EXHIBIT 10.19
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement") is made and entered into,
as of December 6, 1996 by and among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇" and, together with ▇▇▇▇▇▇▇▇, the "Stockholders"), T.A.R.
Preferred Mortgage Corporation, a California corporation (the "Company") and
▇▇▇▇▇▇▇ ▇▇▇▇▇ Mortgage Capital Inc., a Delaware corporation ("MLMCI"), and
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, a Delaware corporation
("MLPF&S" and, together with MLMCI, the "Optionholders"), with reference to the
following:
WHEREAS, as of the date hereof, the Company has issued to the Optionholders
warrants (the "Warrants") to purchase in the aggregate up to two percent (2%) of
the fully-diluted shares of Common Stock, $0.1 par value (the "Common Stock"),
of the Company;
WHEREAS, the Stockholders own all of the issued and outstanding shares of
the Company;
WHEREAS, in connection with the issuance of the Warrants, the Company, the
Stockholders and the Optionholders desire to set forth the respective rights and
obligations of the parties in the event of a "Sale of the Business" (as defined
in Section 1 hereof) or other events resulting in a transfer of shares of Common
Stock of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions hereinafter set forth, the parties hereto agree as
follows:
Section 1. Definitions. For purposes of this Agreement, the following terms
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shall have the following meanings:
"Affiliate" of any Person means (i) any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with such Person; or (ii) any executive officer, director or
partner of such Person, and the term "control" shall include the possession,
direct or indirect, of the power to direct or cause the direction of the
management or policies of a Person, whether through ownership of voting
securities, by conduct or otherwise.
"Affiliated Purchaser" means any of the Company, an Affiliate of the
Company, any Person who acquires rights under a Plan, a Stockholder Affiliate or
a Stockholder Representative.
"Acquired Shares" means, on any particular date, the number of shares
issued by the Company to the Optionholders as a result of the Optionholders'
exercise of the Warrants, and any shares issued with respect thereto as a result
of a stock split, stock dividend, reorganization or similar corporate event.
"Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-
law, daughter-in-law, brother-in-law, sister-in-law or any adopted children of
either of the Stockholders.
"IPO" means the first closing of the initial public offering of the Common
Stock of the Company effected pursuant to an effective registration statement
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 (other than a registration
statement relating either (i) to the sale of securities to officers, directors,
employees or bona fide consultants of the Company, or any of its parents or
subsidiaries, pursuant to a Plan, or (ii) to a reclassification, merger, or
other transaction of the type referred to in Rule 145(a) of the rules and
regulations of the Commission under the Securities Act of 1933).
"Stockholder Affiliate" means (i) during the life of either Stockholder,
any entity in which the Stockholder owns 50% or more of the outstanding voting
securities, any member of Stockholder's Immediate Family or a trust established
for the benefit of his Immediate Family and (ii) following the death of the
Stockholder, any Person or group of Persons acting in concert, who beneficially
own or control more than 50 % of the outstanding shares of Common Stock of the
Company and which Person or Persons have not acquired such shares as a result of
a Sale of the Business.
"Stockholder Representative" means (i) in the event of the physical or
mental incapacity of the Stockholder, his duly appointed administrator,
representative or attorney-in-fact, or (ii) in the event of the death of the
Stockholder, any Person or group of Persons acting in concert, who beneficially
own or control more than 50% of the outstanding shares of Common Stock of the
Company and which Person or Persons have not acquired such shares as a result of
a Sale of the Business.
"or" includes "and/or."
"Person" means any individual, person, entity, company, corporation,
partnership, trust, joint venture or association.
"Plan" means and refers to any plan adopted by the Company providing for
the grant of option, stock purchase or other derivative rights to employees,
officers, directors, consultants and representatives of the Company.
"Sale of the Business" means any transaction or series of transactions
(whether structured as a stock sale, merger, consolidation, reorganization,
asset sale or otherwise) which results in the sale or transfer of all or
substantially all of the assets or greater than 50 % of the outstanding shares
of Common Stock of the Company to a Person who is not an Affiliated Purchaser.
"Transfer" has the meaning ascribed to such term in Section 3 hereof.
Section 2. Term. This Agreement shall be effective as of the date first set
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forth above and shall terminate on the earlier to occur of (i) December 6, 2011
and (ii) an IPO.
Section 3. Additional Restrictions on Transfer of Shares. During the term
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of this Section 3, the Optionholders shall not sell, assign, pledge,
hypothecate, or in any manner transfer the Warrants or any Acquired Shares, or
any right or interest in the Warrants or the Acquired Shares, with or without
consideration, to any Person (each such action is referred to herein as a
"Transfer") except as permitted by this Agreement. The Warrants and all stock
certificates representing the Acquired Shares shall bear the following legend:
THE WARRANT AND THE WARRANT SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO TRANSFER RESTRICTIONS AND PURCHASE RIGHTS SET FORTH IN A
STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 6, 1996. A COPY OF SUCH
AGREEMENT IS MAINTAINED ON FILE IN THE PRINCIPAL OFFICE OF THE COMPANY
IN THE STATE OF CALIFORNIA.
Any Transfer of the Warrants or the Acquired Shares not made in accordance
with this Agreement shall be null and void, and the Company shall not cause or
permit the Transfer of the Warrants or any such Acquired Shares to be made on
this books unless the Transfer is permitted by this Agreement and has been made
in accordance with the terms hereof, and each transferee of the Warrants or any
such Acquired Shares has executed an agreement, in form and substance
satisfactory to the Stockholders, to be bound by and subject to the terms and
conditions of this Agreement.
Section 4. Right of First Refusal
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(a) If at any time either Optionholder wishes to effect a Transfer of any
or all of its Warrant or its Acquired Shares to any other Person (other than a
Transfer permitted under any of Sections 5 and 6 of this Agreement), such
Optionholder shall offer to sell (and sell if such offer is accepted) such
Warrant and/or such Acquired Shares, as applicable, to each of the Stockholders
and the Company in accordance with the procedures hereinafter described in this
Section 4 (the "First Offer Procedures").
(b) Each offer pursuant to this Section 4 shall initially be made by the
delivery to the Stockholders and the Company of a written notice (the "First
Offer Notice") which (i) shall make reference to this Section 4; (ii) shall name
the Person or Persons with whom the proposed transaction is to be effected; and
(iii) shall enclose a copy of the agreement or other writing under which the
proposed transaction is expected to occur or shall state the price, closing
date, and other significant terms and conditions (in reasonable detail) of the
proposed transaction (collectively, the "Offer Terms"). The First Offer Notice
shall serve as an offer to sell the portion of the Warrant and/or the number of
shares set forth in the First Offer Notice on the
terms set forth herein, other than the price which, for purposes of the First
Offer Procedures, shall equal (the "Acceptance Price") the price set forth in
the First Offer Notice (or, if the consideration to be paid includes property
other than cash, the "price" set forth in the First Offer Notice shall be deemed
to be the fair market value of such property, as determined by the Board of
Directors of the Company in the exercise of its good faith discretion). The
offer, as set forth in the First Offer Notice, is hereinafter referred to as the
"First Offer." The First Offer shall be irrevocable for three business days
after delivery of the First Offer Notice (the "Offer Period"). The Stockholders
or the Company (or both) may accept, in whole or in part, the First Offer, but
only on the same terms as those stated in the First Offer Notice. Such
acceptance shall be made in the manner described in Section 4(c) hereof.
(c) If the Stockholders or the Company elect to purchase any of such
Warrant or such Acquired Shares, he or it shall, within the applicable Offer
Period, notify such Optionholder in writing of the acceptance of such offer and,
if either or both of the Stockholders elect to purchase any Acquired Shares, he
shall concurrently deliver a copy of his notice of acceptance to the Company.
The Company's and any Stockholder's election to purchase under this Section 4(c)
is an irrevocable commitment to purchase. If the total number of Acquired Shares
subscribed for by the Company and the Stockholder exceeds the number of Acquired
Shares offered in the First Offer Notice, unless the Company and the
Stockholders otherwise agree, the Stockholders' acceptance shall have priority
over the Company, and the number of Acquired Shares purchasable by the Company
shall be ratably reduced. The Company and the Stockholders, to the extent that
they elect to purchase any of the Acquired Shares offered are collectively
referred to below in this Section 4 as the "Section 4 Purchasers." Promptly
following receipt of the Stockholders' notice of acceptance, or concurrently
with its delivery of its notice of acceptance, whichever shall first occur, the
Company shall advise the applicable Optionholder in writing of the closing date
(the "Scheduled Closing Date") in respect of such sale (which shall not be more
than 30 days following delivery of the First Offer Notice to the Section 4
Purchasers). On the Scheduled Closing Date, the Acceptance Price in respect of
all Shares to be purchased by the Section 4 Purchasers shall be paid in full to
the applicable Optionholder by the respective Section 4 Purchasers, against
delivery of a certificate or certificates representing the portion of the
Warrant or the Shares purchased in proper form for Transfer. In connection with
such closing, such Optionholder shall warrant to the Section 4 Purchasers good
and marketable title to the purchased Warrant or Acquired Shares, free and clear
of all claims, liens, charges, encumbrances and security interests of any nature
whatsoever (other than the restrictions set forth in this Agreement).
(d) If the Section 4 Purchasers do not accept the First Offer prior to the
expiration of the Offer Period, the First Offer shall terminate, and the
applicable Optionholder shall be free to Transfer its Warrant or its Acquired
Shares described in the First Offer Notice in the manner and in the time period
disclosed in the First Offer and in accordance with the remaining terms of this
Agreement (including, without limitation, the requirements set forth in Section
3 that the certificates be legended and that the transferee execute such
documents as the Company may require). If the transaction has not been so
effected within 90 days following termination of the
Offer Period, such Acquired Shares shall again be subject to all of the
provisions of this Agreement.
Section 5. Tag-Along Rights.
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(a) If, within any 90 day period, the Stockholders or a Stockholder
Affiliate propose to effect one or a series of related Transfers (other than an
IPO) of any of the shares of Common Stock owned by him or it (the "Stockholder
Stock") to any Person which is not an Affiliated Purchaser such that,
immediately following such Transfers, the Stockholders and the Stockholder
Affiliates beneficially own or control, in the aggregate, less than 50% of all
issued and outstanding shares of Common Stock, then the Stockholders shall give
written notice (the "Tag-Along Notice") to the Optionholders at least 30 days
prior to the first scheduled closing of all such Transfers (or as soon as
practicable thereafter). The Tag-Along Notice shall describe in reasonable
detail each of the proposed Transfers including, without limitation, the name
of, and the number of shares of Common Stock of the Company proposed to be
purchased by, each transferee (the "Tag-Along Transferee"), the purchase price
of all shares of Common Stock of the Company proposed to be sold in each
Transfer, any other significant terms of such sales and the date such proposed
sales will be consummated.
(b) Each Optionholder shall have the right, exercisable upon irrevocable
written notice to the Stockholders within four business days after receipt of
the Tag-Along Notice, to participate in all, but not less than all, such sales
of Stockholder Stock on the same terms and conditions as set forth in the Tag-
Along Notice and to sell all or any portion of the number of Acquired Shares
(including Acquired Shares purchased upon exercise of its Warrant after the
receipt of the Tag-Along Notice) owned by such Optionholder as determined in
accordance with the calculation set forth below. Each Optionholder shall
indicate in the notice of election to the Stockholders the maximum number of
Acquired Shares such Optionholder desires to sell in each such sale. Each
Optionholder understands that such Optionholder shall be entitled to sell only a
"pro rata portion" of the Acquired Shares in each sale. For purposes of this
Section 5Co), "pro rata portion" shall mean the number of Acquired Shares
determined by multiplying (i) the total number of Acquired Shares owned by such
Optionholder by (ii) a fraction, the numerator of which is the number of shares
of Common Stock the Tag-Along Transferee proposes to purchase and the
denominator of which is the total number of issued and outstanding shares of
Common Stock of the Company owned by the proposed transferors (including such
Optionholder), in each case measured as of the date of the notice described in
the last sentence of this Section 5(b). In the event the total number of shares
to be purchased by any Tag-Along Transferee is reduced for any reason, the "pro
rata portion" of Acquired Shares to be sold by each Optionholder shall be
recalculated in accordance with the foregoing sentence. In the event the Tag-
Along Transferee increases the number of shares it is willing to purchase, if
either Optionholder has previously exercised its Tag-Along rights under this
Section 5 with respect to the Transfer to such Tag-Along Transferee, such
Optionholder shall also be permitted to sell an "excess pro rata portion" of
Acquired Shares. For purposes of this Agreement, "excess pro rata portion" shall
mean the number of Acquired Shares determined by multiplying (i) the total
number of Acquired Shares
owned by such Optionholder by (ii) a fraction, the numerator of which is the
additional number of shares of Common Stock of the Company the Tag-Along
Transferee is willing to purchase and the denominator of which is the total
number of outstanding shares of Common Stock of the Company owned by the
proposed transferors (including such Optionholder). Not later than 3 days prior
to the date scheduled for such sale, the Company shall provide notice (the "Pro
Rata Notice") to the Optionholders of the "pro rata portion" and "excess pro
rata portion" of Acquired Shares to be sold by each such Optionholder in such
sale. For purposes of this Section 5, the "Acquired Shares" shall include all
shares purchased by an Optionholder before the date of the Pro Rata Notice.
(c) Each Optionholder shall effect its participation in the sale by
delivering to the Stockholders (or such other Person as may be designated by the
Stockholders) on the date scheduled for such sale, one or more certificates, in
proper form for Transfer, which represent the number of Acquired Shares which
such Optionholder is entitled to sell in accordance with this Section 5. Such
stock certificate or certificates that the applicable Optionholder delivers to
the Stockholders shall be delivered on such date to such transferee in
consummation of the sale of the Acquired Shares pursuant to the terms and
conditions specified in the Tag-Along Notice, and the Stockholders shall, or
shall cause the Tag-Along Transferee to, concurrently therewith remit to such
Optionholder that portion of the sale proceeds to which such Optionholder is
entitled by reason of its participation in such sale, based on the pro rata
portion of Acquired Shares delivered by such Optionholder to the Stockholders.
As a condition to an Optionholder's exercise of its Tag-Along Rights under this
Section 5, such Optionholder shall execute an agreement, in form and substance
acceptable to each Stockholder, to be bound by and subject to the same
representations, warranties, covenants and indemnities (solely in respect of the
Acquired Shares being transferred) of any agreements executed by the Company,
the Stockholders or any Stockholder Affiliates in connection with the sale of
the Stockholder Stock to the Tag-Along Transferee.
Section 6. Grant to the Stockholders of Voting Rights; Come Along Right.
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Each time the shareholders of the Company meet, or act by written consent in
lieu of meeting, for the purpose of approving a Sale of the Business or IPO,
each Optionholder agrees to vote all of its Acquired Shares as directed by the
Stockholders. In order to effect the foregoing covenant, each Optionholder
hereby grants to the Stockholders with respect to all of such Optionholder's
Acquired Shares an irrevocable proxy (which is deemed to be coupled with an
interest) for the term of this Agreement with respect to any shareholder vote or
action by written consent to effect the Sale of the Business or IPO.
In furtherance of each Optionholder's covenants set forth in this Section
6, each such Optionholder hereby agrees to cooperate fully with the Stockholders
and the Company in any transaction involving a Sale of the Company or an IPO, to
execute and deliver all documents and instruments as the Stockholders, the
Company and, in the case of a Sale of the Company, the purchaser or, in the case
of an IPO, the underwriter, reasonably request to effect such transactions;
provided, however, that in no event shall either Optionholder be required to
make
any representations, warranties, covenants or indemnities other than in respect
of title to the Acquired Shares and provided, further, that in no event shall
either Optionholder be required to execute any agreements or instruments other
than with respect to such representations, warrants, covenants or indemnities in
respect of title to the Acquired Shares. In connection with a Sale of the
Business, the Stockholders may require each Optionholder to sell, or cause to be
sold, the same proportionate number of the shares of Common Stock owned by such
Optionholder as are proposed to be sold or Transferred by the Stockholders for
the same consideration per share (determined in each case on the basis of the
number of Acquired Shares owned by such Optionholder and the total number of
shares of Common Stock to be sold by all shareholders of the Company) and
otherwise on the same terms and conditions obtained by the Stockholders in the
Sale of the Company (other than (i) those terms and conditions which are offered
to the Stockholders due to their status as key employees and founders of the
Company such as employment agreements, and noncompetition and nonsolicitation
covenants, and (ii) agreements relating to the Stockholders' personal assets
(including those personal assets which have been leased to, or licensed for use
by, the Company); but including those terms and conditions which relate to their
shares of Common Stock of the Company, such as indemnification obligations in
respect of title to such Acquired Shares. On the closing date of the sale of an
Optionholder's Acquired Shares under this Section 6, the consideration due such
Optionholder shall be paid in full to such Optionholder against deliver of a
certificate or certificates, as the case may be, representing the shares of
Common Stock sold by such Optionholder in proper form for transfer; provided,
that if such Optionholder fails to deliver the certificate or certificates to
the Stockholders or the purchaser in the Sale of the Company in proper form for
transfer on the date scheduled for closing, the Stockholders may deposit or
cause to be deposited the consideration due such Optionholder with a third party
selected by the Stockholders with instructions to release such consideration
only upon such Optionholder's satisfaction of the conditions set forth in this
Section 6, and the Company shall record the transfer of the certificate or
certificates on the Company's stock transfer ledger and deem such certificate or
certificates cancelled.
Section 7. Benefits Only to Parties. Nothing expressed by or mentioned in
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this Agreement is intended or shall be construed to give any person or entity,
other than the parties hereto and their respective successors or permitted
assigns (including any transferees of the Warrants) any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective successors and permitted assigns, and for the
benefit of no other Person.
Section 8. Agreement Controlling. In the event of any conflict or
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inconsistency between the terms of this Agreement and any other agreement or
understanding between the parties hereto with respect to the subject matter
hereof, the terms of this Agreement shall control, except as expressly set forth
herein. This Agreement contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes and terminates all
prior arrangements or understandings (whether written or oral) with respect
thereto.
Section 9. Captions. The Article and Section captions used herein are for
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reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 10. Counterparts. For the convenience of the parties, any number of
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counterparts of this Agreement may be executed by the parties hereto and each
such counterpart shall be deemed to be an original instrument.
Section 11. Notices. All notices, consents, requests, instructions,
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approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return receipt requested and postage prepaid addressed as
follows:
If to the Company, to:
T.A.R. Preferred Mortgage Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to MLMCI, to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Mortgage Capital Inc.
World Financial Center
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to MLPF&S, to:
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
World Financial Center
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to ▇▇▇▇▇▇▇▇▇, to:
T.A.R. Preferred Mortgage Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 101
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to ▇▇▇▇▇▇▇▇, to:
T.A.R. Preferred Mortgage Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 102
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mall, as of the date so received.
Section 12. Successors and Assigns. This Agreement shall be binding upon
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and inure to the benefit of the Company, MLMCI, MLPF&S the Stockholders and
their respective heirs, devisees, legal representatives, successors, permitted
assigns and other permitted transferees.
Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
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CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
Section 14. Amendments; Waivers. No provision of this Agreement may be
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amended, modified or waived without approval of all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
▇▇▇▇▇▇▇ ▇▇▇▇▇ Mortgage Capital Inc.,
a Delaware corporation
By:__________________________________
Its: Authorized Signatory
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated,
a Delaware corporation
By:__________________________________
Its: Authorized Signatory
T.A.R. Preferred Mortgage Corporation,
a California corporation
By:__________________________________
Its: Authorized Signatory
▇▇▇▇▇▇▇▇▇
______________________________________
▇▇▇▇▇▇▇▇
______________________________________
