Exhibit 10.12
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FIFTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JULY 29, 1999
BY AND AMONG
VANTAS INCORPORATED
AND
THE SECURITYHOLDERS IDENTIFIED HEREIN
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TABLE OF CONTENTS
RECITALS.....................................................................1
ARTICLE I DEFINITIONS......................................................3
1.1 Defined Terms....................................................3
ARTICLE II BOARD; COMMITTEES...............................................13
2.1 Board of Directors..............................................13
2.2 Removal of Directors............................................15
2.3 Committees......................................................16
2.4 Vacancies.......................................................17
2.5 Proxies.........................................................17
2.6 Compensation....................................................17
2.7 Subsidiary Boards...............................................17
ARTICLE III CERTAIN CORPORATE ACTION........................................18
3.1 Approval of Certain Board Action................................18
3.2 Approval of Certain Stockholders................................21
3.3 Appointment of Appraiser........................................22
3.4 Appointment of Certain Executive Personnel......................22
3.5 Resolution of Certain Tie Votes of the Board....................22
ARTICLE IV TRANSFER OF SHARES..............................................23
4.1 Restrictions on Transfer........................................23
4.2 Certain Permitted Transfers.....................................23
4.3 Rights of First Refusal.........................................24
4.4 Restrictions in Connection with Registrations...................28
4.5 Tag-Along Right.................................................28
4.6 Transfers to a Competitor.......................................30
4.7 Sales of Xxxxx Securities.......................................31
4.8 Sale of the Company.............................................33
4.9 Repurchase of Equity Interests..................................34
4.10 Restrictions Following Qualified Public Offering................34
ARTICLE V PUT.............................................................35
5.1 Ability to Put..................................................35
5.2 Put Price.......................................................38
5.3 Appraisal Procedure.............................................38
5.4 Consent Required to Put.........................................39
ARTICLE VI REGISTRATION RIGHTS.............................................40
6.1 Public Offering Shares..........................................40
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ARTICLE VII PREEMPTIVE RIGHTS..............................................48
7.1 Preemptive Rights...............................................48
7.2 Standstill......................................................52
ARTICLE VIII TERMINATION...................................................52
8.1 Termination.....................................................52
ARTICLE IX MISCELLANEOUS...................................................54
9.1 Information.....................................................54
9.2 Certificate Legend..............................................56
9.3 Negotiable Form.................................................56
9.4 Enforcement.....................................................56
9.5 Specific Performance............................................56
9.6 Transferees.....................................................57
9.7 Notices.........................................................57
9.8 Binding Effect; Assignment......................................66
9.9 Governing Law...................................................66
9.10 Severability....................................................66
9.11 Entire Agreement................................................67
9.12 Counterparts....................................................67
9.13 Amendment; Waiver...............................................67
9.14 Captions........................................................67
9.15 Waivers.........................................................67
9.16 Subsequent Option Grants........................................68
9.17 Non-Competition.................................................68
SCHEDULE 1 Holdings of Securityholders
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FIFTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT OF
VANTAS INCORPORATED
STOCKHOLDERS' AGREEMENT dated as of July 29,1999 (this "Agreement") by and
among VANTAS INCORPORATED, a Nevada corporation (the "Company"); the parties
identified on the signature pages under the heading "Xxxxxx, Xxxxxxx Holders"
(the "Xxxxxx Holders"); the parties identified on the signature pages under the
heading "Northwood Holders" (the "Northwood Holders"); the party identified on
the signature pages under the heading "Paribas Holder" (the "Paribas Holder");
the party identified on the signature pages under the heading "PNA Holder" (the
"PNA Holder"); the parties identified on the signature pages under the heading
"Unit Holders" (the "Unit Holders"); the parties identified on the signature
pages under the heading the "Series C and D Holders" (the "Series C and D
Holders"); and the parties identified on the signature pages under the heading
"Other Holders" (collectively, the "Other Holders"). The Xxxxxx Holders, the
Northwood Holders, the Paribas Holder, the PNA Holder, the Unit Holders, the
Series C and D Holders, and the Other Holders are referred to herein
collectively as the "Securityholders".
RECITALS
A. The Company entered into a Series A Convertible Preferred Stock Purchase
Agreement, dated as of November 15, 1996 (the "First Series A Stock Purchase
Agreement"), with the Xxxxxx Holders, pursuant to which the Xxxxxx Holders
acquired shares of the Company's Series A Convertible Preferred Stock and
warrants on the terms and conditions set forth therein.
B. The Company entered into a Stockholders' Agreement, dated as of November
15, 1996 (the "Initial Stockholders' Agreement"), with the Xxxxxx Holders and
certain of the Other Holders identified therein.
C. The Company entered into a Series A Convertible Preferred Stock Purchase
Agreement, dated as of December 31, 1996 (the "Second Series A Stock Purchase
Agreement"), with the Northwood Holders, pursuant to which the Northwood Holders
acquired shares of the Company's Series A Convertible Preferred Stock and
warrants on the terms and conditions set forth therein.
D. The Company entered into Subscription Agreements, dated as of December
30, 1996 and January 14, 1997, with certain of the Other Holders pursuant to
which each of them acquired shares of the Company's Series A Convertible
Preferred Stock and warrants on the terms and conditions set forth therein.
E. The Company entered into an Amended and Restated Stockholders'
Agreement, dated as of December 31, 1996 (the "First Restated Stockholders'
Agreement"), with the Xxxxxx Holders, the Northwood Holders and the Other
Holders who subscribed for Series A Preferred Stock, which amended, restated and
superseded in its entirety the Initial Stockholders' Agreement.
F. The Company entered into an Amendment No. 1, dated as of January 14,
1997 ("Amendment No. 1"), to the First Restated Stockholders' Agreement with the
Xxxxxx Holders, the Northwood Holders and the Other Holders who subscribed for
Series A Preferred Stock.
G. The Company entered into a Second Amended and Restated Stockholders'
Agreement, dated as of February 15, 1997 (the "Second Restated Stockholders
Agreement"), with the Xxxxxx Holders, the Northwood Holders, the Other Holders
who subscribed for Series A Preferred Stock, and the Paribas Holder which
amended, restated and superseded in its entirety the First Restated Stockholders
Agreement.
H. The Company entered into a Series B Convertible Preferred Stock Purchase
Agreement, dated as of April 29, 1998 (the "Series B Stock Purchase Agreement"),
with the PNA Holder, the Xxxxxx Holders, the Northwood Holders and certain of
the Other Holders, pursuant to which such Securityholders acquired shares of the
Company's Series B Convertible Preferred Stock.
I. The Company entered into a Third Amended and Restated Stockholders'
Agreement, dated as of April 29, 1998 (the "Third Restated Stockholders
Agreement"), with the Xxxxxx Holders, the Northwood Holders, the Other Holders,
the PNA Holder and the Paribas Holder which amended, restated and superseded in
its entirety the Second Restated Stockholders Agreement.
J. The Company entered into Series B Convertible Stock Purchase Agreements
dated as of December 21, 1998 with the holders of units of limited partnership
interest (the "Unit Holders") of certain limited partnerships, of which various
Subsidiaries of the Company are the general partners, pursuant to which such
Unit Holders exchanged their units of limited partnership interest for shares of
the Company's Series B Convertible Preferred Stock.
K. The Company entered into an Amended and Restated Credit Agreement dated
as of November 6, 1998 (as such agreement may be amended, supplemented,
refinanced, modified or replaced, the "Credit Agreement") with certain financial
institutions party thereto from time to time and Paribas, as Agent, or any other
successor Agent thereto.
L. On January 8, 1999, ALLIANCE Holding, Inc., a wholly owned subsidiary of
the Company, was merged with and into Interoffice Superholdings Corporation
("Interoffice"), and, immediately thereafter, ANI Holding, Inc., a wholly owned
subsidiary of the Company, was merged with and into Reckson Executive Centers,
Inc. ("REC"), in each case pursuant to the respective merger agreements (the
"Merger Agreements") and in connection with such mergers (the "Mergers"), the
Series C and D Holders exchanged all of their shares of capital stock of REC and
Interoffice beneficially held on January 8, 1999 (the "Merger Date") for shares
of the Company's Series C Convertible Preferred Stock.
M. The Company entered into a Fourth Amended and Restated Stockholders'
Agreement, dated January 8, 1999 (the "Fourth Restated Stockholders'
Agreement"), with the Series A Holders, Series B Holders and Series C Holders,
which amended, restated and superceded in its entirety the Third Amended and
Restated Stockholders' Agreement.
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N. The Company entered into a Series D Convertible Preferred Stock Purchase
Agreement, dated as of July 29, 1999 (the "Series D Stock Purchase Agreement"),
with the Series C and D Holders who subscribed for Series D Preferred Stock.
O. The Company anticipates entering into a Series D and E Convertible
Preferred Stock Purchase Agreement (the "Series D and E Stock Purchase
Agreement") with certain Securityholders who will also subscribe for Series D
Preferred Stock or Series E Preferred Stock pursuant thereto, subject to
Super-Majority Approval (as defined herein).
P. On the date hereof, each Securityholder owns the shares of capital stock
of the Company or options or warrants exercisable for shares of capital stock of
the Company set forth opposite his, her or its name on Schedule 1 hereto (which
Schedule 1 does not, as of the date of this Agreement, include any shares of
Series D Preferred Stock or Series E Preferred Stock which may be issued
pursuant to the Series D and E Stock Purchase Agreement).
Q. The Securityholders desire to enter into this Agreement with the Company
which shall amend, restate and supersede in its entirety the Fourth Restated
Stockholders' Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. The following terms are defined as follows:
(1) "Adjusted Fully Diluted Capitalization" shall mean the number of issued
and outstanding shares of Common Stock, assuming that (i) any Options or
Warrants outstanding as of the Merger Date, and any Options outstanding under
the Company's 1996 Stock Option Plan, whether or not outstanding as of the date
of this Agreement, have been exercised in full, (ii) any outstanding options or
warrants to purchase Common Stock or to purchase any security convertible into
or exchangeable for Common Stock, other than those described in clause (i)
hereof, that are Exercisable and that have an exercise price that is lower than
the then fair market value of the Common Stock have been exercised in full, and
(iii) any outstanding securities that are then convertible into or exchangeable
for Common Stock have been converted or exchanged in full.
(2) "Affiliate" shall mean, with respect to any Person, (i) any Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with, such Person, (ii) any executive officer (as such term is defined by Rule
501 promulgated under the Securities Act) or director (or individual with a
similar capacity) of such Person, or (iii) when used with respect to an
individual, shall include the Family Group Members of such individual.
(3) "Annual Budget" shall mean the budget for the Company and its
Subsidiaries in respect of each fiscal year of the Company which shall include,
without limitation, a cash flow projection, an operating budget, a capital
expenditures budget and an acquisition budget.
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(4) "Xxxxx Employment Agreement" shall mean that certain Employment
Agreement, dated as of November 15, 1996, between the Company and Xxxxx X.
Xxxxx.
(5) "Beneficially Own" shall have the meaning given such term under Rule
13d-3 promulgated under the Exchange Act. The term "Beneficial Ownership" shall
have the correlative meaning. The foregoing terms shall exclude any record or
Beneficial Ownership in any securities issued by RSI or any interest in JAH
Realties L.P.
(6) "Blackout Period" shall mean the period commencing on the consummation
of a Qualified Public Offering and ending on the earliest to occur of (i) the
second anniversary of the consummation of the Qualified Public Offering, (ii)
the consummation of a secondary offering of the Common Stock in which (X) the
gross proceeds of such offering equal or exceed 30% of the gross proceeds of the
Qualified Public Offering, and (Y) the offering price per share of Common Stock
is at least 10% higher than the offering price per share of Common Stock in the
Qualified Public Offering (as adjusted to reflect stock dividends, stock splits,
stock combinations or any other similar transaction occurring after the
Qualified Public Offering), and (iii) the presentation by any Securityholder
that is subject to restrictions on resale during the Blackout Period of evidence
reasonably satisfactory to a majority of the other Securityholders that are also
subject to such restrictions that the Company is capable of consummating an
offering of the type described in clause (ii) hereof. The parties agree that the
opinion of a bulge bracket underwriter to the foregoing effect based on the then
current market price of the Common Stock, earnings multiples and any other
relevant factors shall automatically be satisfactory evidence. (7) "Board" shall
mean the Board of Directors of the Company. (8) "Business Day" shall mean a day
(other than a Saturday or Sunday) on which both federally and New York State
chartered banks are generally open for business in New York City. (9)
"Certificates of Designation" shall collectively mean the Series A Certificate
of Designation, the Series B Certificate of Designation, the Series C
Certificate of Designation, the Series D Certificate of Designation and the
Series E Certificate of Designation. (10) "Commission" shall mean the Securities
and Exchange Commission or any other federal agency at the time administering
the Securities Act. (11) "Common Stock" shall mean the Company's common stock,
par value $.01 per share, whether designated as Class A Common Stock or Class B
Common Stock. (12) "Common Stock Equivalent" shall mean, with respect to any
Securityholder, the number of shares of Common Stock owned by such
Securityholder, plus the number of shares of Conversion Stock, the number of
Warrant Shares, and the number of Option Shares which such Securityholder has
the right to acquire (or would upon the full vesting of all Options have the
right to acquire) by conversion or exercise as of the date of determination
thereof.
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(13) "Control" shall mean the power to direct the management and policies
of any Person whether through voting control, by contract or otherwise, and the
terms "Controls" and "Controlled" shall have the correlative meanings.
(14) "Conversion Stock" shall mean Common Stock issuable upon the
conversion of the Preferred Stock.
(15) "Core Business" shall mean the business of the outsourcing of office
operations both on an on-site and off-site basis, and the outsourcing of
business support services to customers or clients of the Company which purchase
any of the Company's products or services.
(16) "Director" shall mean any member of the Board.
(17) "Encumbrances" shall mean any and all liens, pledges, claims, charges,
security interests, options or other legal or equitable encumbrances and
restrictions.
(18) "Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(19) "Exercisable" shall mean, with respect to any options or warrants to
purchase Common Stock or any security convertible into or exchangeable for
Common Stock, that at the time of determination, such options or warrants may be
exercised for Common Stock or any security convertible into or exchangeable for
Common Stock.
(20) "Family Group Members" shall mean (i) the parents, grandparents,
brothers, sisters, descendants (whether natural or adopted) and spouse of the
specified individual; (ii) any spouse or descendant of any specified individual
specified in clause (i) above; (iii) any trust created solely for the benefit of
any individual described in clauses (i) through (ii) above; (iv) any executor or
administrator for any of the individuals described in clauses (i) through (ii)
above; (v) any partnership solely of individuals described in clauses (i)
through (iv) above; and (vi) any tax exempt corporate foundation created by any
of the Persons described in clauses (i) through (v) above exclusively engaged in
charitable purposes.
(21) "Fully Diluted Capitalization" shall mean the number of issued and
outstanding shares of Common Stock assuming full issuance of all Conversion
Stock, Warrant Shares, Option Shares and other shares of Common Stock issuable
upon exercise of any other options to purchase Common Stock or any security
convertible or exchangeable for Common Stock and conversion of any such
convertible or exchangeable securities.
(22) "GAAP" shall mean generally accepted accounting principles.
(23) "Incapacity" with respect to an individual, shall mean that a
committee or conservator shall have been appointed for such individual or his
property.
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(24) "Initial Public Offering" shall mean the consummation of either I(i) a
public offering that has received Super-Majority Approval, or (ii) a Qualified
Public Offering.
(25) "Intercompany Agreement" means that certain Intercompany Agreement,
dated as of January 8, 1999, by and between the Company and the RSI Holder.
(26) "JAH Beneficial Holders" shall mean (i) Xxx X. Xxxxxxx and any Person
Controlled by him, (ii) any Family Group Member of Xxx X. Xxxxxxx so long as Xxx
X. Xxxxxxx has the power to control, by contract or otherwise, the vote of the
Shares of Series C Preferred Stock or Series D Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group Member, and (iii) in the
event of the death or Incapacity of Xxx X. Xxxxxxx, any of his Family Group
Members or any conservator or committee who, as a result of his death, obtain
Beneficial Ownership of the Shares of Series C Preferred Stock, Series D
Preferred Stock or Common Stock Equivalents, which were Beneficially Owned by
Xxx X. Xxxxxxx prior to his death or Incapacity so long as Control with respect
to such Beneficial Ownership thereof resides in a single individual.
(27) "Majority of the Shares of Series A, B and E Preferred Stock" shall
mean at least 66_% of the Shares of the Series A, B and E Preferred Stock (taken
as a single class) issued and outstanding at the time any such vote is taken.
(28) "Majority of the Shares of Series C and D Preferred Stock" shall mean
at least 50.1% of the Shares of the Series C and D Preferred Stock (taken as a
single class) issued and outstanding at the time any such vote is taken.
(29) "OnSite" shall mean OnSite Ventures, L.L.C.
(30) "OnSite Agreement" means the agreement to be entered into between the
Company and OnSite with respect to the provision of Internet and
telecommunications services to the Company by OnSite.
(31) "Option Plan" shall mean the Company's 1996 Stock Option Plan, the
Company's 1999 Stock Option Plan, or any other stock option or phantom interest
plan that has received Super-Majority Approval.
(32) "Options" shall mean (i) the options to purchase Common Stock, each
originally dated as of June 30, 1996, issued to Xxxxx X. Xxxxx, Xxxxx X.
Xxxxxxxx, Xxxxx X. Xxxxxxxxxx and Xxxx X. Xxxxxx, (ii) the options to purchase
Common Stock, each originally dated as of November 1, 1996, issued to Xxxxx X.
Xxxxx, Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx, (iii) the option
to purchase Common Stock, originally dated as of August 4, 1998, issued to Xxxxx
X. Xxxxx (as all of such options described in clauses (i), (ii) and (iii) have
been amended and restated as of January 8, 1999), and (iv) any options to
purchase Common Stock granted under an Option Plan.
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(33) "Option Shares" shall mean the shares of Common Stock of the Company
issuable (or which may become issuable upon vesting) upon the exercise of
Options.
(34) "Person" means any individual, proprietorship, partnership,
corporation, limited liability company, trust, estate, or other form of entity
including, if applicable, any governmental authority or agency.
(35) "Preferred Stock" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
(36) "Prime Rate" shall mean the prime rate publicly announced by The Chase
Manhattan Bank, N.A. from time to time.
(37) "Pro Rata Share" with respect to any Securityholder shall mean the
percentage equal to the fraction obtained by dividing the number of Common Stock
Equivalents such Securityholder owns by the aggregate number of all Common Stock
Equivalents owned by all Securityholders.
(38) "Prohibited Business" shall mean the executive office suite business
in which the Company is engaged at the time of determination, taken as a whole
and including (i) on-site and off-site operations and (ii) any product or
service which is part of the executive office suite business and is being
actively pursued for development by management of the Company and which has been
presented to the Executive Committee of the Company and not been rejected
thereby (provided that if such product or service has been rejected and
thereafter been taken to the Board and not been rejected, such product or
service shall be considered part of the Prohibited Business). The time of
determination shall be the time of the development of a business or the making
of any investment in question under Section 9.17 by any of the Persons subject
to the restrictions in Section 9.17.
(39) "Qualified Public Offering" shall mean the consummation of a
firm-commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock for the account of the Company in which (i) the aggregate gross
proceeds of such offering equal or exceed $75 million, (ii) the valuation of the
Company (as reflected by the quotient obtained by dividing (A) the product of
(1) the Adjusted Fully Diluted Capitalization (giving effect to the Qualified
Public Offering) and (2) the aggregate gross proceeds of such offering by (B)
the number of shares of Common Stock sold in such offering) equals or exceeds a
multiple of 20 times the Company's projected net income for the 12 month period
following the date of the most recent financial statements included in the
registration statement for such offering (which projected net income shall be
based on reasonable assumptions that have been disclosed to the Board and shall
be determined in a manner consistent with the last regularly prepared quarterly
financial statements of the Company, except for any change in accounting
practices made subsequent thereto with which the Company's independent
accountants concur and in accordance with applicable financial standards (e.g.
AICPA Professional Standards Section 200 for a Financial Forecast)), and (iii)
the lead managing underwriter is either a "bulge bracket" firm or BT Alex. Xxxxx
Incorporated, NationsBank Xxxxxxxxxx Securities LLC or Xxxxxxx Xxxxx & Company,
L.L.C. The assumptions used in determining projected net income may
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include: (i) consistency in financial reporting policies and procedures
(except as otherwise required or suggested by GAAP), (ii) the earnings growth of
the Company during the relevant (e.g., prior 2-year) period, (iii) projected
events and transactions during the projected one year period per the Annual
Budget (as adjusted per variance analysis for the prior four quarters) and the
expected use of funds from the public offering, (iv) financial effect (pro
forma) of any acquisitions that are likely to be consummated and (v) such other
factors as any investment banking firm described above might consider in valuing
the Company.
(40) "Qualifying Series C and D Beneficial Holders" shall mean the RSI
Beneficial Holders, the JAH Beneficial Holders, the Xxxxxxxxxx Beneficial
Holders, the Xxxxxx Beneficial Holders and the Xxxxxx Beneficial Holders.
(41) "Xxxxxxxxxx Beneficial Holders" shall mean (i) Xxxxxx Xxxxxxxxxx and
any Person Controlled by him, (ii) any Family Group Member of Xxxxxx Xxxxxxxxxx
so long as Xxxxxx Xxxxxxxxxx has the power to control, by contract or otherwise,
the vote of the Shares of Series C and D Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group Member, and (iii) in the
event of the death or Incapacity of Xxxxxx Xxxxxxxxxx, any of his Family Group
Members or any conservator or committee who, as a result of his death or
Incapacity, obtain Beneficial Ownership of the shares of Series C and D
Preferred Stock or the Common Stock Equivalents, which were Beneficially Owned
by Xxxxxx Xxxxxxxxxx prior to his death. Notwithstanding the foregoing
provisions of this definition, no Person shall be deemed a Xxxxxxxxxx Beneficial
Holder with respect to any shares of Series C and D Preferred Stock or Common
Stock Equivalents which were not acquired by a Xxxxxxxxxx Beneficial Holder
either (i) pursuant to the Merger Agreements, or (ii) by exercise of a right to
purchase under Article 4 or under Section 7.1 hereof.
(42) "Registered Securities" shall mean securities that (i) have been
registered under the Securities Act and (ii) are of a class (A) listed on a
national securities exchange or designated for quotation on NASDAQ, and (B)
having an aggregate market value (which shall include securities issued to the
holders of the Company's securities) of at least $50,000,000.
(43) "Xxxxxx Beneficial Holders" shall mean (i) Xxxxxx Xxxxxx and any
Person Controlled by him, (ii) any Family Group Member of Xxxxxx Xxxxxx so long
as Xxxxxx Xxxxxx has the power to control, by contract or otherwise, the vote of
the Shares of Series C and D Preferred Stock or Common Stock Equivalents, and
(iii) in the event of the death or Incapacity of Xxxxxx Xxxxxx, any of his
Family Group Members or any conservator or committee who, as a result of his
death or Incapacity, obtain Beneficial Ownership of the shares of Series C and D
Preferred Stock or the Common Stock Equivalents, which were Beneficially Owned
by Xxxxxx Xxxxxx prior to his death. Notwithstanding the foregoing provisions of
this definition, no Person shall be deemed a Xxxxxx Beneficial Holder with
respect to any shares of Series C and D Preferred Stock or Common Stock
Equivalents which were not acquired by a Xxxxxx Beneficial Holder either (i)
pursuant to the Merger Agreements, or (ii) by exercise of a right to purchase
under Article 4 or under Section 7.1 hereof.
(44) "RSI" shall mean Reckson Service Industries, Inc.
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(45) "RSI Beneficial Holders" shall mean RSI and any Affiliates of RSI
Controlled by RSI, in each case for so long as an acquisition of Control of RSI
of the type described in Section 4.6 has not occurred.
(46) "Sale of the Company" shall mean (i) consummation of a merger or
consolidation (or similar transaction) of the Company with or into another
Person that is not a direct or indirect parent or subsidiary of the Company
pursuant to which all or substantially all of the then outstanding shares of
capital stock of the Company are converted or exchanged into the right to
receive cash or securities of another Person, (ii) the consummation of the sale
or other disposition of all or substantially all of the outstanding Shares,
Options and Warrants that are the subject of this Agreement to a Person that is
not a direct or indirect parent or Subsidiary of the Company or (iii) the
consummation of the sale or other disposition of all or substantially all of the
Company's assets to a Person that is not a direct or indirect parent or
Subsidiary of the Company; provided, however, that notwithstanding anything to
the contrary contained herein, a Sale of the Company shall only be deemed to
have occurred if at least 80% of the consideration to be received by the
Securityholders in connection with such transaction is payable in (i) cash, (ii)
Registered Securities or (iii) any combination of cash and Registered
Securities.
(47) "Securities Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
(48) "Series A, B and E Holders" shall collectively mean Series A Holders,
Series B Holders and Series E Holders.
(49) "Series A, B and E Preferred Directors" shall mean the directors
nominated by the Series A, B and E Holders pursuant to Section 2.1(a) and (b).
(50) "Series A, B and E Preferred Stock" shall collectively mean the Series
A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock.
(51) "Series A Certificate of Designation" shall mean the Fifth Amended and
Restated Certificate of Designation of Series A Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
(52) "Series A Holders" shall mean the holders of the Series A Preferred
Stock issued and outstanding at any time.
(53) "Series A Preferred Stock" shall mean the Company's Series A
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(54) "Series B Certificate of Designation" shall mean the Second Amended
and Restated Certificate of Designation of Series B Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
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(55) "Series B Holders" shall mean the holders of the Series B Preferred
Stock issued and outstanding at any time.
(56) "Series B Preferred Stock" shall mean the Company's Series B
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(57) "Series C and D Adjusted Fully Diluted Capitalization" shall mean the
Adjusted Fully Diluted Capitalization,
(1) decreased by the number of Common Stock Equivalents (A) issued upon the
exercise of options to purchase Shares granted to directors or employees of, or
consultants to, the Company pursuant to the Company's 1999 Stock Option Plan or
any other stock option plan of the Company (other than the Company's 1996 Stock
Option Plan), (B) issued pursuant to the exercise of any rights, warrants,
options (other than as described in clause (A) hereof) or other agreements to
purchase Shares, which rights, warrants, options or other agreements are not
outstanding on the date of this Agreement (except if and to the extent that the
Series C and D Holders had the right to exercise preemptive rights under Article
7 with respect to the initial sale or grant by the Company of such rights,
warrants, options or agreements), (C) issued in an Initial Public Offering as to
which the RSI Beneficial Holders or the Series C and D Holders would have had
the right to exercise preemptive rights under Section 7.1(b) but for the
limitation set forth in Section 7.1(b) relating to the right to acquire up to
30% of the New Securities sold in such Initial Public Offering until other
Persons have purchased $75,000,000 of such New Securities, and (D) issued as
consideration for, or in connection with, any merger or acquisition of the stock
or assets of any acquired entity by the Company, and
(2) increased in the event there is an issuance of New Securities (as
defined in Section 7.1(a)) or Additional Securities (as defined in Section
7.1(b)) by the number of Unused Backlog CSE's (as hereinafter defined) as to
which the RSI Beneficial Holders or any of the Series C and D Holders have the
right to exercise (as determined below) preemptive rights under the second
paragraph of Section 7.1(a) or under Section 7.1(b) (the "Testing Sections").
As used herein, "Backlog CSE's" shall mean the aggregate number of Common Stock
Equivalents by which the Adjusted Fully Diluted Capitalization has been
decreased pursuant to clause (i) above of this Section 1.1(bbb), and "Unused
Backlog CSE's" shall mean the number of Backlog CSE's reduced by the number of
Backlog CSE's by which the Adjusted Fully Diluted Capitalization has been
increased pursuant to clause (ii) above of this Section 1.1(bbb). For the
purpose of determining whether the RSI Beneficial Holders or the Series C and D
Holders have the right to exercise preemptive rights under the Testing Sections
with respect to Unused Backlog CSEs, the RSI Beneficial Holders or the Series C
and D Holders, as the case may be, shall be deemed to have such rights if and to
the extent that the number of New Securities or Additional Securities which the
RSI Beneficial Holders or any of the Series C and D Holders have the right to
purchase under the Testing Sections is greater than the number of such New
Securities or Additional Securities which the RSI Beneficial Holders or any
Series C and D Holders would then have the right to purchase if the RSI
10
Beneficial Holders and the Series C and D Holders (x) had actually exercised
preemptive rights to the maximum extent permitted to them under Sections 7.1(a)
and 7.1(b) with respect to all issuances of New Securities or Additional
Securities, and (y) had the right to exercise, and had actually exercised,
preemptive rights under the Testing Sections with respect to all issuances
described in clause (i) above of this Section 1.1(bbb). If at any time the
Company requests, and the RSI Beneficial Holders or the Series C and D Holders
agree to, the waiver of preemptive rights that the RSI Beneficial Holders or
such Series C and D Holders may then have with respect to New Securities or
Additional Securities, then for purposes of this Agreement, the RSI Beneficial
Holders and the Series C and D Holders shall not be deemed to have had the right
to exercise preemptive rights with respect to such New Securities or Additional
Securities.
(58) "Series C and D Holders" shall mean the holders of the Series C and D
Preferred Stock.
(59) "Series C and D Preferred Directors" shall mean the directors
nominated by the Series C and D Holders pursuant to Section 2.1(a) and (b).
(60) "Series C and D Preferred Stock" shall mean the Series C Preferred
Stock and Series D Preferred Stock.
(61) Series C Certificate of Designation" shall mean the Amended and
Restated Certificate of Designation of the Series C Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
(62) "Series C Holders" shall mean the holders of the Series C Preferred
Stock issued and outstanding at any time.
(63) "Series C Preferred Stock" shall mean the Company's Series C
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(64) "Series D Certificate of Designation" shall mean the Certificate of
Designation of Series D Preferred Stock, dated as of July 20, 1999, to the
Company's Articles of Incorporation.
(65) "Series D Holders" shall mean the holders of the Series D Preferred
Stock issued and outstanding at any time.
(66) "Series D Preferred Stock" shall mean the Company's Series D
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(67) "Series E Certificate of Designation" shall mean the Certificate of
Designation of Series E Preferred Stock, dated as of July 20, 1999, to the
Company's Articles of Incorporation.
11
(68) "Series E Holders" shall mean the holders of the Series E Preferred
Stock issued and outstanding at any time.
(69) "Series E Preferred Stock" shall mean the Company's Series E
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(70) "Shares" shall mean any shares of capital stock of the Company,
including, without limitation, the Common Stock, Preferred Stock, Warrant Shares
and Option Shares, now or hereafter issued.
(71) "Subsidiary" shall mean any corporation, partnership or limited
liability company of which a majority of the outstanding voting securities or
other voting equity interests or voting power are owned, directly or indirectly,
by the Company.
(72) "Super-Majority Approval" shall mean approval of a majority of the
whole Board (which majority shall include a majority of the Series C and D
Preferred Directors and, solely with respect to the actions specified in
Sections 3.1(e), 3.1(f), and 3.1(j)(A), at least two Series A, B and E Preferred
Directors).
(73) "Warrants" shall mean (1) the warrants originally dated as of November
15, 1996 issued to the Xxxxxx Holders, (2) the warrants originally dated as of
November 15, 1996, December 31, 1996, February 15, 1997 and April 29, 1998
issued to Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx and G. Xxxxx Xxxxxxxxxx and the
warrants originally dated as of December 31, 1996 and April 29, 1998 issued to
The Shattan Group, LLC, (3) the warrants originally dated as of December 31,
1996 and February 15, 1997 issued to the Northwood Holders, (4) the warrants
originally dated as of December 31, 1996, January 14, 1997 and February 15, 1997
issued to certain of the Other Holders, and (5) the warrants originally dated as
of February 15, 1997 issued to the Paribas Holder (as all of such warrants
described in clauses (1), (2), (3), (4) and (5) have been amended and restated
as of January 8, 1999).
(74) "Warrant Shares" shall mean the shares of Common Stock of the Company
issuable upon the exercise of the Warrants.
(75) "Xxxxxx Beneficial Holders" shall mean (i) Xxxxxx Xxxxxx and any
Person Controlled by him, (ii) any Family Group Member of Xxxxxx Xxxxxx so long
as Xxxxxx Xxxxxx has the power to control, by contract or otherwise, the vote of
the shares of Series C and D Preferred Stock or Common Stock Equivalents
Beneficially Owned by such Family Group Member, and (iii) in the event of the
death or Incapacity of Xxxxxx Xxxxxx, any of his Family Group Members or any
conservator or committee who, as a result of his death or Incapacity, obtain
Beneficial Ownership of the shares of Series C and D Preferred Stock or the
Common Stock Equivalents, which were Beneficially Owned by Xxxxxx Xxxxxx prior
to his death. Notwithstanding the foregoing provisions of this definition, no
Person shall be deemed a Xxxxxx Beneficial Holder with respect to any shares of
Series C and D Preferred Stock or Common Stock Equivalents which were not
acquired by a
12
Xxxxxx Beneficial Holder either (i) pursuant to the Merger Agreements, or (ii)
by exercise of a right to purchase under Article 4 or under Section 7.1 hereof.
ARTICLE 2
BOARD; COMMITTEES
2.1 Board of Directors.
(1) The Board shall consist of ten Directors, (i) three Directors initially
nominated by Xxxxx X. Xxxxx (which nominees shall initially be Xxxxx X. Xxxxx,
Xxxxxx X. Xxxxx, and Xxxxx Xxxxxxx) (collectively, and as may be reduced
pursuant to Section 2.1 (b) hereof, the "Company Directors"), (ii) three
Directors (collectively, along with any additional Person nominated pursuant to
Section 2.1(b) hereof, the "Series A, B and E Preferred Directors") initially
nominated as follows: two shall be designated by the Xxxxxx Holders (which
nominees shall initially be Xxxxx X. Xxxxxxx and G. Xxx Xxxx), and one shall be
designated by the Northwood Holders (which nominee shall initially be Xxxxx X.
Xxxxxx), and (iii) four Directors (collectively, the "Series C and D Preferred
Directors") initially nominated by holders of a Majority of the Shares of Series
C and D Preferred Stock (which nominees shall initially be Xxxxx Xxxxxxx, Xxx
Xxxxxxx, Xxxxxx XxXxxx and Xxxxxxx X. Xxxxxxxx). The Chairman of the Board shall
be a Series C and D Preferred Director nominated by the holders of a Majority of
the Shares of Series C and D Preferred Stock and reasonably acceptable to the
Company Directors and the Series A, B and E Preferred Directors. The Chairman of
the Board shall not serve as an employee or officer of the Company but shall be
vested with the rights and privileges typically accorded the Chairman of the
Board of Directors under applicable corporate law, including, without
limitation, the right to call special meetings of the Board or stockholders in
accordance with the Company's By-laws. Notwithstanding the foregoing, the
Chairman of the Board and the Chief Executive Officer of the Company shall
jointly prepare the agenda for and chair each meeting of the Board. The initial
Chairman of the Board shall be Xxxxx Xxxxxxx.
(2) On July 29, 2001, the Directors shall be reelected, such that there
shall be (A) two Company Directors who shall be nominated by Xxxxx X. Xxxxx, (B)
five Series C and D Preferred Directors who shall be nominated by the holders of
a Majority of the Shares of Series C and D Preferred Stock, and (C) three Series
A, B and E Preferred Directors who shall be nominated by the Xxxxxx Holders and
the Northwood Holders as set forth in Section 2.1(a). In order to implement such
reelection, one of the Company Directors shall resign as a Director as of that
date, and, if such resignation has not occurred by such date, the Board shall
vote to remove one Company Director (other than Xxxxx X. Xxxxx) pursuant to a
designation to be made by a majority of the Series C and D Preferred Directors,
following which the Board shall be re-elected in accordance with the first
sentence of this Section 2.1(b). Upon any retirement, resignation, disability or
death of any Company Director (other than Xxxxx X. Xxxxx) following the date
that the Directors are reelected pursuant to this Section 2.1(b), the Xxxxxx
Holders shall have the right to appoint his successor (who shall be reasonably
satisfactory to the Northwood Holders). Thereafter, there shall be (x) four
Series A, B and E Preferred Directors, three of whom shall be
13
nominated by the Xxxxxx Holders (one of whom shall be reasonably satisfactory to
the Northwood Holder) and one of whom shall be nominated by the Northwood
Holders, (y) one Company Director, who shall be nominated by Xxxxx X. Xxxxx, and
(z) five Series C and D Preferred Directors who shall be nominated by the
holders of a Majority of the Shares of the Series C and D Preferred Stock.
(3) Notwithstanding anything to the contrary contained herein, (i) Xxxxx X.
Xxxxx shall have the rights set forth herein to nominate all of the Company
Directors (as the number of Company Directors shall be reduced pursuant to
Section 2.1(b)) only so long as he maintains Beneficial Ownership of at least
50% of the Common Stock Equivalents held by him as of the date of this Agreement
and the Xxxxx Employment Agreement has not been terminated by the Company for
Cause (as defined therein); provided, however, that so long as Xxxxx X. Xxxxx is
the Chief Executive Officer of the Company he shall serve as a Director, (ii)
the Xxxxxx Holders and the Northwood Holders each shall have the rights set
forth herein to nominate the Series A, B and E Preferred Directors, and such
Series A, B and E Preferred Directors shall have the right to nominate members
of the Committees described in Section 2.3 hereof, only so long as the Xxxxxx
Holders or the Northwood Holders, as the case may be, maintain Beneficial
Ownership in the aggregate of at least 50% of the Common Stock Equivalents
(excluding Warrant Shares) initially acquired by it pursuant to the First Series
A Stock Purchase Agreement and the Second Series A Stock Purchase Agreement, and
(iii) the holders of a Majority of the Shares of Series C and D Preferred Stock
shall have the rights set forth herein to nominate the Series C and D Preferred
Directors and to designate the Chairman of the Board, and the Series C and D
Preferred Directors shall have the right to nominate members of the Committees
described in Section 2.3 hereof, only so long as the Qualifying Series C and D
Beneficial Holders maintain Beneficial Ownership of at least 20% of the Series C
and D Adjusted Fully Diluted Capitalization. If any of Xxxxx X. Xxxxx, the
Xxxxxx Holders, the Northwood Holders or the Series C and D Holders loses its
rights to designate Directors, the Directors which such Securityholder had been
entitled to designate shall promptly resign and the vacancies created by such
resignations shall be filled by the stockholders of the Company voting at a
special or general meeting or by written consent in lieu of any such meeting at
any time after the consummation of the transaction in which any such Person lost
its rights to designate Directors. If any Directors or Committee members who are
required to resign such positions pursuant to the preceding sentences fail to
promptly tender their written resignations, the stockholders and the remaining
Directors shall promptly take such steps as may be necessary or appropriate
under the Company's bylaws and applicable law in order to remove such Directors
and/or Committee members. The Directors designated by the stockholders of the
Company shall appoint successor committee members to fill any vacancies then
existing as a result of the resignations of the Directors referred to in the two
preceding sentences (other than any vacancy on the Executive Committee created
by the failure of Xxxxx X. Xxxxx to serve thereon which shall be handled in the
manner provided in Section 2.3(a)).
(4) The Company shall give Xxxxxxx X. Xxxxxxxx, a former Director of the
Company, notice of (in the same manner as notice is given to Directors), and
permit Xxxxxxx X. Xxxxxxxx to attend as a non-voting observer, all meetings of
the Board and shall provide to Xxxxxxx X. Xxxxxxxx the same information
concerning the Company, and access thereto, provided to members of the Board.
Xxxxxxx X. Xxxxxxxx shall keep all such information confidential and shall not
directly or indirectly use such information for any purpose other than
evaluating his continued investment in the Company's securities and to provide
such advice and counsel as may be requested by the
14
Company. Xxxxxxx X. Xxxxxxxx shall have the rights set forth herein to be a
non-voting board observer until December 31, 2000.
(5) The Company shall give the PNA Holder notice of (in the same manner as
notice is given to Directors), and permit one Person designated by the PNA
Holder to attend as a non-voting observer, all meetings of the Board and shall
provide to such observer the same information concerning the Company, and access
thereto, provided to members of the Board. Such observer shall keep all such
information confidential and shall not directly or indirectly use such
information for any purpose other than evaluating the PNA Holder's continued
investment in the Series B Preferred Stock and Series E Preferred Stock. The
direct out-of-pocket expenses reasonably incurred by any such designee of the
PNA Holder in attending any board meetings shall be reimbursed by the Company.
The PNA Holder shall have the rights set forth herein to a non-voting board
observer only so long as the PNA Holder maintains ownership in the aggregate of
at least 50% of the Common Stock Equivalents initially acquired by it pursuant
to the Series B Stock Purchase Agreement and Series D and E Stock Purchase
Agreement. Notwithstanding the foregoing, the Company reserves the right to
excuse the non-voting board observer from all or any portion of any meeting of
the Board if the Board determines in its good faith discretion that there are
confidential matters to be discussed relating to the Company's debt financing.
(6) Election of Nominees. On the date hereof, and at each annual meeting of
stockholders of the Company or any special meeting called for the purpose of
electing Directors of the Company (or by consent of stockholders in lieu of any
such meeting) or at such other time or times as the Securityholders may agree,
the Securityholders shall vote all of their respective Shares entitled to vote
in favor of the election of all of the Persons so nominated in accordance with
Section 2.1(a) and Section 2.1(b) and no other Person.
(7) Term. Each of the Series A, B and E Preferred Directors, the Series C
and D Preferred Directors and the Company Directors shall hold office as a
Director of the Company for a term of one year.
2.2 Removal of Directors. No Securityholder shall vote any Shares, and no
Director shall vote, in favor of the removal of a Director designated by Xxxxx
X. Xxxxx, the Xxxxxx Holders, the Northwood Holders or the Series C and D
Holders unless (i) the right of such other Securityholder(s) to so designate
such Director shall no longer exist as a result of Section 2.1(c), or (ii) such
other Securityholder(s) shall have requested that the Securityholders or
Directors vote for the removal of any such Director (provided the
Securityholder(s) making such request shall at such time remain entitled to
designate a Director pursuant to Section 2.1(c)). In the case of clause (ii) of
the immediately preceding sentence, the (x) Securityholders shall vote all of
their Shares entitled to vote and (y) Directors shall vote, as the case may be,
immediately upon request in favor of the removal of such Director and the
election of any replacement Director as may be designated by requesting
Securityholder(s).
15
2.3 Committees.
(1) The Executive Committee of the Board shall consist of five Directors:
(i) two Directors nominated by the Series A, B and E Preferred Directors (which
nominees shall initially be Xxxxx X. Xxxxx, who shall be entitled to serve on
the Executive Committee for so long as he remains Chief Executive Officer of the
Company, and Xxxxx X. Xxxxxxx) and (ii) three Directors nominated by the Series
C and D Preferred Directors (which nominees shall initially be Xxxxx Xxxxxxx,
Xxx Xxxxxxx and Xxxxxx XxXxxx). The Chairman of the Executive Committee shall be
Xxxxx X. Xxxxx, who shall hold such title for so long as he serves on the
Executive Committee, and, thereafter, the Chairman shall be any successor Chief
Executive Officer to Xxxxx X. Xxxxx. To the extent permitted by law, the
Executive Committee shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Company;
provided, however, that, in no event, shall the Executive Committee have the
authority to authorize any action which requires Super-Majority Approval under
this Agreement. If at least four of the members of the entire Executive
Committee shall not agree on a decision with respect to any matter over which it
has authority to act, such matter shall be referred to the Board for its
determination. Without limiting the foregoing, it is intended that the Executive
Committee shall be responsible for such matters as non-annual (project level)
budget approvals, commitment of capital, incurrence of debt and significant
contractual relations. The Executive Committee shall maintain minutes of its
meetings and report to the Board on all of its proceedings.
(2) The Audit Committee of the Board shall consist of four Directors: (i)
two Directors nominated by the Series A, B and E Preferred Directors, who shall
not be officers or employees of the Company (which nominees shall initially be
Messrs. Xxxxxx Xxxxx and G. Xxx Xxxx) and (ii) two Directors nominated by the
Series C and D Preferred Directors (which nominees shall initially be Messrs.
Xxxxx Xxxxxxx and Xxxxxx XxXxxx). Subject to Section 2.1(c), the Series C and D
Preferred Directors shall have the right to designate the Chairman of the Audit
Committee of the Board. The Audit Committee shall recommend the engagement of
independent auditors, review and consider actions of management in matters
relating to audit function, review with independent auditors the scope and
results of their audit engagement, review the system of internal controls and
procedures of the Company and its Subsidiaries, and review the effectiveness of
procedures intended to prevent violations of law and regulations. The Audit
Committee shall also approve the engagement letter of the Company's independent
accountants, direct the internal control (or internal audit) department, if any,
be authorized to direct agreed upon procedures review by independent public
accountants or consultants and review and approve all public securities filings
and audited financial statements.
(3) The Compensation Committee of the Board shall consist of four
Directors: (i) two Directors nominated by the Series A, B and E Preferred
Directors, who shall not be officers or employees of the Company (which nominees
shall initially be Messrs. Xxxxx Xxxxxxx and Xxxxx X. Xxxxxxx), and (ii) two
Directors nominated by the Series C and D Preferred Directors (which nominees
shall initially be Messrs. Xxxxx Xxxxxxx and Xxx Xxxxxxx). The grant or
allocation of rights, warrants, options or other agreements to purchase Common
Stock or any security convertible into or exchangeable for Common Stock under
any Option Plan or as compensation to any employee,
16
consultant, Director or officer of the Company shall require approval of a
majority of the members of the Compensation Committee.
(4) The Board shall establish a Strategic Steering Committee, which shall
be a management committee. The Strategic Steering Committee shall consist of
Xxxxx X. Xxxxx, three members appointed by the Series C and D Preferred
Directors (which members need not be Directors and which members shall initially
include Xxx X. Xxxxxxx) and three senior managers of the Company appointed by
the Chief Executive Officer of the Company. The Strategic Steering Committee
shall be responsible for evaluating and recommending new products, technologies
and strategies with a view towards ensuring the ultimate success of the Company
by continually meeting the changing needs of customers of the Company. There
shall be no chairman of the Strategic Steering Committee.
2.4 Vacancies. Subject to Sections 2.1(b), 2.1(c) and 2.3, if any vacancy
occurs in the Board or any Committee thereof because of death, disability,
resignation, retirement or removal of a Director or a Committee member in
accordance with this Agreement, the Securityholder or Securityholders that
nominated the Person creating such vacancy (or the Directors who nominated the
Committee member) shall nominate a successor (provided that such Securityholder
shall at such time remain entitled to designate a Director, or the relevant
Directors shall at such time remain entitled to nominate a Committee member, as
the case may be, pursuant to Sections 2.1(a), 2.1(b), 2.1(c) and 2.3), and all
Securityholders shall vote the Shares held by them which are entitled to vote in
favor of the election of such successor to the Board and all of the Directors
shall elect or appoint the successors to such Committee of the Board. Any
vacancy that occurs shall be filled as promptly as possible upon the request of
the group having the right to nominate a Person to fill such vacancy.
2.5 Proxies. Neither the Company nor any Securityholder shall give any
proxy or power of attorney to any Person or entity that permits the holder
thereof to vote in his discretion on any matter that may be submitted to the
Company's Securityholders for their consideration and approval, unless such
proxy or power of attorney is made subject to and is exercised in conformity
with the provisions of this Agreement.
2.6 Compensation. Each Director shall be reimbursed by the Company for all
direct out-of-pocket expenses incurred in the reasonable discretion of the
Director in connection with their services as a Director and a committee member
and each Director, other than any Director who is an officer of the Company,
shall receive from the Company an annual Director's fee of $5,000. In addition,
Xxxxxxx X. Xxxxxxxx shall be reimbursed by the Company for all direct
out-of-pocket expenses reasonably incurred by him in attending meetings of the
Board and providing advice to the Company, and shall receive from the Company an
annual fee of $5,000.
2.7 Subsidiary Boards. The board of directors of each Subsidiary shall be
comprised of a single director who shall be Xxxxx X. Xxxxx or any successor
Chief Executive Officer. No action taken by the board of directors of any
Subsidiary shall be contrary to or inconsistent with the policies,
recommendations or directions of the Board.
17
ARTICLE 3
CERTAIN CORPORATE ACTION
3.1 Approval of Certain Board Action. None of the following actions shall
be taken by the Company or any of its Controlled Affiliates without
Super-Majority Approval (provided that if at the time of the proposed action (i)
the Qualifying Series C and D Beneficial Holders do not have aggregate
Beneficial Ownership of at least 20% of the Series C and D Adjusted Fully
Diluted Capitalization, then the approval of a majority of the Series C and D
Preferred Directors shall not be required as part of the Super-Majority
Approval, and (ii) the Xxxxxx Holders and the Northwood Holders do not have
aggregate Beneficial Ownership of 50% of the Common Stock Equivalents (excluding
Warrant Shares) initially acquired by them pursuant to the First Series A Stock
Purchase Agreement and the Second Series A Stock Purchase Agreement, then the
approval of at least two of the Series A, B and E Preferred Directors shall not
be required as part of the Super-Majority Approval):
(1) any sale, exchange, lease or other disposition (whether in a single
transaction or a series of related transactions), of any asset, group of assets,
division or Subsidiary of the Company, which would have the effect of (i)
disposing of assets which produce gross revenues constituting 4% or more of the
Company's consolidated gross revenues (determined in each case as of the date of
the last regularly prepared quarterly financial statements of the Company but
giving effect to all acquisitions made by the Company and its Subsidiaries on or
after the beginning of the measurement period), (ii) disposing of the Company's
operations in a "metropolitan statistical area" as such term is defined by the
Bureau of the Census (with respect to domestic operations) or a country (with
respect to international operations), or (iii) terminating or substantially
terminating any material product line (e.g., executive office suites, Internet
services, telecommunications service, etc.);
(2) (i) any material amendment to or replacement or extension of the Credit
Agreement as it exists as of the date hereof, or (ii) any request for any waiver
by the Required Banks (as such term is defined in the Credit Agreement) of any
term or provision of the Credit Agreement, other than a waiver in connection
with a Permitted Acquisition (as such term is defined in the Credit Agreement);
(3) incurring any direct or indirect Indebtedness (as such term is defined
in the Credit Agreement as it exists as of the date hereof) for borrowed money,
loaning any money, guaranteeing the payment of any money or indebtedness for
borrowed money of another Person, guaranteeing the performance of any other
obligation of another Person (other than a wholly owned subsidiary), or
indemnifying another Person against any losses, damages or costs, provided that
the foregoing shall not include (i) any borrowing by the Company under its
Credit Agreement for acquisitions which have been approved by the Board or the
Executive Committee, working capital, letters of credit in connection with
leases of real property by the Company or any Subsidiary, or any other purpose
which is within the then current Annual Budget, (ii) any Capital Lease permitted
under Section 3.1(d), (iii) any trade debt of the Company or any Subsidiary
incurred in the ordinary course of business, or (iv) any indemnity which the
Company or any Subsidiary may give to a seller or
18
related entities in connection with an acquisition that has received the
requisite Board approval, in respect of the liabilities or obligations which are
being assumed by the Company or a Subsidiary in connection with such
acquisition;
(4) making capital expenditures, including Capital Leases, in an aggregate
amount as capitalized on a balance sheet under GAAP, in any fiscal year which
exceeds by more than $500,000 the amount approved in the Annual Budget for such
year;
(5) entering into any business other than the Core Business;
(6) entering into any material transaction with any Affiliate of the
Company, except any transaction pursuant to the OnSite Agreement, the
Intercompany Agreement or any Product Agreement entered into pursuant thereto;
(7) any change in the name of the Company;
(8) any voluntary liquidation or dissolution of the Company or filing of a
voluntary petition of the Company under Chapter 7 or Chapter 11 of the
Bankruptcy Act or a determination to not contest an involuntary petition of
bankruptcy or otherwise institute insolvency proceedings or otherwise seek any
relief under laws relating to the relief from debts or the protections of
debtors generally; seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for such
entity or all or any portion of such entity's properties; make any assignment
for the benefit of such entity's creditors; take any action that would cause the
Company to become insolvent as defined by the Bankruptcy Act; or take any action
which consents to a case in a bankruptcy or other insolvency proceedings against
the Company or waives or releases any right or claims of the Company in any such
case or proceeding;
(9) any merger, consolidation or reorganization of the Company with another
Person which is not a Subsidiary of the Company, except if such merger,
consolidation or reorganization is an acquisition transaction that would not
require Super-Majority Approval under Section 3.1(n); provided, however, that
such exception shall not apply to mergers, consolidations, or reorganizations
(i) pursuant to which the Company is not the surviving corporation and the
shares of the Company's capital stock are converted or exchanged, or (ii) which
would materially and adversely affect the relative rights or preferences of the
Series C and D Preferred Stock (including, without limitation, through the
issuance of a security ranking senior to the Series C and D Preferred Stock as
to payment of dividends or liquidation preference);
(10) (A) any issuance or sale of equity securities (including pursuant to
the Series D and E Stock Purchase Agreement) or phantom interests of the Company
or of any security, warrant, option or right (contingent or otherwise) to
purchase or acquire any equity security of the Company or any phantom interests,
or the adoption of any option, phantom interests or similar plan (other than the
Company's 1996 Option Plan and the Company's 1999 Option Plan), except (i) any
issuance of securities pursuant to a Qualified Public Offering, (ii) any grant
of options pursuant to an Option Plan, (iii) any issuance of securities upon the
exercise of any Warrant or Option or upon the conversion of any outstanding
convertible security of the Company or (iv) any issuance of
19
securities as consideration in connection with any merger, consolidation or
acquisition of stock or assets from any Person (if such merger, consolidation or
acquisition would not otherwise require Super-Majority Approval under any other
clause of this Section 3.1); or (B) commencement of the process of an Initial
Public Offering prior to nine months following the closing of the sale of the
Series D Preferred Stock pursuant to the Series D Stock Purchase Agreement (for
this purpose, meeting with potential investment bankers to discuss a public
offering, or delivering to potential investment bankers material, non-public
information about the Company, would be deemed commencing the process of an
Initial Public Offering, provided that this is not, however, intended to prevent
management of the Company from having a limited number of meetings with
investment bankers for the purpose of maintaining relationships and keeping them
informed of the Company's general progress, without disclosing material,
non-public information about the Company);
(11) creating, granting, or consenting to any Encumbrances which secure,
individually or in the aggregate, an amount in excess of $100,000 and which are
not otherwise required or permitted under the terms of the Credit Agreement,
provided that if the Credit Agreement is not then in effect, under the terms of
the Credit Agreement as such Credit Agreement exists as of the date hereof;
(12) any change in the accounting principles used by the Company or the
adoption of any change to the Company's financial reporting practices,
procedures or standards which would as a normal matter require the approval of
the Board, except for any such changes which are required by GAAP or the
Securities and Exchange Commission;
(13) retaining any accounting firm other than PricewaterhouseCoopers, LLP
or another "Big Five" accounting firm which is "independent" as such term is
used in Rule 2-01 of Regulation S-X under the Securities Act and under GAAP;
(14) any acquisition (in any transaction or series of related transactions)
of all or substantially all of the assets of, or of a controlling interest in,
any other Person, where such transaction (or related transactions) would have
the effect, on a pro forma basis, assuming such transaction or related
transactions were consummated, of increasing the consolidated gross revenues of
the Company by 10% or more (in the case of international acquisitions) or 20% or
more, (in the case of domestic acquisitions) over the existing consolidated
gross revenues of the Company, determined for the immediately preceding twelve
month period ending as of the date of the most recent quarterly financial
statements of the Company. For this purpose consolidated gross revenues shall be
calculated giving effect to all other acquisitions made by the Company and its
Subsidiaries on or after the beginning of the measurement period;
(15) entering into any agreement, other than any agreement that may be
entered into under the terms of the Intercompany Agreement (including the OnSite
Agreement), (i) with a real estate investment trust other than Reckson
Associates Realty Corp., except for leases of real property and related
agreements for services ancillary to a lease of real property, or (ii) which is
a material agreement with any Person (other than RSI, OnSite or their respective
Affiliates) which directly competes with RSI as a broad based provider of
multiple outsourced business services (i.e. this clause (ii) shall not apply to
an agreement with a provider of individual business services which
20
RSI, OnSite or their respective Affiliates may offer; provided, that each such
agreement is not otherwise violative of the terms and conditions of the
Intercompany Agreement);
(16) any amendment to the Articles of Incorporation (including the
Certificates of Designation) or Bylaws of the Company, or any change in the
number of members of the Board, any Committee thereof or the Strategic Steering
Committee;
(17) the hiring or termination of employment of any of the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Company, or
of any other officer of the Company with a compensation package equal to or
greater than the compensation package of the Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer or the approval of any renewal,
extension or termination of any employment agreement with any such individual or
the waiver by or on behalf of the Company or any of its Controlled Affiliates of
any of the Company's rights thereunder;
(18) the adoption or amendment of the Annual Budget;
(19) the settlement of any action or proceeding before a federal regulatory
agency, or the commencement or settlement of any litigation by or against the
Company or any Subsidiary in which the amount at issue involves at least
$500,000;
(20) redemption or other purchase of outstanding Shares, Warrants or
Options except pursuant to the provisions of this Agreement, the Certificates of
Designation or the terms of the applicable Option Plan; or
(21) any amendment, modification or waiver of any provision of this
Agreement.
3.2 Approval of Certain Stockholders. The Company agrees it shall not,
without the approval of a Majority of the Shares of Series A, B and E Preferred
Stock and a Majority of the Shares of the Series C and D Preferred Stock:
(1) issue any class or series of equity security (including any issuance
pursuant to the Series D and E Stock Purchase Agreement) senior to or on a
parity with the Preferred Stock as to payment of dividends or senior to or on a
parity with the Preferred Stock as to payments on a dissolution, liquidation or
winding up of the Company;
(2) enter into any agreement or arrangement of any kind that would restrict
the Company's ability to perform its obligations under (i) this Agreement, (ii)
the First Series A Stock Purchase Agreement, the Second Series A Stock Purchase
Agreement, the Series B Stock Purchase Agreement and the Series D and E Stock
Purchase Agreement (it being agreed that no vote shall be required from the
holders of the Series C and D Preferred Stock with respect to the actions
specified in this clause (ii)), (iii) the Merger Agreements or (iv) the Series D
and E Stock Purchase Agreement (it being agreed that no vote shall be required
from the holders of the Series A, B and E Preferred Stock with respect to the
actions specified in this clause (iii));
21
(3) amend the Articles of Incorporation (including the Certificates of
Designation) or the By-laws of the Company in any manner;
(4) merge or consolidate with any other entity or sell all or substantially
all of its assets or issue any voting securities to a Person or entity not then
a holder of Shares which would result in such Person or entity acquiring control
of the Company; or
(5) liquidate or dissolve.
Notwithstanding anything to the contrary contained above, neither the
Paribas Holder, nor any of its affiliated transferees or successors shall be
entitled to participate in any vote needing the approval of a Majority of the
Shares of Series A, B and E Preferred Stock.
3.3 Appointment of Appraiser. Notwithstanding anything to the contrary in
this Agreement or in the Certificates of Designation, any Initial Appraiser (as
defined in this Agreement or the Certificates of Designation) to be selected by
the Company shall be selected by a majority of the Directors of the Company who
are not Affiliates of the Securityholders whose Shares are the subject of the
appraisal and such appraiser shall be reasonably acceptable to the majority of
the Series C and D Preferred Directors.
3.4 Appointment of Certain Executive Personnel. In addition to the rights
contained in Section 3.1(q), the holders of a Majority of the Shares of Series C
and D Preferred Stock shall have the right to appoint on the Merger Date those
executive officers of Parent designated on Schedule 2 and, thereafter, the
employment of such executive officers shall be governed by the terms of such
agreements as the Company may enter into with such persons.
3.5 Resolution of Certain Tie Votes of the Board. Except for matters for
which Super-Majority Approval is required, actions of the Board shall be taken
by a simple majority vote of Directors present and voting at a meeting duly
called and at which a quorum is present and voting throughout (or by unanimous
written consent of the entire Board). If any vote of the entire Board on a
matter for which Super-Majority Approval is not required results in a tie vote,
at the request of any member of the Board the matter shall be put to a vote of
the holders of all outstanding Shares (i.e. excluding Option Shares and Warrant
Shares) voting as a single class, and the vote of such holders shall be
determinative of the matter in question.
22
ARTICLE 4
TRANSFER OF SHARES
4.1 Restrictions on Transfer. So long as this Agreement is in effect, no
Securityholder shall sell, assign, transfer, give, encumber, pledge, hypothecate
or in any other way dispose of any Shares, Warrants or Options (any of which
being a "Transfer") except as provided in this Agreement. For purposes of
Section 4.1, Section 4.2, Section 4.3 and Section 4.6 of this Agreement, a
Transfer shall be deemed to include any Transfer by any Person who Beneficially
Owns any shares of Series C and D Preferred Stock by reason of any Transfer of
any interest (or portion thereof) by or through which such Person holds such
Beneficial Ownership of such shares (any such interest, a "Series C and D
Beneficial Interest"). In addition, each Securityholder agrees that it will not
Transfer any of its Shares, Warrants or Options except as permitted under the
Securities Act or applicable state securities laws or any rule or regulation
promulgated thereunder. No Transfer in violation of this Agreement shall be made
or recorded on the books of the Company and any such Transfer shall be void and
of no force or effect. Subject to the terms of this Agreement, the
Securityholders shall be entitled to exercise all rights of ownership of their
Shares and any such Options or Warrants, and the transferability of any such
Options or Warrants shall, in addition to the terms hereof, be subject to the
terms and conditions contained therein. Except as set forth in Section 4.6
hereof, nothing herein is intended to restrict the Transfer of any securities
issued by RSI or any interest in JAH Realties, L.P.
4.2 Certain Permitted Transfers. The Company and the Securityholders
acknowledge and agree that any of the following Transfers shall be deemed to be
in compliance with this Agreement (subject in each case to compliance with
applicable securities laws):
(1) subject to Section 4.6 and 9.6 hereof, a Transfer in accordance with
the provisions of Section 4.3, 4.5, 4.7 or 4.8 or Article 5 hereof, pursuant to
the redemption provisions applicable to the Preferred Stock as in effect from
time to time, or through a sale in a registered offering in accordance with
Article 6 hereof;
(2) subject to Section 4.6 and 9.6 hereof, a Transfer (i) upon the death of
a Securityholder or of a Beneficial Owner of shares of Series C and D Preferred
Stock to his executors, administrators and testamentary trustees and
beneficiaries of his estate or (ii) by the PNA Holder to not more than 15
employees of the PNA Holder or any of the PNA Holder's Affiliates (subject in
each case to compliance with applicable securities laws);
(3) subject to Section 4.6 and 9.6 hereof, a Transfer to (x) an Affiliate
or (y) to members, partners, limited partners, or stockholders of a
Securityholder in the event of a liquidation or other distribution of or by such
Securityholder, or (z) made for nominal consideration or as a gift to any of the
Securityholder's Family Group Members; and
(4) subject to Section 4.6 and 9.6 hereof, any Transfer by any of the
Series C and D Holders (or any member thereof) to any other Series C and D
Holder or by any Beneficial Owner of shares of Series C and D Preferred Stock to
any other Beneficial Owner of shares of Series C and
23
D Preferred Stock or to any of their respective members, partners or
stockholders or any Family Group Members (any such transferee, together with any
transferee pursuant to Section 4.2(b) and (c), being a "Permitted Transferee");
(5) anything herein to the contrary notwithstanding, in the event that any
Securityholder or any of its Affiliates shall deliver to the Company an opinion
of counsel to such Securityholder or such Affiliate, as the case may be, to the
effect that if such Securityholder or such Affiliate, as the case may be, shall
continue to hold some or all of the Warrants or Shares held by it, there is a
material risk that such ownership will result in the violation of any statute,
regulation or rule of any governmental authority (including, without limitation,
Regulation Y promulgated under the Bank Holding Company Act of 1956, as amended
(the "BHCA")), such Securityholder or such Affiliate (a "Regulated Holder"), as
the case may be, may exchange its Shares or Warrants, as herein provided. The
Company shall cooperate with such Securityholder or such Affiliate as the case
may be, in exchanging all or any portion of its voting Shares on a
share-for-share basis for Shares of a non-voting security or warrants (which
shall thereafter be deemed Warrants hereunder) convertible into a nonvoting
security of the Company (such non-voting security shall be identical in all
respects to such voting Shares, except that they shall be non-voting and shall
be convertible or exercisable into voting securities on such conditions as are
requested by such Securityholder in light of the regulatory considerations
prevailing). Without limiting the forgoing, at the request of such
Securityholder or such Affiliate, as the case may be, the Company shall use
commercially reasonable efforts to amend this Agreement, the Articles of
Incorporation of the Company, the By-laws of the Company, and any related
agreements and instruments and shall take such additional actions in order to
effectuate the authorization of the issuance of nonvoting securities and the
exchange of such Securityholder's voting securities into such nonvoting
securities. The provisions of this Section 4.2(e) shall inure solely to the
benefit of the Securityholders and their Affiliates which are subject to the
provisions of the BHCA or the Small Business Investment Act of 1958, as amended
(the "SBIA"); and
(6) any pledge of a Series C and D Beneficial Interest to secure any bona
fide indebtedness, but in each case subject to Section 4.6 and provided that the
lender acknowledges in writing that any sale or Transfer of the pledged Series C
and D Beneficial Interests shall be subject to the provisions of this Agreement
and that it shall not have the right to take title, sell or exercise any rights
of ownership of the pledged Series C and D Beneficial Interests without first
having complied with the provisions of Article IV hereof (it being agreed and
understood among the Company and the Securityholders that any transfer of title
or sale of such pledged interests to any Series C and D Holder or any holder of
a Series C and D Beneficial Interest shall not be subject to the provisions of
Section 4.3).
4.3 Rights of First Refusal.
24
(1) Each Securityholder agrees that, subject to the restrictions on
Transfers contained in Sections 4.3(i), 4.4 and 4.6, if any Securityholder (a
"Transferring Securityholder") proposes to Transfer any or all of the Shares or
Warrants then owned by such Transferring Securityholder pursuant to a bona fide
offer from a third party (who (x) is not an Affiliate of such Securityholder and
(y) reasonably has the ability to consummate such offer in accordance with its
terms), other than as provided in Section 4.2, 4.5, 4.7 or 4.8 or Article 5
hereof or pursuant to the redemption provisions in the Certificates of
Designation or through a sale in a registered offering in accordance with
Article 6 hereof (a "Section 4.3 Transfer"), then such Transferring
Securityholder shall first give a written notice (the "Transfer Notice") to the
Company and each of the other Securityholders (the "Securityholder Offerees")
specifying (i) the number of Shares or Warrants such Transferring Securityholder
proposes to Transfer (the "Transfer Shares"), (ii) the consideration to be
received for the Transfer Shares in the proposed Section 4.3 Transfer pursuant
to such bona fide offer, (iii) any other material terms of the proposed Section
4.3 Transfer, including, without limitation, the conditions precedent to such
offer, and (iv) whether any purchase of the Transfer Shares by the Company and
the Securityholder Offerees pursuant to this Section 4.3 is conditioned upon
purchase by the Company and the Securityholder Offerees of all the Transfer
Shares (an "All or Nothing Condition"). The Transfer Notice shall constitute an
irrevocable offer to the Company and the Securityholder Offerees (the "Transfer
Offer") to sell the Transfer Shares to the Company and the Securityholder
Offerees, pursuant to the provisions of this Section 4.3, for the consideration
and on the other terms stated in the Transfer Notice (or the reasonable
equivalent thereof in the case of non-monetary consideration of a type which is
personal to the third party offeror). For purposes of this Section 4.3, in the
case of a Transfer of a Series C and D Beneficial Interest, the Transfer Shares
shall not be the Series C and D Beneficial Interest proposed to be transferred
but rather shall be deemed to be the number of shares of respective Series C and
D Preferred Stock as to which the transferee of the Series C and D Beneficial
Interest would acquire Beneficial Ownership in such proposed transfer.
(2) The RSI Beneficial Holder shall have the initial right, exercisable, in
RSI's sole discretion, by the Series C and D Holders for the benefit of the RSI
Beneficial Holders or directly by any of the RSI Beneficial Holders (provided,
that, if such right is exercised directly by any of the RSI Beneficial Holders,
such Person shall become a party to this Agreement for all purposes hereunder),
to accept the Transfer Offer as to all or a portion of the Transfer Shares;
provided, however, that in no event shall the foregoing right to accept the
Transfer Offer and purchase Transfer Shares pursuant to this Section 4.3(b) by
or on behalf of the RSI Beneficial Holders entitle the Series C and D Holders or
the RSI Beneficial Holders, as the case may be, to purchase a number of Shares
that, immediately following such purchase, would result in the RSI Beneficial
Holders having Beneficial Ownership of Shares, Options and Warrants
representing, in the aggregate, more than 30% of the Adjusted Fully Diluted
Capitalization. Within 5 Business Days after the receipt of a Transfer Notice,
the Company shall notify the Transferring Securityholder and the Securityholder
Offerees in writing of the number of Transfer Shares that the Series C and D
Holders or the RSI Beneficial Holders, as the case may be, shall have the right
to purchase pursuant to this Section 4.3(b). Within 15 Business Days after
receipt of such notice from the Company, if the Series C and D Holders or the
RSI Beneficial Holders, as the case may be, shall be entitled to purchase any of
the Transfer Shares pursuant to this Section 4.3(b), the Series C and D Holders
or the RSI Beneficial Holders, as the case may be, shall give a written notice
to the Company and the
25
Transferring Securityholder, accepting the Transfer Offer (an "Acceptance
Notice"), which shall specify the number of Transfer Shares that they desire to
purchase pursuant to this Section 4.3(b). The failure of the Series C and D
Holders or the RSI Beneficial Holders, as the case may be, to timely give an
Acceptance Notice shall be deemed to be an election by them to not purchase any
Transfer Shares pursuant to this Section 4.3. If the Series C and D Holders or
the RSI Beneficial Holders, as the case may be, have given timely Acceptance
Notices electing to purchase less than all, or are not entitled to purchase
pursuant to this Section 4.3(b) all, of the Transfer Shares, the number of
Transfer Shares as to which the Series C and D Holders or the RSI Beneficial
Holders, as the case may be, shall have not given timely Acceptance Notices
pursuant to this Section 4.3(b) (the "Initial Remaining Transfer Shares") shall
be deemed offered by the Transferring Securityholder to the Company pursuant to
Section 4.3(c). The rights set forth in this Section 4.3(b) shall terminate and
shall no longer apply in the event that the Qualifying Series C and D Beneficial
Holders do not Beneficially Own at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization. The Series C and D Holders shall provide such
information as the Company shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C and D Beneficial Holders. In the
event that any RSI Beneficial Holder transfers Beneficial Ownership in any
Shares, Options or Warrants to any Qualifying Series C and D Beneficial Holder,
then, notwithstanding such transfer, the Shares, Options or Warrants so
transferred shall be deemed to be Beneficially Owned by the RSI Beneficial
Holders for purposes of this Section 4.3.
(3) The Company shall have the right to accept the Transfer Offer as to all
or a portion of the Initial Remaining Transfer Shares. Within 15 Business Days
after the end of the 15 Business Day period provided to the Series C and D
Holders in Section 4.3(b), if the Company elects to purchase any of the Initial
Remaining Transfer Shares, the Company shall give an Acceptance Notice to the
Transferring Securityholder and each of the Securityholder Offerees, which shall
specify the number of Initial Remaining Transfer Shares that it desires to
purchase pursuant to this Section 4.3(c), up to the total of such Initial
Remaining Transfer Shares. The failure of the Company to timely give an
Acceptance Notice shall be deemed to be an election by the Company to not
purchase any Transfer Shares. If the Company has given a timely Acceptance
Notice electing to purchase less than all of the Initial Remaining Transfer
Shares, the number of Initial Remaining Transfer Shares as to which the Company
has not given a timely Acceptance Notice pursuant to this Section 4.3(c) (the
"Final Remaining Transfer Shares") shall be deemed offered by the Transferring
Securityholder to the Securityholder Offerees pursuant to Section 4.3(d).
(4) The Securityholder Offerees shall have the right to accept the Transfer
Offer as to the Final Remaining Transfer Shares. Within 15 Business Days after
the end of the 15 Business Day period provided to the Company in Section 4.3(c),
each Securityholder Offeree who wishes to purchase any of the Final Remaining
Transfer Shares shall give an Acceptance Notice to the Company and the
Transferring Securityholder, which shall specify the number of Final Remaining
Transfer Shares (up to such Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares, which for the RSI Beneficial Holders shall be
calculated including any Transfer Shares to be acquired by them or by the Series
C and D Beneficial Holders for their account pursuant to the exercise of the
rights set forth in Section 4.3(b)) which such Securityholder Offeree desires to
purchase. The Acceptance Notice may, at the Securityholder Offeree's option,
indicate the maximum number of Final Remaining Transfer Shares such
Securityholder Offeree would
26
purchase in excess of such Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares (the "Excess Amount"). If one or more Securityholder
Offerees does not give a timely Acceptance Notice, or elects in an Acceptance
Notice to purchase less than such Securityholder Offeree's Pro Rata Share of the
Final Remaining Transfer Shares, then the Final Remaining Transfer Shares shall
automatically be deemed to be accepted by Securityholder Offerees who specified
an Excess Amount in their respective Acceptance Notice, allocated among such
Securityholder Offerees (with rounding to the nearest whole share to avoid
fractional shares) in proportion to their respective Pro Rata Shares determined
based only on those Securityholder Offerees who have given timely Acceptance
Notices which specified an Excess Amount. In no event shall an amount greater
than a Securityholder Offeree's Excess Amount be allocated to such
Securityholder Offeree. Any excess Final Remaining Transfer Shares shall be
further allocated among the Securityholder Offerees whose specified Excess
Amount has not been satisfied (with rounding to the nearest whole share to avoid
fractional shares) in proportion to their respective Pro Rata Shares, determined
based only on those Securityholder Offerees whose specified Excess Amount has
not yet been satisfied, and such procedure shall be employed until the entire
Excess Amount of each Securityholder Offeree has been satisfied or all Final
Remaining Transfer Shares have been allocated.
(5) The closing of the purchase by the Series C and D Holders or the RSI
Beneficial Holders, as the case may be, the Company and/or the Securityholder
Offerees of the Transfer Shares pursuant to this Section 4.3 shall take place at
the principal offices of the Company on the fifteenth Business Day after the end
of the 15 Business Day period set forth in (i) Section 4.3(d) or (ii) if the
Series C and D Holders are purchasing all of the Transfer Shares, Section
4.3(c). At such closing, the Series C and D Holders or the RSI Beneficial
Holders, as the case may be, the Company and/or the Securityholder Offerees who
have elected to purchase Transfer Shares shall deliver a certified check or
checks in the appropriate amount to the Transferring Securityholder against
delivery of duly endorsed certificates with all stock transfer tax stamps
attached representing the Transfer Shares to be purchased. The Transfer Shares
shall be delivered free and clear of all Encumbrances other than those imposed
by this Agreement.
(6) If any Transfer Shares allocated to a Securityholder Offeree are not
purchased by such Securityholder Offeree, such Transfer Shares may be purchased
by the Company promptly following any such default. Nothing contained herein
shall prejudice any Person's right to maintain any cause of action or pursue any
other remedies available to it as a result of such default.
(7) If, at the end of the 15 Business Day period set forth in Section
4.3(d), timely Acceptance Notices have not been given covering all of the
Transfer Shares and the Transfer Notice contained an All or Nothing Condition,
then the Transferring Securityholder shall have 90 days in which to complete the
sale of all, but not less than all, of the Transfer Shares. If, at the end of
the 15 Business Day period set forth in Section 4.3(d), timely Acceptance
Notices have not been given covering all of the Transfer Shares and the Transfer
Notice did not contain an All or Nothing Condition, then the Transferring
Securityholder shall have 90 days in which to complete the sale of any or all of
the Transfer Shares as to which timely Acceptance Notices have not been given.
Any such sale of Transfer Shares shall be to a third party for a consideration
not less than the consideration, and on terms no more favorable to the
transferee, than those contained in the Transfer Notice. No such Transfer may be
made to any third party unless and until such third party delivers
27
to the Company an executed consent to be bound by the provisions of this
Agreement in form and substance reasonably satisfactory to the Company. Promptly
after any Transfer pursuant to this Section 4.3, the Transferring Securityholder
shall notify the Company of the consummation thereof and shall furnish such
evidence of the completion and time of completion of such Transfer and of the
terms thereof as the Company may request. If, at the end of such 90 day period,
the Transferring Securityholder has not completed the Transfer of all of the
Transfer Shares, the Transferring Securityholder shall no longer be permitted to
Transfer such Shares pursuant to this Section 4.3(g) without again complying
with this Section 4.3 in its entirety. If the Transferring Securityholder
determines at any time within such 90 day period that the Transfer of all or any
part of such Transfer Shares for a consideration not less than and on terms no
more favorable to the transferee than those contained in the Transfer Notice is
impractical, the Transferring Securityholder may terminate all attempts to
Transfer such Transfer Shares and recommence the procedures of this Section 4.3
in their entirety without waiting for the expiration of such 90 day period by
delivering written notice of such decision to the Company.
(8) If any Regulated Holder has the right to purchase any Transfer Shares
but is prohibited from exercising such right under the BHCA or SBIA or the
regulations promulgated thereunder, such Regulated Holder may assign such right
to the Company and upon such assignment the Company shall, subject to any legal
or contractual restrictions and at no cost or expense to the Company, purchase
such Transfer Shares and concurrently sell to such Regulated Holder such
Transfer Shares, or if requested by such Regulated Holder, securities that do
not have voting rights but otherwise have the same terms as such Transfer
Shares, for the purchase price upon which such Transfer Shares were purchased by
the Company. The Company's obligations under this Section 4.3(h) are solely as
an accommodation to such Regulated Holder and the Company shall be under no
obligation to advance any funds or to obtain any financing to acquire such
Transfer Shares.
(9) No Transfer of Options may be made in a Section 4.3 Transfer.
(10) Any time periods contained in this Section 4.3 shall be extended to
the extent reasonably necessary to allow any Securityholder to obtain any
requisite approvals under the Xxxx-Xxxxx-Xxxxxx Act and any other approvals that
may be required under applicable state or federal law. The Company shall
cooperate (at the Securityholder's expense) in the obtaining of such approvals.
4.4 Restrictions in Connection with Registrations. Each Securityholder
agrees not to effect any public sale or distribution of Shares, including any
sale pursuant to Rule 144, during the seven (7) days prior to the effective date
of a registration statement effected pursuant to the terms hereof and during
such period of time beginning on such effective date as may be required by the
underwriters of such offering and agreed to by the Company, but in no event
exceeding nine (9) months (in each case except as part of such registration).
Each Securityholder hereby acknowledges that such Securityholder shall have no
right to include its Shares in any registration of Shares, except as expressly
provided in Article 6.
4.5 Tag-Along Right. Prior to the effective date of an Initial Public
Offering (or such longer period as set forth in the second following paragraph),
if any Transferring Securityholder wishes to Transfer any Shares or Warrants,
either in one transaction or a series of related
28
transactions, and any portion of the Transfer Shares are not purchased by the
Series C and D Holders or the RSI Beneficial Holders, as the case may be, the
Company or the Securityholder Offerees under Section 4.3 (other than any
Transfer pursuant to Section 4.2, 4.7 or 4.8, or through a redemption or put of
Preferred Stock or a sale in a registered offering or pursuant to Rule 144 under
the Securities Act, or through the right of any Remaining Securityholder (as
defined below) to sell Shares provided by this Section 4.5), then as a condition
to such Transfer, the Transferring Securityholder shall permit (or cause to be
permitted) all other Securityholders who did not seek to purchase the Transfer
Shares pursuant to Section 4.3 (other than Securityholders who elected to
purchase Transfer Shares and failed to close on the purchase thereof) or were
unable to purchase the Transfer Shares as a result of the failure of the All or
Nothing Condition to be satisfied (the "Remaining Securityholders") to sell,
either to the prospective purchaser of the Transferring Securityholder's Shares
or Warrants or to another financially reputable purchaser reasonably acceptable
to such Remaining Securityholders, up to the same proportion of the Shares,
Warrants and Options (if then vested) then owned by such Remaining
Securityholder as the proportion that the number of Shares and Warrants the
Transferring Securityholder proposes to Transfer pursuant to this Section 4.5 in
the contemplated sale on the date of the Tag-Along Notice (as defined below)
bears to the total number of Shares and Warrants held by the Transferring
Securityholder on such date prior to any Shares or Warrants sold pursuant to
Section 4.3, on equivalent terms and at an equivalent price and for the same
type of consideration to that offered by the third-party offeror, taking into
account any difference in the type of securities (i.e., the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Common Stock) held (or acquirable) by the
Transferring Securityholder and the Remaining Securityholders who desire to sell
Shares, Warrants or Options. All numbers of Shares and Warrants and Options
(only to the extent then vested) under this Section 4.5 shall be determined on a
fully converted and fully exercised basis.
The Transferring Securityholder shall give written notice (the "Tag-Along
Notice") to the Remaining Securityholders of each proposed Transfer giving rise
to the rights referred to in this Section 4.5 (the "Tag-Along Rights")
immediately following the end of the 15 Business Day period provided in Section
4.3(d) and at least 20 days prior to the proposed consummation of such Transfer,
setting forth the name of the prospective purchaser, the maximum number of
Shares and Warrants proposed to be Transferred, the proposed amount and form of
consideration and the other terms and conditions of the proposed transaction.
The Tag-Along Notice shall also provide that each of the Remaining
Securityholders may elect to exercise such rights within 15 days following the
giving of the Tag-Along Notice, by delivery, on or before the expiration of such
time period, of a written notice to the Transferring Securityholder indicating
such Securityholder's desire to exercise its rights under this Section 4.5 and
specifying the number of Shares, Warrants or Options he, she or it desires to
sell. No present or future Tag-Along Rights of a Securityholder shall be
adversely affected by its failure to exercise such rights in the past.
Notwithstanding anything to the contrary contained herein, a holder of
Options shall only be entitled to exercise Tag-Along Rights with respect to such
Options if the Tag-Along Notice relates to the sale or other disposition of a
majority of the outstanding shares of voting capital stock of the Company (based
on the Fully Diluted Capitalization excluding Option Shares and Warrant Shares)
to a Person that is not a parent or Subsidiary of the Company. Notwithstanding
anything to the contrary contained herein, the provisions of this Section 4.5
shall apply to any Transfer
29
following an Initial Public Offering if, at the time of any such Transfer, the
provisions of Rule 144 promulgated under the Securities Act are not generally
applicable to sales of the Company's securities due to the failure of the
condition set forth in Rule 144(c) to be satisfied. The Company shall use all
reasonable efforts to inform the Securityholders if such condition has not been
satisfied at any time following an Initial Public Offering; provided however,
the Company shall have no liability to any Securityholder arising out of the
failure of any Transferring Securityholder to comply with the provisions
contained in this Section 4.5.
The Transferring Securityholder's sale of Shares or Warrants in any sale
proposed in a Tag-Along Notice shall be effected on substantially the terms and
conditions set forth in such Tag-Along Notice (except in the case of
non-monetary consideration which is unique to the third party as to which there
shall be paid the reasonable equivalent thereof). The number of Shares or
Warrants to be sold by the Transferring Securityholder shall be reduced by the
aggregate number of Shares, Warrants or Options to be sold by each of the
Remaining Securityholders who have exercised Tag-Along Rights in connection with
such Transfer.
In no event shall any Securityholder transferring Shares, Warrants or
Options pursuant to this Section 4.5 receive any special consideration
(including, without limitation, financial advisory, finders, consulting or other
similar fees) in connection with any sale of Shares, Warrants or Options
pursuant to this Section 4.5, unless such consideration is shared among the
Transferring Securityholder and the other Remaining Securityholders pro rata
based on their respective Shares, Warrants or Options sold (on a fully exercised
and converted basis); provided, however, this sentence shall not apply with
respect to an arms-length negotiated engagement of The Shattan Group LLC or any
of its Affiliates (any such Persons are hereinafter referred to as "Shattan") to
act as the Company's financial advisor with respect to such sale of Shares,
Warrants or Options. Furthermore, no Remaining Securityholder shall be required
to provide any representations or warranties in connection with the sale of
Shares, Warrants or Options pursuant to this Section 4.5, except representations
as to the authority to transfer, and title to, such Shares, Warrants or Options
and the absence of any Encumbrances on the title of such Shares, Warrants or
Options.
4.6 Transfers to a Competitor. Each Securityholder agrees that it shall
not, except in connection with a Sale of the Company, without the approval of at
least two of the Series A, B and E Preferred Directors (in the case of Transfers
described in clauses (i), (iv) and (v) of this Section 4.6) and a majority of
the Series C and D Preferred Directors, directly or indirectly, Transfer any of
its Shares, Warrants or Options to (any of the Persons described in clauses (i)
through (v) hereof is referred to herein as a "Prohibited Transferee"): (i) any
entity that is engaged in owning, operating and/or managing executive office
suites and providing related business support services, including secretarial,
telecommunications, word processing, printing and copying; (ii) any real estate
investment trust (other than Reckson Associates Realty Corp.); (iii) any direct
competitor of RSI; (iv) any entity that Beneficially Owns 5 percent or more of
the outstanding equity securities or voting control of a Prohibited Transferee,
excluding transfers to an institutional holder that holds such equity securities
or voting control as a passive investment without the right to Control such
Prohibited Transferee; and (v) any Affiliate, officer or director of any
Prohibited Transferee. For purposes of this Section 4.6, a Transfer shall
include any indirect Transfer arising out of an acquisition of Control of RSI
(provided that for this purpose no presumption of Control shall arise
30
solely from ownership of any specific percentage of equity securities of RSI) by
any of (w) CarrAmerica, (x) HQ Omni, or (y) Regus, so long as any of such
Persons named in clauses (w), (x) or (y) is engaged in the executive office
suite business, or (z) any other Person which owns or operates 50 executive
office suite centers as its primary business (any of the foregoing Persons, a
"Disqualified Transferee"), unless prior to or substantially contemporaneously
with such acquisition Beneficial Ownership of the Series C and D Preferred Stock
shall have been transferred to a Person that is (x) Controlled by the executive
officers of RSI immediately prior to such acquisition and (y) not an Affiliate
of RSI or the Disqualified Transferee following such acquisition.
4.7 Sales of Xxxxx Securities.
(1) If the employment of Xxxxx X. Xxxxx ("Xxxxx") by the Company is
terminated by reason of the occurrence of any of the events set forth in
Paragraph 7(d) of the Xxxxx Employment Agreement, then at any time and from time
to time thereafter, Xxxxx shall have the option (the "Xxxxx Put"), subject to
Section 4.7(c), to require the Company to purchase all or any portion of his
Common Stock and Common Stock Equivalents, including the vested portion of any
Options granted to Xxxxx under an Option Plan, and the non-vested portion of
such Options which otherwise would vest pursuant to the terms of such Plan
within two years of such termination (which unvested portion shall immediately
vest and become exercisable) (all of the foregoing being collectively referred
to as the "Xxxxx Securities"), at the Xxxxx Put Price (as hereinafter defined)
by delivery of written notice to the Company (the "Xxxxx Put Notice"). Upon
receipt of such election(s), the Company will be obligated, subject to Section
4.7(c), to purchase the Xxxxx Securities specified (collectively the "Offered
Shares") in such Xxxxx Put Notice within ninety (90) days after the receipt by
the Company of the Xxxxx Put Notice (or such longer period as may be reasonably
necessary to determine the Xxxxx Put Price pursuant to the provisions of Section
4.7(b)) (such date of closing being hereinafter referred to as the "Xxxxx Put
Closing Date").
Upon election exercised by Xxxxx to require the Company to purchase the
Offered Shares pursuant to the provisions of this Section 4.7, the Company will,
subject to Section 4.7(c), notify Xxxxx of the Xxxxx Put Closing Date with
respect to such Offered Shares and Xxxxx shall surrender the certificate or
certificates duly endorsed in blank or together with an acknowledgment of such
redemption representing such Offered Shares to the Company on or before such
date. On the Xxxxx Put Closing Date, the Xxxxx Put Price for such Offered Shares
shall be paid to Xxxxx by certified or bank cashier's check or, at Xxxxx'x
option, by wire transfer in immediately available funds to an account designated
by Xxxxx, and each surrendered certificate shall be canceled and retired. If
less than all of the Shares represented by such certificates are purchased, a
new certificate or certificates shall be issued representing the Shares not
purchased by the Company. If the Company does not have available legal surplus
to purchase all of the Offered Shares, the Company shall purchase the maximum
number of Offered Shares that it may purchase with such legal surplus available,
and the Company shall purchase the remainder of such Offered Shares as soon as
it has funds legally available to do so. If payment of the Xxxxx Put Price shall
cause the Company to be in default under the provisions of any of its loan
agreements (a "Default Event"), the Company may defer payment of all or such
part of the Xxxxx Put Price to Xxxxx in an amount (a "Xxxxx Deferred Amount")
and for such time as is necessary to avoid a Default Event. Interest shall
accrue on so much of the Xxxxx Deferred Amount as is outstanding from time to
time at a rate per annum equal
31
to 3 1/2% plus the Prime Rate and such interest shall be payable by the Company
to Xxxxx at the time of payment of the Xxxxx Deferred Amount in full.
(2) Determination of Xxxxx Put Price. For purposes of this Section 4.7, the
"Xxxxx Put Price" shall be an amount per Offered Share equal to the "fair market
value" thereof (as determined in accordance with this Section 4.7(b)). For
purposes of this Section 4.7(b), fair market value shall be determined by mutual
agreement of the Company and Xxxxx or, if the Company and Xxxxx are unable to
agree on a fair market value, then the fair market value shall be determined
pursuant to the procedure set forth in the immediately following paragraph.
If Xxxxx and the Company are unable to mutually agree on a fair market
value within 60 days after the occurrence of the termination event, Xxxxx and
the Company shall each appoint one appraiser (each, an "Appointed Appraiser")
within five (5) business days thereafter (the "Appointment Date"), which
Appointed Appraisers shall independently, within 25 days of Appointment Date
(the "Determination Date"), determine a fair market value (collectively the
"Original Estimates"). If the Original Estimates do not differ in amount by more
than 10% of the lower market value, then the fair market value shall be deemed
to be the average of such fair market values. If the Original Estimates differ
in amount by more than 10% of the lower market value, the Appointed Appraisers
shall within five (5) business days of the Determination Date appoint a third
appraiser, which third appraiser shall independently, within 25 days of the
Determination Date, determine a fair market value (the "Third Estimate"). The
Original Estimate that is nearest in amount to the Third Estimate shall be
deemed to be the fair market value, or if the Third Estimate is exactly the mean
of the two Original Estimates the Third Estimate shall be deemed to be the fair
market value, that shall be binding upon the Company and Xxxxx. If either Xxxxx
or the Company fails to appoint an Appointed Appraiser by the Appointment Date,
then the Appointed Appraiser who has been appointed shall be the sole appraiser
and the fair market value determined by such Appointed Appraiser shall be the
fair market value and shall be binding on the parties. All Appointed Appraisers
shall be qualified in valuing companies similar to the Company and shall not be
an Affiliate of either party. Any determination of the fair market value under
this Section 4.7(b) shall be made without any reduction as a result of the lack
of liquidity of the Offered Shares or the fact that the Offered Shares may
represent a minority interest in the Company. The Company and Xxxxx shall
equally bear and be responsible for all costs and expenses of the appraisers
under this Section 4.7(b).
(3) Consent of Required Banks. Upon receipt of a Xxxxx Put Notice, the
Company shall request the Required Banks (as such term is defined in the Credit
Agreement) to consent to the exercise of the Xxxxx Put. Unless the Required
Banks have consented in writing to the exercise of the Xxxxx Put, the Company
shall not be required to purchase the Offered Shares pursuant to Section 4.7(a),
the Xxxxx Put Notice shall be deemed rescinded and withdrawn and of no force and
effect and no beneficiary of the Xxxxx Put shall have any rights thereunder and
shall have no rights or remedies to enforce the Xxxxx Put until such time as all
Obligations (as defined in the Credit Agreement) shall have been paid in full in
cash.
(4) Restriction on Sale of Xxxxx Securities. Prior to the earliest to occur
of (i) an Initial Public Offering, or (ii) any termination of Xxxxx'x employment
with the Company, or (iii) any
32
other time approved by Super-Majority Approval, Xxxxx shall be prohibited from
making any Transfer of any of the Xxxxx Securities, other than pursuant to
Section 4.2(b), Section 4.5, or Section 4.8, to a Permitted Transferee, or a
pledge of up to 50% of the Shares owned by Xxxxx to secure any bona fide
indebtedness, but in each case subject to Section 4.6 and provided that the
lender acknowledges in writing that any sale or Transfer of such pledged Shares
shall be subject to the provisions of this Agreement. Any such lender also shall
agree in writing that upon the existence and continuance of an event of default
of any such indebtedness, the Series C and D Holders shall upon 10 Business
Days' prior notice have the right to purchase such indebtedness at an aggregate
price equal to the lower of (x) the "fair market value" or (y) the then
principal amount of such indebtedness and the accrued interest thereon (without
regard to costs, charges or additional interest or fees accruing as a result of
such default) provided that, in connection with such purchase, the Series C and
D Holders acknowledge in writing that they shall not have the right to foreclose
or otherwise acquire the pledged shares without first having complied with the
transfer provisions contained in Article IV hereof.
4.8 Sale of the Company. If (i) the Board (by Super-Majority Approval) and
the holders of a Majority of the Shares of Series A, B and E Preferred Stock and
a Majority of the Series C and D Preferred Stock approve a Sale of the Company
of the type described in clauses (i) or (iii) of the definition thereof, or (ii)
if the holders of a Majority of the Shares of the Series A, B and E Preferred
Stock and a Majority of the Series C and D Preferred Stock approve of a Sale of
the Company of the type described in clause (ii) of the definition thereof, in
each case to a third party which is not an Affiliate of any such Person or the
Company, the Company shall deliver a notice to each Securityholder containing
the material terms thereof (a "Sale Notice"). Each Securityholder agrees to
vote, if such a vote is required under applicable law, all of its Shares in
favor of such a Sale of the Company, and to sell all of its Shares, Warrants and
Options on the terms contained in the Sale Notice. Each Securityholder and the
Company agrees to cooperate in any such Sale of the Company (including, without
limitation, by not exercising any appraisal rights that may be available under
applicable law) and agrees to execute and deliver all documents and instruments
as is required in the Sale Notice and which the holders of a Majority of the
Shares of Series A, B and E Preferred Stock or a Majority of the Series C and D
Preferred Stock request to effect such Sale of the Company; provided, however,
that the Sale Notice (i) shall not require any Securityholder to provide any
representations or warranties in connection with the Sale of the Company
pursuant to this Section 4.8, except representations as to the authority to
transfer such Shares, Warrants or Options and the absence of any Encumbrances
(other than under this Agreement) on the title of such Shares, Warrants and
Options, and (ii) shall require that each Securityholder receive the same
percentage of each type of consideration delivered in connection with the Sale
of the Company.
Upon such Sale of the Company, each Securityholder shall receive its Pro
Rata Share of the consideration paid by the purchaser or received from the sale
of securities. In no event shall any Securityholder receive special
consideration (including, without limitation, financial advisory, finders,
consulting or other similar fees) in connection with a Sale of the Company
contemplated by this Section 4.8, unless such consideration is shared among all
Securityholders based on their Pro Rata Shares; provided, however, this sentence
shall not apply with respect to an arms-length negotiated engagement of Shattan
to act as the Company's financial advisor with respect to the Sale of the
Company.
33
4.9 Repurchase of Equity Interests. The Company covenants and agrees that
it will not, without giving prior written notice to any Securityholder of which
the Company has written notice is a Regulated Holder, directly or indirectly,
purchase, redeem, retire or otherwise acquire any Shares or Warrants if, as a
result of such purchase, redemption, retirement or other acquisition, such
Regulated Holder, together with its Affiliates, will own, or be deemed to own,
Common Stock Equivalents representing capital equal to 25% or more of the
aggregate equity interests then outstanding of the Company.
4.10 Restrictions Following Qualified Public Offering. In the event of the
consummation of a Qualified Public Offering that has not been approved by a
majority of the Company Directors and the Series A, B and E Preferred Directors
(taken in the aggregate) then serving, and by a majority of the Series C and D
Preferred Directors then serving, then, during the Blackout Period, (x) none of
the Xxxxxx Holders or Xxxxx shall Transfer any Shares, Options or Warrants
Beneficially Owned by any of them, (y) the RSI Beneficial Holders shall not, and
shall cause the Series C and D Holders not to, make any Transfer of any of the
RSI Beneficial Holders' Beneficial Ownership of Shares, Options or Warrants,
except to a Permitted Transferee who agrees in writing to be bound by terms of
this Agreement, including the restrictions contained in this Section 4.10, and
(z) the JAH Beneficial Holders shall not, and shall cause the Series C and D
Holders not to, make any Transfer of any of the JAH Beneficial Holders'
Beneficial Ownership of Shares, Options or Warrants other than to a Permitted
Transferee who agrees in writing to be bound by this Agreement, including the
restrictions contained in this Section 4.10; provided, however, that (i) the
foregoing restrictions shall not apply to any Shares acquired by any such Person
in the open market following an Initial Public Offering and not directly from
the Company, (ii) the foregoing restrictions shall not apply to any Transfer
which is a pledge by any of (A) the RSI Beneficial Holders, (B) Xxxxx X. Xxxxx,
or (c) the JAH Beneficial Holders of their respective Beneficial Ownership of
Shares, Options or Warrants, provided that such pledgor retains voting control
of such pledged Shares, Options or Warrants, (iii) at any time following the
first anniversary of the consummation of the Qualified Public Offering, the
Xxxxxx Holders shall be entitled to distribute any Shares, Options, or Warrants
held by any of them to any limited partners or non-managing members of such
Xxxxxx Holders (provided such limited partners or non-managing members are not
Affiliates of the general partner or managing member of such Xxxxxx Holders),
and such limited partners or non-managing members, other than Xxxxx X. Xxxxxxx
and Xxxxxx Xxxxxx, shall not be subject to any further restrictions pursuant to
this Section 4.10, and (iv) Xxxxx shall be entitled to sell any Shares, Options,
or Warrants held by him in an amount sufficient to provide proceeds to pay any
tax liabilities arising in connection with the exercise of any Options that
would expire if not exercised during the Blackout Period (provided, such
exercise is made not more than five Business Days prior to the expiration date
thereof and that all of the proceeds therefrom will be used to pay such tax
liability and provided, further, that such a sale by Xxxxx shall not be
permitted if "cashless exercise" of such Options is available to him to achieve
the same after tax result).
34
ARTICLE 5
PUT
5.1 Ability to Put. (a) If (A) the Company has not, prior to November 15,
2001, either made an Initial Public Offering, or merged into a public company
resulting in the holders of the then outstanding Series A, B and E Preferred
Stock and Conversion Stock receiving Registered Securities in such merger in
exchange for their Shares, or (B) the Series C and D Holders Beneficially Own
Shares, Options and Warrants representing (on a fully exercised and converted
basis), in the aggregate, 65% or more of the Fully Diluted Capitalization, then
at any time and from time to time thereafter until the earlier of November 15,
2003 or two years after the occurrence of the event described in clause (B) of
this paragraph, the holders of a Majority of the Shares of Series A, B and E
Preferred Stock shall have the option (the "Put") to require, subject to Section
5.4, the Company to purchase all of the outstanding Series A , B and E Preferred
Stock respectively held by the Series A, B and E Holders who have voted in favor
of the exercise of the Put, at the Put Price (as hereinafter defined) by
delivery of written notice to the Company (the "Put Notice"). Upon receipt of
the Put Notice, the Company shall notify each other Series A, B and E Holder,
who shall have the right to join in the Put by written notice to the Company
(the "Supplemental Put Notice"). The Company shall also provide notice thereof
to the holders of the Series C and D Preferred Stock. The Company shall be
obligated to purchase, subject to Section 5.4, the Series A, B and E Preferred
Stock specified in the Put Notice and the Supplemental Put Notice within 90 days
after the receipt by the Company of the Put Notice (or such longer period as may
be reasonably necessary to determine the Put Price pursuant to the provisions of
Sections 5.2 and 5.3). The closing of the purchase by the Company of the Series
A, B and E Preferred Stock shall occur at the Company's principal office, or at
such other place as shall be mutually agreeable to the Series A, B and E Holders
and the Company as soon as possible (and in any event within 10 days after the
determination of the Put Price in accordance with Sections 5.2 and 5.3) (such
date of closing being hereinafter referred to as the "Put Closing Date").
(b) If the holders of a Majority of the Shares of Series A, B and E
Preferred Stock are entitled to exercise the Put pursuant to the preceding
paragraph and shall not have done so, then at any time and from time to time
thereafter until the earlier of November 15, 2003 or two years after the
occurrence of the event described in clause (B) of the preceding paragraph, the
PNA Holder shall have the option, subject to all of the terms and conditions set
forth in this Article 5 (other than those pertaining to the repurchase of all of
the outstanding shares of the Series A, B and E Preferred Stock), to require the
Company to purchase all of the outstanding Series B Preferred Stock and Series E
Preferred Stock then held by the PNA Holder at the Put Price by delivery of
written notice to the Company (the "PNA Holder Put Notice"). Following the
receipt of the PNA Holder Put Notice, the Company shall promptly (and in any
event within 10 days after its receipt of the PNA Put Holder Notice) provide
notice thereof to the Xxxxxx Holders, the Northwood Holders and the holders of
the Series C and D Preferred Stock. Each of the Xxxxxx Holders and the Northwood
Holders shall have the right, subject to all of the terms and conditions set
forth in this Article Five (other than those pertaining to the repurchase of all
of the outstanding shares of the Series A, B and
35
E Preferred Stock), to require the Company to purchase all of the outstanding
shares of Series A, B and E Preferred Stock then held by it at the Put Price by
delivery of written notice to the Company within 20 days after such holder's
receipt of the PNA Holder Put Notice. If the Xxxxxx Holders or the Northwood
Holders exercise the Put pursuant to this paragraph, each other Series B Holder
and Series E Holder shall be entitled to join in the Put by written notice to
the Company. Any repurchase of Series A Preferred Stock, Series B Preferred
Stock or Series E Preferred Stock pursuant to this paragraph shall be made on
one closing date.
(c) If the Company has not, prior to November 15, 2001, either made an
Initial Public Offering, or merged into a public company resulting in the
holders of the then outstanding Series C and D Preferred Stock and Conversion
Stock receiving Registered Securities in such merger in exchange for their
Shares, then at any time and from time to time thereafter until November 15,
2003, the holders of a Majority of the Shares of Series C and D Preferred Stock
shall have the option (the "Series C and D Put") to require, subject to Section
5.4, the Company to purchase all of the outstanding Series C and D Preferred
Stock held by the Series C and D Holders who have voted in favor of the exercise
of the Series C and D Put, at the Series C and D Put Price (as hereinafter
defined) by delivery of written notice to the Company (the "Series C and D Put
Notice"). Upon receipt of the Series C and D Put Notice, the Company shall
notify each other Series C and D Holder, who shall have the right to join in the
Series C and D Put by written notice to the Company (the "Supplemental Series C
and D Put Notice"). The Company shall also provide notice thereof to the holders
of the Series A, B and E Preferred Stock. The Company shall be obligated to
purchase, subject to Section 5.4, the Series C and D Preferred Stock specified
in the Series C and D Put Notice and the Series C and D Supplemental Put Notice
within 90 days after the receipt by the Company of the Series C and D Put Notice
(or such longer period as may be reasonably necessary to determine the Series C
and D Put Price pursuant to the provisions of Sections 5.2 and 5.3). The closing
of the purchase by the Company of the Series C and D Preferred Stock shall occur
at the Company's principal office, or at such other place as shall be mutually
agreeable to the Series C and D Holders and the Company as soon as possible (and
in any event within 10 days after the determination of the Series C and D Put
Price in accordance with Sections 5.2 and 5.3) (such date of closing being
hereinafter referred to as the "Series C and D Put Closing Date").
Notwithstanding anything to the contrary contained herein, in the event of an
acquisition of Control of RSI of the type described in Section 4.6 hereof, the
Series C and D Put may only be exercised in the event that the Put has been
exercised.
(d) The Company shall not be required to purchase any Preferred Stock
pursuant to this Section 5.1 to the extent that the Company does not have
available legal surplus pursuant to the General Corporation Law of the State of
Nevada from which it can purchase such stock at the Put Price or the Series C
and D Put Price, as the case may be, provided that the Company shall use all
legally permissible methods in the reduction of capital and in the revaluation
of its assets, including appraisal, in obtaining such legal surplus, and the
Company gives written notice to the electing Securityholders within 30 days
after the date of the notice of exercise of the Put or the Series C and D Put by
such Securityholders that it is not required to purchase the number of Shares of
Preferred Stock set forth in such notice by reason of this clause and setting
forth the facts relating thereto.
(e) It is acknowledged and agreed that any Put Notice, Supplemental Put
Notice, PNA Holder Put Notice, Series C and D Put Notice, and Supplemental
Series C and D Put Notice received
36
by the Company within any 30 day period shall be treated in all respects under
the terms and provisions of this Agreement as though such notices were received
on the same date at the same time. Accordingly, the Put Closing Date, the
closing date related to a PNA Holder Put Notice and the Series C and D Put
Closing Date related to such notices shall occur simultaneous on one closing
date and the payments to all such Securityholders shall be made pro rata on the
basis of the Common Stock Equivalents subject to such put rights.
(f) Upon election to require the Company to purchase the Preferred Stock
pursuant to the provisions of this Article 5, the Company will, subject to
Section 5.4, notify each Series A, B and E Holder or Series C and D Holder of
the Put Closing Date or the Series C and D Put Closing Date, as the case may be,
and each such Series A, B and E Holder or Series C and D Holder, as the case may
be, shall surrender the certificate or certificates representing such Shares to
the Company on or before such date. On the Put Closing Date or the Series C and
D Put Closing Date, as the case may be, the Put Price or the Series C and D Put
Price, as the case may be, for such Shares shall be payable to each such Series
A, B and E Holder or Series C and D Holder, as the case may be, by certified or
bank cashier's check or, at the option of the Series A, B and E Holder and
Series C and D Holder, as the case may be, receiving the same, by wire transfer
in immediately available funds to an account designated by each such holder, and
each surrendered certificate shall be canceled and retired. If less than all of
the Shares represented by such certificate are purchased, a new certificate or
certificates shall be issued representing the Shares not purchased by the
Company. If the Company does not have available legal surplus to purchase all of
the Series A, B and E Preferred Stock or Series C and D Preferred Stock that
each such Series A, B and E Holder or Series C and D Holder has requested the
Company to purchase under this Article 5, the Company shall purchase the maximum
number of Shares of Series A, B and E Preferred Stock and Series C and D
Preferred Stock that it may purchase with such legal surplus available, pro rata
to the Put Price or the Series C and D Put Price, as the case may be, thereof,
and the Company shall repurchase the remainder of such Series A, B and E
Preferred Stock and Series C and D Preferred Stock, as the case may be, as soon
as it has funds legally available to do so.
(g) The Company shall be permitted to pay the Put Price or the Series C and
D Put Price, as the case may be, by delivery of a subordinated note payable in
three annual installments of principal commencing on the first anniversary of
the Put Closing Date or the Series C and D Put Closing Date, as the case may be,
with interest at an annual rate equal to 3 1/2% plus the Prime Rate, it being
acknowledged and agreed that with respect to the decision to pay the Put Price
in cash or in such annual installments, the Series A, B and E Directors shall
not be entitled to vote if such decision is with respect to the redemption or
repurchase of the Series A, B and E Preferred Stock and the Series C and D
Directors shall not be entitled to vote if such decision is with respect to the
redemption or repurchase of the Series C and D Preferred Stock.
(h) If payment of the Put Price to the Series A, B and E Holders or the
Series C and D Put Price to the Series C and D Holders shall cause the Company
to be in default under the provisions of any of its loan agreements (a "Default
Event"), the Company may defer payment of all or such part of the Put Price or
the Series C and D Put Price, as the case may be, to each Series A, B and E
Holder or Series C and D Holder, as the case may be, pro rata to the Put Price
or the Series C and D Put Price, as the case may be, thereof, in an amount (a
"Deferred Amount") and for
37
such time as is necessary to avoid a Default Event. Interest shall accrue on so
much of the Deferred Amount as is outstanding from time to time at a rate per
annum (based on the actual number of days elapsed in a 365 day year) equal to 3
1/2% percent plus the Prime Rate and such interest shall be payable by the
Company to the Series A, B and E Holders or Series C and D Holders, as the case
may be, at the time of payment of the Deferred Amount in full. In addition, the
Company shall use its best efforts to pay the Put Price or the Series C and D
Put Price in full on the Put Closing Date or the Series C and D Put Closing
Date, as the case may be, and, in this regard, the Company shall (i) seek to
negotiate with its lenders to permit the Company, under the terms of its loan
agreements, to perform its obligations under this Article 5 and/or (ii) seek to
obtain new financing.
5.2 Put Price. (a) For purposes of this Article 5, the Put Price shall be
the greater of (i) the Appraised Value of the Conversion Stock underlying the
Series A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock,
as the case may be, or (ii) the Adjusted Value of the Series A Preferred Stock,
Series B Preferred Stock or Series E Preferred Stock, as the case may be. The
"Appraised Value" shall mean the fair market value of the Conversion Stock
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock or Series E Preferred Stock, as the case may be, determined pursuant to
the appraisal procedure set forth in the immediately succeeding section. The
"Adjusted Value" shall be an amount per share equal to the Adjusted Purchase
Price of the Series A Preferred Stock (determined in accordance with the Series
A Certificate of Designation), or of the Series B Preferred Stock (determined in
accordance with the Series B Certificate of Designation) or of the Series E
Preferred Stock (determined in accordance with the Series E Certificate of
Designation), as the case may be, plus a cumulative accretion computed on the
Adjusted Purchase Price at the rate of 8% per annum (compounded annually) from
the date of issue up to the date of the Put Notice, reduced by an amount equal
to the aggregate of all declared and paid cash dividends, if any.
(b) For purposes of this Article 5, the Series C and D Put Price shall be
the greater of (i) the Series C and D Appraised Value of the Conversion Stock
underlying the Series C Preferred Stock or Series D Preferred Stock, or (ii) the
Series C and D Adjusted Value. The "Series C and D Preferred Stock Appraised
Value" shall mean the fair market value of the Conversion Stock issuable upon
conversion of the Series C Preferred Stock or Series D Preferred Stock
determined pursuant to the appraisal procedure set forth in the immediately
succeeding section (the "Series C and D Preferred Stock Appraised Value"). The
"Series C and D Adjusted Value" shall be an amount per share equal to the
Adjusted Purchase Price of the Series C Preferred Stock (determined in
accordance with the Series C Certificate of Designation) or Series D Preferred
Stock (determined in accordance with the Series D Certificate of Designation),
plus a cumulative accretion computed on the Adjusted Purchase Price at the rate
of 8% per annum (compounded annually) from the date of issue up to the date of
the Series C and D Put Notice, reduced by an amount equal to the aggregate of
all declared and paid cash dividends, if any.
5.3 Appraisal Procedure. In order to determine the Appraised Value or the
Series C and D Appraised Value, the holders of a Majority of the Shares of
Series A, B and E Preferred Stock (in the case of determinations of the
Appraised Value) or the holders of a Majority of the Shares of Series C and D
Preferred Stock (in the case of determinations of the Series C and D Appraised
Value), on the one hand, and the Board (excluding the Series A and Series B
Preferred Directors,
38
in the case of the determination of the Appraised Value of the Series A, B and E
Preferred Stock, and excluding the Series C and D Preferred Directors, in the
case of the determination of the Appraisal Value of the Series C and D Preferred
Stock), on the other hand, shall each appoint one appraiser (collectively, the
"Initial Appraisers"), within 20 days after delivery of the Put Notice or the
Series C and D Put Notice, as the case may be, which appraisers shall promptly
determine a fair market value based on the going concern value of the Company as
a whole and without adjustment for minority interest or lack of liquidity,
within 30 days. In the event that the fair market values determined by the
Initial Appraisers (collectively, the "Original Estimates") do not differ in
amount by more than 10 percent, the fair market value for purposes of this
Section 5.3 shall be the amount equal to the average of the Original Estimates.
In the event that the Original Estimates differ in amount by more than 10
percent, the holders of a Majority of the Shares of Series A, B and E Preferred
Stock (in the case of determinations of the Appraised Value) or the holders of a
Majority of the Shares of Series C and D Preferred Stock (in the case of
determinations of the Series C and D Appraised Value) and the Company shall
mutually agree on a third appraiser within 5 days thereafter, provided that if
such holders and the Company fail to appoint a third appraiser within such 5-day
period, then the Initial Appraisers shall appoint a third appraiser within 5
days thereafter. The third appraiser shall independently, within 30 days of such
third appraiser's appointment, determine such a fair market value (the "Third
Estimate"). The Original Estimate that is nearest in amount to the Third
Estimate shall be deemed to be the fair market value that shall be binding on
the Company and the holders of the Shares subject to the Put. The Company shall
bear all costs of appraisers under this Section 5.3. All appraisers appointed
pursuant to this Section 5.3 shall be qualified in valuing companies similar to
the Company and shall be unaffiliated with any party hereto. Any determination
of the Appraised Value or the Series C and D Appraised Value under this Section
5.3 shall be made without reduction resulting from the lack of liquidity of the
Shares subject to Put or the Series C and D Put or the fact that such Shares
may, at such time, represent a minority interest in the Company.
5.4 Consent Required to Put. Upon receipt of a Put Notice or a Series C and
D Put Notice, the Company shall request the Required Banks to consent to the
exercise of the Put or the Series C and D Put, as the case may be. The Company
shall not be required to purchase Series A, B and E Preferred Stock or Series C
and D Preferred Stock, as the case may be, pursuant to Section 5.1, and the Put
Notice or the Series C and D Put Notice, as the case may be, shall be deemed
rescinded and withdrawn and of no force and effect and no beneficiary of any Put
or Series C and D Put, as the case may be, shall have any rights thereunder, and
no beneficiary of any Put or Series C and D Put, as the case may be, shall have
any rights or remedies to enforce any Put or Series C and D Put, as the case may
be, until such time as all Obligations shall have been paid in full in cash,
unless the Required Banks have consented in writing to the exercise of the Put
or Series C and D Put, as the case may be.
39
ARTICLE 6
REGISTRATION RIGHTS
6.1 Public Offering Shares.
(1) Demand Registration Rights. (i) Subject to Section 6.1(a)(ii), at any
time and from time to time following the one year anniversary of an Initial
Public Offering, if the Company receives written notice from either (A) holders
of Class A Common Stock (as defined in Section 8.1(e)) who, immediately prior to
the Initial Public Offering, constituted the holders of a majority of the Shares
of the Series A, B and E Preferred Stock, or (B) holders of Class B Common Stock
(as defined in Section 8.1(e)) who immediately prior to the Initial Public
Offering, constituted the holders of a Majority of the Shares of the Series C
and D Preferred Stock, which notice demands the registration of all or any
portion of the Common Stock, Conversion Stock or Warrant Shares held by such
Series A, B and E Holders or Series C and D Holders and specifies the intended
methods of disposition thereof (which may include a delayed and continuous
offering pursuant to Rule 415 promulgated under the Securities Act), then the
Company shall promptly (and in any event within 10 days after its receipt of
such demand) provide notice thereof to the other Securityholders in accordance
with this Section 6.1 (which other Securityholders shall have the right, subject
to Section 6.1(c)(ii) to include in such registration any shares of Common
Stock, and any shares of Common Stock issuable upon conversion of Preferred
Stock or upon exercise of Warrants or Options held by them) and cause to be
prepared a registration statement, file and obtain a receipt for the
registration statement as soon as practicable (but not later than 90 days after
the date of such demand), and exercise its best efforts to file a final
registration statement, to obtain a receipt therefor as soon as practicable
thereafter and to have such registration statement declared effective as soon as
practicable thereafter, under the Securities Act and such other securities laws
as shall be directed by such Securityholders, to the end that the Shares
(including Shares issuable upon conversion of Preferred Stock or upon exercise
of Warrants or Options) held by all demanding Securityholders, may be sold
thereunder as soon as practicable after the receipt of such notice, and the
Company will use its best efforts to ensure that a distribution of such Shares
pursuant to the registration statement may continue for up to six months from
the date of the effective date of the registration statement or such later time
pursuant to the method of disposition specified in the demand for registration;
provided, however, that the Company shall not be obligated to take any action to
effect such registration, qualification or compliance pursuant to this Section
6.1(a) unless the Company shall have received requests for such registration of
such Shares having a minimum anticipated aggregate net offering price (based on
the then market price of the Common Stock and customary underwriter's discounts
and commissions, if applicable) of $20.0 million, subject, however, to the right
of the Company pursuant to Section 6.1(c)(ii), upon advice of the managing
underwriters, to reduce the number of Shares that are requested to be registered
by such holders (a "Market Cut Back"). Notwithstanding the foregoing, the
holders of Class B Common Stock shall be entitled to exercise the registration
rights contained herein solely with respect to the Class A Common Stock issuable
upon conversion of such Class B Common Stock. The Class B Common Stock shall be
automatically converted into Class A Common Stock upon the consummation of an
underwritten offering for such Class A Common Stock or upon the sale of such
Class A Common Stock pursuant to any delayed and continuous offering pursuant to
Rule 415 promulgated under the Securities Act. Each such registration shall
hereinafter be called a "Demand Registration." The Series A, B and E Holders
shall be entitled to request one Demand Registration and the Series C and D
Holders shall be entitled to request two Demand Registrations; provided,
however, that if all of the Series C and D Preferred Stock may have been (x)
included in the registration statement prepared upon the exercise of the Series
C and D Holders' first exercised right for a Demand Registration and (y) offered
and sold in such offering in accordance with the plan of distribution described
therein (after giving full force and
40
effect to the Company's right to a Market Cut Back and the Company's rights
under Section 6.1(a)(ii)), then the Series C and D Holders shall not have the
right to the second Demand Registration (but will continue to have the rights
provided under Section 6.1(b)). A Demand Registration shall not count as such
until a registration statement becomes effective; provided, that if, after such
registration statement has become effective, the offering pursuant to the
registration statement is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental authority, such
registration shall be deemed not to have been effected unless such stop order,
injunction or other order shall subsequently have been vacated or otherwise
removed. The holders of a Majority of the Shares of the Series A, B and E
Preferred Stock or the holders of a Majority of the Shares of the Series C and D
Preferred Stock requesting such registration shall select the underwriters of
any underwritten offering pursuant to a registration statement filed pursuant to
this Section 6.1(a).
(ii) (A) If, upon receipt of a registration request pursuant to Section
6.1(a)(i), the Company is advised in writing (with a copy to the person(s)
requesting registration pursuant to Section 6.1(a)) by a nationally recognized
investment banking firm selected by the Company that, in such firm's opinion, a
registration at the time and on the terms requested would materially and
adversely affect any immediately planned underwritten public equity financing by
the Company for the primary purpose of raising capital for the Company that had
been contemplated by the Board prior to receipt of notice requesting
registration pursuant to Section 6.1(a)(i) (a "Transaction Blackout"), the
Company shall not be required to effect a registration pursuant to Section
6.1(a)(i) until the earliest of (1) the abandonment of such financing, (2) 90
days after the completion of such financing, (3) the termination of any "hold
back" or "lock-up" period obtained by the underwriter(s) selected by the Company
from any person in connection with such financing, or (4) 180 days after notice
to the Securityholders requesting registration of written notice of such
Transaction Blackout (together with a copy of the investment banking firm
opinion referred to above in this Section 6.1(a)(ii)(A)); provided, however,
that the Company shall be entitled to exercise this right on only one occasion
during any twelve-month period; or
(B) If, while a registration request is pending pursuant to Section 6.1(a),
counsel to the Company has determined in good faith that the filing of a
registration statement would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential and which has not been disclosed to the public (which determination
shall be made promptly), the Company shall not be required to effect a
registration pursuant to Section 6.1(a) until the earlier of (1) the date upon
which such material information is disclosed to the public or ceases to be
material and (2) 45 days after counsel to the Company makes such good faith
determination.
(iii) For purposes of this Article VI, whenever there are references to
Series A, B or E Holders or Series C and D Holders at a time following an
Initial Public Offering, such terms shall be deemed to refer to the same Persons
but in their capacity as holders of Class A Common Stock or Class B Common
Stock, as the case may be.
(2) "Piggyback" Registration Rights. Subject to applicable stock exchange
rules and securities regulations, at least 30 days prior to the filing of any
registration statement for any
41
public offering of any of its Common Stock for the account of the Company or any
other Person, (other than an Initial Public Offering or registration statement
on Form S-4 or S-8 (or any successor forms under the Securities Act) or other
registrations relating solely to employee benefit plans or any transaction
governed by Rule 145 of the Securities Act), the Company shall give written
notice of such proposed filing and of the proposed date thereof to each
Securityholder and if, on or before the twentieth (20th) day following the date
on which such notice is given, the Company shall receive a written request from
any such Securityholder requesting that the Company include among the securities
covered by such registration statement any Shares (including Shares issuable
upon conversion of Preferred Stock or upon exercise of Warrants or Options) held
by such Securityholder for offering for sale in a manner and on terms set forth
in such request, the Company shall include such Shares in such registration
statement, if filed, so as to permit such Shares to be sold or disposed of in
the manner and on the terms of the offering thereof set forth in such request.
Each such registration shall hereinafter be called a "Piggyback Registration."
The holders of a majority of the Shares of Preferred Stock (taken as a single
class) participating in the registration shall have the right to select an
underwriter of any offering pursuant to a registration statement filed pursuant
to this Section 6.1(b).
(3) Terms and Conditions of Registration or Qualification. In connection
with any registration statement filed pursuant to Section 6.1(a) or 6.1(b)
hereof, the following provisions shall apply:
(1) Each selling Securityholder shall, if requested by the managing
underwriter, agree not to sell any Shares held by such selling Securityholder
(other than the Shares so registered) for such period of time following the
effective date of the registration statement relating to such offering, but in
no event in excess of three (3) months in the case of a secondary offering, or
such other longer period as the managing underwriter may require and the Company
shall agree.
(2) If the managing underwriter advises in writing that the inclusion in
such registration or qualification of some or all of the Shares sought to be
registered exceeds the number (the "Saleable Number") that can be sold in an
orderly fashion within a price range acceptable to the Company, if such
registration is being effected at the Company's determination, or holders of a
Majority of the Shares of the Series A, B and E Preferred Stock, if such
registration is being effected at the request of the holders of a Majority of
the Shares of Series A, B and E Preferred Stock or the holders of a Majority of
the Shares of the Series C and D Preferred Stock, if such registration is being
effected at the request of the holders of a Majority of the Shares of Series C
and D Preferred Stock, then the number of Shares offered shall be limited to the
Saleable Number and shall be allocated as follows:
(A) If such registration is being effected at the Company's determination
to sell Shares for its own account, (1) first, all the Shares the Company
proposes to register and (2) second, the difference between the Saleable Number
and the number to be included pursuant to clause (1) above, allocated first to
the Series A, B and E Holders and Series C and D Holders pro rata on the basis
of the relative number of Shares offered for sale by each such
42
Securityholder, and then among all other selling Securityholders pro rata on the
basis of the relative number of Shares offered for sale by each such other
Securityholder; and
(B) in all other cases, including if the registration is being effected
pursuant to a Demand Registration, (1) first, the entire Saleable Number
allocated first to the holders of the Series A, B and E Preferred Stock, if the
Demand Registration was initiated by the holders of a Majority of the Shares of
the Series A, B and E Preferred Stock, or to the holders of the Series C and D
Preferred Stock, if the Demand Registration was initiated by the holders of a
Majority of the Shares of the Series C and D Preferred Stock, and then among all
other selling Securityholders pro rata on the basis of the relative number of
Shares offered for sale by each such Securityholder and (2) second, the
difference (if positive) between the Saleable Number and the number to be
included pursuant to clause (1) above, allocated to the Company.
(3) The selling Securityholders will promptly provide the Company with such
information concerning the selling Securityholder, its ownership of Shares and
its intended methods of distribution as the Company shall reasonably request in
order to prepare such registration statement and, upon the Company's request,
each selling Securityholder shall provide such information in writing and signed
by such Securityholder and stated to be specifically for inclusion in the
registration statement. If the distribution of the Shares covered by the
registration statement shall be effected by means of an underwriting, the right
of any selling Securityholder to include its Shares in such registration shall
be conditioned on such Securityholder's execution and delivery of a customary
underwriting agreement with respect thereto; provided, however, that except with
respect to information concerning such Securityholder and its ownership of
Shares to be included in such registration and such Securityholder's intended
manner of distribution of the Shares, no selling Securityholder shall be
required to make any representations or warranties in such agreement as a
condition to the inclusion of its Shares in such registration.
(4) The Company shall bear all expenses in connection with the preparation
of any registration statement filed pursuant to Section 6.1(a), including the
fees and disbursements of one counsel for the selling Securityholders, except
for the underwriting discounts or commissions with respect to Shares of the
selling Securityholders which shall be borne by the selling Securityholders.
(5) The Company shall bear all expenses in connection with the preparation
of any registration statement filed pursuant to Section 6.1(b), including the
fees and disbursement of one counsel to the selling Securityholders, except for
the underwriting discounts or commissions with respect to Shares of the selling
Securityholders, which shall be borne by the selling Securityholders.
(6) Following the effective date of such registration statement, the
Company shall, upon the request of the selling Securityholders, forthwith supply
such number of prospectuses (including preliminary prospectuses and amendments
and supplements thereto) meeting the requirements of the Securities Act or such
other securities laws where the registration statement or prospectus has been
filed and such other documents as are referred to in the registration statement
as shall be requested by the selling Securityholders to permit such
Securityholders to make a public
43
distribution of their Shares, provided that the selling Securityholders furnish
the Company with such appropriate information relating to such Securityholders'
intentions in connection therewith as the Company shall reasonably request in
writing.
(7) The Company shall prepare and file such amendments and supplements to
such registration statement as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act or
such other securities laws where the registration statement has been filed with
the respect to the offer and sale or other disposition of the Shares covered by
such registration statement during the period required for distribution of the
Shares, which period shall not be in excess of six (6) months from the effective
date of such registration statement or such longer period specified in the
demand for registration.
(8) The Company shall use its best efforts to register or qualify the
Shares of the selling Securityholders covered by any such registration statement
under such securities or Blue Sky laws in such jurisdictions as the
Securityholders may request; provided, however, that the Company shall not be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified in order to comply with such request.
(9) The Company will as expeditiously as possible:
(A) cause the Shares covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the selling Securityholders to consummate the disposition of such Shares;
(B) notify each selling Securityholder at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(C) cause all Shares covered by the registration statement to be listed on
each securities exchange or designated for quotation on NASDAQ on which similar
securities issued by the Company are then so listed or designated and, unless
the same already exists, provide a transfer agent, registrar and CUSIP number
for all such Shares not later than the effective date of the registration
statement;
(D) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the holders of a
44
majority of the voting power of the Shares being sold or the underwriters
retained by such holders, if any, reasonably request in order to expedite or
facilitate the disposition of such Shares;
(E) make available for inspection by any selling Securityholder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any such Inspector in connection with such registration statement;
(F) obtain "cold comfort" letters and updates thereof from the Company's
independent public accountants and an opinion from the Company's counsel, in
each case addressed to the selling Securityholders, in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
and opinion of counsel, respectively, as the holders of a majority of the voting
power of the Shares of the selling Securityholders shall request;
(G) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its Securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12 months, beginning
within three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(H) cause its officers to use their reasonable best efforts to support the
marketing of the Shares covered by the registration statement (including,
without limitation, the participation in "road shows," at the request of the
managing underwriter) taking into account the Company's business needs.
(10) Each selling Securityholder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
6.1(c)(ix)(B), such Securityholder will forthwith discontinue disposition of its
Shares pursuant to the registration statement covering such Shares until such
Securityholder's receipt of the copies of the supplemented or amended prospectus
contemplated by such Section 6.1(c)(ix)(B) and, if so directed by the Company,
such Securityholder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Securityholder's
possession, of the prospectus covering such its Shares current at the time of
receipt of such notice.
(4) Transfer Restrictions. The transfer restrictions contained in Article
4, including, without limitation, those set forth in Section 4.3, of this
Agreement shall not apply to any offering of Shares pursuant to this Section
6.1.
(5) Indemnification.
(1) In the event of the registration or qualification of any Shares of the
Securityholders under the Securities Act or any other applicable securities laws
pursuant to the
45
provisions of this Section 6.1, the Company agrees to indemnify and hold
harmless each Securityholder thereby offering such Shares for sale (a "Seller")
and each of their officers, directors, partners, members or agents, the
underwriter, broker or dealer, if any, of such Shares, and each other Person, if
any, who controls any such Seller, underwriter, broker or dealer within the
meaning of the Securities Act or any other applicable securities laws (each an
"Indemnified Seller"), from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Seller may become subject under the Securities Act or any other
applicable securities laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Shares were registered or
qualified under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, offering circular or other document or any
amendment or supplement thereto or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation under the Securities Act, the
Exchange Act or any other applicable securities laws applicable to the Company
or relating to any action or inaction required by the Company in connection with
any such registration or qualification and will promptly reimburse each such
Indemnified Seller for any legal or other expenses reasonably incurred by such
Indemnified Seller in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission made in
such registration statement, such preliminary prospectus, such final prospectus
or such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Seller
specifically and expressly for use in the preparation thereof, or to the extent
that an Indemnified Seller sold securities to a Person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the final prospectus as then amended or supplemented if the Company previously
furnished copies thereof to such Indemnified Seller and the loss, claim, damage,
liability or action results from an untrue statement or omission contained in
the preliminary prospectus that was corrected in the final prospectus.
(2) In the event of the registration or qualification of any Shares of the
Securityholders under the Securities Act or any other applicable securities laws
for sale pursuant to the provisions of this Section 6.1, each selling
Securityholder, each underwriter, broker and dealer, if any, of such Shares, and
each other Person, if any, who controls any such selling Securityholder,
underwriter, broker or dealer within the meaning of the Securities Act, agrees
severally, and not jointly, to indemnify and hold harmless the Company, each
Person who controls the Company within the meaning of the Securities Act, and
each officer and director of the Company from and against any and all losses,
claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Company, such controlling Person or any such officer or
director may become subject under the Securities Act or any other applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in any registration statement
under which such Shares were registered or qualified under the Securities Act or
any other applicable securities laws,
46
any preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon an untrue
statement or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which untrue
statement or omission was made therein in reliance upon and in conformity with
written information furnished to the Company by such selling Securityholder,
underwriter, broker, dealer or controlling Person specifically for use in
connection with the preparation thereof, and will reimburse the Company, such
controlling Person and each such officer or director for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that no selling Securityholder will be liable under this Section 6.1(e)(ii) for
any amount in excess of the net proceeds paid to such selling Securityholder in
respect of Shares sold by it.
(3) Promptly after receipt by a Person entitled to indemnification under
this Section 6.1(e) (an "Indemnified Party") of notice of the commencement of
any action or claim relating to any registration statement filed under Section
6.1(a) or 6.1(b) or as to which indemnity may be sought hereunder, such
indemnified party will, if a claim for indemnification hereunder in respect
thereof is to be made against any other party hereto (an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the omission to so notify the Indemnifying Party will not
relieve the Indemnifying Party from any liability that it may have to any
Indemnified Party otherwise than pursuant to the provisions of this Section
6.1(e) and shall also not relieve the Indemnifying Party of its obligations
under this Section 6.1(e) except to the extent that the Indemnifying Party is
actually prejudiced thereby. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense, with counsel
reasonably satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable cost of investigation;
provided, however, that no Indemnifying Party shall enter into any settlement
agreement without the prior written consent of the Indemnified Party unless such
Indemnified Party is fully released and discharged from any such liability.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (A) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such suit, action, claim or
proceeding, (B) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of the defense
of such action, suit, claim or proceeding, or (C) such Indemnified Party shall
have reasonably concluded, based upon the advice of counsel, that there may be
defenses available to it that are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the reasonable fees and expenses of one
counsel or firm of counsel
47
selected by a majority in interest of the Indemnified Parties (and reasonably
acceptable to the Indemnifying Party) shall be borne by the Indemnifying Party.
If, in any such case, the Indemnified Party employs separate counsel, the
Indemnifying Party shall not have the right to direct the defense of such
action, suit, claim or proceeding on behalf of the Indemnified Party and the
Indemnified Party shall assume such defense and/or settle such action; provided,
however, that an Indemnifying Party shall not be liable for the settlement of
any action, suit, claim or proceeding effected without its prior written
consent, which consent shall not be unreasonably withheld.
ARTICLE 7
PREEMPTIVE RIGHTS
7.1 Preemptive Rights.
(1) Prior to an Initial Public Offering. If, after the date hereof and
prior to an Initial Public Offering, the Company shall propose to issue or sell
New Securities (as hereinafter defined) or enter into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any New Securities, then subject to the immediately
following paragraph, each Securityholder shall have the right to purchase that
number of New Securities, at the same price and on the same terms proposed to be
issued or sold by the Company, so that each such Securityholder would, after the
issuance or sale of all such New Securities (and after giving effect to the
preference given to the Series C and D Holders set forth in the immediately
following paragraph), hold the same proportionate interest of the Fully Diluted
Capitalization as was held by each such Securityholder immediately after any
issuance or sale of New Securities as set forth in the immediately following
paragraph and immediately prior to the issuance or sale of the balance of such
New Securities (the "Proportionate Percentage"). "New Securities" shall mean any
Shares or other securities or other rights convertible or exchangeable into or
exercisable for Shares; provided, however, that "New Securities" does not
include: (i) any Warrants, Options or Common Stock issued or issuable on
conversion of the Preferred Stock, or upon the exercise of Warrants or Options
(other than options referred to in clause (v) below); (ii) Shares issued
pursuant to the exercise of any rights, warrants, options (other than options
referred to in clause (v) below) or other agreements not outstanding on the date
of this Agreement including, without limitation, any security convertible or
exchangeable, with or without consideration, into or for any stock, options and
warrants, provided that the rights established by this Section 7.1 apply with
respect to the initial sale or grant by the Company of such rights or
agreements; (iii) securities issued by the Company as part of any public
offering pursuant to an effective registration statement under the Securities
Act; (iv) Shares issued in connection with any stock split, stock dividend or
recapitalization of the Company; (v) Shares issued to management, directors or
employees of, or consultants to, the Company pursuant to options outstanding as
of the date hereof and options to purchase Shares issued pursuant to any Option
Plan or as otherwise approved by the Compensation Committee and Shares issuable
upon exercise thereof; and (vi) securities issued as consideration for, or in
connection with, any merger or acquisition of the stock or assets of any
acquired entity by the Company.
48
Notwithstanding the provisions of the foregoing paragraph, if, at the time
of any proposed issuance or sale by the Company of New Securities prior to an
Initial Public Offering, the RSI Beneficial Holders have Beneficial Ownership of
Shares, Options and Warrants (which in the case of Options or Warrants shall
include only those Options or Warrants that are Exercisable) representing (on a
fully exercised and converted basis), in the aggregate, less than 30% of the
Adjusted Fully Diluted Capitalization, then the RSI Beneficial Holders shall
have the initial right, exercisable, in the sole discretion of RSI, by the
Series C and D Holders for the benefit of the RSI Beneficial Holders or directly
by any of the RSI Beneficial Holders (provided, that, if such right is exercised
directly by any of the RSI Beneficial Holders, such Person shall become a party
to this Agreement for all purposes hereunder), to purchase that number of New
Securities (subject to the maximum number of New Securities proposed to be
issued or sold) at, except as set forth in the two immediately following
sentences, the same price and on the same terms proposed to be issued or sold by
the Company so that after such priority purchase under this paragraph the RSI
Beneficial Holders would have Beneficial Ownership of Shares, Options and
Warrants representing (on a fully exercised and converted basis), in the
aggregate, 30% of the Adjusted Fully Diluted Capitalization on a pro forma basis
giving effect to the maximum number of New Securities proposed to be issued or
sold. If, at the time of any issuance of New Securities, there are Unused
Backlog CSE's that are derived from a previous issuance of shares as
consideration for, or in connection with, any merger or acquisition of the stock
or assets of any acquired entity by the Company ("Merger Shares"), then,
notwithstanding the proposed price of the New Securities to be issued, the price
per share of the New Securities (only for that number of New Securities as are
purchasable under this paragraph with respect to such Unused Backlog CSE's
derived from the Merger Shares which number of New Securities shall be deemed to
be the first New Securities issued unless there are at the time Unused Backlog
CSE's derived from In-the-Money Option Shares with respect to which such Unused
Backlog CSE's came into existence prior to the Unused Backlog CSE's derived from
the Merger Shares) acquirable by the Series C and D Holders or the RSI
Beneficial Holders, as the case may be, shall be equal to the price per share at
which the Merger Shares were valued at the time of issuance, as determined in
good faith by the Board at the time of such acquisition (provided that if RSI
disagrees with such valuation, then the Company and RSI shall utilize the
appraisal procedures set forth in Section 5.3 hereof to determine such fair
market value). If, at the time of any issuance of New Securities, there are
Unused Backlog CSE's that are derived from the issuance of rights, warrants,
options or other agreements to purchase Common Stock or any security convertible
or exchangeable therefor (other than options granted under the Company's 1996
Option Plan) which such rights, warrants, options or other agreements were
either (x) issued as consideration for, or in connection with, any merger or
acquisition of the stock or assets of any acquired company (other than such
issuances which are made as incentive compensation for future services and are
approved by the Compensation Committee), or (y) issued with an exercise price
below the then fair market value of the Common Stock, as determined in good
faith by the Board (provided that if RSI disagrees with such valuation, then the
Company and RSI shall utilize the appraisal procedures set forth in Section 5.3
hereof to determine such fair market value and provided further that the
exercise price of any options issued pursuant to any Option Plan or as
compensation to any consultant to the Company shall be deemed to be at or above
fair market value and shall not be subject to the appraisal procedures if such
exercise price has been established by the Compensation Committee), and which
rights, warrants, options or other agreements described in clause (x) or clause
(y) are Exercisable ("In-the-Money Option Shares"), then, notwithstanding the
proposed price of the New Securities to
49
be issued, the price per share (only for that number of New Securities as are
purchasable under this paragraph with respect to such Unused Backlog CSE's
derived from the In-the-Money Option Shares which number of New Securities shall
be deemed to be the first New Securities issued unless there are at the time
Unused Backlog CSE's derived from Merger Shares with respect to which such
Unused Backlog CSE's came into existence prior to the Unused Backlog CSE's
derived from the In-the-Money Option Shares) of the New Securities acquirable by
the Series C and D Holders or the RSI Beneficial Holders, as the case may be,
shall be equal to the exercise price for such In-the-Money Option Shares. The
failure of the RSI Beneficial Holders to exercise or to cause the Series C and D
Holders to exercise such preemptive rights shall constitute an irrevocable
waiver of the RSI Beneficial Holders' preemptive rights with respect to such New
Securities. The Company shall comply with the procedural requirements of this
Section 7.1 in connection with the offer of New Securities to the Series C and D
Holders or the RSI Beneficial Holders, as the case may be. The rights set forth
in this paragraph shall terminate and shall be of no force and effect at such
time as the Qualifying Series C and D Beneficial Holders shall no longer
maintain Beneficial Ownership of at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization. The Series C and D Holders shall provide such
information as the Company shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C and D Beneficial Holders. In the
event that any RSI Beneficial Holder transfers Beneficial Ownership in any
Shares, Options or Warrants, then, notwithstanding such transfer, the Shares,
Options or Warrants so transferred shall be deemed to be Beneficially Owned by
the RSI Beneficial Holders for purposes of this Section 7.1.
Subject to the immediately preceding paragraph, the Company shall give the
Securityholders written notice of its intention to issue and sell New
Securities, describing the type of New Securities, the price and the general
terms and conditions upon which the Company proposes to issue the same. Subject
to the immediately preceding paragraph, the Securityholders shall have 15 days
from the giving of such notice to agree to purchase all (or any part) of its
Proportionate Percentage of New Securities for the price and upon the terms and
conditions specified in the notice by giving written notice of the Company and
stating therein the quantity of New Securities to be purchased.
If the Securityholders fail to exercise in full such right within such 15
days, the Company shall have 120 days thereafter to sell the New Securities in
respect of which the Securityholders' rights were not exercised, at a price and
upon general terms and conditions no more favorable to the purchasers thereof
than specified in the Company's notice to the Securityholders pursuant to this
Section 7.1(a). If the Company has not sold the New Securities within such 120
days, the Company shall not thereafter issue or sell any New Securities, without
first offering such securities to the Securityholders in the manner provided
above.
If a Securityholder which is a SBIC has the right to acquire any voting New
Securities under this Section 7.1(a), the Company shall, at such
Securityholder's request, offer to sell to such Securityholder, New Securities
that do not have voting rights but otherwise have the same terms as such voting
New Securities.
Prior to the consummation of an Initial Public Offering, if there remain
any Unused Backlog CSE's that are derived from Merger Shares or In-the-Money
Option Shares, upon request of the RSI Beneficial Holders, the Company shall
issue to the RSI Beneficial Holders or the Series C and D
50
Holders, as determined by RSI in its sole discretion, that number of shares of
Series C and D Preferred Stock as are purchasable under the second paragraph of
this Section 7.1(a) with respect to such Unused Backlog CSE's derived from the
Merger Shares and the In-the-Money Option Shares. The per share price for such
shares to be issued shall be calculated in the manner set forth in the second
and third sentences, as applicable, contained in the second paragraph of this
Section 7.1(a). The Company shall notify the Series C and D Holders of the
consummation of an Initial Public Offering at least 30 days, prior thereto and
the Series C and D Holders or the RSI Beneficial Holders, as the case may be,
shall have 15 days after receipt of such notice to exercise the rights contained
in this paragraph. The rights set forth in this paragraph, if not exercised by
the RSI Beneficial Holders or the Series C and D Holders for the account of the
RSI Beneficial Holders, prior to the consummation of an Initial Public Offering,
shall terminate upon the effectiveness of an Initial Public Offering.
(2) Initial Public Offering and Following an Initial Public Offering. If,
in connection with an Initial Public Offering or thereafter, the Company shall
propose to issue or sell Additional Securities or enter into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any Additional Securities, then the Series C and D
Holders shall have the right to purchase that number of Additional Securities,
at the same price and on the same terms proposed to be issued or sold by the
Company, so that the Series C and D Holders would, after the issuance or sale of
all such Additional Securities, Beneficially Own the greater of (i) 46% of the
Adjusted Fully Diluted Capitalization or (ii) the same percentage of the
Adjusted Fully Diluted Capitalization as they held immediately prior to such
issuance or sale of all such Additional Securities, provided, however, that (x)
in connection with an Initial Public Offering, the right of the Series C and D
Holders to purchase Additional Securities pursuant to this Section 7.1(b) also
shall be limited to a right to acquire 30% of the Additional Securities until
the dollar amount of such Additional Securities sold in such Initial Public
Offering to Persons other than the Series C and D Holders (or any Beneficial
Owner of the Series C and D Preferred Stock or Shares acquired by conversion
thereof) is at least $75,000,000 and thereafter shall be exercisable to the
extent provided above. Notwithstanding the immediately preceding sentence, if,
at the time of issuance of any Additional Securities, the Series C and D Holders
Beneficially Own less than 46% of the Adjusted Fully Diluted Capitalization and
the Series C and D Holders do not exercise their right in full to acquire
Additional Securities pursuant to the previous sentence, then, in any subsequent
issuance of Additional Securities, the Series C and D Holders shall have the
rights to purchase only that number of Additional Securities, at the same price
and on the same terms proposed to be issued or sold by the Company, so that the
Series C and D Holders would, after the issuance or sale of all such Additional
Securities, Beneficially Own the same percentage of the Adjusted Fully Diluted
Capitalization as such Series C and D Holders Beneficially Owned after the
issuance of Additional Securities in which such Series C and D Holders did not
so exercise their right in full (for these purposes any capital stock of the
Company subsequently acquired by the Series C and D Holders other than pursuant
to a direct issuance by the Company shall not be deemed to be Beneficially Owned
by such Series C and D Holders). For purposes of this Section 7.1(b), the term
"Additional Securities" shall mean New Securities plus all securities issued by
the Company as part of any public offering pursuant to an effective registration
statement under the Securities Act ("Additional Securities").
51
Subject to the immediately preceding paragraph, the Company shall give the
Series C and D Holders written notice of its intention to issue and sell
Additional Securities, describing the type of Additional Securities, the price
and the general terms and conditions upon which the Company proposes to issue
the same. Subject to the immediately preceding paragraph, the Series C and D
Holders shall have 15 days from the giving of such notice to agree to purchase
all (or any part) of the Additional Securities which they are entitled to
purchase pursuant to this Section 7.1(b) for the price and upon the terms and
conditions specified in the notice by giving written notice of the Company and
stating therein the quantity of Additional Securities to be purchased.
If the Series C and D Holders fail to exercise in full such right within
such 15 days, the Company shall have 180 days thereafter to sell the Additional
Securities in respect of which the Series C and D Holders' rights were not
exercised, at a price and upon general terms and conditions no more favorable to
the purchasers thereof than specified in the Company's notice to the Series C
and D Holders pursuant to this Section 7.1(b). If the Company has not sold the
Additional Securities within such 180 days, the Company shall not thereafter
issue or sell any Additional Securities, without first offering such securities
to the Series C and D Holders in the manner provided above. The rights set forth
in this Section 7.1(b) shall terminate and shall be of no force and effect at
such time as the Qualifying Series C and D Beneficial Holders shall no longer
maintain Beneficial Ownership of at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization.
7.2 Standstill. Except as expressly provided in Section 7.1, no Series A
Holder, Series B Holder, Series C Holder, Series D Holder or Series E Holder or
any Affiliate thereof shall purchase or otherwise acquire any securities of the
Company that are not subject to the provisions of this Agreement, without the
prior approval of a majority of the Series A, B and E Preferred Directors and
the Company Directors (taken in the aggregate) and a majority of the Series C
and D Preferred Directors. Notwithstanding the generality of the foregoing, this
Section 7.2 shall not apply to restrict the granting by the Company to any
Person of Options pursuant to any Option Plan and/or to the exercise of any such
Options.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement shall terminate automatically upon the
consummation of (i) an Initial Public Offering, or (ii) a Sale of the Company;
provided, however, that, notwithstanding the foregoing:
(a) the provisions of Section 4.5 shall survive an Initial Public Offering
and shall terminate upon the third anniversary thereof;
(b) the provisions of Section 4.10 shall survive in accordance with the
terms thereof;
52
(c) the provisions of Article 6 shall survive an Initial Public Offering
until each Securityholder has disposed of its Shares that are the subject of
this Agreement; provided, however, that the provisions of Section 6.1(a) shall
terminate upon the third anniversary of the date of consummation of such Initial
Public Offering and the provisions of Section 6.1(b) shall terminate when each
Securityholder is eligible to sell all of the securities held by it and covered
by this Agreement in a single transaction pursuant to Rule 144 promulgated under
the Securities Act (taking into account the volume limitations contained
therein); and
(d) the provisions of (i) Section 7.1(b), (ii) Section 2.1(a) exclusively
as it relates to the right to nominate the Chairman of the Board, (iii) Section
3.1(e), (iv) Section 3.1(h), (v) Section 3.1(o), and (vi) Section 3.1(p), in
each case, shall survive an Initial Public Offering and continue until such time
as the RSI Beneficial Holders no longer have Beneficial Ownership of 15% of the
Series C and D Adjusted Fully Diluted Capitalization; provided, however, that
following the fifth anniversary of the Initial Public Offering, such percentage
shall be increased to 23%. Notwithstanding the foregoing, from and after an
Initial Public Offering, Section 3.1(e) and Section 3.1(p) shall be modified to
read as follows:
(A) Section 3.1(e): "entering into any business other than the Core
Business if, as a result of the entering into such business, the Core
Business would no longer be the predominant business of the Company;"
and
(B) Section 3.1(p): "any amendment to the Articles of Incorporation
(including the Certificates of Designation) or By-laws of the Company
or any change in the number of members of the Board, any Committee
thereof, or the Strategic Steering Committee, which amendment or
change would materially and adversely affect the rights of the Series
C and D Holders under this Agreement that survive an Initial Public
Offering (it being agreed and understood that any amendment that
increases the authorized capital stock of the Company shall not be
deemed to materially and adversely affect such rights)";
(e) upon an Initial Public Offering, the Shares of Series C Preferred Stock
and Series D Preferred Stock shall automatically be converted pursuant to and in
accordance with the Series C Certificate of Designation and Series D Certificate
of Designation, respectively, into shares of the Company's Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), to be issued solely to
the Series C and D Holders (provided that, to the extent that any Shares of
Series C and D Preferred Stock are Beneficially Owned by Persons who are not
Qualifying Series C and D Beneficial Holders, such Shares of Series C and D
Preferred Stock shall be converted pursuant to and in accordance with the Series
C Certificate of Designation and Series D Certificate of Designation into Shares
of Class A Common Stock, and such Persons who are not Qualifying Series C and D
Beneficial Holders, by their execution of a consent pursuant to Section 9.6
hereof, irrevocably elect such conversion to Shares of Class A Common Stock,
provided further however, that if any such Person shall not have executed such a
consent for any reason, such Person shall
53
nonetheless be deemed bound by the obligation set forth herein to convert Shares
of Series C and D Preferred Stock to Shares of Class A Common Stock; and
provided, further, that the Qualifying Series C and D Beneficial Holders shall
be deemed to have irrevocably elected to receive Shares of Class B Common
Stock). Prior to such Initial Public Offering, the Board shall by resolution
grant the Shares of Class B Common Stock the rights set forth in the immediately
following sentence and shall provide for the automatic conversion of Shares of
Class B Common Stock into Shares of Class A Common Stock upon any transfer
thereof to a Person who is not a Qualifying Series C and D Beneficial Holder or
upon the events set forth in clause (y) of the second sentence of Section
9.17(d). Shares of Class B Common Stock shall (i) carry the right to elect that
number of Directors, but in no event more than four, as are equal to (A) 1, if
the outstanding shares of the Class B Common Stock then represent 10% or more
but less than 20% of the Series C and D Adjusted Fully Diluted Capitalization,
(B) 2, if the outstanding shares of the Class B Common Stock then represent 20%
or more but less than 30% of the Series C and D Adjusted Fully Diluted
Capitalization, (C) 3, if the outstanding shares of the Class B Common Stock
then represent 30% or more but less than 40% of the Series C and D Adjusted
Fully Diluted Capitalization, or (D) 4, if the outstanding shares of the Class B
Common Stock then represent 40% or more of the Series C and D Adjusted Fully
Diluted Capitalization, (ii) automatically convert into Common Stock upon any
Person that is not a Qualifying Series C and D Beneficial Holder acquiring
Beneficial Ownership thereof, and (iii) otherwise be identical to the Common
Stock in all respects. From and after an Initial Public Offering, the reference
to the Series C and D Preferred Directors in the definition of Super-Majority
Approval shall mean the Directors elected by the holders of the Class B Common
Stock. Nothing in this paragraph shall diminish any other rights of such holders
contained in this Agreement that shall survive an Initial Public Offering which
provisions shall survive in accordance with the terms thereof, notwithstanding
the conversion of the Preferred Stock into Class A Common Stock or Class B
Common Stock, as the case may be; and
(f) the provisions of Section 9.17 shall survive in accordance with their
terms.
ARTICLE 9
MISCELLANEOUS
9.1 Information. The Company covenants and agrees to deliver to each
Securityholder who continues to own at least 2% of the Fully Diluted
Capitalization (any such Securityholder, a "Large Securityholder") the
information specified in this Section 9.1 unless any such Large Securityholder
at any time specifically requests that such information not be delivered to it.
(1) Monthly and Quarterly Financial Statements. As soon as available, but
in any event not later than forty-five (45) days after the end of each monthly
or quarterly fiscal period as the case may be (other than the last quarterly
fiscal period in any fiscal year of the Company), the unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of each such
period and the related unaudited consolidated statements of income and cash
flows of the Company and its Subsidiaries for such period and for the elapsed
period in such fiscal year, all in reasonable detail and stating, in comparative
form (i) the figures as of the end of and for the comparable periods
54
of the preceding fiscal year and (ii) the figures reflected in the operating
budget for such period as specified in the financial plan of the Company
delivered pursuant to Section 9.1(e) hereof. All such financial statements shall
be prepared in accordance with GAAP applied on a consistent basis throughout the
periods reflected therein except as stated therein and shall be accompanied by a
certificate of the Company's president or chief financial officer to such
effect.
(2) Annual Financial Statements. As soon as available, but in any event
within ninety (90) days after the end of each fiscal year of the Company, a copy
of the audited consolidated (and unaudited consolidating) balance sheets of the
Company and its Subsidiaries as at the end of such fiscal year and the related
audited consolidated (and unaudited consolidating) statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal year, all in reasonable detail and stating in comparative form the
figures as at the end of and for the immediately preceding fiscal year,
accompanied (in the case of the audited consolidated financial statements) by an
opinion of an accounting firm of recognized national standing selected by or
such Subsidiary, which opinion shall state that such accounting firm's audit was
conducted in accordance with generally accepted auditing standards. All such
financial statements shall be prepared in accordance with GAAP applied on a
consistent basis throughout the periods reflected therein except as stated
therein.
(3) Material Litigation. Within ten (10) days after the Company learns of
the commencement or written threat of commencement of any litigation or
proceeding against the Company or any of its Subsidiaries or any of their
respective assets that could reasonably be expected to have a material adverse
effect on the Company, written notice of the nature and extent of such
litigation or proceeding.
(4) Material Agreement. Within five (5) days after the receipt by the
Company of written notice of the occurrence of a default by the Company or any
of its Subsidiaries under any material contract, agreement or document that
could reasonably be expected to have a material adverse effect on the Company,
written notice of the nature and extent of such default.
(5) Budgets. As soon as available, but in any event not later than thirty
(30) days prior to the beginning of each fiscal year of the Company, the Annual
Budget as well as any updates or revisions to such plan as soon as available.
(6) Accountants' Management Letters, Etc. Promptly after receipt by the
Company, copies of all accountants' management letters and all management and
board responses to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material litigation or similar
matters relating to the Company and its Subsidiaries, which shall be prepared by
the Company or its officers and delivered to the third parties.
(7) Stockholders' Lists. Within sixty (60) days after the end of each
fiscal year, a stockholders' list, showing the authorized and outstanding shares
by class (including the Common Stock equivalents of any convertible security),
the holders of all outstanding shares (both before giving effect to dilution and
on a fully diluted basis) and all outstanding options, warrants and convertible
securities, and detailing all options and warrants granted, exercised or lapsed
(including
55
in each case, without limitation, all option and warrant exercise prices, stock
issuance prices and other terms) and all shares issued or sold (whether to
directors or managers, in connection with financing or otherwise).
(8) Other Information and Access. From time to time, and promptly, such
additional information regarding results of operations, financial condition or
business of the Company and its Subsidiaries, including, without limitation,
cash flow analyses, projections and minutes of any meetings of the Board, as any
Large Securityholder may reasonably request. The Company shall also afford to
any Large Securityholder (and its representatives) access, at reasonable times
and on reasonable prior notice, to the books, records and properties of the
Company and its Subsidiaries.
9.2 Certificate Legend. Upon execution of this Agreement, the stock
certificates representing Shares held by the Securityholders shall contain
substantially the following legend, in addition to any other legends deemed
reasonably appropriate or necessary by the Company:
"This certificate is transferable only upon compliance with and subject to
the provisions of a Stockholders' Agreement among the Company and certain
Securityholders, a copy of which Agreement is on file in the office of the
Secretary of the Company at its principal place of business. The Company
will furnish a copy of such Agreement to the record holder of this
Certificate, without charge, upon written request to the Company at its
principal place of business or registered office."
9.3 Negotiable Form. Whenever any Shares, Warrants or Options are to be
delivered or sold pursuant to this Agreement, the Person selling such Shares,
Warrants or Options shall deliver such certificates or other instruments duly
endorsed or accompanied by appropriate stock powers or assignments separate from
the instrument along with attached stock transfer tax stamps.
9.4 Enforcement. No Shares, Warrants or Options shall be transferred on the
books of the Company and no Transfer thereof shall be effective unless and until
the terms and provisions of this Agreement are complied with, and in cases of
violation of this Agreement by the attempted Transfer of the Shares, Warrants or
Options without compliance with the terms and provisions thereof, such Transfer
shall be invalid and of no effect and be deemed in all respects void ab initio,
and the Company and/or any of the Securityholders who are not attempting to
Transfer the Shares, Warrants or Options shall have the right to compel the
Securityholder who is attempting to Transfer the Shares, Warrants or Options,
and/or the purported transferee, to Transfer and deliver the same in accordance
with the applicable provisions of this Agreement.
9.5 Specific Performance. The parties hereto recognize that the Shares,
Warrants or Options cannot be readily purchased or sold on the open market and
that it is to the benefit of the Company and the Securityholders that this
Agreement be carried out; and for those and other reasons, the parties hereto
would be irreparably damaged if this Agreement is not specifically enforced in
the event of a breach hereof. If any controversy concerning the rights or
obligations to purchase or sell any Shares, Warrants or Options arises, or if
this Agreement is breached, the parties hereto hereby agree that remedies at law
might be inadequate and that, therefore, such rights and
56
obligations, and this Agreement, shall be enforceable by specific performance.
The remedy of specific performance shall not be an exclusive remedy, but shall
be cumulative of all other rights and remedies of the parties hereto at law, in
equity or under this Agreement.
9.6 Transferees. The Company and the Securityholders shall cause any
transferee of any Shares, Warrants or Options held by any Securityholder to
execute a consent, in form and substance reasonably acceptable to the Company,
to be bound by the terms and conditions of this Agreement and upon execution
thereof such future Securityholder shall be entitled to the rights of an owner
of the Shares, Warrants or Options held by such transferee hereunder, provided
that the foregoing shall not apply to Shares that have been sold pursuant to an
effective registration statement under the Securities Act or Rule 144
thereunder.
9.7 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in person,
transmitted by telecopier or sent by registered or certified mail (return
receipt requested) or recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address as any such party may notify to
the other parties in writing:
(1) if to the Company:
VANTAS Incorporated
00 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
with a copy to :
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
(2) if to the Xxxxxx Holders:
Xxxxxx, Xxxxxxx & Company LLC
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
57
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xx.
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esquire
Facsimile No.: (000) 000-0000
(3) if to the Northwood Holders:
Northwood Ventures LLC
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Cost, Esquire
Facsimile No.: (000) 000-0000
and a copy to:
Xxxx, Xxxx & Co.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(4) if to the Paribas Holder or the PNA Holder:
Paribas, acting through its
Cayman Island Branch
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Paribas North America
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
58
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
(5) if to the Series C and D Holders:
RSI I/O Holdings, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
InterOffice Superholdings LLC
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
Reckson Office Centers LLC
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx, Esq.
Xxxxx Xxxxx, Esq.
Fax: (000) 000-0000
and to:
JAH I/O LLC
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxxx
59
and to:
Battle, Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(6) if to any of the Other Holders, to the respective Other Holder as set
forth below:
Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxx Xxxxxx Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxx and
Xxxx Xxxxxx Xxxxxxx Trust
FBO Xxxxxx Bay Xxxxxxx,
Xxxxxxx X. Xxxxxx, Trustee
000 Xxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxx and
Xxxx Xxxxxx Xxxxxxx Trust
FBO Xxxx Xxxxxxxx Xxxxxxx,
Xxxxxxx X. Xxxxxx, Trustee
000 Xxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxxxxx Mendel
Cust for Xxxxx Xxxxxx Xxxxxx UTMA NJ
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
60
Xxxxx Xxxxxxxxx Xxxxxx
Cust for Xxxxx Xxxx Mendel UTMA NJ
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
G. Xxxxx Xxxxxxxxxx
0 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
The Shattan Group LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxx
000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx
000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx XXX Rollover,
Gruntal & Co., LLC Custodian
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxxxx
000 Xxxxx Xxxx Xxxx
Xxx Xxxxxxxx, Xxxxxxxxxxx 00000
Xxxxxxx Xxxxxxxx
00 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxxxx 00000
61
Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx
00 Xxxxxxxx Xxxx
Xxx Xxxxxx, Xxxxxxxxxxx 00000
Xxxxxx Xxxxxx and Xxxxx Xxxxxx
X.X. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxx
Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxx X. Xxxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx. 000
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxxxx
00 00xx Xxxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxx Xxxxxxxxxx
0 Xxxxxx Xxxx
Xxx. 0-X
Xxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx
00 Xxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
M.L.P.F. & S. Custodian for Xxxxxxx Xxxxx
00 Xxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Xxxxx X. Xxxxxxxx
00000 Xxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx. 00X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxxx Xxxxxx
62
00 Xxxxxxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx, # 0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxxx
0000 Xxxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
G. Xxx Xxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxx X. Xxxxxxx
c/x Xxxxxx, Xxxxxxx & Co.
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Xxxxxxx Xxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx. 0X/0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxx
00 Xxxx 000xx Xxxxxx
Xxxxxxxxx 0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx
Xxx X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxxxx Xxxxxx & Xxxxxxxx
Custodian for Xxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxx Xxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxx
63
000-00 00xx Xxxxxx
Xxxxxx Xxxxx, Xxx Xxxx 00000
Rommel Mapa
00-00 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxx Xxxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxx
000 Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxx Xxxxxxxx
00 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxx, Xx.
0000 Xxxxx Xxxxxxxxxx
Casita No. 6
Xxxxxxxxxx, Xxxxxxx 00000
Xxxxxxxxx Xxxx
0 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx
Xxx Xxxx 00xx Xxxxxx, Xxx. 0-X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
64
Xxxxx X. Xxxxxxxx, Trustee
for Xxxxx Xxxxxxxxxxx
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxx X. Xxxxxxxx, Trustee
for Xxxxxxxx Xxxxxxxxxxx
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Tippet Partners
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxx Xxxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx Xxxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxxxxxx 00000
Xxxxx Xxx Xxxxxxxx
00 Xxx Xxxx
Xxxxxx, Xxx Xxxx 00000
The Xxxxxxxx Group
c/o Xxxxx Xxx Xxxxxxxx
General Partner
00 Xxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxx
Fortrend International, LLC
0000 X'Xxxxxx Xxx, Xxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxx
65
0 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
0000 Xxxxx Xxxxxx Realty, Inc. Profit Sharing Plan
c/o Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx, Trustees
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx, XXX
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxx
00 Xxxxxx Xxxx
Xxxxxx Xxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx
00 Xxxxxx Xxxx
Xxxxxx Xxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, 3 business days
after dispatch.
9.8 Binding Effect; Assignment. This Agreement, including the rights and
conditions contained herein in connection with disposition of Shares, Warrants
or Options shall be binding upon the parties hereto, together with their
respective executors, administrators, successors, Personal representatives,
heirs and assigns permitted under this Agreement.
9.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York for contracts executed and to
be fully performed in such state and without regard to principles regarding
conflict of laws.
9.10 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable
66
provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as part
of this Agreement, a provision as similar in its terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.11 Entire Agreement. This Agreement together with the Certificates of
Designation and the Warrants and Options embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to the subject
matter hereof. To the extent that any provision contained herein conflicts or is
otherwise inconsistent with any provision contained in the Warrants or Options,
including, without limitation, any provision relating to preemptive rights, the
provisions contained herein shall be controlling.
9.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
9.13 Amendment; Waiver. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Company and
Securityholders holding Common Stock Equivalents in excess of 66 2/3% of the
Common Stock Equivalents that are then subject to this Agreement (which
approving Securityholders shall include each Securityholder who, either alone or
together with its Affiliates, holds 2% or more of the Common Stock Equivalents
that are then subject to this Agreement); provided, however, that any amendment,
modification or supplement that would (i) impose additional restrictions on any
Securityholder's right to transfer its Options, Warrants or Shares or eliminate
any Securityholder's rights under the Agreement to transfer its Options,
Warrants or Shares pursuant to Article 4, in each case in a manner that does not
affect all similarly situated Securityholders equally, or (ii) materially and
adversely affect any Securityholder's registration rights (other than as a
result of any increase in the number of shares that may be covered by such
registration rights), in each case in a manner that does not affect all
similarly situated Securityholders equally, or preemptive rights shall, in each
case, require the approval of each such affected Securityholder. Section 4.7(c)
and Section 5.4 of this Agreement shall not be permitted to be amended without
the consent of the Required Banks.
9.14 Captions. The captions of this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
9.15 Waivers. (a) By executing this Agreement, each Securityholder shall be
deemed to have waived any preemptive rights such Securityholder may have had
under this Agreement or under any other instrument or agreement in connection
with the issuance and sale of Series C Preferred Stock pursuant to the Merger
Agreements.
(b) By executing this Agreement, each Securityholder who had the right to
receive information concerning the Company pursuant to the provisions of the
First Series A Stock Purchase Agreement, the Second Series A Stock Purchase
Agreement or the Series B Stock Purchase Agreement shall be deemed to have
irrevocably waived the right to receive any such information.
67
The foregoing waiver shall not limit the rights of any Securityholder to receive
information pursuant to Section 9.1 hereof.
9.16 Subsequent Option Grants. In the event of any grant by the Company of
any Option pursuant to the Company's 1996 Stock Option Plan, (i) if the grantee
is a party to this Agreement, such Options and Option Shares shall
automatically, and without any action on the part of such grantee, become
subject to the provisions of this Agreement, and (ii) if the grantee is not a
party to this Agreement, such grantee shall become a party with respect to such
Options and Option Shares by executing a signature page hereto. Schedule 1
hereto shall be amended by the Company, without any action on the part of any
Securityholder, from time to time to reflect such additions. The Company shall
not be required to give notice to any Securityholder of any such amendments to
Schedule 1 but shall, upon the request of any Securityholder, provide a copy of
Schedule 1, as so amended.
9.17 Non-Competition. (a) Each of the Xxxxxx Holders, the Northwood
Holders, the RSI Beneficial Holders and the JAH Beneficial Holders (each of the
foregoing Persons, a "Non-Competing Party" and collectively, the "Non-Competing
Parties") shall not, and shall cause each of its Affiliates Controlled by such
Person not to, directly or indirectly, (i) "Compete" with the Company, or act as
a director, officer, consultant to, or as an employee of, any Person that
directly or indirectly Competes with the Company, or (ii) knowingly own or
control any voting securities or other securities convertible into voting
securities in any Person that Competes with the Company. A Person shall be
deemed to "Compete" with the Company, for purposes of this Section 9.17, if a
business conducted by such Person is materially competitive with the Prohibited
Business. In determining whether a business conducted by a Person is materially
competitive with the Prohibited Business, the factors to be considered shall
include, without limitation, the respective customer base and distribution
channels of such Person and the Prohibited Business with respect to the specific
products and services which compete with each other. Notwithstanding the
foregoing, a Person shall not be deemed to Compete with the Company if it offers
for sale one or more products or services which are part of the Prohibited
Business so long as the provision of any such products or services taken in the
aggregate are not materially competitive with the Prohibited Business. In the
event that the Company believes that any proposed investment or the conduct of
any business by any Non-Competing Party would violate such restrictions, it
shall so notify such Non-Competing Party within six months after receipt of
written notice from the Non-Competing Party of such investment or business. The
failure of the Company to so notify such Non-Competing Party within such
six-month period shall constitute an irrevocable waiver of the Company's right
to contest such investment or business.
(b) Notwithstanding the foregoing, each of the Non-Competing Parties shall
be permitted to make an investment in any Person whose business Competes with
the Company, provided that within 9 months after the consummation of such
investment, such Person ceases to engage in the business which Competes with the
Company provided, that if there is a dispute with respect to whether an
investment Competes, then any required divestiture shall not be required until
nine (9) months after the date of final determination of such Dispute adverse to
the Non-Competing Party. If such Person ceases to engage in the business which
Competes with the Company through the divestiture of the competing business
lines (including any divestiture following a final
68
determination described above), the Non-Competing Party shall use and cause each
of its Affiliates Controlled by it to use its reasonable good faith efforts to
offer the Company the first opportunity to acquire such business lines which
such Person is divesting.
(c) Nothing in this Section 9.17 shall limit the right of (i) the iRSI
Beneficial Holders to provide products and services under the terms of the
Intercompany Agreement, or (ii) any Non-Competing Party to own not more than
4.9% of the outstanding shares of a corporation or other entity whose shares or
other equity or debt interests are listed on any United States national or
regional securities exchange or reported by NASDAQ or any successor thereto. In
the event of a final determination by a court of competent jurisdiction that any
Non-Competing Party has breached the covenants in this Section 9.17, then,
except as set forth in Section 9.17(d) below, the Company shall be entitled to
all available remedies at law and in equity for such breach. It is acknowledged
and agreed that no provision of this Section 9.17 shall require any
Non-Competing Party to divest or refrain from conducting any investment or
business (a "Pre-Existing Business") which it acquired or developed prior to the
time that, as a result of developments of or modifications to the Prohibited
Business, such Pre-Existing Business taken as a whole Competes with the
Prohibited Business. However, the restrictions set forth in Section 9.17 shall
apply to such Pre-Existing Business if, as a result of developments of or
modifications to such Pre-Existing Business, such Pre-Existing Business taken as
a whole then Competes with the Prohibited Business.
(d) In the event of a final determination by a court of competent
jurisdiction that any of the RSI Beneficial Holders or the JAH Beneficial
Holders has breached the covenants in this Section 9.17, then, without
duplication or limitation of any rights and remedies that may be available to
the Company under the Intercompany Agreement, the Company shall have the right
to recover the profits (taking into account the consideration set forth in the
last sentence of this Section 9.17(d)), to the RSI Beneficial Holders and their
Affiliates (in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders and their Affiliates (in the
case of a breach of this Section 9.17 by any of the JAH Beneficial Holders)
derived from the operations of the business or investment that has been
determined to Compete with the Company for the period commencing on the
notification of a dispute with respect to such business or investment pursuant
to Section 9.17 hereof and ending on the earlier to occur of (i) the date of
divestiture of the business line that Competes with the Company, (ii) the
termination of the Intercompany Agreement in accordance with the terms thereof
(solely in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders), and (iii) the exercise of the Call Right (as defined below)
or the conversion of the Class B Common Stock described below, as applicable
(which right to recover profits (taking into account the consideration set forth
in the last sentence of this Section 9.17(d)) shall be Alliance's sole and
exclusive remedy at law and in equity for such breach other than Alliance's
rights set forth in this Section 9.17(d), (e) and (f) and in the Intercompany
Agreement). Further, in the event that such final determination occurs (x) prior
to an Initial Public Offering, the Company shall have the right to acquire all
of the Shares, Options and Warrants then Beneficially Owned by the RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders) in accordance with
the provisions of Section 9.17(e) and the rights granted to the Series C and D
Holders pursuant to this Agreement shall terminate to the extent provided in
Section 9.17(e), or (y) after an Initial Public Offering: (1)
69
all of the shares of Class B Common Stock shall automatically, and without any
action on the part of any Person, convert into an equal number of shares of
Class A Common Stock; provided, however, that if only the JAH Beneficial Holders
are the parties that have been determined to breach the provisions of this
Section 9.17, then only the shares of Class B Common Stock then Beneficially
Owned by such JAH Beneficial Holders shall be converted as described above; (2)
all of the rights of the RSI Beneficial Holders and the Series C and D Holders
that survive an Initial Public Offering shall automatically terminate and be of
no further force and effect; provided, however, that if only the JAH Beneficial
Holders are the parties that have been determined to breach the provisions of
this Section 9.17, then such rights shall survive in accordance with their
terms; and (3) any Directors then serving that are Affiliates or appointees
(other than Xxx X. Xxxxxxx who shall continue to serve as a Director if the JAH
Beneficial Holders would then remain entitled to designate a Director under the
provisions of Section 9.17(e) (assuming for the purpose of applying said Section
9.17(e) to this clause (3) that an Initial Public Offering has not occurred) and
other than the Special Series C and D Director if he is then serving), of the
RSI Beneficial Holders (in the case of a breach of this Section 9.17 by any of
the RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the JAH Beneficial Holders) shall
immediately resign or shall be removed from the Board. Nothing herein shall
preclude the RSI Beneficial Holders or the JAH Beneficial Holders from
exercising their rights as holders of Common Stock following any automatic
conversion of the Class B Common Stock, including, without limitation, the right
to vote for, and nominate Directors, in accordance with the Company's Articles
of Incorporation and By-Laws and applicable law. The Company agrees that,
following any automatic conversion of the Class B Common Stock, it shall
continue to hold its annual meetings for stockholders in accordance with the
Company's By-laws. Notwithstanding the foregoing, the Company shall not have the
rights described in clause (x) of the second preceding sentence and the actions
described in clause (y) of the second preceding sentence shall not occur if,
within thirty days after the final determination referred to in the first
sentence of this Section 9.17(d), the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders), at its option, delivers written notice to the Company
that the business line which Competes with the Company will be divested, and
such divestiture is actually completed within nine months after the date of such
final determination. If a breach of the covenant contained in this Section 9.17
arises out of an investment in an entity that is not a wholly owned subsidiary
of a Non-Competing Party or its Affiliates (an "Acquired Competing Party"),
then, for purposes of this Section 9.17(d), the profits referred to herein shall
include only those profits that a Non-Competing Party or its Affiliates (other
than the Acquired Competing Party and its Affiliates Controlled by such Acquired
Competing Party) shall have received and the portion of the profits of the
Acquired Competing Party as to which such Non-Competing Party or its Affiliates
(other than the Acquired Competing Party and its Affiliates Controlled by such
Acquired Competing Party) would be entitled by virtue of their proportionate
ownership in the Acquired Competing Party (whether or not such profits have been
distributed to a Non-Competing Party or its Affiliates).
(e) The Company shall have the right (the "Call Right") to acquire, upon
written notice delivered to RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17
70
by any of the JAH Beneficial Holders) within 30 days after the final
determination referred to in the first sentence of Section 9.17(d) (only if such
final determination occurs prior to an Initial Public Offering), all (but not
less than all) of the Shares (including any Class B Common Stock acquired upon
conversion of the Series C and D Preferred Stock), Options and Warrants then
Beneficially Owned by the RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) at the fair market value of such Shares, Options and
Warrants at the time of exercise of the Call Right (without giving effect to any
actions that the Company may take to effectuate the payment of the Call Purchase
Price (as defined below) and without giving effect to the impact, if any, of any
termination of the Intercompany Agreement) as determined pursuant to and in
accordance with the appraisal procedures set forth in Section 5.3 hereof. The
aggregate amount payable to RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) upon exercise of the Call Right shall be referred to herein
as the "Call Purchase Price." Upon exercise of the Call Right with respect to
the RSI Beneficial Holders, the Company shall be required to pay to such RSI
Beneficial Holders in immediately available funds an amount equal to the lesser
of (1) 10% of the estimated Call Purchase Price, and (ii) $7,000,000, which
amount shall be refunded to the Company in the event that the Call Right shall
not be consummated due to the failure of the RSI Beneficial Holders to deliver
the Shares, Options and Warrants that are the subject of the Call Right. Upon
exercise of the Call Right with respect to the JAH Beneficial Holders, the
Company shall be required to pay to such JAH Beneficial Holders in immediately
available funds an amount equal to the lesser of (i) 10% of the estimated Call
Purchase Price, and (ii) $2,800,000, which amount shall be refunded to the
Company in the event that the Call Right shall not be consummated due to the
failure of the JAH Beneficial Holders to deliver the Shares, Options and
Warrants that are the subject of the Call Right. Following any exercise of the
Call Right, the Series C and D Holders and the Series C and D Preferred
Directors shall not utilize any of the rights granted to any of them pursuant to
this Agreement or under the Series C Certificate of Designation and Series D
Certificate of Designation to prohibit the Company from taking any actions
reasonably necessary to effect the consummation of the Call Right. The closing
of the purchase by the Company of the Shares, Options and Warrants that are the
subject of the Call Right shall occur at the Company's principal office, or at
such other place as shall be mutually agreeable to the RSI Beneficial Holders
(in the case of a breach of this Section 9.17 by any of the RSI
71
Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the JAH Beneficial Holders) and the Company as soon
as possible (and in any event within 9 months after the final determination
referred to in Section 9.17) (such date of closing being hereinafter referred to
as the "Call Closing Date"). Notwithstanding anything to the contrary contained
herein, if the Call Right has been exercised and an Initial Public Offering (as
evidenced by a filing of a registration statement with the Securities and
Exchange Commission) or a Rule 144A offering is pending or is being undertaken
in connection with the exercise of the Call Right, then, (x) the Call Closing
Date shall occur prior to or contemporaneous with the consummation of such
offering, and (y) the payment of the Call Purchase Price shall be made in
immediately available funds at a price per share equal to the greater of (i) the
price per share of Common Stock in such offering and (ii) the fair market value
of a share of Common Stock as determined in accordance with the first sentence
of this Section 9.17(e). At the Call Closing Date, each of the RSI Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the JAH Beneficial Holders) shall surrender to the
Company any Options, Warrants and the certificate or certificates representing
its Shares, in each case free and clear of all Encumbrances and the Company
shall pay the Call Purchase Price by wire transfer in immediately available
funds to an account designated by the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders). Notwithstanding the foregoing, the Company shall be
permitted to pay the Call Purchase Price by delivery of a subordinated note
payable in three annual installments of principal commencing on the first
anniversary of the Call Closing Date, with interest at an annual rate equal to 3
1/2% plus the Prime Rate. Upon payment of the Call Purchase Price, any Directors
then serving that are Affiliates or appointees (other than Xxx X. Xxxxxxx if the
JAH Beneficial Holders remain entitled to designate a director under the
provisions of this Section 9.17(e) and other than the Special Series C and D
Director if he is then serving) of the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders) shall immediately resign or shall be removed from the
Board. In the event of a breach of this Section 9.17 by any of the RSI
Beneficial Holders and upon payment of the Call Purchase Price to the RSI
Beneficial Holders, all of the rights of the RSI Beneficial Holders and the
Series C and D Holders contained in this Agreement shall automatically terminate
and be of no further force and effect; provided, however, that (x) the JAH
Beneficial Holders shall have the right to designate that number of Directors as
are equal to the number of Directors they would have had the right to designate
pursuant to Section 8.1(e), assuming that the shares of Series C and D Preferred
Stock Beneficially Owned by such JAH Beneficial Holders had been converted to
Class B Common Stock as provided therein and that there were no other
outstanding shares of Class B Common Stock, (y) for purposes of any
Super-Majority Approval requirements thereafter, any Directors designated by the
JAH Beneficial Holders or any other Series C and D Holders shall not be
considered Series C and D Preferred Directors but any actions specified in
Sections 3.1(e), 3.1(f), and 3.1(j) shall require the approval of a majority of
the Directors then designated by the JAH Beneficial Holders and (z) the JAH
Beneficial Holders shall remain entitled to exercise the rights granted to all
Securityholders generally as set forth in Section 3.2, Article IV, Article V,
Article VI, and Section 7.1(a) which rights shall survive in accordance with
their terms. Notwithstanding the previous sentence, if the JAH Beneficial
Holders shall Beneficially Own less than 10% of the Series C and D Adjusted
Fully Diluted Capitalization but shall not have disposed of any shares of Series
C Preferred Stock originally issued to them pursuant to the Merger Agreements,
or any shares of Series D Preferred Stock issued to them pursuant to the Series
D Stock Purchase Agreement or the Series D and E Stock Purchase Agreement, and
shall have exercised in full all rights previously available to them under
Section 4.3 and Section 7.1 hereof, then the JAH Beneficial Holders shall be
entitled to designate one Director. In the event of a breach of this Section
9.17 by any of the JAH Beneficial Holders, all of the rights of the RSI
Beneficial Holders and the Series C and D Holders contained in this Agreement
shall survive in accordance with their respective terms. In the event of the
Company's failure to exercise the Call Right or pay the Call Purchase Price, the
rights of the Series C and D Holders shall remain unaffected.
(f) Upon exercise of the Call Right, the Company shall request the Required
Banks to consent to such exercise. The Company shall not be required to
consummate the Call
72
Right, and the exercise of such Call Right shall be deemed rescinded and
withdrawn and of no force and effect and no RSI Beneficial Holder or JAH
Beneficial Holder, as the case may be, shall have any rights or remedies to
enforce the Call Right, until such time as all Obligations (as defined in the
Credit Agreement) shall have been paid in full in cash, unless the Required
Banks have consented in writing to the exercise of the Call Right. The Company
may assign the Call Right, in whole or in part, to any Person provided that such
Person must pay the Call Purchase Price with respect to any Shares, Options or
Warrants acquired by it in immediately available funds.
(g) The prohibitions set forth in this Section 9.17 shall apply to each of
the Xxxxxx Holders and the Northwood Holders only so long such Xxxxxx Holders or
Northwood Holders maintain Beneficial Ownership in the aggregate of 50% or more
of the Common Stock Equivalents (excluding Warrant Shares) initially acquired by
them pursuant to the First Series A Stock Purchase Agreement and the Second
Series A Stock Purchase Agreement. The prohibitions set forth in this Section
9.17 shall apply to the JAH Beneficial Holders for so long as such JAH
Beneficial Holders maintain Beneficial Ownership in the aggregate of 50% or more
of the Common Stock Equivalents initially acquired by them pursuant to the
Merger Agreements, the Series D Stock Purchase Agreement and the Series D and E
Stock Purchase Agreement. The prohibitions set forth in this Section 9.17 shall
apply to the RSI Beneficial Holders for so long as such RSI Beneficial Holders
maintain Beneficial Ownership in the aggregate of 15% or more of the Series C
and D Adjusted Fully Diluted Capitalization.
[NO FURTHER TEXT ON THIS PAGE]
[PAGES FOLLOW]
VANTAS INCORPORATED
FIFTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JULY 29, 1999
SIGNATURE PAGE
VANTAS INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
XXXXXX, XXXXXXX STRATEGIC
PARTNERS FUND, L.P.
By: XXXXXX, XXXXXXX STRATEGIC
PARTNERS, L.P., its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: XXXXXX, XXXXXXX & COMPANY,
L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
NORTHWOOD VENTURES LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director
1
NORTHWOOD CAPITAL PARTNERS LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
XXXXX X. XXXXXX
2
PARIBAS, acting through its
Cayman Island Branch
By: /s/ X. Xxxxxx
-------------------------------------------
Name: X. Xxxxxx
Title: M. Director
PARIBAS NORTH AMERICA, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Financial Controller
INTEROFFICE SUPERHOLDINGS LLC
By: RSI I/O HOLDINGS, INC.,
its managing member
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman
3
RECKSON OFFICE CENTERS LLC
By: RSI I/O HOLDINGS, INC.,
its managing member
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman
/s/ Xxxxx X. Xxxxx
---------------------------------------------
XXXXX X. XXXXX
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxx Xxxxxx Shattan
---------------------------------------------
XXXX XXXXXX XXXXXXX
4
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
XXXXXXX X. XXXXXX, AS TRUSTEE OF THE XXXXXX
X. XXXXXXX AND XXXX XXXXXX XXXXXXX TRUST FBO
XXXXXX BAY SHATTAN
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
XXXXXXX X. XXXXXX, AS TRUSTEE OF THE XXXXXX
X. XXXXXXX AND XXXX XXXXXX
SHATTAN TRUST FBO XXXX XXXXXXXX
SHATTAN
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
XXXXXXX X. XXXXXX
5
/s/ Xxxxx Xxxxxxxxx Xxxxxx
---------------------------------------------
XXXXX XXXXXXXXX MENDEL CUST FOR XXXXX XXXXXX
XXXXXX UTMA NJ
/s/ Xxxxx Xxxxxxxxx Mendel
---------------------------------------------
XXXXX XXXXXXXXX XXXXXX CUST FOR XXXXX XXXX
MENDEL UTMA NJ
/s/ G. Xxxxx Xxxxxxxxxx
---------------------------------------------
G. XXXXX XXXXXXXXXX
6
THE SHATTAN GROUP LLC
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
/s/ Xxxxxx X. Xxxxx
---------------------------------------------
XXXXXX X. XXXXX
/s/ Xxxxxxx Xxxxx
---------------------------------------------
XXXXXXX XXXXX
7
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX XXX ROLLOVER
GRUNTAL & CO., LLC CUSTODIAN
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX
8
/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXX AND XXXXX XXXXXXXX
9
/s/ Xxxxxx Xxxxxx and Xxxxx Xxxxxx
---------------------------------------------
XXXXXX XXXXXX AND XXXXX XXXXXX
/s/ Xxxx X. Xxxxxx
---------------------------------------------
XXXX X. XXXXXX
/s/ Xxxxx X. Xxxxxxxxxx
---------------------------------------------
XXXXX X. XXXXXXXXXX
10
/s/ Xxxxxx X.Xxxxxxxxx
---------------------------------------------
XXXXXX X. XXXXXXXXX
/s/ Xxxxxx Xxxxx Xxxxxxxxxx
---------------------------------------------
XXXXXX XXXXX XXXXXXXXXX
/s/ Xxxxxxx Xxxxx
---------------------------------------------
XXXXXXX XXXXX
11
/s/ M.L.P.F. & S.
---------------------------------------------
M.L.P.F. & S. CUSTODIAN FOR XXXXXXX XXXXX
/s/ Xxxxx X. Xxxxxxxx
---------------------------------------------
XXXXX X. XXXXXXXX
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX
/s/ Xxxxxxxx Xxxxxx
---------------------------------------------
XXXXXXXX XXXXXX
12
/s/ Xxxxx Xxxxxx
---------------------------------------------
XXXXX XXXXXX
/s/ Xxxxxx Xxxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXXX
/s/ Xxxxxx Xxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXX
/s/ G. Xxx Xxxx
---------------------------------------------
G. XXX XXXX
13
/s/ Xxxxx X. Xxxxxxx
---------------------------------------------
XXXXX X. XXXXXXX
/s/ Xxxxxxx Xxxxxxx
---------------------------------------------
XXXXXXX XXXXXXX
/s/ Xxxxx Xxxxxx
---------------------------------------------
XXXXX XXXXXX
/s/ Xxxxx Xxxxxx
---------------------------------------------
XXXXX XXXXXX
14
/s/ Xxxx Xxxxxx Xxxxxxxx
---------------------------------------------
XXXX XXXXXX XXXXXXXX
CUSTODIAN FOR XXXXXX XXXXX
/s/ Xxxxxx Xxxxx
---------------------------------------------
XXXXXX XXXXX
/s/ Xxxxxx Xxxxx
---------------------------------------------
XXXXXX XXXXX
/s/ Rommel Mapa
---------------------------------------------
ROMMEL MAPA
15
/s/ Xxxxxx Xxxxxx
---------------------------------------------
XXXXXX XXXXXX
/s/ Xxxx Xxxxxxxxxx
---------------------------------------------
XXXX XXXXXXXXXX
/s/ Xxxxx Xxxxxxxx
---------------------------------------------
XXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXX
16
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
---------------------------------------------
XXXX XXXXXXXX
/s/ Xxxxx Xxxxxx
---------------------------------------------
XXXXX XXXXXX
/s/ Xxxxxxxxx Xxxx
---------------------------------------------
XXXXXXXXX XXXX
17
/s/ Xxxxxxx Xxxxx
---------------------------------------------
XXXXXXX XXXXX
/s/ Xxxxxx Xxxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXXX
/s/ Xxxxx X. Xxxxxxxx
---------------------------------------------
XXXXX X. XXXXXXXX, TRUSTEE FOR XXXXX
XXXXXXXXXXX
/s/ Xxxxx X. Xxxxxxxx
---------------------------------------------
XXXXX X. XXXXXXXX, TRUSTEE FOR
XXXXXXXX XXXXXXXXXXX
18
TIPPET PARTNERS
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Partner
/s/ Xxxxx Xxxxxxxxxx
---------------------------------------------
XXXXX XXXXXXXXXX
/s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXXXX
THE XXXXXXXX GROUP
By: /s/ Xxxxx Xxx Xxxxxxxx
-----------------------------------------
Name: Xxxxx Xxx Xxxxxxxx
Title: General Partner
19
/s/ Xxxxxx Xxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
---------------------------------------------
XXXXXX XXXXXXXX
/s/ Xxxxx Xxxxxxxx
---------------------------------------------
XXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXX AND XXXXXXX XXXXXXXX,
TRUSTEES FOR KASSO CIRCLE REALTY, INC.
PROFIT SHARING PLAN
20
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
XXXXXXX XXXXXXXX, XXX
/s/ Xxxxxxx Xxxxxxx
---------------------------------------------
XXXXXXX XXXXXXX
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX
21
/s/ Xxxxx Xxxxxxx
---------------------------------------------
XXXXX XXXXXXX, in his personal capacity (solely
for purposes of Section 2.1, Section 2.2 and
Section 2.4) /s/ Xxx Xxxxxxx
---------------------------------------------
XXX XXXXXXX, in his personal capacity
(solely for purposes of Section 2.1, Section
2.2. and Section 2.4)
RECKSON SERVICE INDUSTRIES, INC.,
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxx
Title: President and Chief
Executive Officer
22
