named in such instrument of assignment and this Option
shall promptly be canceled.
This Option is exchangeable, without expense, at the option of the
Optionee, upon presentation and surrender hereof to the Corporation at its
principal office, or at the office of its stock transfer agent, if any, for
other Options of different denominations entitling the Optionee to purchase, in
the aggregate, the same number of Shares purchasable hereunder.
Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Option, and (in the case of
loss, theft, or destruction) of reasonably satisfactory indemnification, and (in
the case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, which shall constitute an
additional contractual obligation on the part of the Corporation, whether or not
this Option so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
3. RIGHTS OF THE OPTIONEE. Except as provided in the last sentence of
Section 1, the Optionee shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Corporation, either at law or equity. The rights of the
Optionee are limited to those expressed in this Option and are not enforceable
against the Corporation except to the extent set forth herein.
4. OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon the exercise of this Option or the Exercise Price shall be
adjusted as required by the provisions of this option agreement, the Corporation
shall forthwith file with its Secretary or Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise of
this Option and the adjusted Exercise Price determined as herein provided and
setting forth in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustments. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the Optionee and the Corporation shall, forthwith after each such adjustment,
mail by certified mail a copy of such certificate to the Optionee.
5. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK:
(a) In the event that a share dividend shall be declared upon the
common stock of the Corporation, the number of shares of Common Stock then
subject to this Option shall be adjusted by adding to each such share the number
of shares which would be distributable in respect thereof if such Common Stock
had been outstanding on the date fixed for determining the shareholders of the
Corporation entitled to receive such share dividend.
(b) In the event that the outstanding shares of the Corporation shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Corporation or of another corporation, whether through
reorganization, recapitalization, split-up, combination of shares, merger,
consolidation, or otherwise, then there shall be substituted for each share of
Common Stock subject to this Option the number and kind of shares or other
securities into which each outstanding share of the Corporation shall have been
so changed or for which each such share shall have been exchanged. Under no
circumstances shall any such reorganization, recapitalization, split-up,
combination of shares, merger, consolidation, or other exchange be accomplished
without a comparable share option being substituted pursuant to the foregoing.
3
(c) In the event there shall be any change, other than as specified
elsewhere in this paragraph, in the number of kind of outstanding shares or of
any shares or other securities into which such shares shall have been changed or
for which they shall have been exchanged, then the board of directors of the
Corporation shall, in its sole discretion, determine whether such change
equitable requires an adjustment in the number or kind of Common Stock to be
issued on the exercise of this Option. Such adjustment shall be made by the
Corporation's board of directors and shall be binding and effective for all
purposes of this Option.
(d) In the case of any such substitution or adjustment as provided for
in this paragraph, the option price set forth in this Option for each share of
Common Stock covered hereby prior to such substitution or adjustment shall be
the option price for all shares or other securities which shall have been
substituted for such Common Stock or to which such Common Stock shall have been
adjusted pursuant to this paragraph. No adjustment or substitution provided for
in this paragraph shall require the Corporation to sell a fractional share of
Common Stock, and the substitution or adjustment with respect to this Option
shall be limited accordingly; PROVIDED, HOWEVER, that the aggregate option price
paid shall be appropriately reduced on account of any fractional share of Common
Stock not issued. Upon any adjustment made pursuant to this paragraph, the
Corporation shall, upon request, deliver to the Optionee a certificate of the
Corporation's treasurer setting forth the option price thereafter in effect and
the number and kind of shares or other securities thereafter purchasable on the
exercise of this Option.
(e) If at any time:
(i) The Corporation proposes to pay any dividend or make
any distribution, including cash or property dividend
payable out of earnings, earned surplus, or assets of
the Corporations; or
(ii) The Corporation proposes to effectuate any plan of
reorganization or reclassification of the Common
Stock; or
(iii) The Corporation proposes to merge, consolidate or
encumber or sell all or substantially all of its
assets other than in the ordinary course of business;
then, and in any one of such events, the Corporation shall cause a notice to be
mailed to the registered holder(s) of this Option at the address of such
holder(s) set forth in the registration records of the Corporation. Such notice
shall be solely for the convenience of such registered holders and shall not be
a condition precedent to nor shall any defect therein or failure in connection
therewith affect the validity of, the action proposed to be taken by the
Corporation. Such notice shall be mailed at least twenty (20) days prior to the
date on which the books of the Corporation shall close or a record date shall be
taken for such dividend, share split, reclassification, consolidation, merger or
sale of properties and assets, as the case may be. Such notice shall specify the
record date for closing of the Corporation's shareholder records.
6. NOTICES TO OPTION OPTIONEE. So long as this Option shall be
outstanding, if the Corporation shall propose to take any action that would
cause an adjustment to be made pursuant to this option agreement, the
Corporation shall mail by certified mail to the Optionee, before, or
4
no later than 15 days after, the day on which such adjustment would become
effective, a notice setting forth in reasonable detail the action so taken.
7. NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Optionee, to
Optionee's last known address, and if to the Corporation, at its principal
office, or such other addresses as a party shall so notify the other party in
writing. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which shall be deemed given at the time of receipt thereof.
8. BINDING EFFECT. The provisions of this Option shall be binding
upon and inure to the benefit of (a) the parties hereto, (b) the successors and
assigns of the Corporation, (c) if the Optionee is a corporation, partnership,
or other business entity, the successors and assignee of the Optionee, and (d)
if the Optionee is a natural person, the assignees, heirs, and personal
representative of the Optionee.
9. PRONOUNS. Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, as the context
requires.
10. LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, United States of America.
11. TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
12. COMPUTATION OF TIME. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday,
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
13. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
14. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
15. PARTIES IN INTEREST. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
5
Dated: October 1, 1999
ROOMSYSTEMS, INC.,
A NEVADA CORPORATION
BY: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
XXXXXX X. XXXXXXX
PRESIDENT
6
EXHIBIT "A"
THE OPTION PRICE IS AS FOLLOWS:
The purchase price of the option granted under that certain "Option to
Purchase Common Shares" is $6.60 per share.
7
EXHIBIT "B"
ROOMSYSTEMS, INC.
NOTICE OF EXERCISE OF SHARE OPTION
I, ___________________, hereby exercise my Share Option granted by
RoomSystems, Inc. (the "Corporation") and seek to purchase _____ of common
shares of the Corporation pursuant to said Option. I understand that this
exercise is subject to all the terms and provisions of my Stock Option Agreement
referred to therein.
Check and complete as appropriate:
______ Enclosed is my check in the sum of $__________ in payment for
such shares.
______ Enclosed are _______ common shares of the Corporation owned by
me which I hereby transfer to the ______ Corporation in payment for
such shares.
I hereby represent that the _________ shares of common shares to be
delivered to me pursuant to the above-mentioned exercise of said Option are
being acquired by me as an investment and not with a view to, or for sale in
connection with, the distribution of any thereof.
Dated:
---------------------------------------------------
Optionee's Signature
Receipt is hereby acknowledged of the delivery to me by RoomSystems, Inc. of
certificates for _______ common shares of the Corporation purchased by me
pursuant to the terms and conditions of the Stock Option Agreement referred to
above.
Date:
---------------------------------------------------
Optionee's Signature
8
[THIS PAGE OMITTED]
[THIS PAGE OMITTED]
EXHIBIT G
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "AGREEMENT") is entered into
this 24th day of August, 1999 by and between RoomSystems, Inc. ("RSI"), a Nevada
corporation (hereinafter referred to as "RSI") and Providence Management, LLC
(hereinafter referred to as "CONSULTANT").
ARTICLE 1. WORK ASSIGNMENTS
ACCEPTANCE OF WORK ASSIGNMENTS
SECTION 1.01. Consultant will consult with RSi on a
consulting basis as required by RSi commencing on September 30, 1999 and
terminating as set forth herein.
TERMS OF AGREEMENT
SECTION 1.02. The Agreement period will begin on September
30, 1999 and terminate at such time as Consultant has completed its duties as
described herein.
ARTICLE 2. DUTIES OF CONSULTANT
PERFORMANCE DESCRIPTION AND DUTIES
SECTION 2.01. Consultant is hereby contracted to assist RSi
in the marketing of its products; in increasing business development; in
developing marketing tools, programs, marketing materials and marketing
promotions; to assist in developing advertising and sponsorship programs with
large, national companies; to provide strategic financial planning; and to
provide assistance in any other area reasonably requested by RSi.
TIME AND ATTENTION
SECTION 2.02. Consultant agrees to devote such time as
reasonably requested by RSi, but in no wise shall Consultants' duties hereunder
interfere with its principals' other employment.
ARTICLE 3. COMPENSATION
BASE COMPENSATION
SECTION 3.01. (A) As compensation for the services previously
rendered by Consultant, RSi shall pay and deliver upon execution of this
Agreement the following: Cash payment in the amount of fifty-one thousand eight
hundred and seventy-five dollars ($51,875); and an option to purchase nineteen
thousand nine hundred and forty-eight (19,948) shares of
RSi's common stock in the form of the option agreement, attached hereto as
Exhibit "A" and incorporated herein by reference.
(B) Should Consultant hereafter provide services to RSi
hereunder, Consultant shall account for its time and the time of its employees,
agents, consultants or independent contractors and shall submit xxxxxxxx to RSi
at the rate of $75 per hour, which shall be paid within fifteen (15) days of
receipt of such billing.
ADDITIONAL COMPENSATION
SECTION 3.02. As additional compensation, Consultant shall be
entitled to accrue and vest in additional options to purchase shares of RSi's
common stock (the "ADDITIONAL OPTIONS") based upon achieving certain benchmarks,
to be determined by Consultant and RSi, and included hereinafter to this
Agreement as Exhibit B. The Additional Options shall bear an exercise price of
one hundred and twenty percent (120%) of the selling price of RSi's shares of
common stock at the time of issue.
ARTICLE 4. CONSULTANT'S RECORDS/TRADE SECRETS
OWNERSHIP OF CONSULTANT'S RECORDS
SECTION 4.01.(A) All records of the accounts, customer lists,
sales and marketing plans, product design and specifications of RSi, of any
nature, whether existing at the time of Consultant's engagement, procured
through the efforts of Consultant, or obtained by Consultant from any other
source, and whether prepared by Consultant or otherwise, shall be the exclusive
property of RSi regardless of who actually purchased the original book, record,
or magnetic storage unit on which such information is recorded; or who developed
the program, marketing material, advertising program or material, or any other
matter relating to or arising out of RSi's business.
(B) All such books and records shall be immediately returned
to RSi by Consultant on any termination of engagement, whether or not any
dispute exists between RSi and Consultant, regarding any matter contained herein
and/or following the termination of this Agreement.
RESTRICTIONS ON USE OF TRADE SECRETS AND RECORDS
SECTION 4.02.(A) During the term of this Agreement, and any
prior dealings with RSi, Consultant has had access to and become acquainted with
various trade secrets, consisting of formulas, programs, patterns, records and
specifications, business plans and other materials, all of which are owned by
RSi and regularly used in the operation of RSi's business.
(B) All files, records, documents, drawings, specifications,
programs, equipment and similar items relating to the business of RSi, whether
they are prepared by RSi or
1
by Consultant, or have come into Consultant's possession in any other way and
whether or not they contain or constitute trade secrets owned by RSi, are and
shall remain the exclusive property of RSi and shall not be removed from the
premises or RSi under any circumstances whatsoever without the prior written
consent of RSi.
(C) Consultant promises and agrees that Consultant shall not
misuse, misappropriate, give, sell, furnish, nor disclose, whether for
consideration or for no consideration, and whether or not during or following
its work under this Agreement with RSi, or at any other time thereafter, any
trade secrets described herein, directly or indirectly, or use them in any way
or manner, for its own benefit or the benefit of others, except as required in
the course and scope of Consultant's engagement with RSi. Consultant agrees and
promises not to make known to any other person, firm, or corporation the names,
addresses or any other information or any of RSi's customers or vendors, or call
on, solicit, or take away any of the customers of RSi on whom Consultant called
on or with whom Consultant became acquainted with during this Agreement herein.
(D) Consultant agrees that the use or dissemination of any
trade secrets as described above, whether by Consultant or by any other person
or entity constitutes unfair trade practices. Consultant agrees to not employ
unfair trade practices whether during the time of this employ or at any time
thereafter.
ARTICLE 5. CONSULTANT NON-COMPETE
NON-COMPETE DURING AGREEMENT PERIOD
SECTION 5.01. During the term of this Agreement, Consultant
shall not, directly or indirectly, engage in any business, commercial or
professional activity, which directly competes with the business of RSi.
Consultant further agrees not to provide any services of any other entity on a
formal or informal basis which may compete, directly or indirectly, with any of
the services or products which RSi currently provides or may provide during the
term of this Agreement or which may result directly or indirectly, in the
diversion of customers from RSi.
Further, Consultant agrees that during this Agreement it shall not hire
away or assist in other company's (ies') hiring away current employees or
consultants of RSi.
NON-COMPETE AFTER TERMINATION
SECTION 5.02. Consultant agrees that for a period of two
years (24 months) after termination with RSi, neither it nor any of its
employees, agents, consultants, partners, managers, and/or officers will engage
in competitive activities or deal with any products similar to and in
competition with RSi and/or its products.
2
ARTICLE 6. GENERAL PROVISIONS
NOTICES
SECTION 6.01. Any notices to be given by either party to the
other may be effected either by personal delivery in writing or by mail,
registered and certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at their last known addresses as
appearing on the books of RSi.
ENTIRE AGREEMENT
SECTION 6.02. This Agreement supersedes any an all other
agreements, either oral or written between the parties with respect to the
engagement of Consultant by RSi for the purposes set forth in Article 2.1, and
contains all of the covenants and agreements between the parties with respect to
such consulting work whatsoever. Each party to this Agreement acknowledges that
no representations, acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing signed by the party to be changed.
PARTIAL INVALIDITY
SECTION 6.03. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any manner.
LAW GOVERNING AGREEMENT
SECTION 6.04. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
ATTORNEY'S FEES AND COSTS
SECTION 6.06. If any legal action is necessary or brought in
any court or arbitration proceeding, to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs, and necessary expenses, in addition to any other relief to which such
party may be entitled. This provision shall be construed as applicable to the
entire Agreement.
3
ASSIGNMENT
SECTION 6.07. Neither party may assign any right or duty hereunder
without the express written consent of the other party.
This Agreement is entered into on this 24th day of August, 1999.
ROOMSYSTEMS, INC.
BY: /S/ XXXXXX X. XXXXXXX
-----------------------------------
ITS: CHIEF EXECUTIVE OFFICER
CONSULTANT: PROVIDENCE MANAGEMENT, LLC
BY: /S/ XXXXX X. XXXXX
-----------------------------------
ITS: MANAGER
4
EXHIBIT A
TO CONSULTING AGREEMENT
Attached hereto as Exhibit E-1
Option to Purchase Common Stock
97,750 Shares
EXHIBIT A
TO CONSULTING AGREEMENT
Attached hereto as Exhibit E-2
Option to Purchase Common Stock
75,000 Shares
EXHIBIT H
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made and entered into this
17th day of August, 1999, by and between RoomSystems, Inc., a Nevada corporation
("RSi" or the "Company"), Ash Capital, LLC, a Utah limited liability company
("Ash"), and U.S. Bank National Association (the "Escrow Agent").
PREMISES
A. RSi and Ash have entered into an Agreement of Understanding,
including exhibits, dated of even date herewith, the delivery of which is
required by various parties herein, which Agreement of Understanding and its
exhibits (some of which also constitute agreements between the parties) shall be
collectively referred to as the "Acquisition Agreements." The Acquisition
Agreements provide for the acquisition by Ash of Series B Preferred Stock issued
by RSi ("Preferred Stock") and provide for various other rights and
responsibilities among the parties.
B. RSi has delivered to the Escrow Agent certificates representing
Preferred Stock in such amounts as has been agreed between the Company and Ash
at a price of $3.00 per share. Ash has delivered to the Escrow Agent funds equal
to $3.00 per share for the Preferred Stock issued by the Company.
C. The parties desire to retain the Escrow Agent to hold with the
Acquisition Agreements, stock certificates, and funds pursuant to the
instructions contained in this Escrow Agreement, and the Escrow Agent has agreed
to serve as Escrow Agent and perform the duties and responsibilities identified
herein in exchange for the consideration identified herein.
AGREEMENT
NOW, THEREFORE, upon the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual promises
and covenants hereinafter set forth, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, it is hereby agreed
as follows:
1. DELIVERIES. The parties shall make the following deliveries to the
Escrow Agent:
1.1 DELIVERIES OF ASH: Ash has delivered to the Escrow Agent the
following:
a. Executed Acquisition Agreements, including executed
exhibits thereto (2 originals);
b. A check in the amount of $1,000,000 payable to U.S. Bank
National Association, Escrow Agent for RoomSystems, Inc., which
shall be placed in the escrow account by and with Escrow Agent
and invested in the First American Prime Obligations Fund
pursuant to the written direction of Ash.
1.2 DELIVERIES BY RSI: RSi has delivered to the Escrow Agent the
following:
a. Executed Acquisition Agreements, including executed exhibits
thereto (2 originals);
b. A stock certificate representing 333,334 shares of Preferred
Stock issued by RSi to Ash.
2. INSTRUCTIONS TO ESCROW AGENT. Escrow Agent shall hold all documents,
funds, and stock certificates delivered to it pursuant to paragraph 1 in escrow
until the earlier of: (i) September 30, 1999 or (ii) the satisfaction of the
conditions set forth in paragraph 3 of this Escrow Agreement.
In the event that all of the conditions set forth in paragraph 3 have
not been satisfied on or before September 30, 1999, the Escrow Agent shall
return to each of the parties set forth in
1
paragraph 1 the documents, funds, and stock certificates that were delivered to
Escrow Agent by such party pursuant to paragraph 1; provided, however, that the
funds returned to Ash shall include all interest accrued on such funds during
the pendency of the escrow. Upon completion of such deliveries, this Escrow
Agreement shall terminate.
In the event that the conditions set forth in paragraph 3 have been
satisfied on or prior to September 30, 1999, the Escrow Agent shall take the
following actions:
2.1 DELIVERIES TO ASH: Escrow Agent shall deliver to Ash one
original of each of the originally executed documents identified in paragraphs
1.1a and 1.2a, together with the stock certificate identified in paragraph 1.2b
that has been issued in the name of Ash.
2.2 DELIVERIES TO RSI: Escrow Agent shall deliver to RSi one
original of each of the originally executed documents identified in paragraphs
1.1a and 1.2a. Escrow Agent shall also deliver to RSi the funds, including all
interest accrued on such funds during the pendency of the escrow, delivered by
Ash pursuant to paragraph 1.1b.
3. CONDITIONS. The following conditions must all be satisfied to the
satisfaction of Ash, which satisfaction shall be evidenced by a certificate from
Ash to the Escrow Agent that such conditions have been satisfied. In the event
the Company has made efforts to satisfy such conditions, such consent shall not
be arbitrarily withheld but Ash may exercise reasonable discretion in whether to
give or withhold the consent on the basis of a reasonable good faith belief that
one or more of the conditions has not been satisfied. The certificate from Ash
to the Escrow Agent shall certify that the following conditions have been met or
waived to its satisfaction.
a. Ash shall have received a letter from AMRESCO Leasing
Corporation to the effect that all of the AMRESCO conditions precedent,
and other requirements have
2
been met by RSi and that AMRESCO is willing to comply with its funding
obligations under the Amended and Restated Program Agreement with RSi
dated March 10, 1999 for the funding of units.
x. Xxx shall have received a letter from RSG Investments, LLC
to the effect that its Equipment, Purchase, and Sale Agreement with
RSi has been modified and settled according to the following terms:
$300,000 has been completely forgiven or repaid through a revenue
sharing arrangement relative to a fixed number (not to exceed 2,000)
of refreshment centers, $500,000 has been converted to Preferred
Stock, $250,000 has been paid, and the balance of $750,000 will be
repaid at the time of the initial public offering of RSi or within
eight months of settlement. x. Xxx shall have received a certificate
from the president of RSi to the effect that:
- the Company believes that the letter identified in paragraph
3a above is true and correct and that all of the AMRESCO
conditions precedent, underwriting requirements and other
requirements have been met by RSi and that AMRESCO is
willing to comply with its funding obligations under the
Amended and Restated Program Agreement with RSi dated March
10, 1999 for the funding of units.
- the Company believes that the letter identified in paragraph
3b above is true and correct and that the Equipment,
Purchase, and Sale Agreement with RSi has been modified and
settled according to the terms set forth in paragraph 3b
above.
- the Company has effectuated a reverse stock split of the
common stock (but not the Preferred Stock) of the Company
and that the percentage of ownership represented by the
stock certificate set forth in
3
paragraph 1.2 hereof, on a fully diluted basis, is as
represented and warranted in the Acquisition Agreements.
- the representations and warranties set forth in the
Acquisition Agreements are true and correct as of a date
immediately preceding the distribution of escrowed
documents, funds, and stock certificate.
Ash will only issue such certificate to the Escrow Agent in the event that:
- Ash has no reasonable basis to believe that such certificate
of the president of RSi (see paragraph 3c) is inaccurate in
any material respect.
- Ash's financial and business due diligence as to RSi has
been completed to its satisfaction.
- All of the conditions of this paragraph 3 have been met or
waived to its satisfaction.
4. DUTIES OF ESCROW AGENT. This Agreement states the entire agreement
between the parties hereto and merges all prior negotiations, agreements and
understandings, if any, and states in full the representations and warranties
which have induced the Agreement, there being no representations or warranties,
other than those herein stated, with respect to the escrow property. Escrow
Agent's rights, duties and obligations are strictly limited to those expressly
set forth in the Escrow Agreement and Escrow Agent shall be under no implied
obligation or subject to any implied liability hereunder. Escrow Agent shall not
be required to take notice of any default or any other matter, nor be bound nor
required to give notice or demand, nor required to take any action whatever
except as herein expressly provided. Escrow Agent shall not be liable for any
loss or damage unless caused by its own gross negligence or willful misconduct.
The duties and liabilities of the Escrow Agent shall be determined solely by
this Agreement and not be reference to any other agreement among the parties.
4
5. AUTHORIZATION TO OPEN THE ACCOUNT. This Agreement is to be executed
by the parties hereto in sufficient numbers so that an Agreement bearing each
party's original signature can be held by the Escrow Agent. The parties hereto
hereby authorize Escrow Agent to establish and administer the account upon
receipt of a fully executed facsimile, telex or telecopy of the Agreement.
6. METHODS OF COMMUNICATION. Escrow Agent may act in reliance upon any
instrument or signature believed to be genuine and may assume that any person
purporting to give any notice or make any statement in connection with the
provisions hereof has been duly authorized to do so. Escrow Agent is requested
and authorized, but not obligated, to rely upon and act in accordance with any
communication which may be given by telephone, facsimile, telex or other
electronic transmission. Escrow Agent shall be entitled, but not bound, to treat
such communication as fully authorized by and binding, and shall be entitled to
take such steps in connection with or in reliance on such communication.
7. INVESTMENT INSTRUCTIONS. Escrow Agent shall have no duty or right to
invest funds on deposit in the escrow unless investment direction is provided.
Interest earned on the escrow account will be distributed to the party receiving
the funds as set forth in paragraph 2. All entities entitled to receive
interest from the escrow account will provide Escrow Agent with a W-9 or W-8 IRS
tax form prior to the disbursement of interest. A statement of citizenship will
be provided if requested by Escrow Agent.
8. DISBURSEMENT BY WIRE TRANSFER. Parties hereto may elect to request
transfer of funds by Fedwire from time to time, subject to the conditions stated
herein. Parties hereto agree that the wire transfer security procedures
identified on the attached Schedule A to this
5
Agreement are commercially reasonable. Parties hereto further agree that Escrow
Agent should use these procedures to detect unauthorized wire transfer payment
requests prior to executing such requests and further agree that any request
acted upon by the Escrow Agent in compliance with these security procedures,
whether or not authorized, shall be treated as an authorized request. Parties
hereto agree that the Escrow Agent has the right to change the wire transfer
security procedures from time to time and that use of any changed procedures
evidences the acceptance of the commercially reasonability of such change by the
parties hereto.
9. RIGHT TO INTERPLEAD. If any controversy arises between the parties
hereto or with any third person, Escrow Agent shall not be required to resolve
the same or to take any action to do so but may, at its discretion, institute
such interpleader or other proceedings as it deems proper. Escrow agent may rely
on any joint written instructions as to the disposition of funds, assets,
documents, or other held in escrow.
10. FEES. Escrow Agent shall be paid for services hereunder in
accordance with the attached fee schedule and shall be reimbursed for its out of
pocket expenses for fees of counsel in setting up the escrow. Payments of all
fees shall be the responsibility of RSi and may, to the extent of unpaid fees
and expenses, be deducted from any property placed within the escrow with Escrow
Agent. In the event that Escrow Agent is made a party to litigation with respect
to the property held hereunder, or brings an action in interpleader or in the
event that the conditions of this escrow are not promptly fulfilled, or Escrow
Agent is required to render any service not provided for in this Agreement and
fee schedule, or there is any assignment of the interest of this escrow or any
modification hereof, Escrow Agent shall be entitled to reasonable compensation
for such extraordinary services and reimbursement for all fees, costs, liability
and expenses, including attorney fees. The Escrow Agent may amend its fee
schedule from time to time on 60 days' prior written notice to the parties.
6
11. RESIGNATION AND TERMINATION. Escrow Agent may, upon providing
fifteen (15) days' written notice, resign its position and terminate its
liabilities and obligations hereunder. In the event Escrow Agent is not notified
within fifteen days of the Successor Escrow Agent, Escrow Agent shall be
entitled to transfer all funds and assets to a court of competent jurisdiction
with a request to have a successor appointed. Upon filing such action and
delivering such assets, Escrow Agent's obligations and responsibilities shall
cease. Similarly, RSi and Ash may also jointly terminate Escrow Agent and
appoint a Successor Escrow Agent by providing fifteen (15) days' written notice
to Escrow Agent.
12. INDEMNIFICATION. The parties hereto jointly and severally indemnify
and hold harmless the Escrow Agent from loss, damage, or any claims made against
the Escrow Agent arising out of or relating to the escrow Agreement, such
indemnification to include all costs and expense incurred by the Escrow Agent,
including, but not limited to, reasonable attorney fees; provided, that this
indemnity and hold harmless shall not apply to the acts of gross negligence or
willful misconduct of the Escrow Agent. This indemnity shall survive the
termination of this Agreement for any reason, or the resignation or removal of
Escrow Agent.
13. NOTICES. Notices, requests, demands and other communications
required under this Agreement shall be in writing considered validly served when
delivered by first-class mail, facsimile, telex or telecopy to address/telephone
number specified below:
RoomSystems, Inc.
000 Xxxxx 0000 Xxxx
Xx. Xxxxxx, Xxxx 00000
Tel.000-000-0000
Fax.000-000-0000
Attn: Xxxxxx X. Xxxxxxx
7
Ash Capital, LLC
0000 X. Xxxxxxxx Xxxxx, Xxxxx X00
Xxxx Xxxx Xxxx, Xxxx 00000
Tel.000-000-0000
Fax.000-000-0000
Attn: Xxx Xxxxx
U.S. Bank National Association
000 Xxxx Xxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attn: Xxxx Xxxxx
And any party may alter their address by giving written notice of such change.
14. AMENDMENTS. This Agreement may be amended, and observance of any
term of the Agreement may be waived, with (and only with) the written consent of
the parties hereto. This Agreement may be terminated at any time by a written
document signed to all parties to the original.
15. DISCLOSURE. The parties hereto hereby agree not to use the name of
U.S. BANK NATIONAL ASSOCIATION to imply an association with the transaction
other than that of a legal escrow agent.
16. BINDING AGREEMENT AND ASSIGNMENT. The foregoing provisions shall be
binding upon the assigns, successors, personal representatives and heirs of the
parties hereto, and shall be effective as of the day accepted by the Escrow
Agent. Any corporation into which the Escrow Agent may merge, sell, or transfer
its escrow business and assets, shall automatically be and become successor
Escrow Agent hereunder and vested with all powers as was its predecessor,
without the execution or filing of any instruments, or any further act, deed or
conveyance on the part of the parties hereto.
8
ROOMSYSTEMS, INC.
BY: /s/ XXXXXX X. XXXXXXX
----------------------
ITS: CEO
ASH CAPITAL, LLC
BY: /S/ XXXXX X. XXXXX
----------------------
ITS: MANAGER
The above Escrow Agreement received and accepted this 24th day of
August, 1999.
U.S. BANK NATIONAL ASSOCIATION
BY: /S/
--------------------------
ITS: VICE PRESIDENT
9
EXHIBIT I
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated the 30th
day of September, 1999, is entered into by and between ROOMSYSTEMS, INC., a
Nevada corporation (the "Company"), ASH CAPITAL, LLC, a Utah limited liability
company ("Ash"), SKM INVESTMENTS, LLC, a Utah limited liability company, C&W/RSI
PARTNERS, LLC, a Utah limited liability company, THUNDER MOUNTAIN PROPERTIES,
LC, a Utah limited liability company, and such other persons and entities that
are introduced to the Company by Ash and who purchase shares of Preferred Stock
(as defined) and become parties to this Agreement (each, a "Holder" or together
the "Holders"), on the following:
PREMISES
WHEREAS, concurrently with the execution of this Registration Rights
Agreement, the Company and the Holders have entered into a Subscription
Agreement and other related agreements, all of which shall be together referred
to as the "Purchase Agreement" pursuant to the terms of which the Company has
agreed to issue certain share of its Series B Preferred Stock ("Preferred
Stock"), to the Holders, all on the terms and conditions and in the amounts set
forth in the Purchase Agreement (the "Acquisition").
WHEREAS, the Holders and the Company are entering into this Agreement
and agree that this Agreement shall govern the rights of the parties respecting
the ownership, transferability, and registration of the resale of the
Registrable Securities (as defined below) issuable to Holders and acknowledge
and understand that other Holders may enter into this Agreement by executing the
Joinder to Registration Rights Agreement (the "Joinder") attached hereto as
Exhibit "A." This Agreement is the registration rights agreement contemplated by
Paragraph 8 of the Agreement of Understanding between the Company and Ash and
pursuant to which the other Holders are third party beneficiaries thereof.
WHEREAS, as a condition to the effectiveness of the obligations of the
Company and the Holder pursuant to the Purchase Agreement, the Company is
required to enter into this Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, which are
incorporated herein, the parties hereto agree as follows:
AGREEMENT
1. DEFINITIONS. For purposes of this Agreement:
(a) "AGREEMENT" shall mean this Agreement.
(b) "COMMON STOCK" shall mean the common stock of the Company,
into which the Preferred Stock is convertible.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(d) "HOLDER" means a holder of Registrable Securities or any
permitted assignee of any of the foregoing, if the transfer to such
assignee has been recorded in the corporate books and records of the
Company, in accordance with the provisions of this Agreement.
(e) "HOLDERS" shall mean the parties to this Agreement as
identified above and such other persons or entities that become a party
to this Agreement by executing the Joinder attached hereto as Exhibit
"A."
(f) "INITIATING HOLDERS" shall mean the Holders of not less than
50% of the Registrable Securities.
(g) "PREFERRED STOCK" shall mean the Company's 6% Series B
Convertible Preferred Stock.
(h) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act and the
declaration or ordering of effectiveness of such registration statement
or document.
(i) "REGISTRABLE SECURITIES" means all shares of Common Stock
issued or issuable by the Company in the Acquisition, including any
Common Stock issued or issuable on the exercise of options or warrants
issued or issuable by the Company, upon conversion of the Preferred
Stock sold to the Holders in accordance with the Agreement of
Understanding or the Purchase Agreement and any Common Stock otherwise
issued or issuable with respect to such shares of Preferred Stock or
Common Stock, PROVIDED, HOWEVER, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so
long as they have not been (x) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities
transaction; or (y) sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such
sale; or (z) have been held, either separately or in the aggregate, to
the extent tacking of holding periods is permitted under the Securities
Act, for the period specified in paragraph (k) of Rule 144 (or any
similar provision then in force), so as to permit the sale of such
shares without restrictions on transfer under the Securities Act.
(j) "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Section 5, 6 and 7 hereof, including all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, fees and
disbursements of one counsel for the Holders, fees and expenses
incurred in qualifying the subject securities for resale in applicable
states, and the expense of any special audits incident to or required
by any such registration (but
1
excluding the compensation of regular employees of the Company which
shall be paid in any event by the Company).
(k) "RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear the legend as set forth in this Agreement.
(l) "SECURITIES ACT" means the Securities Act of 1933, as
amended or any similar or successor federal statute and the rules and
regulations of the SEC thereunder, all as the same shall be in effect
at the time.
(m) "SEC" means the United States Securities and Exchange
Commission.
(n) "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and all fees and disbursements of
counsel for the Holders.
2. RESTRICTIONS ON TRANSFERABILITY. The Registrable Securities shall
not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act and to preserve and protect the best
business interests of all stockholders of the Company. Each Holder will cause
any proposed purchaser, assignee, transferee or pledgee of the Registrable
Securities to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. The face of each certificate representing any
of the Registrable Securities shall (unless otherwise permitted by the
provisions to this Agreement set forth below) bear a conspicuous legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
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.
Each Holder consents to the Company making a notation on its records and giving
instructions to any transfer agent of the Restricted Securities in order to
implement the restrictions on transfer established in this Section.
2
4. NOTICE OF PROPOSED TRANSFERS. Each Holder of each certificate
represented Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section. Prior to any proposed sale,
assignment, pledge, or other transfer for value of any Restricted Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, each Holder shall give written notice to the
Company of such Holders' intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed sale, assignment, pledge, or other transfer for value in reasonable
detail, which shall be accompanied, at such Holder's expense, by either (a) an
unqualified written opinion of legal counsel, whose legal opinion shall be
reasonably satisfactory to the Company, addressed to the Company, based on the
specific terms of the proposed transaction, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration under
the Securities Act; or (b) a "no action" letter from the SEC to the effect that
the transfer of such securities without registration will not result in a
recommendation by the staff of the SEC that enforcement action be taken with
respect thereto; (c) an interpretive response from the SEC concluding, based on
the specific terms of the proposed transaction, that such transaction may be
effected without registration under the Securities Act; or (d) any other
evidence reasonably satisfactory to counsel to the Company, whereupon each
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
such Holder to the Company. The Company will not require such a legal opinion or
"no action" or interpretive letter (x) in any transaction in compliance with
Rule 144, (y) in any transaction in which a Holder that is a corporation
transfers Restricted Securities solely to its majority owned subsidiaries or
affiliates for no consideration, or (z) in any transaction in which a Holder
that is a partnership transfers Restricted Securities solely to partners thereof
for no consideration; PROVIDED that in each case each transferee agrees in
writing to be subject to the terms of this Section. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except is
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such Holder and the Company, such
legend is not required in order to establish compliance with any provision of
the Securities Act.
5. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive
from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable state securities laws and
appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations)
as may be so requested and as
3
would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of the written
notice from the Company; PROVIDED, HOWEVER, that the Company shall not
be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this subsection:
(A) That is not permitted by the SEC;
(B) In any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification or compliance unless the Company is already
subject to service in such jurisdiction and except as may be
required by the Securities Act;
(C) Prior to the earlier of the date that is (1)
nine months following the last closing of the Company's
initial public offering, or (2) March 31, 2001; or
(D) After the Company has effected two (2) such
registrations pursuant to this subparagraph 5, each such
registration has been declared or ordered effective, and each
such registration statement remained effective for at least 90
days, excluding any period during which securities could not
be sold thereunder as described in Sections 9(f) and 10(b).
(b) UNDERWRITING. In the event that a registration pursuant to
Section 5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to this
Section. The right of any Holder to registration pursuant to this Section shall
be conditioned upon such Holder's participation in the underwriting arrangements
required by this Section and the inclusion of such Holder's Registrable
Securities in the underwriting, to the extent requested and provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section, if the managing underwriter advises the Company in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the
4
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter, and the Initiating Holders. The
Registrable Securities or other securities so withdrawn shall also be withdrawn
from registration, and such Registrable Securities shall not be transferred in a
public distribution prior to 90 days after the date of the final prospectus used
in such public offering.
6. PARTICIPATORY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time,
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder other than (i) a registration
relating solely to employee benefit plans, or (ii) a registration relating
solely to a transaction of the type referred to in SEC Rule 145(a), the Company
will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under state securities laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities
specified in a written request or requests made within twenty (20) days
after such written notice from the Company, but only to the extent that
such inclusion is permitted by the SEC and will not diminish the number
of securities included by the Company or by stockholders who have
demanded such registration.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to this Section. In such event, the right of any Holder to registration
pursuant to this Section shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting, to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
stockholders who have demanded such registration, as the case may be).
Notwithstanding any other provision of this Section, if the managing underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting, on a PRO RATA
basis based on the total number of securities (including Registrable Securities)
entitled to registration pursuant to registration rights granted by the Company;
PROVIDED, HOWEVER, that no such reduction may reduce the number of securities
being sold by the Company for its own account. To facilitate the allocation of
shares in accordance with the above provisions, the
5
Company or the underwriters may round the number of shares allocated to any
Holder or other stockholder to the nearest 100 shares.
If any Holder or other stockholder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety (90) days after the date of
the final prospectus in the registration statement relating thereto.
-5-
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
7. REGISTRATION ON FORM S-3.
(a) If any Holder or Holders of Registrable Securities requests
that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3) for a public Offering of shares of
Registrable Securities, the reasonably anticipated aggregate price to
the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use
Form S-3 to register the Registrable Securities for such an offering,
the Company shall use its best efforts, to cause such Registrable
Securities to be registered for the offering on such form; PROVIDED,
HOWEVER, that the Company shall not be required to effect more than one
registration pursuant to this Section in any consecutive twelve (12)
months. The Company will (i) promptly give written notice of the
proposed registration to all other Holders, and (ii) as soon as
practicable, use its best efforts to effect such registration
(including the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of the
Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request
received by the Company within twenty (20) days after receipt of
written notice from the Company. The substantive provisions of Section
5(b) shall be applicable to each registration initiated under this
Section.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section (i) not permitted
by the SEC; (ii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act; (iii) during the period
starting with the date sixty (60) days prior to
6
the filing of, and ending on the earlier of (x) one year after the
date of filing of, or (y) a date six (6) months following the
effective date of, a registration statement (other than with respect
to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not
appropriate for the registration of Registrable Securities), PROVIDED
that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed
by the President of the Company stating that, in the good faith
judgment of the Board of Directors, it would be seriously detrimental
to the Company or its shareholders for registration statements to be
filed in the near future, then the Company's obligation to use its
best efforts to file a registration statement shall be deferred for a
period not to exceed one hundred twenty (120) days after the receipt
of the request to file such registration by such Holder or Holders,
PROVIDED, HOWEVER, that the Company shall be permitted to defer a
registration pursuant to this paragraph (B)(iv) only once in any
twelve month period.
8. LIMITATIONS ON SUBSEQUENT PARTICIPATORY REGISTRATION RIGHTS. The
Company has not and from and after the date hereof, the Company shall not,
without the consent of each Holder of at least 50% of the Registrable
Securities, enter into any agreement granting any holder or prospective holder
of any securities of the Company registration rights with respect to such
securities unless (a) such new registration rights, including market standoff
obligations, are on a PARI PASSU basis with those rights of the Holders
hereunder or (b) such new registration rights, including market standoff
obligations, are subordinate to the registration rights granted Holders in
Section 6 hereof.
-6-
9. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall
proceed diligently and in good faith to:
(a) Prepare and file with the SEC a registration statement
with respect to the resale of such Registrable Securities by the
Holders and use commercially reasonable best efforts to cause such
registration statement to become effective and keep such registration
statement effective until the earliest of the passage of two years,
until all Registrable Securities included therein have been sold by the
selling Holder(s), or until the Company has received an opinion from
its legal counsel that the sale of such securities is no longer
required to be registered by reason of Rule 144(k) adopted under the
Securities Act;
(b) Use commercially reasonable best efforts to prepare and
file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement for a period of at least one
year, excluding any period during which securities cannot be sold
thereunder as described in subparagraph (f) of this Section and Section
10(b);
7
(c) Furnish to the Holders of the Registrable Securities
included in such registration statement such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(d) If the offer and sale of the Registrable Securities is
not preempted from the jurisdiction of state securities laws, use
commercially reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders; PROVIDED THAT, the Company is not
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions;
(e) In the event of any underwritten public Offering of
Registrable Securities, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such Offering;
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event that limits the Holder's ability to rely on such
registration statement, including any event that results in the
prospectus included in such registration statement, as then in effect,
containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing; any stop order issued by the SEC or any state securities
agency; or the suspension or limitation of any state exemption on which
the Company and the Holders are relying, in which case the Company
shall use commercially reasonable best efforts to file an amendment to
update the registration statement to the extent necessary or to take
other remedial action;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number
for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(i) In the event of an underwritten public offering of
Registrable Securities, use commercially reasonable best efforts to
furnish, if required under the terms of the underwriting agreement, on
the date that such Registrable Securities are to be delivered to the
underwriters for sale in connection with a registration: (1) an
opinion, dated such date, of the counsel representing the Company for
the purposes of such registration, in
8
form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if any,
and to the Holders requesting registration of Registrable Securities
and (2) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants of the
Company, in form and substance as is customarily given in independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
10. COOPERATION BY THE HOLDERS.
(a) Each Holder shall furnish to the Company in writing such
information and affidavits as the Company may reasonably require from
each Holder in connection with any registration, qualification, or
compliance with respect to such Registrable Securities. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the
Company such information regarding the Holder, the Registrable
Securities and other securities in the Company held, and the intended
method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
(b) Each Holder, upon receipt of any notice from the Company of
the happening of any event of the kind described in paragraph (f) of
Section 9, will forthwith discontinue disposition of the Registrable
Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (f) of
Section 9 or until it is advised in writing by the Company that the use
of such prospectus may be resumed and has received copies of any
additional or supplemental filings that are incorporated by reference
in such prospectus, and if so directed by the Company, each Holder
will, or will request the managing underwriter or underwriters, if any,
to deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(c) At the end of any periods during which the Company is
obligated to keep any registration statement current and effective as
provided herein, such Holder shall discontinue sales of securities
pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the securities
covered by such registration statement which remain unsold, and such
Holder shall notify the Company of the number of securities registered
which remain unsold promptly after receipt of such notice from the
Company.
(d) Each Holder acknowledges that the registration of the sale
of the Registrable Securities or the availability of an exemption from
registration in certain states may impose certain limitations and
conditions on the manner and nature of such sales. The Company shall
advise each Holder in writing of such registration or exemption and the
9
related limitations and conditions from time to time. Each Holder shall
be solely responsible for such Holder's own compliance with such
limitations and conditions.
11. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 5, 6 and 7 shall be borne
by the Company. All Selling Expenses in any such registration shall be borne by
the Holders of Registrable Securities PRO RATA on the basis of the number of
shares to be registered.
12. DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
13. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder whose Registrable Securities are included
in a registration statement, any underwriter (as defined in the
Securities Act) for such Holder, and each person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities
to which they may become subject under the Securities Act, insofar as
such losses, claims, damages, or liabilities arise out of or are based
upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act or any rule or regulation promulgated under the
Securities Act; and the Company will pay to each such Holder,
underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED,
HOWEVER, that the indemnity agreement shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if
such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, underwriter, or controlling person.
(b) To the extent permitted by law, each selling Holder whose
Registrable Securities are included in a registration statement will
indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the
10
Securities Act, any underwriter, any other Holder selling securities
in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or
liabilities to which any of the foregoing persons may become subject
under the Securities Act or the Exchange Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such
Holder will pay any legal or other expenses reasonably incurred by any
person intended to be indemnified in connection with investigating or
defending any such loss, claim, damage, liability, or action;
PROVIDED, HOWEVER, that the indemnity agreement shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of each
Holder, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing provision, each Holder's indemnification
obligation under this subparagraph shall not exceed the amount
received by such Holder on the sale of securities pursuant to the
registration statement.
(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this paragraph, deliver to
the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and
to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; PROVIDED,
HOWEVER, that an indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this paragraph, but the
omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified
party otherwise than under this paragraph.
(d) If the indemnification provided for in this Section is held
by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage,
or expense referred to therein, then the indemnifying party, in lieu to
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the
11
indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relating intent, knowledge, access
to information, and opportunity to correct or prevent such statement
or omission. Notwithstanding the foregoing provision, the contribution
obligation of each Holder shall not exceed the amount received by that
Holder from the sale of securities pursuant to the registration
statement.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with an underwritten
public officer are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(f) The obligations of the Company and Holders under this
paragraph shall survive the completion of any offering of Registrable
Securities pursuant to a registration statement.
14. CURRENT PUBLIC INFORMATION. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Restricted Securities to the public without registration,
after such time as the Shares have been held, either separately or in the
aggregate, to the extent tacking of holding period is permitted under the
Securities Act, to satisfy the requirements of paragraph (d) or Rule 144 through
the date after which the Restricted Securities can be resold without restriction
and without complying with Rule 144 pursuant to the provisions of paragraph (k)
of Rule 144 or any successor rule, the Company agrees to use its best efforts
to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act (at any time
after it has become subject to such reporting requirements); and
(c) Furnish to the Holders forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company
for an offering of its securities to the general public) and of the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the
12
most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as an Investor may reasonably
request in availing itself of any rule or regulation of the SEC
allowing an Investor to sell any such securities without registration.
15. TRANSFER OF REGISTRATION RIGHTS. The rights and all related
obligations under this Agreement shall automatically be transferred to and
binding on any transferee or assignee of the Registrable Securities; PROVIDED
THAT: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; (c) the transfer or
assignment is in compliance with the Securities Act and applicable state
securities laws or an exemption from the registration requirements of the
Securities Act and applicable state securities laws; and (d) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act.
16. "MARKET STAND-OFF" AGREEMENT. In order to facilitate the
possibility of future public offerings of Common Stock, the Holder and any
subsequent Holder agree that the shares of Common Stock included in the
Registrable Securities will not be resold during a period commencing fifteen
(15) days preceding the effective date of a registration statement under the
Securities Act for a public offering for cash by the Company of its Common Stock
or securities convertible into or exercisable or exchangeable for its Common
Stock and continuing until the earlier of abandonment of the proposed public
offering or ninety (90) days following the date of the last closing in the
public offering period. Holders of such securities shall cooperate with the
Company in providing reasonable written assurances respecting the foregoing to
the underwriter of any such public offering. During the above restricted period,
Holders shall not directly or indirectly sell, offer to sell, contract to sell
(including any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) shares of
Common Stock included in the Registrable Securities at any time during such
period except securities included in such registration. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to such shares of Common Stock held by each Holder, which shall be
binding on any assignee or successor of such Holder (and the shares or
securities of every other person subject to the foregoing restriction), until
the end of such restricted period.
17. MISCELLANEOUS.
(a) Other Holders of Preferred Stock or Registrable Securities
may become parties to this Agreement by the execution of the Joinder
attached hereto as Exhibit A and the delivery thereof by such Holder to
the Company and other Holders. From and after such execution and
delivery, any person becoming a party hereto shall be deemed to be a
"Holder." To the extent that any shares of Preferred Stock or
Registrable Securities are issued to a person or entity that subscribes
to purchase Preferred Stock on terms substantially identical to those
set forth in the Agreement, the Holders consent to the admission of any
such new Holder.
13
(b) Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including permitted transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(c) This Agreement shall be governed by and construed under the
laws of the State of Utah.
(d) 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.
(f) 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.
(g) This Agreement may be executed in one or more counterparts
of like tenor, each of which shall be deemed an original, and all of
which taken together shall be considered a single instrument.
(h) Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed
effectively given if delivered personally or by facsimile transmission
(if receipt is confirmed by the facsimile operator of the recipient),
or delivered by overnight courier service or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the
parties at the address indicated for such party on the signature page
hereof. For the purposes of any notice required to be given to Holders,
the Company can rely on the address for the registered holder of the
securities in question as reflected on its stock transfer records, and
such notice shall be deemed adequate notice to the original or any
subsequent Holder. Any notice hereunder delivered in person or by
facsimile (if receipt is confirmed by the facsimile operator of the
recipient) shall be deemed given on the date hereof; any notice by
registered or certified mail shall be deemed given three days after the
date of mailing; and any notice by overnight courier shall be deemed
given two days after shipment or the date of receipt, whichever is
earlier, PROVIDED that notices of a change of address shall be
effectively only upon receipt thereof.
(i) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may
be entitled.
14
(j) The parties hereby specifically acknowledge that monetary
damages for breach of this Agreement may be difficult to determine
and/or inadequate to compensate the parties for such breach and hereby
agree that, in the event of any breach, the parties, in addition to any
other remedies they may have under the terms of this Agreement or at
law, shall have the right to bring an action in equity for an
injunction against the breach or threatened breach or seeking specific
performance of the obligations of the other party under the terms of
this Agreement.
(k) Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Holders of at least
two-thirds of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and
the Company.
(l) 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.
(m) All shares of Registrable Securities held or acquired by
affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this
Agreement.
(n) This Agreement constitutes the full and entire understanding
and agreement between the parties with regard to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement this 30th
day of September, 1999.
ROOMSYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx, CEO
---------------------------
Duly authorized officer
15
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Holder has caused this Registration
Rights Agreement to be executed to be effective as of the date of the Agreement.
ASH CAPITAL, LLC
By PROVIDENCE MANAGEMENT, LLC
By: /s/ Xxxxx X. Xxxxx
-----------------------
Manager
Printed Name: Xxxxx X. Xxxxx
---------------------------
0000 Xxxxx Xxxxxxxx Xxxxx,
Address: Suite B25
---------------------------
Xxxx Xxxx Xxxx, Xxxx 00000
---------------------------
16
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Holder has caused this Registration
Rights Agreement to be executed to be effective as of the date of the Agreement.
SKM INVESTMENTS, LLC
By PROVIDENCE MANAGEMENT, LLC
By: /s/ Xxxxx X. Xxxxx
----------------------------
Manager
Printed Name: Xxxxx X. Xxxxx
-----------------------------
0000 Xxxxx Xxxxxxxx Xxxxx,
Address: Suite B25
-----------------------------
Xxxx Xxxx Xxxx, Xxxx 00000
-----------------------------
17
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Holder has caused this Registration
Rights Agreement to be executed to be effective as of the date of the Agreement.
C&W/RSI PARTNERS, LLC
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------------------
Manager
Printed Name: Xxxxx X. Xxxxxxxxxxx
-----------------------------
0000 X. Xxxxxxxxx Xxxx,
Xxxxxxx: No. 350
----------------------------------
Xxxx Xxxx Xxxx, Xxxx 00000
----------------------------------
18
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Holder has caused this Registration
Rights Agreement to be executed to be effective as of the date of the Agreement.
THUNDER MOUNTAIN PROPERTIES, LC
By: /s/ XxXxx X. Xxxxxxxx
----------------------------------------
Manager
Printed Name: XxXxx X. Xxxxxxxx
-------------------------
891 E. 280 N.,
Address: Xxxx, Xxxx 00000
-------------------------------
19
JOINDER IN
REGISTRATION RIGHTS AGREEMENT
THIS JOINDER IN REGISTRATION RIGHTS AGREEMENT (this "Joinder") is made
and entered into effective _____________, ____, among ROOMSYSTEMS, INC., a
Nevada corporation (the "Company"), the Holders (as defined in the Registration
Rights Agreement), and _____________ ("New Holder") who has purchased shares of
Preferred Stock.
PREMISES:
A. New Holder has, contemporaneously with the execution of this
Joinder, acquired, of record and beneficially, ______ shares (the "Shares") of
6% Series B Convertible Preferred Stock ("Preferred Stock") of the Company.
B. The Company and certain Holders of the Preferred Stock are parties
to a Registration Rights Agreement (herein so called) dated August ___, 1999,
under which the Company has granted to Holders certain registration rights with
respect to the resale of their Registrable Securities (as defined in the
Registration Rights Agreement).
C. New Holder desires to become a party to the Registration Rights
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other valuable consideration, receipt of which is
hereby acknowledged, it is hereby agreed among the parties hereto as follows:
1. Pursuant to Section 17(a) of the Registration Rights Agreement, New
Holder hereby subjects the Shares to the Registration Rights Agreement and
consents and agrees to be bound by the Registration Rights Agreement as a Holder
under the Registration Rights Agreement for all purposes.
2. New Holder hereby joins in and agrees to be bound by all of terms
and conditions of the Registration Rights Agreement as if an original signature
thereto.
3. New Holder hereby specifies the address set forth beneath New
Holder's signature below as the address at which any notice is to be given to
such New Holder pursuant to Section 17(h) of the Registration Rights Agreement
(subject to the right of New Holder to specify a different address).
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IN WITNESS WHEREOF, the parties hereto have executed this Joinder in
Registration Rights Agreement as of the date first above written.
NEW HOLDER:
Address: --------------------------------
--------------------------------
ROOMSYSTEMS, INC.
By:
------------------------------------------
, President
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