Exhibit 10.40
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this 7th day of
December, 1999, by and among Reckson Service Industries, Inc., a Delaware
corporation ("RSI"), Xxxxxx X. Xxxxxxxxxxx ("Xxxxxxxxxxx"), and H. Xxxxx Xxxx
("Xxxx"; together with Cooperstone, the "Founders").
RECITALS
WHEREAS, each of Cooperstone and Xxxx is a Founder of eSourceOne, Inc.
("eSourceOne"), a Delaware corporation, and each owns 6,666,667 shares of common
stock, par value $.01 per share, of eSourceOne ("Founder Common Stock");
WHEREAS, RSI, through its wholly-owned subsidiary RSI ESO, Inc., a Delaware
corporation ("RSI ESO"), owns 15,000,000 shares of Series A Preferred Stock of
eSourceOne (the "Series A Preferred Stock"), each such share being convertible
into common stock of eSourceOne ;
WHEREAS, (A) RSI desires to grant to each of the Founders, and each of the
Founders desire to obtain from RSI, a warrant (each a "Warrant"; collectively
the "Warrants") to purchase 100,000 shares (collectively, the "Warrant Shares")
of common stock, par value $.01 per share, of RSI (the "RSI Common Stock"), and
(B) each of the Founders desires to grant to RSI, and RSI desires to obtain from
each Founder, an option (each an "Option"; together, the "Options") to purchase
394,737 shares (collectively, the "Option Shares") of Founder Common Stock; and
WHEREAS, the terms and conditions of this Agreement, the Options and the
Warrants have been negotiated at arm's length and the fair market value of the
Options are intended by the parties to be approximately equal to the fair market
value of the Warrants for which they are being exchanged in accordance with this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the receipt and sufficiency of which is hereby
acknowledged, and subject to the terms and conditions set forth herein, the
parties hereto agree as follows:
1. DEFINITIONS
Certain defined terms used in this Agreement have the following meanings:
Affiliate. The term "affiliate" shall mean (i) in the case of a corporation
or other entity, any corporation or other entity in which the subject person
(A)(1) owns or controls the voting rights of 50% or more of the capital stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or entity or (2) has the right to nominate and/or elect at least
one-half of the members of the board of directors of such corporation or entity
or (3) at least one-half of the then current members of the board of directors
of such corporation or entity were nominated or designated for election as
directors of such corporation by the subject person and (B) for financial
reporting purposes, the financial statements of the subject person includes on a
consolidated basis the financial statements of such corporation or other entity,
and (ii) in the case of an individual, the individual's spouse, siblings, lineal
descendants, ancestors, or a trustee of a trust which is maintained solely for
the benefit of such individual.
Agreement. The "Agreement" shall mean this Agreement, as the same may be
amended or restated from time to time hereafter.
Board. As to any corporation, the "Board" shall mean the Board of Directors
of that corporation as the same may be constituted from time to time hereafter
pursuant to applicable law, the charter and by-laws of such corporation, and
applicable agreements.
Change-in-Control Transaction. A "Change-in-Control Transaction" shall
mean:
(i) with respect to RSI, any merger or consolidation of RSI into or with
another corporation, sale, transfer or other disposition of all or substantially
all of the assets or capital stock of RSI, or any reorganization,
recapitalization or like transaction or series of transactions having
substantially equivalent effect and purpose, at the conclusion of which such
merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
RSI immediately prior to such transaction or series of transactions own less
than a majority of the voting capital stock of the acquiring entity or entity
surviving or resulting from such transaction or series of transactions
immediately thereafter; and
(ii) with respect to eSourceOne, any merger or consolidation of eSourceOne
into or with another corporation, sale, transfer or other disposition of all or
substantially all of the assets or capital stock of eSourceOne, or any
reorganization, recapitalization or like transaction or series of transactions
having substantially equivalent effect and purpose, at the conclusion of which
such merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
eSourceOne immediately prior to such transaction or series of transactions own
less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter; provided, however, that Change-in-Control Transaction
shall not include any acquisition or series of related acquisitions of more than
50% of the outstanding capital stock of eSourceOne by RSI or RSI's Affiliates.
Encumbrances. "Encumbrances" shall mean any mortgages, judgments, claims,
liens, security interests, pledges, escrows, charges or other encumbrances of
any kind or character whatsoever.
Fair Market Value. "Fair Market Value" shall mean with respect to any
asset, property or security of or issued by a corporation the fair market value
thereof as determined in good faith by the Board of that corporation, provided,
however, that in the event any such determination by such Board is disputed by
an interested stockholder, then the corporation, at shared expense, shall engage
an independent appraiser mutually acceptable to the corporation and such
stockholder, and the fair market value of such asset, property or security for
the purposes hereof shall be determined by such independent appraiser; and
provided further, however, that in the event that the parties are not able to
promptly agree upon an independent appraiser, then the party entitled to receive
such asset, property or security shall be entitled to select as an independent
appraiser any of the independent accounting firms generally regarded as
comprising the "Big Five" independent accounting firms and which is not then
providing services to such party.
Founder Common Stock. "Founder Common Stock" shall have the meaning
ascribed to that term in the Recitals.
Founders. The "Founders" shall mean Xxxxxx X. Xxxxxxxxxxx and H. Xxxxx
Xxxx.
Option(s). Each "Option", and together, the "Options", shall have the
meaning ascribed to that term in the Recitals.
Option Shares. The Option Shares shall have the meaning ascribed to that
term in the Recitals.
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Person. A "Person" shall mean any entity, corporation, company,
association, joint venture, joint stock company, partnership, limited liability
company, trust, organization, individual (including personal representatives,
executors and heirs of a deceased individual), nation, state, government
(including agencies, departments, bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator.
Qualified IPO. A "Qualified IPO" shall mean a firm underwritten public
offering of common stock of eSourceOne by a nationally recognized underwriter
which offering results in the receipt of aggregate gross proceeds by eSourceOne
of at least $30,000,000 and reflects a market value of eSourceOne of at least
$150,000,000 immediately prior to such public offering.
Registration Rights Agreement. "Registration Rights Agreement" shall mean
that certain Registration Rights Agreement, dated August 10, 1999, by and among
eSourceOne, RSI, RSI ESO and each of the Founders.
RSI Common Stock. "RSI Common Stock" shall have the meaning ascribed to
that term in the Recitals.
RSI ESO. "RSI ESO" shall have the meaning ascribed to that term in the
Recitals.
Securities Act. The "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations thereunder.
Stockholders' Agreement. The "Stockholders' Agreement" shall mean that
certain Stockholders' Agreement, dated August 10, 1999, by and among RSI, RSI
ESO, the Founders and eSourceOne.
Transfer. A "Transfer" of shares of common stock or any interest of a
stockholder therein shall mean any sale, assignment, transfer, disposition,
pledge, hypothecation or encumbrance, whether direct or indirect, voluntary,
involuntary or by operation of law, and whether or not for value, of such shares
or such interest of a stockholder therein, including, without limitation, any
direct or indirect Transfer of a controlling interest in any stockholder, other
than transfers of capital stock of RSI.
Warrant. "Warrant" shall have the meaning ascribed to that term in the
Recitals.
Warrant Shares. "Warrant Shares" shall have the meaning ascribed to that
term in the Recitals.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF RSI. RSI represents and
warrants to the Founders as of the date hereof, and agrees with the Founders, as
follows:
(a) ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY. RSI (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and (ii) has all requisite corporate power and
authority to enter into and carry out the transactions and perform the
obligations contemplated by this Agreement and the Warrant.
(b) AUTHORIZATION OF AGREEMENT AND WARRANTS; ENFORCEABILITY. The execution,
delivery and performance by RSI of each of this Agreement and the Warrants has
been duly authorized by all requisite corporate action on the part of RSI, and
no other corporate action on the part of RSI is necessary to authorize the
execution, delivery and performance of this Agreement and the Warrants. Each of
this Agreement and the Warrants constitutes a legal, valid and binding
obligation of RSI enforceable against
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RSI in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and equitable principles
generally.
(c) AUTHORIZATION AND ISSUANCE OF THE WARRANT SHARES. The authorization,
reservation, issuance, sale and delivery of the Warrant Shares have been duly
authorized by all requisite corporate action on the part of RSI, and the Warrant
Shares, when issued, sold and delivered in accordance with the Warrant, will be
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, free of any Encumbrances and not
subject to preemptive or similar rights of the stockholders of RSI or other
rights, in each case created by RSI.
(d) CONSENTS. No permit, authorization, registration, qualification,
decree, consent or approval of or by, or any notification of or filing with, any
person (governmental or private) is required of RSI in connection with the
execution, delivery and performance by RSI of this Agreement or the Warrants or
any documentation relating thereto, or the issuance, sale or delivery of the
Warrant Shares by RSI to each Founder (other than such notifications or filings
required under the General Corporation Law of the State of Delaware and
applicable federal and state securities laws, if any, which shall be made on a
timely basis) except where the absence of such permit, authorization, consent,
approval, notification or filing would not result in a material adverse change
in the business, operations, properties, assets or financial condition, or in
the earnings, business affairs or business prospects of RSI (a "Material Adverse
Effect") or would prohibit, impair, hinder or delay the consummation of the
transactions contemplated by this Agreement or the performance of RSI's
obligations under this Agreement or the Warrants.
(e) NO CONFLICT. The execution, delivery and performance by RSI of this
Agreement and the Warrants, the consummation by RSI of the transactions
contemplated thereby, and the issuance, sale and delivery of the Warrant Shares
by RSI will not (i) materially violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to RSI or any
of the properties or assets of RSI, (ii) materially conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute (with
due notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any Encumbrance upon any of the properties or assets of RSI under, any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, license,
lease or other agreement or instrument to which RSI is a party or by which RSI
may be bound, or to which any of the property or assets of RSI is subject, or
any applicable treaty, law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over RSI or any of RSI's properties, or (iii)
violate the certificate of incorporation or the by-laws of RSI.
2.2 REPRESENTATIONS, WARRANTIES AND COVENANTS BY FOUNDERS. Each of the
Founders represents and warrants to
RSI as of the date hereof, and agrees with RSI, as follows:
(a) POWER AND AUTHORITY. Such Founder has all right, requisite power and
authority to enter into and carry out the transactions and perform the
obligations contemplated by this Agreement and the Option to be granted to RSI
by such Founder.
(b) ENFORCEABILITY. Each of this Agreement and the Option to be granted to
RSI by such Founder constitutes a legal, valid and binding obligation of such
Founder enforceable against such Founder in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and equitable principles generally.
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(c) OPTION SHARES. The Option Shares purchasable upon exercise of the
Option to be granted to RSI by such Founder are validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching to the
ownership thereof, free of any Encumbrances and, except as provided in the
Stockholders' Agreement, not subject to preemptive or similar rights of the
stockholders of eSourceOne or other rights, in each case created by such
Founder.
(d) CONSENTS. No permit, authorization, order, registration, qualification,
decree, consent or approval of or by, or any notification of or filing with, any
person (governmental or private) is required of such Founder in connection with
the execution, delivery and performance by such Founder of this Agreement or the
Option to be granted to RSI by such Founder or any documentation relating
thereto, or the sale or delivery of the Option Shares by such Founder to RSI
(other than such notifications or filings required under the General Corporation
Law of the State of Delaware and applicable federal and state securities laws,
if any, which shall be made on a timely basis) except where the absence of such
permit, authorization, consent, approval, notification or filing would prevent
such sale and delivery of such Option Shares by such Founder to RSI.
(e) NO CONFLICT. The execution, delivery and performance by such Founder of
this Agreement and the Option to be delivered to RSI by such Founder, the
consummation by such Founder of the transactions contemplated thereby, and the
sale and delivery of the Option Shares upon exercise of such Option will not (i)
materially violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court, administrative
agency or other governmental body applicable to the Founder or any of the
properties or assets of the Founder, or (ii) materially conflict with or result
in any breach of, any of the terms, conditions or provisions of, or constitute
(with due notice or lapse of time, or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, or result in the creation
of any Encumbrance upon any of the Option Shares owned by or properties or
assets of the Founder under any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, license, lease or other agreement or instrument
to which such Founder is a party or by which such Founder may be bound, or to
which any of the property or assets of such Founder is subject, or any
applicable treaty, law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over such Founder or any of such Founder's
properties.
(f) GOOD AND MARKETABLE TITLE. Such Founder has and will at the time of
exercise of the Option granted by such Founder have good and valid title to the
Option Shares to be sold by such Founder under such Option, free and clear of
any Encumbrances created by such Founder or imposed by applicable federal and
state securities laws, other than pursuant to this Agreement and such Option;
and upon delivery of such Option Shares and payment of the purchase price
therefor as contemplated in such Option, RSI will receive good and marketable
title to such Option Shares purchased by it from such Founder, free and clear of
any Encumbrances.
3. DELIVERY OF WARRANTS IN EXCHANGE FOR OPTIONS; REGISTRATION RIGHTS AND
TRANSFERABILITY.
3.1 EXCHANGE OF WARRANTS FOR OPTIONS. On the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, RSI agrees to deliver to each Founder the Warrant in the form
attached to this Agreement as Exhibit I, and each Founder agrees to deliver to
RSI the Option in the form attached to this Agreement as Exhibit II, in each
case at the Closing (as defined below).
3.2 CLOSING. The exchange and delivery of the Warrants and Options shall be
made at the offices of Xxxxx & Xxxx LLP, Xxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other place as
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shall be agreed upon by RSI and the Founders, and shall be made at the time and
date of execution of this Agreement (such exchange and delivery being herein
called the "Closing").
3.3 EXEMPTION FROM STOCKHOLDERS' AGREEMENT. The parties hereby agree that
the delivery of the Options and the delivery of any Option Shares upon exercise
of the Options shall not give rise to any right of first offer, co-sale right,
right to compel participation in certain transfers or restrictions on transfer
under Sections 3 and 4 of the Stockholders' Agreement.
3.4 REGISTRATION RIGHTS. The parties agree that the registration rights of
each Founder under the Registration Rights Agreement with respect to the Option
Shares held by such Founder, upon and in connection with any purchase of such
Option Shares pursuant to any exercise of the Option covering such Option
Shares, are deemed hereby to be assigned to RSI without any further act or deed
by any party. RSI hereby agrees to provide registration rights to the Founders
in respect of the Warrant Shares as set forth in the form of the Warrant
Registration Rights Agreement attached hereto.
3.5 TRANSFERABILITY. RSI may not transfer the Options except to an
Affiliate or employee of RSI and neither Founder may transfer his Warrants
except to an Affiliate of such Founder for a period (the "Restricted Period")
commencing on the date of this Agreement and ending on:
(i) with respect to each Founder, the first to occur of (a) two (2) years
from the date of this Agreement and (b) a Change-in-Control Transaction; and
(ii) with respect to RSI, the first to occur of (a) two (2) years from the
date of this Agreement, (b) a Qualified IPO and (c) a Change-in-Control
Transaction.
Neither the Option Shares nor the Warrant Shares may be transferred during
the Restricted Period, except to an Affiliate of RSI or the Founders, as the
case may be.
4. NON-DISCLOSURE; PUBLIC ANNOUNCEMENTS.
4.1 NON-DISCLOSURE. The terms of this Agreement shall not be disclosed to
any third party without the consent of the other parties to this Agreement;
provided that from and after the Closing, RSI or either Founder may disclose the
terms of this Agreement, the Warrants or the Options, as the case may be, and
copies of the documents relating thereto, solely, to employees, investors,
investment bankers, lenders, accountants, legal counsel, business partners, and
bona fide prospective investors, lenders and business partners of RSI, such
Founder or eSourceOne, as the case may be, in each case only where such persons
or entities have been advised of the confidential nature of such information and
the receiving party's obligation with respect thereto.
4.2 PUBLIC ANNOUNCEMENTS. The parties may at any time make public
announcements or filings regarding the parties' relationship which are required
by applicable law, regulatory bodies, or stock exchange or stock association
rules, so long as the party so required to make the public announcement or
filing, promptly upon learning of such requirement, notifies the other affected
party of such requirement and in the case of public filings, including, without
limitation, periodic and other reports filed under the Securities Exchange Act
of 1934, as amended, seeks confidential treatment for information reasonably
determined by the parties as appropriate for such treatment.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE DELIVERY.
5.1 All representations, warranties and covenants contained in this
Agreement shall remain operative and in full force and effect indefinitely,
regardless of any investigation made by or on behalf of any party
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or person controlling such party, and shall survive delivery of the Warrants and
the Options under this Agreement.
6. LEGENDS ON WARRANTS AND OPTIONS
6.1 LEGEND ON WARRANTS AND OPTIONS. The Warrants and the securities issued
upon exercise of same shall bear the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR
SUCH TRANSFER. IN NO EVENT MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN
THE FIRST TO OCCUR OF (A) DECEMBER 7, 2001 AND (B) A CHANGE-IN-CONTROL
TRANSACTION (AS DEFINED HEREIN).
The Options and the securities issued upon exercise of same shall bear the
following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR
SUCH TRANSFER. IN NO EVENT MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN
THE FIRST TO OCCUR OF (A) DECEMBER 7, 2001, (B) A QUALIFIED IPO (AS DEFINED
IN THAT CERTAIN EXCHANGE AGREEMENT DATED DECEMBER 7, 1999 BY AND AMONG
RECKSON SERVICE INDUSTRIES, INC., XXXXXX X. XXXXXXXXXXX AND H. XXXXX XXXX)
AND (C) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
7. GENERAL PROVISIONS
7.1 NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested, with a copy sent by ordinary
mail on the same day), telex, telecopier with confirmation and followed promptly
by hard copy in accordance with this provision, or courier guaranteeing
reasonably prompt delivery and recognized for high quality service:
(i) if to RSI at:
Reckson Service Industries, Inc.
00 Xxxx 00xx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxx
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with copies to:
Xxxxx Xxxxxxx, Esq.
General Counsel
RSI Service Industries, Inc.
00 Xxxx 00xx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Xxxxx & Xxxx LLP
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: J. Xxxxxx Xxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
(ii) if to Cooperstone, at
Xxxxxx X. Xxxxxxxxxxx
00 Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Tel: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
(iii) if to Xxxx, at
H. Xxxxx Xxxx
00 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
or, in any case, at such other address or addresses as shall have been furnished
in writing by one party to the other parties in accordance with the provisions
of this Section 9.1.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered, if delivered by hand, telex or by courier; five
(5) business days after being deposited in the mail, if mailed; and when receipt
acknowledged, if telecopied.
7.2 WAIVER. No waiver of any provision of this Agreement in any instance
shall be, or for any purpose be deemed to be, a waiver of the right of any party
hereto to enforce strict compliance with the provisions hereof in any subsequent
instance.
7.3 AGREEMENT TO PERFORM NECESSARY ACTS. Each party hereto and the heirs,
executors or administrators of the Stockholders shall perform any further acts
and execute and deliver any documents or procure any court orders which may
reasonably be necessary or appropriate to carry out the provisions of this
Agreement.
7.4 MODIFICATION. Except as otherwise provided herein, this Agreement may
not be modified or amended except by a writing signed by each of the Founders
and by an officer duly authorized to act on behalf of RSI.
7.5 SUBMISSION TO JURISDICTION. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States of America, in
each case located in the County of New York, for any action, proceeding or
investigation in any court or before any governmental authority ("Litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any Litigation relating thereto except in
such courts). Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any Litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America, in each case located in the
County of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such Litigation
brought in any such court has been brought in an inconvenient forum.
7.6 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law rules thereof, applicable to contract made and to be performed
within that State.
7.7 EFFECT OF HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
7.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In proving this Agreement
it shall not be necessary to produce or account for more than one such
counterpart executed by the party against whom enforcement is sought.
7.9 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement unless the effect thereof would be to alter materially the effect of
this Agreement, and this Agreement (if not so altered) shall be carried out as
if any such illegal, invalid or unenforceable provision were not contained
herein.
7.10 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy on the part of any party upon any breach or
default of any party to this Agreement shall impair
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any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein, or of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any party of any breach or default under
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies either under this
Agreement, or by law otherwise afforded to any party, shall be cumulative and
not alternative.
7.11 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. To the extent that this Agreement refers to
any defined term or provision in any other agreement between and among the
parties hereto, such reference or use thereof in this Agreement shall not be
deemed to supercede such defined term or provision in such other agreement. This
Agreement is intended to be for the sole and exclusive benefit of the
signatories hereto and their permitted successors and assigns, and for the
benefit of no other Person.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RECKSON SERVICE INDUSTRIES, INC.
By: ________________________________
Xxxxxxx X. Xxxxxxx
Executive Vice President
XXXXXX X. XXXXXXXXXXX
_________________________________________
H. XXXXX XXXX
_________________________________________
EXHIBIT I
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER __, 2001 AND (B) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
WARRANT TO PURCHASE UP TO 100,000 SHARES
OF COMMON STOCK OF
RECKSON SERVICE INDUSTRIES, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
W-1
This certifies that [NAME OF HOLDER] or its permitted assigns (the
"Holder"), for value received, is entitled to purchase from Reckson Service
Industries, Inc., a Delaware corporation (the "Company"), having a place of
business at 00 Xxxx 00xx Xxxxxx - 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, a maximum of
100,000 fully paid and nonassessable shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock") for cash at a price of $15.00 per
share (as may be adjusted from time to time in accordance with Section 3, the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (New York time), on the first to occur of (i) a Change-in-Control
Transaction (as defined below), and (ii) December __, 2009 (the first of such
dates in clauses (i) and (ii) being referred to herein as the "Expiration
Date"). Holder may purchase the shares hereunder upon surrender to the Company
at its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Warrant is exercisable at any time prior to the
Expiration Date with respect to all or any part of the shares of Common Stock
set forth in the first paragraph of this Warrant. Any unexercised portion of
this Warrant shall terminate on the Expiration Date. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Common Stock as may be requested by the Holder hereof and shall be registered in
the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the Common Stock is not then quoted on any
automated quotation system or exchange, the price determined by the Company's
Board of Directors in good faith.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights evidenced by this Warrant may be
exercised, the Company will at all times during such period have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights evidenced by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the securities of the Company may be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities laws with respect to such exercise except as
otherwise provided by that certain Warrant Registration Rights Agreement, of
even date herewith, by and among the Company, Xxxxxx X. Xxxxxxxxxxx and H. Xxxxx
Xxxx.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment in accordance with this Section 3 and
from time to time upon the occurrence of certain events described in this
Section 3. Upon each adjustment of the Stock Purchase Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor,
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action, (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Warrant, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had the Holder
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then, as a condition of
such Organic Change, lawful and adequate provisions shall be made by the Company
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby. In the event of any Organic Change, the Company
shall make appropriate provision with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holders
of a majority of the warrants to purchase Common Stock then outstanding,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase. The Company shall notify the Holder of this Warrant of any proposed
Organic Change or Change-in-Control Transaction reasonably prior to the
consummation of such Organic Change or Change-in-Control Transaction so as to
provide such Holder with a reasonable opportunity prior to such consummation to
exercise this Warrant in accordance with the terms and conditions hereof;
provided, however, that in the case of a transaction which requires notice be
given to the holders
of Common Stock of the Company, the Holder of this Warrant shall be provided the
same notice given to the holders of Common Stock of the Company.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant and of the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 10
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at least 30
business days prior to the date on which an Organic Change shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon
the exercise of any portion of this Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of any portion of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof the
right to vote or to consent or to receive notice as a stockholder of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall
give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Warrant, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Warrant, shall be transferable, in whole or in part,
except to the Holder's estate, heirs, administrators or executors and, whether
by gift or otherwise, from the Holder to the Holder's spouse, siblings, lineal
descendants or ancestors (or to a trustee of a trust which upon such transfer
and at all times thereafter is maintained solely for the benefit of such
persons). Commencing at the end of the Restricted Period and thereafter, subject
to compliance with applicable federal and state securities laws, this Warrant
and all rights hereunder shall be transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed.
For purposes of this Warrant, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter.
For purposes of this Warrant, the "Restricted Period" shall mean the period
commencing on the date of this Warrant and ending on the first to occur of (a)
two (2) years from the date of this Warrant and (b) a Change-in-Control
Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of New York, without regard to
its rules concerning conflicts of law.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer thereunto duly authorized.
Dated: As of December __, 1999 Reckson Service Industries, Inc.,
a Delaware corporation
By__________________________________________
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Reckson Service Industries, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Ladies and Gentlemen:
|_| The undersigned hereby elects to exercise the warrant issued to it by
Reckson Service Industries, Inc. (the "Company") and dated December __,
1999 Warrant No. W-1 (the "Warrant") and to purchase thereunder ___________
shares of the Common Stock, par value $.01 per share, of the Company (the
"Shares") at a purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the "Purchase
Price").
|_| The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1.1 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
By:
Title:
9
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO RECKSON SERVICE
INDUSTRIES, INC., ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANT DATED DECEMBER __, 1999, WILL BE ISSUED.
------------, ----
Reckson Service Industries, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock") of
Reckson Service Industries, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
By:
Title:
11
EXHIBIT II
FORM OF OPTION
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER __, 2001, (B) A QUALIFIED IPO (AS DEFINED IN THAT CERTAIN EXCHANGE
AGREEMENT DATED DECEMBER __, 1999 BY AND AMONG RECKSON SERVICE INDUSTRIES, INC.,
XXXXXX X. XXXXXXXXXXX AND H. XXXXX XXXX) AND (C) A CHANGE-IN-CONTROL TRANSACTION
(AS DEFINED HEREIN).
OPTION TO PURCHASE UP TO 394,737 SHARES
OF COMMON STOCK OF
ESOURCEONE, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
O-1
This certifies that RECKSON SERVICE INDUSTRIES, INC., a Delaware
corporation, or its permitted assigns (the "Holder"), for value received, is
entitled to purchase from [Name of Party Granting the Option] (the "Optionor"),
an individual residing at ____________________, a maximum of 394,737 fully paid
and nonassessable shares of the Common Stock, $.01 par value per share (the
"Common Stock"), of eSourceOne, Inc., a Delaware corporation (the "Company") for
cash at a price of $3.80 per share (as may be adjusted from time to time in
accordance with Section 3, the "Stock Purchase Price") at any time or from time
to time up to and including 5:00 p.m. (New York time), on the first to occur of
(i) a Change-in-Control Transaction (as defined below), and (ii) December __,
2009 (the first of such dates in clauses (i) and (ii) being referred to herein
as the "Expiration Date"). The shares purchasable hereunder are referred to as
the "Purchasable Shares". Holder may purchase all or any part of the Purchasable
Shares upon surrender to the Optionor at the address of Optionor set forth above
(or at such other location as the Optionor may advise the Holder in writing) of
this Option properly endorsed with the Form of Exercise Notice attached hereto
duly completed and signed and against payment in cash or by check of the
aggregate Stock Purchase Price for the number of Purchasable Shares for which
this Option is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of Purchasable Shares
are subject to adjustment as provided in Section 3 of this Option.
This Option is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Option is exercisable at any time prior to the
Expiration Date with respect to all or any part of the Purchasable Shares. Any
unexercised portion of this Option shall terminate on the Expiration Date.
Certificates for all or any portion of the Purchasable Shares for which this
Option is exercised, properly endorsed, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Optionor at the Optionor's expense within
a reasonable time after this Option has been so exercised and payment of the
purchase price for such Purchasable Shares has been received by the Optionor. In
the case of an election to purchase less than all of the Purchasable Shares, the
Optionor shall cancel this Option and execute and deliver a new Option or
Options of like tenor for the unexercised portion of the Purchasable Shares
within a reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof, and the
Optionor shall execute any such documents as may be requested by the Company to
register on the Company's stock ledger the ownership of the Purchasable Shares
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value per share of the Common Stock is greater than
the Stock Purchase Price (at the date of calculation as set forth below), in
lieu of exercising this Option for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Option (or the portion thereof
being canceled) by surrender of this Option at the address of the Holder
together with the properly endorsed Form of Exercise Notice and notice of such
election in which event the Optionor shall transfer to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
----
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of Purchasable Shares or, if only a portion of this
Option is being exercised, the portion of this Option being
exercised (at the date of such calculation)
A = the fair market value per share of Common Stock (at the date of
such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value per share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any
successor thereto or the primary exchange on which the Common Stock is then
quoted, or, if the Common Stock is not then quoted on any automated quotation
system or exchange, the price determined by the Company's Board of Directors in
good faith.
2. SHARES TO BE UNENCUMBERED. The Optionor covenants and agrees that all of
the Purchasable Shares have been duly authorized, validly issued, fully paid and
nonassessable and are free from all preemptive rights of any stockholder and
free of all taxes, encumbrances, liens, charges and the like (each an
"Encumbrance") with respect to the issue thereof, including, without limitation,
any Encumbrance under that certain Stockholders' Agreement, dated August 11,
1999, by and among certain stockholders of the Company, including, among others,
the Optionor and the Holder. The Optionor further covenants and agrees that,
during the period within which the rights evidenced by this Option may be
exercised, the Optionor will maintain ownership of the Purchasable Shares and
any additional stock or other securities or property (including cash) by way of
spin-off, split-up, reclassification, or combination thereof or similar
corporate action free and clear of any Encumbrances. The Optionor will not take
any action in his individual capacity which would cause, or omit to take any
action within the reasonable control of Optionor which would prevent, the
purchase of any of the Purchasable Shares by the Holder as provided herein to
be, or from being, as the case may be, a violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the securities of the Company may be listed; provided, however, that the
foregoing sentence shall not apply in any case where it requires the Optionor to
act or omit to act in a manner that is contrary to any fiduciary duty that the
Optionor has to the Company in the Optionor's capacity as an officer or director
of the Company.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Option shall be subject to adjustment in accordance with this Section 3 and from
time to time upon the occurrence of certain events described in this Section 3.
Upon each adjustment of the Stock Purchase Price, the Holder of this Option
shall thereafter be entitled to purchase, at the Stock Purchase Price resulting
from such adjustment, the number of shares obtained by multiplying the Stock
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Option) shall
have received or become entitled to receive, without payment therefor,
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Option, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had he been the
holder of record of such Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then the Holder hereof
shall thereafter have the right to purchase and receive (in lieu of the shares
of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of Purchasable Shares of immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In the event of any Organic Change, the Optionor shall make appropriate
provision with respect to the rights and interests of the Holder of this Option
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of shares
purchasable and receivable upon the exercise of this Option) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Optionor shall notify the Holder of
any proposed Organic Change or Change-in-Control Transaction reasonably prior to
the consummation of such Organic Change or Change-in-Control Transaction so as
to provide Holder with a reasonable opportunity prior to such consummation to
exercise this Option in accordance with the terms and conditions hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder in accordance with such provisions, then the
Optionor shall make an adjustment in the number and class of shares available
under the Option, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of this Option upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as the
Holder would have owned had this Option been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Option and of the Stock Purchase Price, the Optionor shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Optionor shall give written notice to the Holder at least ten (10)
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Optionor shall also give written notice to the Holder at least
thirty (30) business days prior to the date on which an Organic Change shall
take place.
4. TRANSFER AND ISSUE TAXES. The transfer of and issuance of certificates
for shares of Common Stock upon the exercise of any portion of this Option shall
be made without charge to the Holder of this Option for any transfer or issue
tax (other than any applicable income taxes) in respect thereof; provided,
however, that neither Optionor nor the Company shall be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of this
Option being exercised.
5. CLOSING OF BOOKS. The Optionor shall not cause the Company to close at
any time the Company's transfer books against the transfer of any shares of
Common Stock transferable upon the exercise of this Option in any manner which
interferes with the timely exercise of any portion of this Option; provided,
however, that the foregoing sentence shall not apply in any case where it
requires the Optionor to act or omit to act in a manner that is contrary to any
fiduciary duty that the Optionor has to the Company in the Optionor's capacity
as an officer or director of the Company.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Option shall be construed as conferring upon the Holder hereof the right
to vote or to consent or to receive notice as a stockholder of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Option or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Option shall have been exercised. No provisions
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the Stock Purchase
Price or as a stockholder of the Company, whether such liability is asserted by
the Optionor, the Company or by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Option, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Option, shall be transferable, in whole or in part, except
to Affiliates or employees of the Holder. Commencing at the end of the
Restricted Period and thereafter, subject to compliance with applicable federal
and state securities laws, this Option and all rights hereunder shall be
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of the Option properly enclosed.
For purposes of this Option, the term "Affiliate" shall mean shall mean any
corporation or other entity in which the subject person (A)(1) owns or controls
the voting rights of 50% or more of the capital stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or entity or (2)
has the right to nominate and/or elect at least one-half of the members of the
board of directors of such corporation or entity or (3) at least one-half of the
then current members of the board of directors of such corporation or entity
were nominated or designated for election as directors of such corporation by
the subject person and (B) for financial reporting purposes, the financial
statements of the subject person includes on a consolidated basis the financial
statements of such corporation or other entity.
For purposes of this Option, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter; provided, however, that
Change-in-Control Transaction shall not include any acquisition or series of
related acquisitions of more than 50% of the outstanding capital stock of the
Company by Reckson Service Industries, Inc. or its Affiliates.
For purposes of this Option, a "Qualified IPO" shall mean a firm
underwritten public offering of common stock of eSourceOne by a nationally
recognized underwriter which offering results in the receipt of aggregate gross
proceeds by eSourceOne of at least $30,000,000 and reflects a market value of
eSourceOne of at least $150,000,000 immediately prior to such public offering.
For purposes of this Option, the "Restricted Period" shall mean the period
commencing on the date of this Option and ending on the first to occur of (a)
two (2) years from the date of this Option, (b) a Qualified IPO and (c) a
Change-in-Control Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF OPTION. The rights and
obligations of the Company, of the Holder of this Option and of the holder of
shares of Common Stock issued upon exercise of this Option referred to in
Section 7 shall survive the exercise of this Option.
9. MODIFICATION AND WAIVER. This Option and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Optionor shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as set forth in the first paragraph of this Option, to the Optionor at
the Optionor's address as set forth in the first paragraph of this Option, or,
in each case, such other address as either may from time to time be provided by
one party to the other.
11. BINDING EFFECT ON SUCCESSORS. This Option shall be binding upon any
successor in interest to the Optionor. All of the obligations of the Optionor
relating to the transfer of the Common Stock upon the exercise of this Option
shall survive the exercise and termination of this Option. All of the covenants
and agreements of the Optionor shall inure to the benefit of the successors and
assigns of the Holder.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Option are inserted for convenience only
and do not constitute a part of this Option. This Option shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the internal laws of the State of New York, without regard to its rules
concerning conflicts of law.
13. LOST OPTION. The Optionor represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Optionor of the
loss, theft, destruction, or mutilation of this Option and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Optionor, or in the case of any such mutilation upon
surrender and cancellation of this Option, the Company, at its expense, will
make and deliver a new Option, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Option.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Option. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
IN WITNESS WHEREOF, the Option has caused this Option to be duly executed
by its officer thereunto duly authorized.
Dated: As of December __, 1999 [NAME OF OPTIONOR]
-----
By_____________________________
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
[NAME OF OPTIONOR]
[STREET ADDRESS]
[CITY, STATE ZIPCODE]
Dear __________:
|_| The undersigned hereby elects to exercise the option issued to it by [Name
of Optionor] (the "Optionor"), dated December __, 1999 (the "Option"), and
to purchase thereunder ___________ shares (the "Shares") of the Common
Stock, par value $.01 per share, of eSourceOne, Inc., a Delaware
corporation, at a purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the "Purchase
Price").
|_| The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Option pursuant to the provisions of Section
1.1 of the Option.
Pursuant to the terms of the Option the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Option.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: ________________________________
Name:
Title:
9
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO THE OPTIONOR, ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
OPTION, DATED DECEMBER __, 1999, WILL BE ISSUED.
------------, ----
[NAME OF OPTIONOR]
[STREET ADDRESS]
[CITY, STATE ZIPCODE]
Dear ____________:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock"), of
eSourceOne, Inc. (the "Company") from you ("Optionor") pursuant to the exercise
of that certain Option, dated December __, 1999, granted by Optionor to
Purchaser. The Common Stock will be sold to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by Optionor and the Company,
Purchaser represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by Optionor and the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
Purchaser agrees that the shares of Common Stock to be purchased by Purchaser
upon exercise of the Option shall in the hands of Purchaser continue to be
subject to the terms and conditions of that certain Stockholders Agreement by
and among the Company and certain stockholders of the Company, including, among
others, Optionor and Purchaser, or any replacement stockholders agreement (the
"Stockholders Agreement"), and to execute a counterpart of the Stockholders
Agreement upon request by Optionor or the Company for the purpose of evidencing
such agreement by Purchaser.
Purchaser also understands and agrees that, in addition to any legends required
by the Stockholders Agreement, there will be placed on the certificate(s) for
the Common Stock or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: _______________________________
Name:
Title:
11
