RAPID CAST, INC.
----------------
SHAREHOLDERS AGREEMENT
----------------------
JANUARY 15, 1997
TABLE OF CONTENTS
Section Page
------- ----
Prefatory Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Board of Directors. . . . . . . . . . . . . . . . . . . . . . 11
2.2 Committees of the Board of Directors. . . . . . . . . . . . . 20
2.3 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.5 No Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.6 Voting by the JPM Investors and Clipper Investors . . . . . . 25
2.7 Director Expenses . . . . . . . . . . . . . . . . . . . . . . 26
2.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 26
2.9 Termination of Voting Provisions. . . . . . . . . . . . . . . 27
2.10 Schedule 13D. . . . . . . . . . . . . . . . . . . . . . . . . 28
2.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 28
3. Restrictions on Transfer of Shares of the Company. . . . . . . . . 29
3.1 Transfer Restricted . . . . . . . . . . . . . . . . . . . . . 29
3.2 Certain Permitted Transfers . . . . . . . . . . . . . . . . . 31
3.3 First Offer Rights. . . . . . . . . . . . . . . . . . . . . . 33
3.4 Right to Join in Sale . . . . . . . . . . . . . . . . . . . . 43
3.5 Control Block . . . . . . . . . . . . . . . . . . . . . . . . 46
4. Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . 47
4.1 "Pro Rata Share". . . . . . . . . . . . . . . . . . . . . . . 47
4.2 "New Securities". . . . . . . . . . . . . . . . . . . . . . . 48
4.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.4 Nonvoting Securities. . . . . . . . . . . . . . . . . . . . . 50
4.5 Failure to Exercise Preemptive Rights . . . . . . . . . . . . 50
4.6 Termination of Preemptive Rights. . . . . . . . . . . . . . . 50
5. Representations and Warranties . . . . . . . . . . . . . . . . . . 51
6. Termination of Existing Voting Agreements. . . . . . . . . . . . . 52
7. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 53
8. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 55
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 55
8.4 Entire Agreement; Amendment; Waiver . . . . . . . . . . . . . 55
8.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . 56
8.6 Invalidity of Provision . . . . . . . . . . . . . . . . . . . 56
8.7 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.8 Headings; Execution in Counterparts . . . . . . . . . . . . . 57
8.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 57
8.10 Additional Investors. . . . . . . . . . . . . . . . . . . . . 58
i
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of January 15, 1997, by and among
Rapid Cast, Inc., a Delaware corporation (the "Company"), ▇.▇. ▇▇▇▇▇▇ Investment
Corporation, a Delaware corporation ("JPMIC"), Sixty Wall Street SBIC Fund,
L.P., a Delaware limited partnership ("Sixty Wall" and, together with JPMIC, the
"JPM Investors"), those persons listed on the signature pages hereto under the
caption "Clipper Investors" (collectively, the "Clipper Investors"), those other
persons (if any) listed on the signature pages hereto under the caption "Other
Investors" (the "Other Investors" and, together with the JPM Investors and the
Clipper Investors, the "Investors"), and those other persons listed on the
signature pages hereto under the caption "Existing Stockholders" (collectively,
the "Existing Stockholders" and, together with the Investors, the
"Stockholders").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company is issuing and selling to the Investors, and the
Investors are purchasing from the Company (it being acknowledged and agreed that
it is JPMIC's intention to subsequently allocate and assign a portion of its
securities to Sixty Wall upon such terms and conditions as they may hereafter
agree), (i) 7,275,000 shares of Series A Convertible Preferred
Stock, par value $0.001 per share, of the Company (the "Series A Stock"), (ii)
725,000 shares of Series B Nonvoting Convertible Preferred Stock, par value
$0.001 per share, of the Company (the "Series B Stock") and (iii) 1,400,000
warrants (expiring five years from the date of issuance) which entitle the
holder thereof to purchase shares of (x) common stock, par value $0.001 per
share, of the Company (the "Common Stock") or (y) nonvoting common stock, par
value $0.001 per share, of the Company (the "Non-Voting Common Stock"), at an
initial exercise price of $1.74 per share (collectively, the "Warrants"), in
each case, upon the terms and conditions set forth in that certain Series A
Convertible Preferred Stock and Warrants Purchase Agreement, dated of even date
herewith (the "Purchase Agreement"), by and among the Company, the Investors
and, solely to the extent therein indicated, ▇▇. ▇▇▇▇▇ ▇▇▇▇ and Incomnet, Inc.,
a Delaware corporation ("Incomnet"); and
WHEREAS, it is a condition precedent to the obligations of the
Investors under the Purchase Agreement that the Company, the Existing
Stockholders and the Investors enter into this Shareholders Agreement; and
WHEREAS, the Company, the Existing Stockholders and the Investors
desire to enter into this Shareholders Agreement for the purpose of regulating
certain aspects of the relationship of the Existing Stockholders and the
Investors as stockholders of the Company, and concurrently to terminate certain
existing
2
stockholders agreements by and among the Company and the Existing Stockholders;
and
WHEREAS, it is in the best interests of the Company and the
Stockholders that such aspects of their relationship be so regulated;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. DEFINITIONS. Unless otherwise defined in this Agreement,
terms defined in the Purchase Agreement are used herein as therein defined. As
used in this Agreement, the following terms shall have the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries Controls, is
controlled by or is under common control with such Person and, as to any Person
that is an individual, such individual's spouse, parents, siblings and lineal
descendants.
3
"AGREEMENT" means this Shareholders Agreement, including all
amendments, modifications and supplements hereto and any exhibits or schedules
to any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"AUDIT COMMITTEE" means the Audit Committee of the Board of Directors
of the Company.
"BY-LAWS" means the Amended and Restated By-Laws of the Company in the
form of Exhibit I to the Purchase Agreement.
"CEO SEARCH COMMITTEE" means the CEO Search Committee of the Board of
Directors of the Company.
"CERTIFICATE OF INCORPORATION" means the Restated Certificate of
Incorporation of the Company in the form of Exhibit A to the Purchase Agreement.
"CHARTER DOCUMENTS" means, collectively, the Certificate of
Incorporation and the By-Laws.
"CLASS VOTING" means that the Certificate of Incorporation provides
that the holders of the Series A Stock shall be entitled to elect four (4)
directors and the holders of the Common Stock shall be entitled to elect five
(5) directors.
"CLIPPER RELATED INVESTORS" means, collectively, the Clipper Investors
and, with respect to Common Shares or Preferred
4
Shares transferred by a Clipper Investor to a Permitted Transferee of such
Clipper Investor, such Permitted Transferee(s).
"▇▇▇▇▇ RELATED SHAREHOLDERS" means, collectively, Dr. ▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇. ▇▇▇▇▇"), those Persons identified on the signature pages hereto as ▇▇▇▇▇
Related Shareholders (such Persons, together with ▇▇. ▇▇▇▇▇, are hereinafter
referred to collectively as the "▇▇▇▇▇ Shareholders"), and, with respect to
Common Shares or Preferred Shares transferred by a ▇▇▇▇▇ Shareholder to a
Permitted Transferee of such ▇▇▇▇▇ Shareholder, such Permitted Transferee(s).
"COMMITTEES" has the meaning ascribed thereto in Section 2.2 hereof.
"COMMON SHARE EQUIVALENTS" means shares of Common Stock and Non-Voting
Common Stock at the time outstanding or issuable upon conversion of shares of
Series A Stock, Series B Stock or Series C Stock at the time outstanding.
"COMMON SHARES" means, collectively, the Common Stock and Non-Voting
Common Stock.
"COMPENSATION COMMITTEE" means the Compensation Committee of the Board
of Directors of the Company.
"CONTROL BLOCK" has the meaning ascribed thereto in Section 3.5
hereof.
5
"CONTROLS" including, with correlative meanings, the terms "controlled
by" and "under common control with," means, as to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERTIBLE SECURITIES" means any evidence of indebtedness, shares
(other than Common Shares) or other securities convertible into or exchangeable
for Common Shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE COMMITTEE" means the Executive Committee of the Board of
Directors of the Company.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"INCOMNET CHANGE OF CONTROL" means (i) ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall cease
for any reason whatsoever to serve as the designee of Incomnet on the Board of
Directors of the Company, (ii) any Person or "group" (within the meaning of
Rules 13(d)-3 and 13(d)-5 under the Securities Exchange Act of 1934 as in effect
on the date hereof) shall (A) have acquired beneficial
6
ownership of 20% or more on a fully diluted basis of the voting and/or economic
interest in Incomnet's capital stock or (B) obtained the power (whether or not
exercised) to elect a majority of Incomnet's directors or (iii) during any
period of twelve consecutive months, individuals who at the beginning of such
period constituted the Board of Directors of Incomnet (together with any new
directors whose election by such Board or whose nomination for election by the
stockholders of Incomnet was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved), cease
for any reason to constitute a majority of the Board of Directors of Incomnet
then in office.
"INCOMNET RELATED SHAREHOLDERS" means, collectively, Incomnet and,
with respect to Common Shares or Preferred Shares transferred by Incomnet to a
Permitted Transferee of Incomnet, such Permitted Transferee(s).
"INDIVIDUAL EXISTING STOCKHOLDER" means any Existing Stockholder or
Other Investor who is a natural person.
"INSTITUTIONAL INVESTOR" means any JPM Investor, Clipper Investor,
Other Investor or, with respect to Common Shares or Preferred Shares transferred
by any such Investor to a Permitted Transferee of such Investor, such Permitted
Transferee(s).
7
"INSTITUTIONAL PREFERRED SHARES" means, collectively, Series A Stock
and Series B Stock.
"INTERIM CEO" has the meaning ascribed thereto in Section 2.1(b)(vii)
hereof.
"INTERIM DIRECTOR" has the meaning ascribed thereto in Section
2.1(b)(vii) hereof.
"JPM DESIGNEES" has the meaning ascribed thereto in Section 2.1(b)(i)
hereof.
"JPM RELATED INVESTORS" means, collectively, the JPM Investors and,
with respect to Common Shares or Preferred Shares transferred by a JPM Investor
to a Permitted Transferee of such JPM Investor, such Permitted Transferee(s).
"MINIMUM SHARE AMOUNT" has the meaning ascribed thereto in Section
2.1(b)(i) hereof.
"NON-STOCKHOLDER DESIGNATED DIRECTOR" means any director of the
Company designated pursuant to Section 2.1(b)(vi) or (vii) hereof.
"OPERATIVE DOCUMENTS" means, collectively, this Agreement, the
Purchase Agreement, the Registration Rights Agreement and the Charter Documents.
"OUTSIDE DIRECTOR" means any director of the Company (i) who is not
and who has not been an officer or employee of the
8
Company, any subsidiary of the Company or any Institutional Investor, and who is
not in the Family Group of, or under common control with, any such officer or
employee and (ii) who has not received (directly or indirectly) any compensation
from the Company or any such subsidiary (other than customary director fees and
reimbursement for travel and related expenses), including, without limitation,
compensation or remuneration of the type which the Company would be required to
disclose pursuant to Item 404 of Regulation S-K as promulgated under the
Exchange Act if the Company was subject to the reporting requirements of such
Act; PROVIDED, HOWEVER, notwithstanding the foregoing, ▇▇. ▇▇▇▇▇ ▇▇▇▇ shall be
deemed to qualify as an Outside Director.
"PERMANENT CEO" means the person selected by the CEO Search Committee
and approved by a majority of the Board of Directors of the Company to serve as
the chief executive officer and a director of the Company.
"PERMITTED TRANSFEREES" has the meaning ascribed thereto in Section
3.2 hereof.
"PERSON" means an individual or a corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind.
"PREFERRED SHARES" means, collectively, the Series A Stock, the Series
B Stock and the Series C Stock.
9
"QUALIFIED PUBLIC OFFERING" means any sale of Common Stock in a public
offering which results in the automatic conversion of Preferred Shares into
Common Shares pursuant to subsection 4(b) of Paragraph B of Article IV of the
Certificate of Incorporation.
"▇▇▇▇▇" means Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇, a natural person.
"▇▇▇▇▇ RELATED SHAREHOLDERS" means, collectively, ▇▇▇▇▇, those Persons
identified on the signature pages hereto as ▇▇▇▇▇ Related Shareholders (such
Persons, together with ▇▇▇▇▇, are hereinafter referred to collectively as the
"▇▇▇▇▇ Shareholders") and, with respect to Common Shares or Preferred Shares
transferred by a ▇▇▇▇▇ Shareholder to a Permitted Transferee of such ▇▇▇▇▇
Shareholder, such Permitted Transferee(s).
"RULE 144 SALES" means open market sales pursuant to Rule 144 under
the Securities Act (or any successor rule or regulation) and in compliance with
the requirements of paragraphs (c), (e) and (f) of such Rule, without giving
effect to paragraph (k) of such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES C STOCK" means the Series C Nonvoting Convertible Preferred
Stock, par value $0.001 per share, of the Company.
10
"VOTING STOCK" means capital stock of any class or classes of the
Company, the holders of which are entitled to participate generally in the
election of the members of the Company's board of directors, and shall include,
without limitation, the Common Stock and Series A Stock.
"VOTING STOCK EQUIVALENTS" means (i) shares of Common Stock at the
time outstanding and (ii) shares of Common Stock issuable upon conversion of
shares of Series A Stock at the time outstanding.
Section 2 VOTING.
2.1 BOARD OF DIRECTORS. Each Stockholder shall vote (or shall cause
to be voted) all shares of Voting Stock owned or controlled by such Stockholder
(including any shares of Voting Stock hereafter acquired), at any regular or
special meeting of stockholders of the Company, shall take all action by written
consent in lieu of such meeting of stockholders, and shall take all other
actions necessary, to ensure:
(a) that the Board of Directors of the Company and each
subsidiary of the Company shall consist of nine (9) members; and
(b) that there shall be elected as members of each such Board
of Directors:
11
(i) two (2) individuals (the "JPM Designees")
designated by the JPM Related Investors holding a majority of the shares of
Voting Stock Equivalents held by the JPM Related Investors; PROVIDED,
HOWEVER, that (x) for so long as the Certificate of Incorporation shall
provide for Class Voting and there shall be outstanding Series A Stock, only
those Stockholders that hold shares of Series A Stock shall be required to
vote, or take action by consent, in accordance with this clause 2.1(b)(i);
(y) if any individual designated by the JPM Related Investors shall become
Interim CEO or Permanent CEO, such individual shall be deemed to have been
designated as a director pursuant to clause 2.1(b)(vii) and the JPM Related
Investors shall thereafter be entitled to designate a new designee pursuant
to this clause 2.1(b)(i); and (z) if the JPM Related Investors at any time
own Common Share Equivalents with an aggregate original purchase price
(including, without limitation, the purchase price of Preferred Shares which
are convertible, or have been converted, into Common Shares) of less than
$2,000,000 (the "Minimum Share Amount"), then (I) if at the time the
Certificate of Incorporation provides for Class Voting and there is Series A
Stock outstanding, and if the Clipper Related Investors own at least the
Minimum Share Amount, then the right of the JPM Related Investors to
designate (A) two (2) directors pursuant to this clause 2.1(b)(i) and (B) one
director pursuant to Section 2.2 hereof to serve on each Committee (a "JPM
Committee Designee") shall terminate, and the right of the Clipper Related
Investors
12
to designate directors pursuant to clause 2.1(b)(ii) shall be increased from
two (2) directors to four (4) directors and the Clipper Related Investors
also shall be entitled to designate one additional director to serve on each
Committee in lieu of a JPM Committee Designee, (II) if at the time the
Certificate of Incorporation provides for Class Voting and there is Series A
Stock outstanding, and if the Clipper Related Investors own less than the
Minimum Share Amount, then the JPM Related Investors shall continue to have
the right to designate (A) two (2) directors pursuant to this clause
2.1(b)(i) and (B) a JPM Committee Designee, and (III) if at the time the
Certificate of Incorporation does not provide for Class Voting or there is no
Series A Stock outstanding, then the right of the JPM Related Investors to
designate (A) two (2) directors pursuant to this clause 2.1(b)(i) and (B) the
JPM Committee Designee, shall terminate; and PROVIDED, FURTHER, that as
provided in clause 2.1(b)(ii)(z)(I) and in the penultimate proviso to clause
2.1(b)(ii), the right of the JPM Related Investors to designate directors
pursuant to this clause 2.1(b)(i) may be increased from two (2) directors to
four (4) directors and the right of JPM Related Investors to designate
directors to serve on Committees may be increased from one (1) to two (2)
directors; and PROVIDED, FURTHER, that if the JPM Investors elect to transfer
Preferred Shares and/or Common Shares to any of their Affiliates that is a
"Regulation Y Stockholder" (as defined in the Certificate of Incorporation),
then at the election of the JPM Investors, the
13
right of the JPM Related Investors to designate directors pursuant to this
clause 2.1(b)(i) and Section 2.2 shall terminate, and the right of the Clipper
Related Investors to designate directors pursuant to clause 2.1(b)(ii) shall be
increased from two (2) directors to four (4) directors and to designate
directors to serve on Committees pursuant to Section 2.2 hereof shall be
increased from one (1) to two (2) directors, and thereafter, the JPM Investors
no longer shall be parties to, or enjoy the benefits of or be entitled to
enforce, and no longer shall be subject to or bound by, this Section 2;
(ii) two (2) individuals (the "Clipper Designees") designated
by the Clipper Related Investors holding a majority of the Voting Stock
Equivalents held by the Clipper Related Investors; PROVIDED, HOWEVER, that
(x) for so long as the Certificate of Incorporation shall provide for Class
Voting and there shall be outstanding Series A Stock, only those Stockholders
that hold shares of Series A Stock shall be required to vote, or take action by
consent, in accordance with this clause 2.1(b)(ii); (y) if any individual
designated by the Clipper Related Investors shall become Interim CEO or
Permanent CEO, such individual shall be deemed to have been designated as a
director pursuant to clause 2.1(b)(vii) and the Clipper Related Investors shall
thereafter be entitled to designate a new designee pursuant to this clause
2.1(b)(ii); and (z) if the Clipper Related Investors at any time own less than
the Minimum
14
Share Amount, then (I) if at the time the Certificate of Incorporation
provides for Class Voting and there is Series A Stock outstanding, and if the
JPM Related Investors own at least the Minimum Share Amount, then the right
of the Clipper Related Investors to designate (A) two (2) directors pursuant
to this clause 2.1(b)(ii) and (B) one (1) director pursuant to Section 2.2
hereof to serve on each Committee (a "Clipper Committee Designee"), shall
terminate, and the right of the JPM Related Investors to designate directors
pursuant to clause 2.1(b)(i) shall be increased from two (2) directors to
four (4) directors and the JPM Related Investors also shall be entitled to
designate one additional director to serve on each Committee in lieu of a
Clipper Committee Designee, (II) if at the time the Certificate of
Incorporation provides for Class Voting and there is Series A Stock
outstanding, and if the JPM Related Investors own less than the Minimum Share
Amount, then the Clipper Related Investors shall continue to have the right
to designate (A) two (2) directors pursuant to this clause 2.1(b)(ii) and (B)
a Clipper Committee Designee, and (III) if at the time the Certificate of
Incorporation does not provide for Class Voting or there is no Series A Stock
outstanding, then the right of the Clipper Related Investors to (A) designate
two (2) directors pursuant to this clause 2.1(b)(ii) and (B) a Clipper
Committee Designee, shall terminate; and PROVIDED, FURTHER, that as provided
in clause 2.1(b)(i)(z)(I) and the final proviso to clause 2.1(b)(i), the
right of the Clipper Related Investors to designate directors
15
pursuant to this clause 2.1(b)(ii) may be increased from two (2) directors to
four (4) directors and the right of the Clipper Related Investors to
designate directors to serve on Committees may be increased from one (1) to
two (2) directors; and PROVIDED, FURTHER, that if Clipper Capital Associates,
L.P. or any of its Affiliates shall cease to control the Clipper Related
Investors, the right of the Clipper Related Investors to designate directors
pursuant to this clause 2.1(b)(ii) and Section 2.2 shall terminate, and the
right of the JPM Related Investors to designate directors pursuant to clause
2.1(b)(i) shall be increased from two (2) directors to four (4) directors and
the right of the JPM Related Investors to designate directors to serve on
Committees pursuant to Section 2.2 hereof shall be increased from one (1) to
two (2) directors; and, PROVIDED, FURTHER, that, notwithstanding the
foregoing, the designation of at least one (1) of the directors to be
designated by the Clipper Investors shall be made by Clipper Equity Partners
I, L.P. (or, if Clipper Equity Partners I, L.P. shall no longer own any
Voting Stock Equivalents, then Clipper Capital Associates, L.P. or such other
Person as Clipper Capital Associates, L.P. shall designate);
(iii) one (1) individual designated by the Incomnet
Related Shareholders holding a majority of the shares of Voting Stock
Equivalents held by the Incomnet Related Shareholders; PROVIDED, HOWEVER, that
(x) only those Stockholders
16
that hold shares of Common Stock (in respect of such shares of Common Stock)
shall be required to vote, or take action by consent, in accordance with this
clause 2.1(b)(iii); (y) if the Incomnet Related Shareholders at any time own
less than twenty-five percent (25%) of the Common Shares owned by Incomnet on
the date hereof, then the right of the Incomnet Related Shareholders to
designate (I) a director pursuant to this clause 2.1(b)(iii) and (II) one
director pursuant to Section 2.2 hereof to serve on the Audit Committee and the
Compensation Committee shall terminate; and (z) if an Incomnet Change of Control
shall have occurred, then the individual designated by Incomnet to serve as a
director also must be approved by a majority of the remaining members of the
Board of Directors of the Company, such approval to be granted or withheld based
on the reasonable business judgment of such remaining directors;
(iv) one (1) individual designated by the ▇▇▇▇▇ Related
Shareholders holding a majority of the Voting Stock Equivalents held by the
▇▇▇▇▇ Related Shareholders; PROVIDED, HOWEVER, that (x) only those Stockholders
that hold shares of Common Stock (in respect of such shares of Common Stock)
shall be required to vote, or take action by consent, in accordance with this
clause 2.1(b)(iv); (y) the right of the ▇▇▇▇▇ Related Shareholders to designate
a director pursuant to this clause 2.1(b)(iv) shall terminate if (I) for any
reason whatsoever ▇▇▇▇▇ ceases to be actively employed as a senior executive
officer of
17
the Company and/or its subsidiaries or (II) the ▇▇▇▇▇ Related Shareholders at
any time own less than fifty percent (50%) of the Common Shares owned by them on
the date hereof; and (z) for so long as the ▇▇▇▇▇ Related Shareholders shall be
entitled to designate a director pursuant to this clause 2.1(b)(iv), such
director shall be ▇▇▇▇▇;
(v) one (1) individual designated by the ▇▇▇▇▇ Related
Shareholders holding a majority of the Voting Stock Equivalents held by the
▇▇▇▇▇ Related Shareholders; PROVIDED, HOWEVER, that (x) only those Stockholders
that hold shares of Common Stock (in respect of such shares of Common Stock)
shall be required to vote, or take action by consent, in accordance with this
clause 2.1(b)(v); (y) if the ▇▇▇▇▇ Related Shareholders at any time own less
than fifty percent (50%) of the Common Shares owned by them on the date hereof,
then the right of the ▇▇▇▇▇ Related Shareholders to designate (i) a director
pursuant to this clause 2.1.1(b)(v) and (ii) one director pursuant to Section
2.2 hereof to serve on the Executive Committee, shall terminate; and (z) for so
long as the ▇▇▇▇▇ Related Shareholders shall be entitled to designate a director
pursuant to this clause 2.1(b)(v) and ▇▇. ▇▇▇▇▇ shall be alive and not
permanently disabled, ▇▇. ▇▇▇▇▇ shall serve as the designee of the ▇▇▇▇▇ Related
Shareholders;
(vi) one (1) individual (initially ▇▇. ▇▇▇▇▇ ▇▇▇▇)
designated by a majority of the members of the Board of
18
Directors of the Company who qualifies as an Outside Director and who is
approved by (x) those Persons holding a majority of the Common Share Equivalents
held by the Investors and their respective Permitted Transferees and (y) those
Persons holding a majority of the Common Share Equivalents held by the Existing
Investors and their respective Permitted Transferees; PROVIDED, HOWEVER, that
only those Stockholders who hold shares of Common Stock (in respect of such
shares of Common Stock) shall be required to vote, or take action by consent, in
accordance with this clause 2.1(b)(vi); and
(vii) the Permanent CEO; PROVIDED, HOWEVER, that (x)
only those Stockholders who hold shares of Common Stock (in respect of such
shares of Common Stock) shall be required to vote, or take action by consent, in
accordance with this clause 2.1(b)(vii) and (y) if at any time there shall not
be a Permanent CEO, at the option of the CEO Search Committee, an individual
selected by the CEO Search Committee shall serve as an additional director of
the Company and each of its subsidiaries (the "Interim Director") and/or interim
Chief Executive Officer of the Company (the "Interim CEO"), and, PROVIDED,
FURTHER, that the Interim Director shall be replaced as a member of the Board of
Directors of the Company and each of its subsidiaries simultaneously with the
designation of the Permanent CEO;
and in the case of each of clauses 2.1(b)(i) (except as otherwise provided
therein), (b)(ii) (except as otherwise provided
19
therein), (b)(iii), (b)(iv) and (b)(v), any director(s) whom a specified
group of Stockholders ceases to be entitled to designate instead shall be
designated by Stockholders holding a majority of the Voting Stock Equivalents
held by the Stockholders.
2.2 COMMITTEES OF THE BOARD OF DIRECTORS. The Company shall
establish the following committees (collectively, the "Committees") of the Board
of Directors: an Executive Committee, a CEO Search Committee, an Audit
Committee and a Compensation Committee. Such Committees shall have the powers
and duties set forth in the resolutions of the Board of Directors of the Company
authorizing the establishment of such Committees. Each Stockholder shall direct
any director designated by such Stockholder, and otherwise take all actions
necessary or desirable, to ensure:
(a) that the following persons shall be appointed to serve on the
committees of the Board of Directors of the Company:
(i) in the case of the Executive Committee, one (1)
JPM Designee (for so long as the JPM Related Investors have representation on
the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, one (1)
Clipper Designee (for so long as the Clipper Related Investors have
representation on the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, and ▇▇. ▇▇▇▇▇ ▇▇▇▇ (for so long as he is a director of
20
the Company), and the JPM Designee (for so long as the JPM Related Investors
have representation on the Board of Directors) shall serve as the chairperson of
the Executive Committee; PROVIDED, HOWEVER, at such time as a Permanent CEO
shall have been designated, then, at the option of the JPM Related Investors
holding a majority of the shares of Voting Stock Equivalents held by the JPM
Related Investors and the Clipper Related Investors holding a majority of the
Voting Stock Equivalents held by the Clipper Related Investors, (x) the
Executive Committee shall be dissolved or (y) the number of persons serving on
the Executive Committee shall be increased from three (3) to six (6) and such
new members shall be ▇▇. ▇▇▇▇▇ (for so long as he is a director of the Company),
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (for so long as he is a director of the Company) and the
Permanent CEO;
(ii) in the case of the CEO Search Committee, one (1)
JPM Designee (for so long as the JPM Related Investors have representation on
the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, one (1)
Clipper Designee (for so long as the Clipper Related Investors have
representation on the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, and an Outside Director, who initially shall be ▇▇. ▇▇▇▇▇ ▇▇▇▇, and
the Outside Director shall serve as the chairperson of the CEO Search Committee;
(iii) in the case of the Audit Committee, one (1) JPM
Designee (for so long as the JPM Related Investors
21
have representation on the Board of Directors), who initially shall be ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, one (1) Clipper Designee (for so long as the Clipper Related
Investors have representation on the Board of Directors), who initially shall be
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the Permanent CEO (if any), and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (for
so long as he is a director of the Company), and ▇▇. ▇▇▇▇▇▇▇ shall serve as the
chairperson of the Audit Committee; and
(iv) in the case of the Compensation Committee, one (1)
JPM Designee (for so long as the JPM Related Investors have representation on
the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, one (1)
Clipper Designee (for so long as the Clipper Related Investors have
representation on the Board of Directors), who initially shall be ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (for so long as he is a director of the Company)
and the Permanent CEO (if any), and the JPM Designee (for so long as the JPM
Related Investors have representation on the Board of Directors) shall serve as
the chairperson of the Compensation Committee; and
(b) that except as otherwise provided in Sections 2.1(b)(i) and
(ii), any director(s) serving on any Committee who a specified group of
Stockholders ceases to be entitled to designate instead shall be designated by
Stockholders holding a majority of the Voting Stock Equivalents held by the
Stockholders.
22
2.3 REMOVAL. A director designated by the JPM Related Investors,
the Clipper Related Investors, the Incomnet Related Shareholders, the ▇▇▇▇▇
Related Shareholders or the ▇▇▇▇▇ Related Shareholders and elected pursuant to
Sections 2.1 and 2.2 shall be removed (with or without cause), if (i) those
Stockholders holding a majority of the Voting Stock Equivalents owned by the
group of Stockholders who designated such director so requests such removal by
written notice to the Company or (ii) if the right of such group of Stockholders
to designate one (1) or more directors pursuant to Sections 2.1 and 2.2 shall
terminate. Such removal shall be effected upon the affirmative vote or action
by written consent of holders of a majority of the then outstanding shares of
Series A Stock or Common Stock, as applicable, and each holder of shares of such
Voting Stock hereby agrees to vote all such shares then owned or held of record
by him, or to take action by written consent, to effect such removal. Any Non-
Stockholder Designated Director may be removed with or without cause by the
affirmative vote of a majority of the members of the Board of Directors of the
Company (other than such Non-Stockholder Designated Director). Any director
(regardless of how designated) may be removed for cause, and the group of
Stockholders entitled to designate any such director agrees to vote or take
action by written consent to effect such removal upon a determination by the
Board of Directors that such cause exists.
23
2.4 VACANCIES. In the event that a vacancy is created on the Board
of Directors of the Company or any of its subsidiaries by the death, disability,
retirement, resignation or removal (with or without cause) of a director or
otherwise there shall exist or occur any vacancy on the Board of Directors of
the Company or any of its subsidiaries, each Stockholder hereby agrees to vote
or take action by written consent, in each case, to the extent such Stockholder
shall be entitled to do so, and to use his best efforts to cause the remaining
directors to vote or take action by written consent, for the election of a
nominee to be designated by the entity or group which had designated or was
entitled to designate the director whose position has become vacant, provided
that such designee was not previously a director of the Company or any of its
subsidiaries who was removed for cause from the Board of Directors of the
Company or any of its subsidiaries.
2.5 NO PROXIES. Each Stockholder covenants and agrees that, except
(i) as a result of transfers expressly permitted by, and pursuant to and in
accordance with, this Agreement, (ii) the voting agreement between the
JPM Investors and the Clipper Investors described in Section 2.6 hereof and
(iii) as otherwise provided in the last sentence of Section 2.8 hereof, such
Stockholder will have sole voting power with respect to such Stockholder's
Voting Stock and will not grant any proxy with respect to such Voting Stock,
enter into any voting trust or
24
other voting agreement or arrangement with respect to such Voting Stock or grant
any other rights to vote such Voting Stock other than the agreement to vote such
Voting Stock set forth herein.
2.6 VOTING BY THE JPM INVESTORS AND CLIPPER INVESTORS.
Notwithstanding anything in any Operative Document to the contrary, each JPM
Investor hereby covenants and agrees with the Clipper Investors, for so long as
the Clipper Related Investors shall own the Minimum Share Amount, and each
Clipper Investor hereby covenants and agrees with the JPM Investors, for so long
as the JPM Related Investors shall own the Minimum Share Amount, that it shall
not (i) vote in favor of, or consent to, any amendment or waiver of the
Operative Documents which amendment or waiver requires the vote or consent of a
specified percentage of the Investors or of the holders of Preferred Shares,
unless, in the case of any such amendment or waiver to be approved by any such
JPM Related Investor, it also is approved by the Clipper Related Investors
holding a majority of the Common Share Equivalents then held by the Clipper
Related Investors (the "Requisite Clipper Investors") and, in the case of any
amendment or waiver to be approved by any such Clipper Related Investor, it also
is approved by the JPM Related Investors holding a majority of the Common Share
Equivalents then held by the JPM Related Investors (the "Requisite JPM
Investors"), as the case may be. In addition, at any time at which the Clipper
Related Investors shall cease to own the Minimum Share Amount or the JPM Related
25
Investors shall cease to own the Minimum Share Amount, without the consent of
the Requisite Clipper Investors or the Requisite JPM Investors, as the case may
be, no JPM Investor or Clipper Investor shall vote in favor of, or consent to,
any such amendment or waiver (x) which would be adverse to and result in non-
uniform treatment of the Clipper Related Investors as compared to the JPM
Related Investors or the JPM Related Investors as compared to the Clipper
Related Investors, as applicable, or (y) if any such JPM Related Investor or
Clipper Related Investor (or their respective Affiliates) has a disproportionate
interest in the transaction or otherwise has a conflicting interest with respect
to the matter which gives rise to the necessity for such amendment or waiver.
This Section 2.6 shall benefit and shall be binding upon the JPM Related
Investors and the Clipper Related Investors only, and may be amended or waived
by the Requisite JPM Investors and Requisite Clipper Investors.
2.7 DIRECTOR EXPENSES. The Company shall bear all travel and
related expenses incurred by the JPM Designees and the Clipper Designees
associated with attending meetings.
2.8 FURTHER ASSURANCES. In order to effectuate the provisions of
this Section 2, the Stockholders hereby agree that when any action or vote is
required to be taken by such Stockholders pursuant to this Agreement, such
Stockholders shall use their respective best efforts to call, or cause the
26
appropriate officers and directors of the Company to call, a special or annual
meeting of stockholders of the Company, as the case may be, or execute or cause
to be executed a consent in writing in lieu of any such meetings pursuant to the
General Corporation Law of the State of Delaware, to effectuate such stockholder
action. In addition, if any Stockholder shall fail to vote as required by the
specific terms of this Section 2, such Stockholder shall be deemed to have
irrevocably constituted and appointed the other Stockholders as his proxy
coupled with an interest to vote such Stockholder's Voting Stock Equivalents on
a pro rata basis in accordance with the terms of this Section 2.
2.9 TERMINATION OF VOTING PROVISIONS. Except for Section 2.7 and as
otherwise provided in the following sentence, the voting agreements and rights
to designate directors as provided in this Section 2 shall terminate upon the
completion by the Company of a Qualified Public Offering. Notwithstanding the
foregoing, following the completion of a Qualified Public Offering and for so
long as the JPM Related Investors and the Clipper Related Investors shall
continue to beneficially own (as such term is used in Rule 13(d)-3 promulgated
under the Exchange Act as in effect on the date hereof) or control any Common
Share Equivalents, each Stockholder shall vote (or cause to be voted) all shares
of Voting Stock owned or controlled by such Stockholder (including any shares of
Voting Stock hereafter acquired), at any regular or special meeting of
stockholders of
27
the Company, shall take all action by written consent in lieu of such meeting of
stockholders, and shall take all other action that may be necessary, to ensure
that there shall be elected to the Board of Directors of the Company and each
subsidiary of the Company one (1) JPM Designee and one (1) Clipper Designee;
PROVIDED, HOWEVER, that the Requisite JPM Investors or the Requisite Clipper
Investors may at any time elect to terminate the right of the JPM Related
Investors or the Clipper Related Investors, respectively, to designate a
director pursuant to this paragraph 2.9, and thereafter, the JPM Related
Investors or the Clipper Related Investors, as applicable, no longer shall be
parties to, or enjoy the benefits of or be entitled to enforce this Section 2.9.
2.10 SCHEDULE 13D. If required by applicable law, each Stockholder,
severally and not jointly, agrees to cooperate in the preparation of, and to
execute, a joint filing on Schedule 13D. The Company shall bear all reasonable
expenses incurred by each such Stockholder in connection with the preparation
and filing of such Schedule 13D.
2.11 INDEMNIFICATION. Without the prior written consent of the JPM
Investors and the Clipper Investors, neither the Company nor any Stockholder
shall take any action to amend Article VIII of the By-Laws in any manner adverse
to the rights of the JPM Designees or the Clipper Designees.
28
Section 3. RESTRICTIONS ON TRANSFER OF SHARES OF THE COMPANY.
3.1 TRANSFER RESTRICTED.
3.1.1 No Common Shares or Preferred Shares, or any interest
therein, shall be sold, assigned, transferred, pledged or otherwise encumbered
or disposed of, directly or indirectly, except in accordance with or as
otherwise specifically permitted by the provisions of this Agreement. The
Company shall not transfer upon its books and records any Common Shares or
Preferred Shares purported to be transferred to any Person in violation of this
Agreement.
3.1.2 In addition to each other restriction on transfer
contained in this Agreement, except for Rule 144 Sales, a sale of shares in a
public offering pursuant to the Registration Rights Agreement and a transfer to
the Company, no Stockholder shall sell, assign, transfer, pledge, or otherwise
encumber or dispose of any Common Shares or Preferred Shares or any interest
therein to any Person (regardless of the manner in which such Stockholder
initially acquired such Common Shares or Preferred Shares), unless (a) the
certificates representing the shares issued to the transferee bear appropriate
legends reflecting the restrictions on transfer contained in this Agreement
substantially to the following effect:
29
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF JANUARY 15, 1997 (A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY) AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH
SHAREHOLDERS AGREEMENT."
and (b) the transferee shall have executed and delivered to the Company, as a
condition to its acquisition of the Common Shares or Preferred Shares, as the
case may be, an appropriate document confirming that such transferee takes such
shares subject to all the terms and conditions of this Agreement.
3.1.3 In addition to each other restriction on transfer
contained in this Agreement, no Stockholder shall sell, assign, transfer, pledge
or otherwise encumber or dispose of any Common Shares or Preferred Shares, or
any interest therein, to any Person unless such sale, assignment, transfer,
pledge or other encumbrance or disposition is pursuant to an effective
registration statement under the Securities Act and under applicable state
securities laws or an exemption from such registration is available.
3.1.4 The restrictions on transfer contained in this Agreement
are in addition to, and not in limitation of,
30
each other restriction on transfer contained in any other agreement between the
Company and any Stockholder.
3.2 CERTAIN PERMITTED TRANSFERS. Notwithstanding anything in this
Agreement to the contrary, the restrictions contained in Sections 3.3, 3.4 and
3.5 of this Agreement with respect to transfers of Common Shares and Preferred
Shares shall not apply to:
(a) any transfer without consideration by an Individual Existing
Stockholder to the spouse or issue of such Individual Existing Stockholder
or to a trust of which there are no principal beneficiaries other than the
spouse or issue of such Individual Existing Stockholder;
(b) any transfer to a legal representative in the event any
Individual Existing Stockholder becomes mentally incompetent;
(c) any transfer by a JPM Investor to any other JPM Investor and any
transfer by a Clipper Investor to any other Clipper Investor;
(d) any transfer by an Institutional Investor (i) that is a
partnership to one or more of its present partners or to another
partnership under common control with such Institutional Investor or (ii)
to an Affiliate of such Institutional Investor;
31
(e) any transfer by a Stockholder to the Company pursuant to any
agreement between the Company and that Stockholder; and
(f) any transfer by a Stockholder which is a corporation to its
ultimate parent corporation (a "Parent") or to any wholly owned direct or
indirect subsidiary of such Parent (a "Controlled Subsidiary"), it being
understood with respect to such Controlled Subsidiary that the later sale,
liquidation or spin-off of such Controlled Subsidiary or other transaction
in which the Parent ceases to control, directly or indirectly, 100% of the
equity of the Controlled Subsidiary would constitute an indirect sale of
Common Shares or Preferred Shares, as the case may be, which sale may only
be made in compliance with the terms and restrictions set forth in this
Agreement;
PROVIDED THAT in each of cases (a) through (f) each transferee agrees in writing
to take subject to and to comply with the restrictions on transfer contained in
this Agreement. In addition, none of the restrictions on transfers of shares
contained in this Agreement shall apply to a transfer by an Individual Existing
Stockholder upon his or her death, by will, by the laws of descent or by
operation of law, except that any such transferee shall be deemed to take such
shares subject to all provisions of this Agreement applicable to the transferor.
Any transfer of Common Shares or Preferred Shares pursuant to and
32
in compliance with this Section 3.2 shall be a permitted transfer under this
Agreement, and any transferee of Common Shares or Preferred Shares pursuant to
and in compliance with this Section 3.2 (other than the Company) is herein
referred to as a "Permitted Transferee." Each Permitted Transferee (other than
the Company), if not previously a Stockholder, shall, upon consummation of the
transfer, be deemed a Stockholder, and each such Permitted Transferee of a JPM
Related Investor, Clipper Related Investor, Incomnet Related Shareholder, ▇▇▇▇▇
Related Shareholder or ▇▇▇▇▇ Related Shareholder shall, with respect to such
transferred shares upon consummation of the transfer, be deemed a JPM Related
Investor, Clipper Related Investor, Incomnet Related Shareholder, ▇▇▇▇▇ Related
Shareholder or ▇▇▇▇▇ Related Shareholder, as the case may be, for purposes of
this Agreement.
3.3 FIRST OFFER RIGHTS. Except as otherwise permitted under Section
3.2 of this Agreement, and except for Rule 144 Sales and sales of shares in
public offerings, a Stockholder may sell or otherwise transfer Common Shares and
Preferred Shares only in compliance with the provisions of this Section 3.3.
3.3.1 A Stockholder desiring to sell or otherwise transfer
Common Shares or Preferred Shares in compliance with this Section 3.3 (a
"Selling Stockholder") shall first deliver written notice to the Company
(hereinafter referred to as the "Notice of Offer") which Notice of Offer shall
specify (i) the number of Common Shares and/or Preferred Shares owned by the
33
Selling Stockholder which such Selling Stockholder wishes to sell (the "Offered
Shares"); (ii) the proposed cash purchase price per share for the Offered Shares
(the "Offer Price"); and (iii) all other terms and conditions of the offer. The
Notice of Offer shall constitute an irrevocable offer by the Selling Stockholder
to sell to the other Stockholders and the Company the Offered Shares at the
Offer Price, as hereinafter provided. Within five business days of its receipt
of the Notice of Offer, the Company shall send a copy of such Notice to each of
the Stockholders of record.
3.3.2 Within 30 days following the Company's receipt of the
Notice of Offer, (i) each other Stockholder of record shall notify the Company
and the Selling Stockholder as to the number of Offered Shares, if any, it is
electing to purchase (such notification is hereinafter referred to as the
"Stockholder's Acceptance" and such Stockholder electing to purchase Offered
Shares, an "Accepting Stockholder") and (ii) the Company shall notify the
Selling Stockholder as to the number of Offered Shares, if any, that it is
electing to purchase (such notification is hereinafter referred to as the
"Company's Acceptance" and, together with the Stockholder's Acceptance, as an
"Acceptance"); PROVIDED; HOWEVER, that the Company shall not be entitled to
purchase Offered Shares (and the Company's Acceptance shall be appropriately
limited) if, and to the extent that, (x) at the time of such purchase any
Preferred Shares or
34
Common Shares are held by a Regulation Y Stockholder, and the effect of such
purchase would be to increase above 24.9% the percentage of equity of the
Company owned, held or controlled by such Regulation Y Stockholder, (y) the
effect of such purchase would be to create a Control Block or (z) such purchase
would be prohibited by the Certificate of Incorporation. If any Stockholder
does not provide a Stockholder's Acceptance to the Company and the Selling
Stockholder, or if the Company does not deliver a Company Acceptance to the
Selling Stockholder, within such period, such Stockholder or the Company, as
applicable, shall be deemed to have declined to purchase any of the Offered
Shares. A Stockholder's Acceptance and the Company's Acceptance each shall be
deemed to be an irrevocable commitment to purchase from the Selling Stockholder
the number of Offered Shares which such Stockholder or the Company has elected
to purchase pursuant to its Acceptance, subject to allocation of the Offered
Shares among Stockholders accepting the Notice of Offer, and the Company if it
has accepted the Notice of Offer, as hereinafter provided. The election by the
Company to purchase Offered Shares shall be made on behalf of the Company by a
majority of those members of the Board of Directors of the Company who have not
been designated by, and are not affiliated or associated with, the Selling
Stockholder.
3.3.3. If the Stockholders (other than the Selling Stockholder)
and the Company have elected to purchase a
35
number of Offered Shares that in the aggregate exceeds the total number of
Offered Shares, the Offered Shares shall be allocated among the Accepting
Stockholders, if any, and the Company, as follows:
(a) In the case of a sale of Institutional Preferred
Shares, (i) first, among the Institutional Investors that are Accepting
Stockholders, as nearly as possible in proportion to the number of Common
Share Equivalents held by such Institutional Investors (provided that for
purposes of this Section 3.3.3(a), the JPM Related Investors shall be deemed
to be a single Institutional Investor and the Clipper Related Investors shall
be deemed to be a single Institutional Investor and may, in each case,
allocate among themselves the total number of Offered Shares purchasable by
Persons within each such group); (ii) second, among those Institutional
Investors, if any, that are Accepting Stockholders and that elected to
purchase more Preferred Shares than the number to which they are entitled
under clause (i), as nearly as possible in proportion to the number of Common
Share Equivalents held by such Institutional Investors; (iii) third, among
any other Accepting Stockholders, if any, as nearly as possible in proportion
to the number of Common Share Equivalents then held by such other Accepting
Stockholders; (iv) fourth, among those other Accepting Stockholders that
elected to purchase more Preferred Shares than the number to which they are
entitled under clause (iii), as nearly as possible in proportion
36
to the number of Common Share Equivalents held by such Accepting
Stockholders; and (v) last, any remainder to the Company (subject to the
limitations on purchases by the Company set forth in Section 3.3.2);
(b) In the case of a sale of Common Shares or shares of
Series C Stock by a Selling Stockholder that is an Existing Stockholder (or a
Permitted Transferee of an Existing Stockholder), (i) first, the Company shall
be entitled to purchase the number of Offered Shares it elected to purchase in
the Company Acceptance (subject to the limitations on purchases by the Company
set forth in Section 3.3.2); (ii) second, among the Existing Stockholders (and
their Permitted Transferees) that are Accepting Stockholders, as nearly as
possible in proportion to the number of Common Share Equivalents then held by
such Existing Stockholders (and their Permitted Transferees); (iii) third, among
those Existing Stockholders (and their Permitted Transferees), if any, that are
Accepting Stockholders and that elected to purchase more Common Shares or shares
of Series C Stock, as the case may be, than the number to which they are
entitled under clause (ii), as nearly as possible in proportion to the number of
Common Share Equivalents held by such Accepting Stockholders; (iv) fourth, among
any other Accepting Stockholders, if any, as nearly as possible in proportion to
the number of Common Share Equivalents then held by such other Accepting
Stockholders (provided that for purposes of this
37
Section 3.3.3(b), the JPM Related Investors that are Accepting Stockholders
shall be deemed to be a single Accepting Stockholder and the Clipper Related
Investors that are Accepting Stockholders shall be deemed to be a single
Accepting Stockholder and may, in each case, allocate among themselves the total
number of Offered Shares purchasable by Persons within each such group); and (v)
any remainder among those other Accepting Stockholders, if any, that elected to
purchase more Common Shares or shares of Series C Stock, as the case may be,
than the number to which they are entitled under clause (iv), as nearly as
possible in proportion to the number of Common Share Equivalents held by such
Accepting Stockholders; and
(c) In the case of a sale of Common Shares by a Selling Stockholder
other than an Existing Stockholder (or its Permitted Transferee), (i) first, the
Company shall be entitled to purchase the number of Offered Shares it elected to
purchase in the Company Acceptance (subject to the limitations on purchases by
the Company set forth in Section 3.3.2); (ii) second, among the Investors (and
their Permitted Transferees), that are Accepting Stockholders as nearly as
possible in proportion to the number of Common Share Equivalents then held by
such Investors (and their Permitted Transferees) (provided that for purposes of
this Section 3.3.3(c), the JPM Related Investors that are Accepting Stockholders
shall be deemed to be a single Accepting Stockholder and the Clipper Related
Investors that are Accepting Stockholders
38
shall be deemed to be a single Accepting Stockholder and may, in each case,
allocate among themselves the total number of Offered Shares purchasable by
Persons within each such group); (iii) third, among those Investors (and their
Permitted Transferees), if any, that are Accepting Stockholders and that elected
to purchase more Common Shares than the number to which they are entitled under
clause (ii), as nearly as possible in proportion to the number of Common Share
Equivalents held by such Accepting Stockholders; (iv) fourth, among any other
Accepting Stockholders, if any, as nearly as possible in proportion to the
number of Common Share Equivalents then held by such Accepting Stockholders; and
(v) any remainder among those other Accepting Stockholders, if any, that elected
to purchase more Common Shares than the number to which they are entitled under
clause (iv), as nearly as possible in proportion to the number of Common Share
Equivalents held by such Accepting Stockholders.
This Section 3.3.3 shall be construed and given effect in such manner that no
Stockholder nor the Company shall be required or entitled to purchase a number
of Offered Shares greater than the number set forth in its Stockholder
Acceptance or Company Acceptance, as applicable. The Company shall promptly
notify each Accepting Stockholder, if any, of the number of shares allocated to
it, and each such Accepting Stockholder shall be obligated to purchase at the
Offer Price such shares, and the Company shall be obligated to purchase at the
Offer Price the
39
number of shares allocated to it in accordance with the foregoing provisions, at
a closing as set forth in Section 3.3.5.
3.3.4 If the Accepting Stockholders and the Company do not
elect to purchase all of the Offered Shares available for purchase under this
Section 3.3, the Selling Stockholder (a) shall be under no obligation to sell
any of the Offered Shares to any other Stockholder or the Company, unless the
Selling Stockholder so elects, and (b) may, within a period of six months from
the date of the Notice of Offer, subject to the provisions of Section 3.4 if
applicable, and subject to the approval of the Board of Directors of the Company
as described below, sell the Offered Shares to one or more third parties (each a
"Third Party Transferee") for cash at a price per share not less than the Offer
Price, and on such other terms and conditions as are no more favorable to the
proposed Third Party Transferee than those specified in the Notice of Offer;
PROVIDED, HOWEVER, that the right of any Stockholder to sell any Offered Shares
to any proposed Third Party Transferee pursuant to this Section 3.3 shall be
subject to the right of the Company, acting by the vote of a majority of the
members of the Board of Directors who have not been designated by, and are not
affiliated or associated with the Selling Stockholder or the proposed Third
Party Transferee, to disapprove such proposed Third Party Transferee based on a
reasonable determination by such members of the Board of Directors of the
Company that such proposed Third Party Transferee's ownership of Offered Shares
would be substantially
40
detrimental to the business of the Company. Upon any such sale, the Third Party
Transferee of such Offered Shares shall execute an agreement in form and
substance reasonably satisfactory to the Company and the Stockholders pursuant
to which such Third Party Transferee agrees that the Offered Shares it acquired
from the Selling Stockholder are subject to the provisions of this Agreement.
Any Third Party Transferee to whom Offered Shares are transferred pursuant to
and in compliance with this Section 3.3.4 shall, with respect to such shares
upon consummation of such transfer, be deemed a Stockholder, and any such Third
Party Transferee of an Institutional Investor shall, upon consummation of such
transfer, be deemed an Institutional Investor for purposes of this Agreement
(subject to the last sentence of Section 8.5 hereof). If the Selling
Stockholder does not complete the sale of the Offered Shares within such
six-month period, the provisions of this Section 3.3 shall again apply, and no
sale of such Offered Shares by the Selling Stockholder shall be made otherwise
than in accordance with the terms of this Agreement.
3.3.5 The closing of purchases of Offered Shares by the Company
and/or other Stockholders pursuant to this Section 3.3 shall take place no later
than 60 days after the date of the Notice of Offer, at 10:00 A.M. local time at
the principal offices of the Company, or at such other date, time or place as
the parties to the sale may agree. At least five (5) business days prior to
such closing, the Company shall notify the Selling
41
Stockholder(s) in writing of the names of purchasers and the portion of the
Offered Shares to be purchased by each. At such closing, the Selling
Stockholder(s) shall sell, transfer and deliver to each purchaser full right,
title and interest in and to the Offered Shares so purchased by such purchaser,
free and clear of all liens, security interests, adverse claims or restrictions
of any kind and nature (except as otherwise set forth in this Agreement and the
other Operative Documents), and shall deliver to each purchaser a certificate or
certificates representing the Offered Shares sold to such purchaser, in each
case duly endorsed for transfer or accompanied by appropriate stock transfer
powers duly endorsed with signatures guaranteed by a commercial bank, trust
company or registered broker dealer and any other documents necessary for
transfer. Simultaneously with delivery of such certificates, each purchaser of
the Offered Shares shall deliver to the Selling Stockholder(s), by wire transfer
of immediately available funds to such bank account as the Selling
Stockholder(s) shall designate, a cash amount equal to the product of the Offer
Price and the number of Offered Shares being acquired by such purchaser, in full
payment of the purchase price of the Offered Shares purchased.
3.3.6 The rights of first offer provided under this Section 3.3
shall terminate upon the completion by the Company of a Qualified Public
Offering.
3.3.7 Notwithstanding anything in this Section 3.3 to the
contrary, (i) if any Existing Stockholder (or its
42
Permitted Transferee) shall purchase any shares of Series A Stock or Series B
Stock pursuant to this Section 3.3, then as a condition precedent to the
consummation of such purchase, such Existing Stockholder (or its Permitted
Transferee) shall immediately convert any shares of Series A Stock or Series B
Stock (after first converting such shares into Series A Stock) so purchased into
a like number of shares of Series C Stock or (ii) if any Regulation Y
Stockholder shall have the right to purchase any shares of Series A Stock,
Series C Stock or Common Stock pursuant to this Section 3.3, then such
Regulation Y Stockholder shall have the right under this Section 3.3 to
purchase, in lieu of any such voting securities, an identical number of shares
of Series B Stock or Non-Voting Common Stock, as the case may be, and the
Selling Stockholder(s), at the request of any such Regulation Y Stockholder,
shall cause any shares of Series A Stock, Series C Stock or Common Stock to be
converted into a like number of Series B Stock or Non-Voting Common Stock, as
the case may be, prior to consummation of such purchase.
3.4 RIGHT TO JOIN IN SALE.
3.4.1 If any one or more Stockholders (the "Selling
Stockholders") propose in a single transaction or series of related transactions
to transfer a number of Common Shares and/or Preferred Shares, as the case may
be, representing 5% or more of the Common Share Equivalents held by the
Stockholders (a "Transaction"), including, without limitation, pursuant to
Section 3.3 (including a transfer to the Company, to the other
43
Stockholders or to a third party), then the Selling Stockholders shall refrain
from effecting a Transaction unless, prior to the consummation thereof, each
Stockholder (in the case of a transfer of Common Shares) or each Stockholder
holding Preferred Shares (in the case of a transfer of Preferred Shares) other
than the Selling Stockholders shall have been afforded the opportunity to join
in such transfer on a pro rata basis, as hereinafter provided. Any purported
transfer subject to this Section 3.4 not made in compliance with this Section
3.4 shall be void and shall not be consummated upon the books and records of the
Company.
3.4.2 Prior to the consummation of any Transaction, the Selling
Stockholders shall cause each person or persons that propose to acquire Common
Shares or Preferred Shares in the Transaction (the "Proposed Purchasers") to
offer (the "Purchase Offer") in writing to each other Stockholder (in the case
of a transfer of Common Shares) or each other Stockholder holding Preferred
Shares (in the case of a transfer of Preferred Shares) to purchase that number
of Common Shares (or, at the election of such other Stockholder, Common Share
Equivalents) (in the case of a transfer of Common Shares) or Preferred Shares
(in the case of a transfer of Preferred Shares) from each such other Stockholder
that constitutes the same percentage of the aggregate Common Share Equivalents
(in the case of a transfer of Common Shares) or Preferred Shares (in the case of
a transfer of Preferred Shares) held by such other Stockholder as the percentage
determined by dividing the number of Common Shares (in
44
the case of a transfer of Common Shares) or Preferred Shares (in the case of a
transfer of Preferred Shares) to be purchased from the Selling Stockholders by
the aggregate number of Common Share Equivalents (in the case of a transfer of
Common Shares) or Preferred Shares (in the case of a transfer of Preferred
Shares) held by the Selling Stockholders, at the same price per share (the
"Joining Price"), and on such other terms and conditions (the "Joining Terms"),
as the Proposed Purchaser has offered to purchase Common Shares or Preferred
Shares, as the case may be, to be sold by the Selling Stockholders.
Notwithstanding the foregoing, if the Proposed Purchasers are acquiring Common
Shares or Preferred Shares in a series of related transactions, or in a single
transaction or series of related transactions from multiple Selling
Stockholders, (i) the Joining Price shall be the highest of the prices offered
by any Proposed Purchaser to any Selling Stockholder in any one of such
transactions, and (ii) the Joining Terms shall be those terms offered by any
Proposed Purchaser to any Selling Stockholder in any one of such transactions
which are most favorable to the offeree. Each Stockholder shall have at least
30 days from the receipt of the Purchase Offer in which to accept the Purchase
Offer and, to the extent any such Stockholder accepts such Purchase Offer in
accordance with the terms hereof, the number of Common Shares or Preferred
Shares, as the case may be, to be sold by the Selling Stockholders shall be
reduced.
45
3.4.3 The provisions of this Section 3.4 shall not apply to (w)
Rule 144 Sales, (x) a sale of shares in a public offering, (y) any redemption of
shares of Preferred Stock by the Company in accordance with the Certificate of
Incorporation or (z) transfers to Permitted Transferees in accordance with
Section 3.2. In the event that a transfer subject to this Section 3.4 is
proposed to be made to a Person other than a Stockholder or the Company, the
Selling Stockholders shall notify such Person that the transfer is subject to
this Agreement and shall ensure that no transfer is consummated without
compliance with this Section 3 or the Company.
3.5 CONTROL BLOCK. In addition to each other restriction on
transfer contained in this Agreement, no Stockholder shall (i) sell, assign,
transfer or otherwise dispose of any Common Shares or Preferred Shares or (ii)
purchase or otherwise acquire any Common Shares or Preferred Shares if, as a
result of such transaction, any Person or group of Affiliated Persons would own
more than 49.9% of the Voting Stock Equivalents then outstanding (a "Control
Block"). In addition, the Company will not, directly or indirectly, redeem,
sell, purchase or take any other action affecting the Common Shares or Preferred
Shares which would result in any Person or group of Affiliated Persons owning a
Control Block. Nothing in this Section 3.5 shall preclude (x) any sale of all
or substantially all of the Common Shares or Preferred Shares in connection with
a proposed sale of the Company to any third party or (y) any merger or
consolidation
46
of the Company with or into any other entity which, in either case, has been
approved by the Board of Directors of the Company and in which one or more third
parties would acquire beneficial ownership of 50.1% or more of the Common Shares
or Preferred Shares. This Section 3.5 shall terminate upon the completion by
the Company of a Qualified Public Offering.
Section 4. PREEMPTIVE RIGHTS. The Company hereby grants to each
Stockholder a preemptive right to purchase all or any part of such Stockholder's
"pro rata share" (as defined in this Section 4) of any "New Securities" (as
defined in this Section 4) that the Company may, from time to time, propose to
sell or issue. Such preemptive right shall be subject to the following
provisions of this Section 4.
4.1 "PRO RATA SHARE". A Stockholder's "pro rata share," for
purposes of this Section 4, is the ratio that (i) the number of Common Share
Equivalents then held by such Stockholder bears to (ii) the total number of
Common Share Equivalents then held by all Stockholders; PROVIDED, HOWEVER, that
for purposes of the determination of a Stockholder's "pro rata share" pursuant
to this Section 4, the JPM Related Investors shall be deemed to be a single
Stockholder and the Clipper Related Investors shall be deemed to be a single
Stockholder and may, in each case, allocate among themselves the total number of
New Securities purchasable by Persons within each such group.
47
4.2 "NEW SECURITIES". "New Securities" shall mean any shares of
capital stock of the Company, including Common Shares and Preferred Shares,
whether now authorized or not, and any rights, options or warrants to purchase
such Common Shares or Preferred Shares, and any Convertible Securities of any
type whatsoever; PROVIDED, HOWEVER, that "New Securities" shall not include
(i) securities issuable upon exercise or conversion of securities outstanding on
the date hereof, (ii) securities sold by the Company pursuant to Section 1.3 of
the Purchase Agreement (and any securities issuable upon conversion of such
securities), (iii) securities offered to the public generally pursuant to an
effective registration statement under the Securities Act, (iv) securities
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of shares, purchase of substantially all of the assets, or
other reorganization whereby the Company acquires not less than fifty-one
percent (51%) of the voting power of such corporation, (v) Common Shares issued
to officers, directors or employees of, or consultants to, the Company pursuant
to stock options outstanding on the date hereof or stock options granted after
the date hereof on terms approved by the Board of Directors of the Company
(including a majority of the members of the Board of Directors who are not
officers or employees of the Company (or any relative thereof)), up to a maximum
of 2,750,000 Common Shares in the aggregate or such greater amount as may be
approved by the Requisite Investors (as adjusted for any stock splits, stock
dividends or stock combinations), (vi) up to 120,000 Common
48
Shares issued to ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ upon exercise of stock options granted
pursuant to that certain letter agreement, dated as of January 15, 1997 between
the Company and ▇▇. ▇▇▇▇▇▇▇▇, (vii) up to 450,000 Common Shares issued to ▇▇.
▇▇▇▇▇ ▇▇▇▇ upon exercise of stock options granted to ▇▇. ▇▇▇▇ upon such terms
and conditions as shall be approved by the Compensation Committee, (viii) shares
of the Company's capital stock issued pursuant to any rights or agreements
including, without limitation, Convertible Securities, provided that the
preemptive rights established by this Section 4 apply with respect to the
initial sale or grant by the Company of such rights or agreements, (ix) shares
of the Company's capital stock issued in connection with any stock split, stock
dividend, or recapitalization by the Company or (x) Common Shares issuable upon
exercise of stock options to be granted to the chief executive officer of the
Company on or prior to December 31, 1997 upon such terms and conditions as shall
be approved by (i) the Compensation Committee of the Board of Directors of the
Company and (ii) Investors holding a majority of the Common Share Equivalents
then held by the Investors.
4.3 PROCEDURE. In the event that the Company proposes to undertake
an issuance of New Securities, the Company shall give each Stockholder written
notice of its intention, describing the type of New Securities and the price and
general terms upon
49
which the Company proposes to issue the same. Each Stockholder shall have
fifteen (15) days from the date any such notice is given to agree to purchase
all or any part of its pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
4.4 NONVOTING SECURITIES. In the event that the New Securities to
be issued are voting securities, a Regulation Y Stockholder shall have the right
under this Section 4 to purchase, in lieu of its pro rata share of such voting
securities, an identical number of non-voting securities that have the same
dividend and liquidation rights as such voting securities and that are
convertible, in whole or in part, on a share-for-share basis, into such voting
securities at the option of such Regulation Y Stockholder in the same manner and
to the same extent that Nonvoting Common Stock is convertible into Common Stock.
4.5 FAILURE TO EXERCISE PREEMPTIVE RIGHTS. In the event that any
Stockholder fails to exercise in full its preemptive right within such fifteen
(15) day period, the Company shall have ninety (90) days thereafter to sell the
New Securities with respect to which any such Stockholder's preemptive rights
were not exercised, at a price and upon general terms no more favorable to the
purchasers thereof than specified in the Company's notice. In the event the
Company has not sold the New
50
Securities within such ninety (90) day period, the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Stockholders in the manner provided above.
4.6 TERMINATION OF PREEMPTIVE RIGHTS. The preemptive right granted
under this Section 4 shall expire upon the completion by the Company of a
Qualified Public Offering.
Section 5. REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto severally, as to itself or himself, and not jointly hereby represents and
warrants to each of the other parties to this Agreement that:
(i) such party has the full right, power and authority to execute,
deliver and perform this Agreement (and any other agreements or instruments to
be executed by such party in connection herewith) and to bind all persons or
entities, if any, for which it is acting pursuant to this Agreement;
(ii) this Agreement has been duly executed and delivered by or on
behalf of such party and constitutes (and each other agreement or instrument to
be executed by such party in connection herewith will, upon such execution, have
been duly executed and delivered by or on behalf of such party and will
constitute) a legal, valid and binding obligation of such party and all persons
or entities, if any, for which such party is acting, enforceable against such
party, and all such persons or entities, if any, for which it is acting, in
accordance with its
51
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting the rights of creditors generally or by the
application of general equity principles;
(iii) no consent, approval, authorization or order of any Person is
required for the execution, delivery or performance of this Agreement (or any
such other agreement or instrument) by such party or any such persons or
entities, if any, for which it is acting; and
(iv) neither the execution, delivery nor performance of this
Agreement (or any such other agreement or instrument) by such party or any such
persons or entities, if any, for which it is acting will (A) conflict with, or
result in a breach of, or constitute a default under, or result in a violation
of, any agreement or instrument to which such party or any such persons or
entities, if any, for which it is acting is a party or by which such party or
any such persons or entities, if any, for which it is acting or their property
is bound, or (B) result in the violation of any applicable law or order,
judgment, writ, injunction, decree or award or any Governmental Authority.
Each of the parties hereto agrees that the representations and
warranties set forth in this Section 5 shall survive the execution and delivery
of this Agreement.
Section 6. TERMINATION OF EXISTING VOTING AGREEMENTS. By executing
this Agreement, each Existing
52
Stockholder and the Company agree that any "stockholders agreement," "voting
agreement," proxy or similar agreement or arrangement relating to the Company or
the securities of the Company to which such Stockholder or the Company is a
party or by which such Stockholder or the Company may be bound are hereby
terminated. The Company hereby represents and warrants to the Investors that no
other "stockholder agreements," "voting agreement," proxy or similar agreement
or arrangement to which the Company is a party or by which it is bound exists on
the date hereof. Each Existing Stockholder hereby represents and warrants to
the Investors that no other "stockholder agreements," "voting agreement," proxy
or similar agreement or arrangement relating to the Company or the securities of
the Company to which such Stockholder is a party or by which such Stockholder is
bound exists on the date hereof.
Section 7. CONFIDENTIALITY.
7.1.1 Each Stockholder agrees that, unless the Company
otherwise consents, such Stockholder will maintain the confidentiality of any
confidential information relating to, and provided to it by, the Company or any
of its subsidiaries; PROVIDED, HOWEVER, that any Stockholder may disclose any
such information (i) to such Stockholder's Affiliates, and to such Stockholder's
and such Affiliates' officers, directors, employees, partners, agents,
accountants, counsel and other professional advisors, (ii) that is or has become
generally available to the public, (iii) as may be required or appropriate
53
in any filing, report, statement or testimony submitted to any Governmental
Authority, (iv) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation, (v) to comply with any law,
order, regulation or ruling applicable to such Stockholder, and (vi) to any
prospective transferee in connection with any contemplated transfer of any of
the Common Shares or Preferred Shares (or any interest therein), as the case may
be, by such Stockholder, provided that such prospective transferee agrees to be
bound by this Section 7 to the same extent as such Stockholder; and PROVIDED,
FURTHER, that Clipper Capital Associates, L.P. or its Affiliates also may
disclose any such information to current or prospective investors in connection
with any fund raising activities sponsored by Clipper Capital Associates, L.P.
or such Affiliates.
7.1.2 Nothing in this Section 7 is intended to or shall amend,
modify or otherwise impair any other agreement between the Company and any of
the Stockholders which may contain more restrictive provisions with respect to
non-disclosure of confidential information with respect to the Company and its
subsidiaries.
Section 8. MISCELLANEOUS.
8.1 INJUNCTIVE RELIEF. Each party hereto acknowledges that it will
be impossible to measure in money the damages that would be suffered if any
party fails to comply with any of the
54
obligations herein imposed on such party and that in the event of any such
failure, an aggrieved person will be irreparably damaged and will not have an
adequate remedy at law. Any such Person shall, therefore, be entitled to
injunctive relief and/or specific performance to enforce such obligations, and
if any action should be brought in equity to enforce any of the provisions of
this Agreement, none of the parties hereto shall raise the defense that there is
an adequate remedy at law.
8.2 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
8.3 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Delaware without giving effect to the
choice of law principles thereof.
8.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement: (a)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (b) supersedes all prior written agreements and
negotiations and oral understandings, if any, with respect thereto, and (c) may
not be
55
amended or supplemented except by an instrument or counterparts thereof in
writing signed by the Company and by (i) Existing Stockholders holding a
majority of the shares of Common Stock held by the Existing Stockholders and
(ii) subject to Section 2.6, Investors holding a majority of the Common Share
Equivalents then held by the Investors. No waiver of any term or provision of
this Agreement shall be effective unless in writing signed by the party to be
charged. The waiver by any party of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
8.5 BINDING EFFECT. This Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns. The rights and obligations arising from this Agreement
shall be transferred in connection with the transfer by a Stockholder to any
Person of any shares of Common Stock or Preferred Shares in compliance with this
Agreement, other than in a registered public offering or in Rule 144 Sales, and
any such Person shall conclusively be deemed to have agreed to be bound by this
Agreement. Notwithstanding the foregoing, none of the rights of any Stockholder
or group of Stockholders to designate director(s) under the provisions of
Section 2 hereof shall be transferable, except to the extent provided in
Sections 2.1(b)(i) and 2.1.(b)(ii) hereof.
8.6 INVALIDITY OF PROVISION. The invalidity or unenforceability of
any provision of this Agreement in any
56
jurisdiction shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability of this
Agreement, including that provision, in any other jurisdiction.
8.7 NOTICE. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
(x) on the date of delivery, if delivered personally or by telecopier, receipt
confirmed, (y) on the second following business day, if delivered by a
recognized overnight courier service, or (z) seven days after mailing, if sent
by registered or certified mail, return receipt requested, postage prepaid, in
each case, to the party to whom it is directed at the address set forth opposite
his or its name on the signature pages hereto (or at such other address as any
party hereto shall hereafter specify by notice in writing to the other parties
hereto).
8.8 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument.
8.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this
57
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
8.10 ADDITIONAL INVESTORS. (a) Pursuant to Section 1.3(b) of the
Purchase Agreement, at any time on or before April 30, 1997, the Company may
sell up to an additional 1,333,333 shares of Series A Stock to such persons as
may be approved by the Board of Directors of the Company. Any such persons who
become "Investors" under the Purchase Agreement shall execute a counterpart of
this Agreement and thereafter shall be deemed to be "Other Investors" for all
purposes of this Agreement.
(b) As a condition precedent to the future grant of any stock option
and/or stock award by the Company to any person who is not then a party to this
Agreement, such person shall execute a counterpart of this Agreement and
thereafter shall be deemed to be an "Existing Stockholder" for all purposes of
this Agreement.
58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
ADDRESS: RAPID CAST, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By:
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
INVESTORS:
JPM INVESTORS
ADDRESS: ▇.▇. ▇▇▇▇▇▇ INVESTMENT CORPORATION
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇ By:
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
ADDRESS: SIXTY WALL STREET SBIC FUND, L.P.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇ By:
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
CLIPPER INVESTORS
ADDRESS: CLIPPER CAPITAL ASSOCIATES, L.P.
c/o Clipper Capital
Partners, L.P. By: Clipper Capital Associates, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ its general partner
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By:
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ --------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
59
ADDRESS: CLIPPER/MERCHANT PARTNERS, L.P.
c/o Clipper Capital
Partners, L.P. By: Clipper Capital Associates, L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ its general partner
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ By: Clipper Capital Associates,
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Inc., its general partner
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
ADDRESS: CLIPPER/MERBAN, L.P.
▇/▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ International Trust By: Clipper Capital Associates, L.P.
Company, N.V. its general partner
De ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ By: Clipper Capital Associates,
▇.▇. ▇▇▇ ▇▇▇ Inc., its general partner
Curacao Netherland Antilles
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: 011 5999 322 500 By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
ADDRESS: CLIPPER EQUITY PARTNERS I, L.P.
c/o Clipper Capital
Partners, L.P. By: Clipper Capital Associates, L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ its general partner
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ By: Clipper Capital Associates,
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Inc., its general partner
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
60
ADDRESS: CLIPPER/EUROPEAN RE, L.P.
▇/▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ International Trust By: Clipper Capital Associates, L.P.,
Company, N.V. its general partner
De ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ By: Clipper Capital Associates,
▇.▇. ▇▇▇ ▇▇▇ Inc., its general partner
Curacao Netherland Antilles
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: 011 5999 322 500 By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
61
OTHER INVESTORS:
ADDRESS:
▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ -------------------------------------------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
EXISTING STOCKHOLDERS:
ADDRESS: INCOMNET, INC.
Incomnet, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ By:
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ --------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇ RELATED SHAREHOLDERS
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇ -------------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇ -------------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ as custodian for
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ under the New York UGMA
62
COHEN RELATED SHAREHOLDERS
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇ ▇▇▇▇▇
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ -------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ as custodian for ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ COHEN and ▇▇▇▇▇ ▇▇▇▇▇ under the
New York UGMA
ADDRESS:
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ -------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ as custodian for ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ COHEN and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ under the
New York UGMA
ADDRESS: THE ▇▇▇▇▇▇▇ ▇▇▇▇▇ IRREVOCABLE TRUST
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇, as Trustee
ADDRESS: THE ▇▇▇▇▇▇▇ ▇▇▇▇▇ IRREVOCABLE TRUST
c/o Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇, as Trustee
63
ADDRESS: THE ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
c/o Rapid Cast, Inc. IRREVOCABLE TRUST
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇, as Trustee
ADDRESS:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
ADDRESS:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ as custodian for ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, TZYPPORAH
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ and YISSOCHAR ▇▇▇▇▇▇ under the
New York UGMA
ADDRESS:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
ADDRESS:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as custodian for ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ under the New
York UGMA
64
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
-------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Partner
-------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
ADDRESS:
Fast Cast Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇ -------------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇
ADDRESS:
Rapid Cast, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ -------------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
ADDRESS:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
ADDRESS:
Incomnet, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -------------------------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ADDRESS:
Winston & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. -------------------------------------------
Telecopy (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
65
ADDRESS:
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ -------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
66
