VOTING TRUST AGREEMENT
Relating to Shares of
Rhythms NetConnections Inc.
THIS VOTING TRUST AGREEMENT (the "Agreement') is made and entered into
as of May 5, 1998, by and among Sprout Capital VII, L.P. ("Sprout VII"), First
Union Trust Company, National Association, as voting trustee (together with its
successors in such capacity, the "Trustee") and Xxxxxxxxx, Xxxxxx & Xxxxxxxx,
Inc. ("DLJ").
WHEREAS, the parties hereto desire to record their arrangements with
respect to shares of Series A Convertible Preferred Stock ("Series A
Preferred"), and Series B Convertible Preferred Stock ("Series B Preferred") of
Rhythms NetConnections Inc., a Delaware corporation (the "Corporation").
NOW, THEREFORE, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. In this Agreement:
(a) "Control Affiliate" means DLJ or any or entity controlling,
controlled by or under common control with, directly or indirectly, DLJ.
(b) "DLJ" means Xxxxxxxxx, Lufkin & Xxxxxxxx, Inc., a Delaware
corporation, and its successors.
(c) "DLJSC" means Xxxxxxxxx, Lufkin & Xxxxxxxx Securities
Corporation, a Delaware corporation, and its successors.
(d) "DLJ Affiliate" means any person or entity who is a Control
Affiliate, Employee Affiliate or Other Affiliate.
(e) "Employee Affiliate" means any person employed by (or who is the
spouse, relative or relative of a spouse, in each case residing in the home of a
person employed by) a Control Affiliate, as reflected in the records of the
Trustee.
(f) "Holder" means from time to time, any person or entity for whom
Shares are held hereunder by the Trustee.
(g) "Other Affiliate" means any person or entity which has a
substantial business relationship with a Control Affiliate and which is not
itself a Control Affiliate.
(h) "Securities Act" means the Securities Act of 1933, as amended.
(i) "Share" means a share of Common Stock or a Share Equivalent.
(j) "Share Equivalent" means any security convertible into,
exchangeable for, or carrying the right to acquire Common Stock of the
Corporation ("Common Stock") or subscriptions, warrants, options, rights or
other arrangements obligating the Corporation to issue or dispose of any shares
or other voting securities of the Corporation, including, without limitation,
the Series A Preferred and the Series B Preferred.
2. DEPOSIT.
(a) Sprout VII, by delivery to the Trustee of certificates
representing the same, duly endorsed or accompanied by appropriate instruments
of transfer herewith, duly assigns and delivers or has caused to be duly
assigned and delivered to the Trustee to be held pursuant to this Agreement
2,609,686 shares of Series A Preferred and 390,966 shares of Series B Preferred
(the "initial deposit"). Sprout VII represents that the Shares in the initial
deposit are all of the Shares beneficially owned by Sprout VII. Subject to the
provisions of Section 2(b) below, DLJ, by delivery to the Trustee of
certificates representing the same, duly endorsed or accompanied by appropriate
instruments of transfer, shall duly assign and deliver or cause to be duly
assigned and delivered to the Trustee all Shares (i) received upon conversion of
Shares held by the Trustee and (ii) owned by any DLJ Affiliate or acquired by
any DLJ Affiliate at any time in excess of 5% in the aggregate of the total
number of shares of the voting capital stock (of any class) of the Corporation
then outstanding. Each person or entity for whom Shares are held from time to
time by the Trustee hereunder as reflected in the records of the Trustee shall
be a Holder and shall be bound by all the provisions of this Agreement
applicable to Holders.
(b) In determining, for purposes of Section 2(a) only, whether more
than 5% in the aggregate of the total number of shares of the voting capital
stock (of any class) of the Corporation at any time then outstanding are owned
by DLJ Affiliates, there shall be excluded from the calculation of shares owned
by DLJ Affiliates, and no deposit of Shares shall be required hereunder as a
consequence of any Shares:
(i) held by DLJSC or any other Control Affiliate which is registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), if such Shares are held in connection with its normal
trading activities as a broker-dealer; PROVIDED, HOWEVER, that DLJ will
cause DLJSC or such other Control Affiliate to agree that it will not vote
such Shares,
(ii) held by DLJSC or any other Control Affiliate which is a
registered broker-dealer under the Exchange Act, if such Shares are held in
a syndicate or trading account and were acquired in its capacity as an
underwriter or placement agent whether in an offering registered under the
Securities Act or otherwise; PROVIDED, HOWEVER, that DLJ will cause DLJSC
or such other Control Affiliate to agree that it will not vote such Shares,
(iii) held by DLJSC for the account of any person or entity other
than a Control Affiliate or Employee Affiliate or in the name of a customer
account, which customer is a person or entity other than a Control
Affiliate or Employee Affiliate; PROVIDED, HOWEVER, that DLJSC may vote the
Shares only when instructed by the beneficial owner thereof or
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as otherwise permitted under the rules of all exchanges, if any, on which
any class of Shares is listed,
(iv) held by an Employee Affiliate other than a person holding the
position of Senior Vice President or above (or performing the comparable
function) of DLJ or any of its subsidiaries, unless in either case a
contract or other arrangement (other than this Agreement) regarding the
voting of such Shares exists between such Employee Affiliate or Other
Affiliate and any Control Affiliate, or
(v) held by the Trustee pursuant to this Agreement.
3. TRANSFER ON BOOKS OF CORPORATION. The Trustee shall, to the
extent applicable, cause all Shares transferred to or deposited with it in its
capacity as Trustee hereunder to be represented by new certificates issued to
the Trustee. The Trustee's newly issued certificates shall state that they are
issued pursuant to this Agreement, and shall bear the legend required under the
Voting Agreement (as hereinafter defined). The Trustee will issue and deliver
(at the address of such Holder provided in writing to the Trustee) to each
Holder a Voting Trust Certificate (a "Trust Certificate") for the number of
Shares so transferred or deposited with the Trustee and held for the Trustee for
such Holder.
4. FORM. Trust Certificates shall be in substantially the following
form (with such modifications as may be appropriate if the applicable Trust
Certificate represents Share Equivalents);
TRANSFER OF THIS VOTING TRUST CERTIFICATE IS SUBJECT TO
TERMS AND CONDITIONS SET FORTH IN THE VOTING TRUST AGREEMENT
DATED AS OF MAY 5, 1998 (THE "VOTING TRUST AGREEMENT"), AND
THE AMENDED AND RESTATED VOTING AGREEMENT DATED AS OF MARCH
12, 1998 (THE"VOTING AGREEMENT"), COPIES OF WHICH HAVE BEEN
FILED IN THE REGISTERED OFFICE IN THE STATE OF DELAWARE OF
RHYTHMS NETCONNECTIONS INC, A DELAWARE CORPORATION (THE
"CORPORATION"). SUCH COPIES ARE OPEN TO INSPECTION DAILY
DURING BUSINESS HOURS BY ANY STOCKHOLDER OF THE CORPORATION
OR ANY BENEFICIARY OF THE VOTING TRUST AGREEMENT OR PARTY TO
THE VOTING AGREEMENT.
Certificate No.____
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RHYTHMS NETCONNECTIONS INC.
VOTING TRUST CERTIFICATE
This certifies that ("Holder") has
transferred to the undersigned Trustee or is otherwise the beneficial
owner of shares of [COMMON STOCK], [SERIES A
PREFERRED STOCK] [SERIES B PREFERRED STOCK] of the Corporation, to be
held by the Trustee pursuant to the terms of the Voting Trust
Agreement and Voting Agreement, copies of which have been delivered to
the above-named Holder and filed in the registered office of the
Corporation in the State of Delaware. The Holder, or his registered
assigns, will be entitled (i) to receive payments equal to any and all
cash dividends collected by the Trustee on the above stated number of
shares, (ii) to receive all other dividends or distributions in
respect of such Shares received by the Trustee except to the extent
that property received is required to be deposited in the trust
created by the Voting Trust Agreement, and (iii) to the delivery of a
certificate or certificates for that number of shares on the
termination of the Voting Trust Agreement, in accordance with its
provisions.
This Voting Trust Certificate is transferable on the books
maintained by the Trustee at the principal corporate trust office of
the Trustee by the Holder hereof, in person or by duly authorized
attorney, and upon surrender hereof; and until so transferred the
Trustee may treat the registered Holder hereof as the absolute owner
hereof for all purposes.
The Holder, by the acceptance of this Voting Trust Certificate,
agrees to be bound by all of the provisions of the Voting Trust
Agreement and Voting Agreement as fully as if its terms were set forth
in this Voting Trust Certificate.
EXECUTED this _____ day of ______________, ____
-------------------------------------------------
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
------------------------------------------
"Trustee"
[Form of Assignment for Reverse of Voting Trust Certificate]
For value received,_________________ hereby sells, assigns, and
transfers unto _________________ the within Voting Trust Certificate
and all rights and
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interests represented thereby, and does hereby irrevocably constitute and
appoint _____________ attorney to transfer such Voting Trust Certificate on
the books of the within-named Trustee with full power of substitution in
the premises.
Date:___________________________
Signed:_________________________
5. ADDITIONAL TRUST CERTIFICATES. Any Holder may at any time
deposit with the Trustee additional certificates (or the equivalent evidence of
ownership in the case of Share Equivalents) for Shares. Any DLJ Affiliate
acquiring Shares shall, if required under this Agreement, become a Holder by (a)
depositing, or causing to be deposited, certificates (or the equivalent evidence
of ownership in the case of Share Equivalents) for Shares, duly endorsed for
transfer, with the Trustee and (b) accepting a Voting Trust Certificate in
respect of such Shares.
6. VOTING; POWERS. At all times prior to the termination of the
voting trust created herein, the Trustee shall have the exclusive right to vote
the Shares deposited with it hereunder (the "Deposited Shares"), or give written
consent, in person or by proxy, at all meetings of stockholders of the
Corporation, and in all proceedings in which the vote or consent, written or
otherwise, of the holders of Shares may be required or authorized by law.
The Trustee shall vote all Deposited Shares in accordance with this
Agreement and with the Amended and Restated Voting Agreement dated as of March
12, 1998 by and among the Corporation, Sprout VII and the other investors listed
therein, as the same may be amended from time to time (as so amended, the
"Voting Agreement"). The Trustee shall have full power and authority, and it is
hereby empowered and authorized, to become a party to and perform its
obligations under, to consent to waivers and amendments of, and otherwise take
or refrain from taking discretionary action under or pursuant to, the Voting
Agreement, in its sole and absolute discretion, and, subject to the Voting
Agreement, to vote the Deposited Shares in its sole and absolute discretion, it
being understood that the Trustee will not consult with any DLJ Affiliate
regarding such voting of such Shares, and to do any and all other things and
take any and all other actions as fully as any stockholder of the Corporation
might do if personally present at a meeting of the stockholders of the
Corporation. The Trustee may rely (and shall be fully protected in so relying)
upon advisors; PROVIDED THAT such advisors are not DLJ Affiliates. At any time
upon the written request of the Trustee, DLJ shall promptly provide to the
Trustee such information as is reasonably necessary (including certificates
and/or other documents) in order to enable the Trustee to carry out the
foregoing obligations; PROVIDED THAT, for all purposes of this Agreement, the
Trustee shall have no duty to inquire or investigate whether a person or entity
is a DLJ Affiliate, shall not be responsible for and shall have no personal
liability in connection with identifying or failing to identify a person or
entity as a DLJ Affiliate unless a Responsible Officer of the Trustee has actual
knowledge that such person or entity is a DLJ Affiliate, and shall be entitled
to assume and be fully protected in assuming that a person or entity is not a
DLJ Affiliate unless a Responsible Officer of the Trustee has actual knowledge
that such person or entity is a DLJ Affiliate. "Responsible Officer of the
Trustee" shall mean an officer of the Trustee in its principal corporate trust
office having primary responsibility for the administration of the voting trust
created under this Agreement.
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7. DIVIDENDS. If the Corporation pays or issues dividends or makes
other distributions on the Deposited Shares, the Trustee shall accept and
receive such dividends and distributions. Upon receipt of dividends and
distributions the same shall be prorated among the Holders that have a
beneficial interest hereunder in the Deposited Shares with respect to which such
dividend or other distribution was made in accordance with their interests and,
subject to the next sentence, the amount shall be distributed promptly pursuant
to transfer instructions set forth on Schedule B attached hereto or otherwise
communicated in writing to the Trustee. If the dividend or distribution is paid
or made in the form of Shares, such Shares shall be held by the Trustee under
the voting trust created herein and new Trust Certificates representing the
Shares received shall be issued to the applicable Holders. Holders entitled to
receive such dividends or distributions, or Trust Certificates in respect
thereof, described in this Section 7 shall be those Holders registered as such
on the transfer books of the Trustee at the close of business on the day fixed
by the Corporation for the taking of a record to determine those holders of its
stock entitled to receive such dividends or distributions. In the performance
of its duties to deliver dividends or distributions received by it under this
Agreement, the Trustee shall not be obligated to risk its own funds and will not
be personally liable for taxes or other charges related to the delivery of such
dividends or distributions.
8. TERMINATION. The voting trust created herein is expressly
declared irrevocable and such voting trust and this Agreement shall terminate on
the earlier to occur of:
(a) ten years from the date hereof; or
(b) The written election of DLJ or the Holder(s) of Trust
Certificates representing the beneficial interest in 50% or more of the
Deposited Shares (notice of which shall be provided to all other parties hereto
and all other Holders), but only if prior to the time notice is given:
(i) DLJ shall have received an opinion of independent nationally
recognized counsel who are experts in matters involving the
federal securities law, that, immediately after such
termination, no DLJ Affiliate will be an of "affiliate" of
the Corporation within the meaning of Rule 144 under the
Securities Act; and
(ii) Trustee shall have received a certificate of an officer of
DLJ (in relying on which the Trustee shall be fully
protected) to the effect that clause (i) above has been
satisfied, together with a copy of the opinion called for
thereby; or
(c) The written election of DLJ or the Holders of Trust Certificates
representing the beneficial interest in 50% or more of the Deposited Shares
(notice of which shall be provided to all other parties here to and all other
Holders) but only if prior to the time the notice is given the Trustee shall
have received a certificate of an officer of DLJ to the effect that no DLJ
Affiliate intends to make a market in any security of the Corporation (in
relying on which the Trustee shall be fully protected); or
(d) transfer of all of the Deposited Shares in accordance with
Section 9; or
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(e) the effective date of a liquidation or dissolution of the
Corporation.
An election pursuant to section 8(b) or 8(c) above shall be effective upon
delivery of notice hereof (together with the required copy of the opinion) to
the Trustee.
Upon the termination of the voting trust herein created, the Holders
shall surrender their Trust Certificates to the Trustee, and shall execute and
deliver any agreement or other document required by the Voting Agreement, and
the Trustee shall deliver or cause to be delivered to the Holders certificates
(or the equivalent evidence of ownership in the case of Share Equivalents) for
Shares, properly endorsed for transfer (to the extent necessary), equivalent to
the number and type of Shares the beneficial interest in which was represented
by the respective Trust Certificates surrendered.
9. TRANSFER. Except as provided in Sections 8 and 10 and in
subsections (a), (b), and (c) of this Section 9, certificates (or the equivalent
evidence of ownership in the case of Share Equivalents) for Deposited Shares may
not be delivered by the Trustee to a Holder, a Holder's designee or any other
third party prior to the termination of the voting trust created herein.
(a) A Holder may notify the Trustee in writing that the Holder
desires to cause a certificate or certificates (or the equivalent evidence of
ownership in the case of Share Equivalents) for Shares in which the Holder has a
beneficial interest hereunder to be transferred to any person or entity,
including such Holder, only if such transfer is an Eligible Transfer as defined
herein. Any person or entity that acquires Shares pursuant to an Eligible
Transfer is hereinafter referred to as an "Eligible Transferee".
For purposes of this Section 9, an "Eligible Transfer" is defined as
(i) any transfer of Shares to a person or entity who is not a DLJ Affiliate,
(ii) any transfer of Shares to an Other Affiliate or to any Employee Affiliate
other than a person holding the position of Senior Vice President or above (or
performing the comparable function) of any Control Affiliate; PROVIDED THAT, in
each case, a contract or other arrangement (other than this Agreement or the
Voting Agreement) regarding the voting of such Shares does not exist between any
Control Affiliate or Employee Affiliate and such transferee and (iii) any
transfer of Shares to DLJSC for the account of any person or entity other than a
Control Affiliate or Employee Affiliate or in the name of a customer account,
which customer is a person or entity other than a Control Affiliate or Employee
Affiliate; PROVIDED, HOWEVER, that DLJ shall cause DLJSC to vote such Shares
only when instructed by the beneficial owner therefor as otherwise permitted
under the rules of all exchanges, if any, on which any class of Shares is
listed.
Such notice shall name such Eligible Transferee and shall state (i)
its name and mailing address, (ii) the proposed transfer date (which date shall
be not less than five days after the Trustee's receipt of such notice), (iii)
the number and type of Shares to be transferred and (iv) the consideration, if
any, to be paid by such Eligible Transferee therefor. The notice to the Trustee
shall also contain a representation that such transferee is an Eligible
Transferee and shall be accompanied by a written agreement and representation
executed by the Eligible Transferee (in relying on which the Trustee shall be
fully protected) that it will execute and deliver any agreement
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or other document required by the Voting Agreement and Trust Certificate or
Certificates of the Holder, duly endorsed for transfer, representing the
beneficial interest in not less than the number of Shares of the type to be
transferred to the Eligible Transferee. On the date specified in such notice,
and upon receipt by the Trustee from such Eligible Transferee of the specified
consideration, if any, the Trustee shall deliver: (i) to the Eligible
Transferee, a certificate (or the equivalent evidence of ownership in the case
of Share Equivalents) for the number of Shares of the type specified in such
notice, issued in the name of the Trustee and duly endorsed for transfer, and
(ii) to the Holder, (x) a Trust Certificate representing the beneficial interest
in a number of Shares, if any, equal to the number of Shares of the type
represented by the surrendered Trust Certificate less the number of Shares of
the type transferred to such Eligible Transferee, and (y) the consideration, if
any, received from such Eligible Transferee. Such consideration shall be
distributed promptly to such Holder pursuant to the transfer instructions set
forth on Schedule B attached hereto or otherwise communicated to the Trustee in
writing.
(b) A Holder (hereinafter referred to as a "Requesting Party" for the
purpose of this Section 9(b)) may request of the Trustee in writing that the
Trustee transfer to such Requesting Party a certificate or certificates (or the
equivalent evidence of ownership in the case of Share Equivalents) for Shares in
which the Requesting Party has a beneficial interest hereunder; provided,
however, that no such request shall be made if immediately after giving effect
thereto DLJ Affiliates will own in the aggregate in excess of 5% in the
aggregate of the total number of shares of the voting capital stock (of any
class) of the Corporation then outstanding, and provided further if the
Requesting Party is not DLJ, the Trustee shall not honor such request unless DLJ
consents in writing to such request. In determining, for purposes of this
section 9(b) only, whether DLJ Affiliates will own in the aggregate in excess of
5% in the aggregate of the total number of shares of the voting capital stock
(of any class) of the Corporation then outstanding, (x) no effect shall be given
to the exclusions set forth in Section 2(b), (y) shares of Common Stock
underlying Share Equivalents owned by a DLJ Affiliate shall be deemed to be
outstanding and owned by such DLJ Affiliate and (z) shares of Common Stock held
by the Trustee pursuant to this Agreement shall be excluded. Such written
request (in relying on which the Trustee shall be fully protected) shall contain
the Requesting Party's agreement and representation that it will execute and
deliver any agreement or other document required by the Voting Agreement, and
shall name such Requesting Party and shall state (i) the proposed transfer date
(which date shall be not less than five days after the Trustee's receipt of such
request) and (ii) the number and type of Shares to be transferred. The written
request to the Trustee shall also be accompanied by (i) a Trust Certificate or
Certificates of the Requesting Party, duly endorsed for transfer, representing
the beneficial interest in not less than the number of Shares of the type to be
transferred to the Requesting Party and (ii) a certificate of an officer of the
Requesting Party and of DLJ (in relying on which the Trustee shall be fully
protected) certifying that immediately after giving effect to such request DLJ
Affiliates will own in the aggregate not more than 5% in the aggregate of the
total number of shares of the voting capital stock (of any class) of the
Corporation then outstanding. On the date specified in such request, and upon
receipt by the Trustee from the Requesting Party of such certificates, the
Trustee shall deliver to the Requesting Party a certificate (or the equivalent
evidence of ownership in the case of Share Equivalents) for the number of Shares
of the type specified in such notice, issued in the name of the Trustee and duly
endorsed for transfer.
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(c) A Holder may at any time direct the Trustee by notice in writing
to transfer a certificate or certificates (or the equivalent evidence of
ownership in the case of Share Equivalents) for Shares in which the Holder has a
beneficial interest hereunder (i) to an underwriter (including DLJSC) in
connection with a public offering of the Shares registered under the Securities
Act or (ii) in connection with sales made pursuant to Rule 144 (other than
subsection (k) thereof) under the Securities Act through a broker-dealer
(including DLJSC). Such notice shall state (a) the underwriter's or broker
dealer's (and transferee's if different) name and mailing address, (b) the
proposed transfer date (which date shall not be less than five days after the
Trustee's receipt of such notice), (c) the number and type of Shares to be
transferred, and (d) the consideration, if any, to be paid. The notice shall
also be accompanied by a written agreement and representation executed by the
underwriter or other transferee (in relying on which the Trustee shall be fully
protected) that it will execute and deliver any agreement or other document
required by the Voting Agreement, and a certificate of an officer of the Holder
(in relying on which the Trustee shall be fully protected) certifying that such
request is being made solely for sales made in connection with a public offering
of the Shares registered under the Securities Act or sales made pursuant to Rule
144 (other than subsection (k) thereof) under the Securities Act through a
broker dealer and a Trust Certificate or Certificates of the Holder, duly
endorsed for transfer, representing the beneficial interest in not less than the
number of Shares of the type to be transferred. The Trustee shall be entitled
to conclusively rely upon such certificate. On the date specified in such
notice, and upon receipt by the Trustee from such underwriter or such other
transferee of the specified consideration, if any, the Trustee shall deliver:
(x) to the underwriter or such other transferee, a certificate (or the
equivalent evidence of ownership in the case of Share Equivalents) for the
number of Shares of the type specified in such notice, issued in the name of the
Trustee and duly endorsed for transfer, and (y) to the Holder, a Trust
Certificate representing the beneficial interest in a number of Shares, if any,
equal to the number of Shares represented by the surrendered Trust Certificate
less the number of Shares transferred to such underwriter or such other
transferee, and (z) to the Holder, the consideration, if any, received from such
underwriter or such other transferee. Such consideration shall be distributed
promptly to the Holder pursuant to the transfer instructions set forth on
Schedule B attached hereto or otherwise communicated to the Trustee in writing.
Notwithstanding the foregoing, if the Holder intends to transfer
Shares pursuant to the exercise of the over-allotment option granted to the
underwriters in connection with a public offering of shares of Common Stock of
the Corporation, the transfer date in the notice may be less than five but shall
not be less than two days after the Trustee's receipt of such notice, provided
that if the transfer date in the notice is less than five business days after
the Trustee's receipt of the notice, the Trustee shall only be obligated to use
its reasonable best efforts to effect the transfer of such Shares by such
transfer date.
Nothing in this Section 9 or elsewhere in this Agreement shall
prohibit a Holder from transferring Trust Certificates in accordance with the
terms of the Trust Certificates.
10. EXERCISE, CONVERSION, EXCHANGE OR CANCELLATION OF SHARES. The
Trustee shall, upon written instruction of a Holder, submit to the Corporation
for exercise, conversion, exchange or cancellation any Share in which such
Holder has a beneficial interest hereunder. Such instruction shall state (a)
whether such Shares are to be exercised, converted, exchanged or canceled, and
the basis for such action, (b) the date on which a certificate or certificates
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representing such Shares are to be submitted to the Corporation (which date
shall not be less than five days after the Trustee's receipt of such
instruction),(c) the number and type of Shares to be submitted to the
Corporation and (d) the consideration, if any, to be received upon such
exercise, conversion, exchange or cancellation from the Corporation. The
instruction (in relying on which the Trustee shall be fully protected) shall be
accompanied by (x) a Trust Certificate or Certificates of the Holder, duly
endorsed for transfer, representing the beneficial interest in not less than the
number of Shares of the type to be submitted to the Corporation and (y) any
exercise price or other payment and any agreement, certificate or other
documentation required in connection with such exercise, conversion, exchange or
cancellation. On the date specified in such instruction, and against receipt
from the Corporation of the specified consideration, if any, the Trustee shall
deliver: (i) to the Corporation, (x) a certificate or certificates for the
number of Shares of the type specified in such instruction issued in the name of
the Trustee and duly endorsed for transfer and (y) any exercise price or other
payment and any agreement, certificate or other documentation delivered to the
Trustee by such Holder with such notice and (ii) to the Holder, (x) a Trust
Certificate representing the beneficial interest in a number of shares equal to
the number of Shares represented by the surrendered Trust Certificate or
Certificates less the number of Shares submitted to the Corporation and (y) upon
receipt, the consideration, if any, received by the Trustee pursuant to such
exercise, conversion, exchange or cancellation; PROVIDED THAT if such
consideration includes Shares, such Shares shall be held by the Trustee pursuant
to this Agreement and new Trust Certificates representing the beneficial
interest in such Shares shall be issued to such Holder.
11. INCREASE OR DECREASE IN NUMBER OF SHARES. In the event of an
increase in the number of outstanding Shares by virtue of a stock split or the
decrease in the number of outstanding Shares because of a contraction of shares
or a change in the number of outstanding Shares as a result of some other
recapitalization in which the Corporation receives no consideration for the
issuance of the additional or reduced number of Shares, the new additional or
changed number of Shares shall be held by the Trustee under this Agreement, the
Trust Certificates outstanding immediately prior to such increase, decrease, or
change in the number of outstanding Shares shall thereupon represent the
beneficial interest in the number of Shares to which the Holders are entitled as
a result of such increase, decrease, or change, and new Trust Certificates
representing the beneficial interest in the appropriate changed number of Shares
shall be issued to Holders upon surrender of the then existing Trust
Certificates.
12. SUCCESSOR TRUSTEE. There shall initially be one Trustee of the
voting trust created herein. Upon the liquidation, dissolution, winding-up,
suspension, incapacity, resignation or removal (in accordance with Section 13
below) of the initial Trustee, DLJ or the Holders of Trust Certificates
representing the beneficial interest in 50% or more of the Deposited Shares
shall appoint a successor Trustee by written notice to the other parties hereto
and the other Holders; PROVIDED, HOWEVER, that such successor Trustee shall not
be a Control Affiliate, an Employee Affiliate, or an other DLJ Affiliate. In
the event a successor Trustee shall not have been appointed within 30 days of
such liquidation, dissolution, winding-up, suspension, incapacity or removal,
the Trustee may petition a court of competent jurisdiction to appoint such a
successor. In the event that the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate trust assets to
another entity that is a bank or trust company, the resulting, surviving, or
transferee entity shall become the successor Trustee upon notice to the
signatories hereto but without further action by the signatories or any Holder.
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13. REMOVAL/RESIGNATION OF TRUSTEE. (a) A Trustee may be removed by
DLJ or the Holders of Trust Certificates representing the beneficial interest in
50% or more of the Deposited Shares by written notice to the other parties
hereto and the other Holders;
(i) if it is determined as a result of binding arbitration pursuant
to this Section 13 that either (A) the Trustee has willfully and materially
violated the terms of this Agreement, or (B) the Trustee has been guilty of
malfeasance, misfeasance or dereliction of duty hereunder;
(ii) if the Trustee shall have commenced a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall have consented to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
have made a general assignment for the benefit of creditors, or shall have
failed generally to pay its debts as they become due, or shall have taken
any corporate action to authorize any of the foregoing; or
(iii) if an involuntary case or other proceeding shall have been
commenced against the Trustee seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or other
proceeding shall have remained undismissed and unstayed for a period of 60
days; or an order for relief shall have been entered against the Trustee
under the federal bankruptcy laws as now or hereafter in effect.
(b) If DLJ or the Holders of Trust Certificates representing the
beneficial interest in 50% or more of the Shares then deposited hereunder
determine that a basis exists for removal of the Trustee under Section 13(a)
above, they shall deliver written notice of such determination to the Trustee
stating the basis for such removal.
(c) Any arbitration pursuant to this Section 13 shall be conducted in
accordance with this Section 13(c). DLJ, the Holders and the Trustee agree and
hereby acknowledge that only the propriety of the removal of the Trustee
pursuant to this Section 13 shall be subject to arbitration and that no other
controversies arising under this Agreement shall be subject to arbitration
unless otherwise expressly agreed by the Trustee, DLJ, and the Holders in a
separate document. Such arbitration shall be governed by the commercial rules
of the American Arbitration Association to the extent not inconsistent with this
Agreement. Such arbitration shall be conducted in New York, New York. Within
15 days after the notice required by Section 13(b) above, the Trustee shall
choose one arbitrator and DLJ or the Holders of Trust Certificates representing
the beneficial interest in 50% or more of the Shares then deposited hereunder
shall choose one arbitrator; and, within 15 days after the selection of both
such chosen arbitrators, the two chosen arbitrators shall choose an impartial
third arbitrator. The decision of a majority of such arbitrators shall be final
and binding on DLJ, the Holders and the Trustee.
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(d) The Trustee may resign its position as such (i) upon ten days'
written notice to DLJ, but only if a successor Trustee, appointed as provided
for in Section 12 above, has agreed to serve as such effective upon the
effectiveness of the resignation of the Trustee then acting, or (ii) in any
event upon thirty days' written notice to DLJ.
14. TRUSTEE MAY OWN SHARES. Nothing in this Agreement shall prevent
the Trustee from owning Shares or options to purchase Shares in its individual
capacity or in any capacity other than as trustee hereunder or for any DLJ
Affiliate.
15. TRUSTEE NOT AN AFFILIATE. The Trustee represents that it is a
bank or trust company which is not a DLJ Affiliate.
16. COMPENSATION; EXPENSES. The Trustee in its individual capacity
shall receive a fee from DLJ of $1,500 for its services in connection with the
establishment of the voting trust, and DLJ will reimburse the Trustee in its
individual capacity in respect of the Trustee's reasonable expenses (including,
without limitation, for up to $2,000 in attorney's fees) lawfully incurred in
connection therewith. During the period of its services hereunder, the Trustee
in its individual capacity shall receive a fee from DLJ of $2,500 per year.
Reasonable expenses (including, without limitation, attorney's fees) lawfully
incurred in the administration or performance of the Trustee's duties or the
exercise of the Trustee's rights, powers and authority hereunder shall be
reimbursed to it in its individual capacity by DLJ on behalf of the Holders.
The provisions of the preceding sentence of this Section 16 shall survive the
termination of this Agreement and the resignation, removal or other cessation of
service of the Trustee.
17. MERGER, ETC. Upon any merger, consolidation, reorganization or
dissolution of the Corporation or the sale of all or substantially all of the
assets of the Corporation pursuant to which shares of capital stock or other
voting securities of another entity are to be issued in payment or exchange for
or upon conversion of Shares and other voting securities, the shares or other
voting securities of said other entity shall, to the fullest extent permitted by
law, automatically be and become subject to the terms of this Agreement and be
held by the Trustee hereunder in the same manner and upon the same terms as the
Shares, and in such event the Trustee shall issue to the Holders that have
deposited Shares with the Trustee new Trust Certificates in lieu of and upon
surrender of the old Trust Certificates for the appropriate number of shares or
other voting securities of such other entity. At the request of any Holder, the
Trustee may transfer, sell or exchange or join with the Holder in a transfer,
sale or exchange of Shares and other voting securities in exchange for shares or
other voting securities of another entity, and in said event the shares and
other voting securities of the other entity received by the transferor shall be
and become subject to this Agreement and be held by the Trustee hereunder in the
same manner as the Shares.
18. NOTICES. All notices, reports, statements and other written
communications directed to the Trustee from the Corporation shall be forwarded
promptly by the Trustee to DLJ and each Holder. All notices, notices of
election and other communications required herein shall be given in writing by
overnight courier, telegram or facsimile transmission and shall be addressed, or
sent, to the appropriate addresses as set forth beneath the signature of each
party hereto, or at such other address as to which notice is given in accordance
with this Section 18.
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19. INDEMNITY ETC. The Trustee, as such and in its individual
capacity, and its directors, officers, employees, and agents, shall be
indemnified, defended and held harmless from and against any and all loss,
liability, claim, damage and expense whatsoever (including, but not limited to,
any and all expense whatsoever reasonably incurred in investigating, preparing
for or defending against any litigation, commenced or threatened, or any claims
whatsoever) (the "Indemnified Claims") arising out of, in connection with, or
based upon this Agreement or the actions or failures to act of the Trustee
hereunder or thereunder, except to the extent such loss, liability, claim,
damage or expense is caused by or results from the Trustee's malfeasance (as
determined by a final and unappealable order of a court of competent
jurisdiction). DLJ agrees on behalf of itself and the Holders that it will
indemnify, defend and hold harmless the Trustee, as such and in its individual
capacity, and its directors, officers, employees, and agents, from and against
any Indemnified Claims. DLJ's obligation hereunder shall survive the transfer
of all or any portions of its respective shares and interests, the termination
of the voting trust created herein, or the resignation, removal or other
cessation of service of the Trustee.
The Trustee as such and in its individual capacity shall be entitled
to the prompt reimbursement from DLJ and the Holders, jointly and severally, for
its out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees and other professional's fees and expenses) incurred in investigating,
preparing for or defending against any litigation, commenced or threatened,
arising out of or based upon this Agreement, or the actions or failures to act
of the Trustee hereunder or thereunder, without regard to the outcome of such
litigation; provided, however, that the Trustee shall be obligated to return any
such portion of such reimbursement as may be subsequently determined by a final
and unappealable order of a court of competent jurisdiction to have been
incurred by the Trustee as a result of the Trustee's malfeasance in the matter
in question. Such expenses payable under this Section 19 shall be prorated
among the Holders in accordance with their respective interests in the Shares
then deposited hereunder.
If a claim under this Section 19 is not paid in full within 30 days
after a written claim has been submitted by the Trustee, the Trustee may at any
time thereafter bring suit to recover the unpaid amount of the claim and, if
successful in whole or in part, the Trustee as such and in its individual
capacity shall be entitled to be paid also the expense of prosecuting such
claims.
The Trustee is authorized and empowered to construe this Agreement and
its construction of the same, made in good faith, shall be final, conclusive,
and binding upon all Holders and all other parties interested. The Trustee may,
in its discretion, consult with counsel to be selected and employed by it, and
the reasonable fees and expenses of such counsel shall be an expense for which
the Trustee as such and in its individual capacity is entitled to reimbursement
under this Agreement, and shall have no personal liability.
The Trustee hereby accepts the voting trust created hereby and agrees
to perform the obligations expressly required hereunder to be performed by the
Trustee, but assumes no other obligations and shall have no responsibility and
shall have no personal liability for the management of the Corporation or for
any action taken by it, by any person elected as a director of the Corporation
or by the Corporation pursuant to any vote cast or consent given by the Trustee.
The Trustee, whether or not acting upon the advice of counsel, shall incur no
personal liability to any
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person or entity because of any error of law or fact, mistake of judgment or any
matter or thing done or omitted under this Agreement, except for its own
malfeasance. Anything done or suffered in good faith by the Trustee in
accordance with the advice of counsel chosen as indicated above or in good faith
reliance on the provisions of this Agreement shall be conclusive in favor of the
Trustee against the Holders and any other interested party and shall give rise
to no personal liability on the part of the Trustee.
The Trustee shall not be personally liable in any event for acts or
defaults of any other trustee or trustees (under this or any other voting trust
of the Corporation's securities) or for acts or defaults of any employee, agent,
proxy or attorney-in-fact of any other trustee or trustees. The Trustee shall
be fully protected and free from personal liability in relying or acting upon
any notice, request, consent, certificate, declaration, guarantee, affidavit or
other paper or document or signature reasonably believed by it to be genuine and
to have been signed by the proper party or parties or by the party or parties
purporting to have signed the same.
No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur any personal financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
20. CERTAIN CALCULATIONS. For purposes of Sections 8, 9, 12, 13, 19
and 26, a Holder owning a Trust Certificate representing the beneficial interest
in Share Equivalents shall, in respect of such ownership, be deemed to be the
Holder of a Trust Certificate representing the beneficial interest in the number
of shares of Common Stock that the Trustee, acting on behalf of such Holder, may
then acquire, whether by exercise, conversion, subscription or otherwise,
pursuant to or by reason of ownership of such Share Equivalents.
21. COUNTERPARTS. This Agreement may be executed in multiple
counterparts all of which counterparts together shall constitute one agreement.
Upon execution of this Agreement and the establishment of the voting trust
created herein, the Trustee shall cause a copy of this Agreement to be filed in
the registered office of the Corporation in the State of Delaware and the
Agreement shall be open to inspection in the manner provided for inspection
under the laws of the State of Delaware.
22. CHOICE OF LAW . This Agreement is intended by the parties to be
a voting trust agreement under Section 218 of the General Corporation Law of the
State of Delaware and shall be governed and construed in accordance with the
laws of the State of Delaware.
23. BOND. The Trustee shall not be required to provide any bond to
secure the performance of its duties hereunder.
24. RELIANCE. DLJ and each Holder acknowledge that DLJ will rely on
this Agreement in complying with the federal securities laws. The Trustee
acknowledges that DLJ will rely on the Trustee abiding by the terms of this
Agreement, including, without limitation, that (x) subject to the Voting
Agreement, the Trustee will vote the Deposited Shares in its sole and absolute
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discretion and will not consult with any DLJ Affiliate regarding the voting of
such Shares and (y) the Trustee will not consent to any amendment or waiver of
this Agreement prohibited by Section 26 hereof whether or not such amendment or
waiver is approved by each of the parties hereto and the Holders.
25. COVENANT OF DLJ. DLJ will cause each Control Affiliate to
perform the covenants hereof that are applicable to Control Affiliates.
26. AMENDMENTS AND WAIVER. This Agreement may not be amended or
waived in any material respect unless DLJ shall have delivered to the Trustee an
opinion (in relying on which the Trustee shall be fully protected) of
independent nationally recognized counsel who are experts in matters involving
the federal securities law, that, immediately after such amendment or waiver, no
DLJ Affiliate will be an "affiliate" of the Corporation within the meaning of
Rule 144 under the Securities Act. Subject to the foregoing, this Agreement may
be amended with the written consent of the Trustee, DLJ and the Holders of Trust
Certificates representing the beneficial interest in 50% or more of the Shares
then deposited hereunder, and if so amended then this Agreement (as so amended)
shall bind all of the parties hereto and all of the Holders.
27. SEVERABILITY. In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
28. VOTING AGREEMENT. Simultaneously with the execution of this
Agreement, the Trustee will execute an amendment to the Voting Agreement,
substantially in the form set forth in Exhibit A, and will thereby, INTER ALLA,
become a party to the Voting Agreement.
29. AUTHORIZATION. Each party to this Agreement hereby represents,
severally and not jointly, that this Agreement has been duly and validly
authorized, executed, and delivered and, assuming, due authorization, execution
and delivery by the other parties hereto, is a valid, binding and enforceable
agreement of such party.
30. BENEFITS AND ASSIGNMENT. Nothing in this Agreement, expressed or
implied, shall give or be constructed to give any person or entity other than
the parties hereto and their successors and permitted assigns, any legal claim
under any covenant, condition or provision hereof, all the covenants, conditions
and provisions contained in this Agreement being for the sole benefit of the
parties hereto and their successors and permitted assigns. No party may assign
any of its rights or obligations under this Agreement (except as provided in
Section 12) without the written consent of all the other parties, which consent
may be withheld in the sole discretion of the party whose consent is sought.
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EXECUTED as of the date and year first above written.
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION
Trustee
By: /s/ XXXXXX X. XXXXXX, XX.
----------------------------------------
Name: XXXXXX X. XXXXXX, XX.
Title: Assistant Vice President
Address: One Xxxxxx Square
First Floor
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Corporate Trust Administration
Telephone: 000-000-0000
Facsimile: 000-000-0000
XXXXXXXXX, XXXXXX & XXXXXXXX, INC.
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Vice President and Secretary
Address: 000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
SPROUT CAPITAL VII, L.P.
By: DLJ CAPITAL CORPORATION,
as Managing General Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
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SCHEDULE B
TRANSFER INSTRUCTIONS
SPROUT CAPITAL VII, L.P.
All payments shall be made by check mailed to:
Sprout Capital VII, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
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