Exhibit 10.2
________________________________________________________________________________
FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JANUARY 8, 1999
BY AND AMONG
ALLIANCE NATIONAL INCORPORATED
AND
THE SECURITYHOLDERS IDENTIFIED HEREIN
________________________________________________________________________________
TABLE OF CONTENTS
RECITALS......................................................................1
ARTICLE I DEFINITIONS.................................................3
1.1 Defined Terms...............................................3
ARTICLE II BOARD; COMMITTEES..........................................12
2.1 Board of Directors.........................................12
2.2 Removal of Directors.......................................14
2.3 Committees.................................................14
2.4 Vacancies..................................................16
2.5 Proxies....................................................16
2.6 Compensation...............................................16
2.7 Subsidiary Boards..........................................16
ARTICLE III CERTAIN CORPORATE ACTION...................................16
3.1 Approval of Certain Board Action...........................16
3.2 Approval of Certain Stockholders...........................20
3.3 Appointment of Appraiser...................................20
3.4 Appointment of Certain Executive Personnel.................21
ARTICLE IV TRANSFER OF SHARES.........................................21
4.1 Restrictions on Transfer...................................21
4.2 Certain Permitted Transfers................................21
4.3 Rights of First Refusal....................................23
4.4 Restrictions in Connection with Registrations..............26
4.5 Tag-Along Right............................................27
4.6 Transfers to a Competitor..................................28
4.7 Sales of Xxxxx Securities..................................29
4.8 Sale of the Company........................................31
4.9 Repurchase of Equity Interests.............................32
4.10 Restrictions Following Qualified Public Offering...........32
ARTICLE V PUT........................................................33
5.1 Ability to Put.............................................33
5.2 Put Price..................................................36
5.3 Appraisal Procedure........................................37
5.4 Consent Required to Put....................................37
ARTICLE VI REGISTRATION RIGHTS........................................38
6.1 Public Offering Shares.....................................38
i
ARTICLE VII PREEMPTIVE RIGHTS...............................................46
7.1 Preemptive Rights..........................................46
7.2 Standstill.................................................50
ARTICLE VIII TERMINATION....................................................50
8.1 Termination................................................50
ARTICLE IX MISCELLANEOUS..............................................53
9.1 Information................................................53
9.2 Certificate Legend.........................................54
9.3 Negotiable Form............................................54
9.4 Enforcement................................................55
9.5 Specific Performance.......................................55
9.6 Transferees................................................55
9.7 Notices....................................................55
9.8 Binding Effect; Assignment.................................65
9.9 Governing Law..............................................65
9.10 Severability...............................................65
9.11 Entire Agreement...........................................66
9.12 Counterparts...............................................66
9.13 Amendment; Waiver..........................................66
9.14 Captions...................................................66
9.15 Waivers....................................................66
9.16 Subsequent Option Grants...................................67
9.17 Non-Competition............................................67
SCHEDULE 1 Holdings of Securityholders
SCHEDULE 2 Series C Adjusted Fully Diluted Capitalization
Sample Calculation
SCHEDULE 3 List of Certain Officers
ii
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT OF
ALLIANCE NATIONAL INCORPORATED
STOCKHOLDERS' AGREEMENT dated as of January 8, 1999 (this "Agreement")
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by and among ALLIANCE NATIONAL INCORPORATED, a Nevada corporation (the
"Company"); the parties identified on the signature pages under the heading
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"Xxxxxx, Xxxxxxx Holders" (the "Xxxxxx Holders"); the parties identified on the
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signature pages under the heading "Northwood Holders" (the "Northwood Holders");
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the party identified on the signature pages under the heading "Paribas Holder"
(the "Paribas Holder"); the party identified on the signature pages under the
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heading "PNA Holder" (the "PNA Holder"); the parties identified on the signature
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pages under the heading "Unit Holders" (the "Unit Holders"); the parties
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identified on the signature pages under the heading the "Series C Holders" (the
"Series C Holders"); and the parties identified on the signature pages under the
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heading "Other Holders" (collectively, the "Other Holders"). The Xxxxxx Holders,
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the Northwood Holders, the Paribas Holder, the PNA Holder, the Unit Holders, the
Series C Holders, and the Other Holders are referred to herein collectively as
the "Securityholders".
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RECITALS
A. The Company entered into a Series A Convertible Preferred Stock
Purchase Agreement, dated as of November 15, 1996 (the "First Series A Stock
---------------------
Purchase Agreement"), with the Xxxxxx Holders, pursuant to which the Xxxxxx
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Holders acquired shares of the Company's Series A Convertible Preferred Stock
and warrants on the terms and conditions set forth therein.
B. The Company entered into a Stockholders' Agreement, dated as of
November 15, 1996 (the "Initial Stockholders' Agreement"), with the Xxxxxx
---------------------------------
Holders and certain of the Other Holders identified therein.
C. The Company entered into a Series A Convertible Preferred Stock
Purchase Agreement, dated as of December 31, 1996 (the "Second Series A Stock
----------------------
Purchase Agreement"), with the Northwood Holders, pursuant to which the
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Northwood Holders acquired shares of the Company's Series A Convertible
Preferred Stock and warrants on the terms and conditions set forth therein.
D. The Company entered into Subscription Agreements, dated as of
December 30, 1996 and January 14, 1997, with certain of the Other Holders
pursuant to which each of them acquired shares of the Company's Series A
Convertible Preferred Stock and warrants on the terms and conditions set forth
therein.
E. The Company entered into an Amended and Restated Stockholders'
Agreement, dated as of December 31, 1996 (the "First Restated Stockholders'
------------------------------
Agreement"), with the Xxxxxx Holders, the Northwood Holders and the Other
---------
Holders who subscribed for Series A Preferred Stock, which amended, restated and
superseded in its entirety the Initial Stockholders' Agreement.
1
F. The Company entered into an Amendment No. 1, dated as of January 14,
1997 ("Amendment No. 1"), to the First Restated Stockholders' Agreement with the
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Xxxxxx Holders, the Northwood Holders and the Other Holders who subscribed for
Series A Preferred Stock.
G. The Company entered into a Second Amended and Restated Stockholders'
Agreement, dated as of February 15, 1997 (the "Second Restated Stockholders
------------------------------
Agreement"), with the Xxxxxx Holders, the Northwood Holders, the Other Holders
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who subscribed for Series A Preferred Stock, and the Paribas Holder which
amended, restated and superseded in its entirety the First Restated Stockholders
Agreement.
H. The Company entered into a Series B Convertible Preferred Stock
Purchase Agreement, dated as of April 29, 1998 (the "Series B Stock Purchase
------------------------
Agreement"), with the PNA Holder, the Xxxxxx Holders, the Northwood Holders and
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certain of the Other Holders, pursuant to which such Securityholders acquired
shares of the Company's Series B Convertible Preferred Stock.
I. The Company entered into a Third Amended and Restated Stockholders'
Agreement, dated as of April 29, 1998 (the "Third Restated Stockholders
-----------------------------
Agreement"), with the Xxxxxx Holders, the Northwood Holders, the Other Holders,
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the PNA Holder and the Paribas Holder which amended, restated and superseded in
its entirety the Second Restated Stockholders Agreement.
J. The Company entered into Series B Convertible Stock Purchase
Agreements dated as of December 21, 1998 with the holders of units of limited
partnership interest (the "Unit Holders") of certain limited partnerships, of
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which various Subsidiaries of the Company are the general partners, pursuant to
which such Unit Holders exchanged their units of limited partnership interest
for shares of the Company's Series B Convertible Preferred Stock.
K. The Company entered into an Amended and Restated Credit Agreement
dated as of November 6, 1998 (as such agreement may be amended, supplemented,
refinanced, modified or replaced, the "Credit Agreement") with certain financial
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institutions party thereto from time to time and Paribas, as Agent, or any other
successor Agent thereto.
L. On the date hereof, ALLIANCE Holding, Inc., a wholly owned
subsidiary of the Company, was merged with and into Interoffice Superholdings
Corporation ("Interoffice"), and, immediately thereafter, ANI Holding, Inc., a
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wholly owned subsidiary of the Company, was merged with and into Reckson
Executive Centers, Inc. ("REC"), in each case pursuant to the respective merger
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agreements (the "Merger Agreements") and in connection with such mergers (the
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"Mergers"), the Series C Holders exchanged all of their shares of capital stock
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of REC and Interoffice for shares of the Company's Series C Convertible
Preferred Stock.
M. On the date hereof, each Securityholder owns the shares of capital
stock of the Company or options or warrants exercisable for shares of capital
stock of the Company set forth opposite his, her or its name on Schedule 1
hereto.
2
N. The Securityholders desire to enter into this Agreement with the
Company which shall amend, restate and supersede in its entirety the Fourth
Restated Stockholders' Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms are defined as follows:
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(a) "Adjusted Fully Diluted Capitalization" shall mean the
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number of issued and outstanding shares of Common Stock,
assuming that (i) any Options or Warrants outstanding as
of the date of this Agreement, and any Options
outstanding under the Company's 1996 Stock Option Plan,
whether or not outstanding as of the date of this
Agreement, have been exercised in full, (ii) any
outstanding options or warrants to purchase Common Stock
or to purchase any security convertible into or
exchangeable for Common Stock, other than those described
in clause (i) hereof, that are Exercisable and that have
an exercise price that is lower than the then fair market
value of the Common Stock, have been exercised in full,
and (iii) any outstanding securities that are then
convertible into or exchangeable for Common Stock have
been converted or exchanged in full.
(b) "Affiliate" shall mean, with respect to any Person, (i)
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any Person that directly or indirectly Controls, is
Controlled by, or is under common Control with, such
Person, (ii) any executive officer (as such term is
defined by Rule 501 promulgated under the Securities Act)
or director (or individual with a similar capacity) of
such Person, and (iii) when used with respect to an
individual, shall include the Family Group Members of
such individual.
(c) "Annual Budget" shall mean the budget for the Company and
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its Subsidiaries in respect of each fiscal year of the
Company which shall include, without limitation, a cash
flow projection, an operating budget, a capital
expenditures budget and an acquisition budget.
(d) "Xxxxx Employment Agreement" shall mean that certain
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Employment Agreement, dated as of November 15, 1996,
between the Company and Xxxxx X. Xxxxx.
(e) "Beneficially Own" shall have the meaning given such term
----------------
under Rule 13d-3 promulgated under the Exchange Act. The
term "Beneficial Ownership" shall have the correlative
meaning. The foregoing terms shall exclude any record or
Beneficial Ownership in any securities issued by RSI or
any interest in JAH Realties L.P.
3
(f) "Blackout Period' shall mean the period commencing on the
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consummation of a Qualified Public Offering and ending on
the earliest to occur of (i) the second anniversary of
the consummation of the Qualified Public Offering, (ii)
the consummation of a secondary offering of the Common
Stock in which (X) the gross proceeds of such offering
equal or exceed 30% of the gross proceeds of the
Qualified Public Offering, and (Y) the offering price per
share of Common Stock is at least 10% higher than the
offering price per share of Common Stock in the Qualified
Public Offering (as adjusted to reflect stock dividends,
stock splits, stock combinations or any other similar
transaction occurring after the Qualified Public
Offering), and (iii) the presentation by any
Securityholder that is subject to restrictions on resale
during the Blackout Period of evidence reasonably
satisfactory to a majority of the other Securityholders
that are also subject to such restrictions that the
Company is capable of consummating an offering of the
type described in clause (ii) hereof. The parties agree
that the opinion of a bulge bracket underwriter to the
foregoing effect based on the then current market price
of the Common Stock, earnings multiples and any other
relevant factors shall automatically be satisfactory
evidence.
(g) "Board" shall mean the Board of Directors of the Company.
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(h) "Business Day" shall mean a day (other than a Saturday or
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Sunday) on which both federally and New York State
chartered banks are generally open for business in New
York City.
(i) "Certificates of Designation" shall mean the Series A
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Certificate of Designation, the Series B Certificate of
Designation and the Series C Certificate of Designation.
(j) "Commission" shall mean the Securities and Exchange
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Commission or any other federal agency at the time
administering the Securities Act.
(k) "Common Stock" shall mean the Company's common stock, par
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value $.01 per share, whether designated as Class A
Common Stock or Class B Common Stock.
(l) "Common Stock Equivalent" shall mean, with respect to any
-----------------------
Securityholder, the number of shares of Common Stock
owned by such Securityholder, plus the number of shares
of Conversion Stock, the number of Warrant Shares, and
the number of Option Shares which such Securityholder has
the right to acquire (or would upon the full vesting of
all Options have the right to acquire) by conversion or
exercise as of the date of determination thereof.
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(m) "Control" shall mean the power to direct the management
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and policies of any Person whether through voting
control, by contract or otherwise, and the terms
"Controls" and "Controlled" shall have the correlative
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meanings.
(n) "Conversion Stock" shall mean Common Stock issuable upon
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the conversion of the Series A Preferred Stock, the
Series B Preferred Stock or the Series C Preferred Stock.
(o) "Core Business" shall mean the business of the
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outsourcing of office operations both on an on-site and
off-site basis, and the outsourcing of business support
services to customers or clients of the Company which
purchase any of the Company's products or services.
(p) "Director" shall mean any member of the Board.
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(q) "Encumbrances" shall mean any and all liens, pledges,
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claims, charges, security interests, options or other
legal or equitable encumbrances and restrictions.
(r) "Exchange Act" shall mean the Securities Exchange Act of
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1934 or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
(s) "Exercisable" shall mean, with respect to any options or
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warrants to purchase Common Stock or any security
convertible into or exchangeable for Common Stock, that
at the time of determination, such options or warrants
may be exercised for Common Stock or any security
convertible into or exchangeable for Common Stock.
(t) "Family Group Members" shall mean (i) the parents,
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grandparents, brothers, sisters, descendants (whether
natural or adopted) and spouse of the specified
individual; (ii) any spouse or descendant of any
specified individual specified in clause (i) above; (iii)
any trust created solely for the benefit of any
individual described in clauses (i) through (ii) above;
(iv) any executor or administrator for any of the
individuals described in clauses (i) through (ii) above;
(v) any partnership solely of individuals described in
clauses (i) through (iv) above; and (vi) any tax exempt
corporate foundation created by any of the Persons
described in clauses (i) through (v) above exclusively
engaged in charitable purposes.
(u) "Fully Diluted Capitalization" shall mean the number of
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issued and outstanding shares of Common Stock assuming
full issuance of all Conversion Stock, Warrant Shares,
Option Shares and other shares of Common Stock issuable
upon exercise of any other options to purchase Common
Stock or any security convertible or exchangeable for
Common Stock and conversion of any such convertible or
exchangeable securities.
5
(v) "GAAP" shall mean generally accepted accounting
----
principles.
(w) "Incapacity" with respect to an individual, shall mean
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that a committee or conservator shall have been appointed
for such individual or his property.
(x) "Initial Public Offering" shall mean the consummation of
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either (i) a public offering that has received
Super-Majority Approval, or (ii) a Qualified Public
Offering.
(y) "Intercompany Agreement" means that certain Intercompany
-----------------------
Agreement, dated as of January 8, 1999, by and between
the Company and the RSI Holder.
(z) "JAH Beneficial Holders" shall mean (i) Xxx X. Xxxxxxx
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and any Person Controlled by him, (ii) any Family Group
Member of Xxx X. Xxxxxxx so long as Xxx X. Xxxxxxx has
the power to control, by contract or otherwise, the vote
of the Shares of Series C Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group
Member, and (iii) in the event of the death or Incapacity
of Xxx X. Xxxxxxx, any of his Family Group Members or any
conservator or committee who, as a result of his death,
obtain Beneficial Ownership of the Shares of Series C
Preferred Stock or Common Stock Equivalents, which were
Beneficially Owned by Xxx X. Xxxxxxx prior to his death
or Incapacity so long as Control with respect to such
Beneficial Ownership thereof resides in a single
individual.
(aa) "Majority of the Shares of Series A and Series B
--------------------------------------------------------
Preferred Stock" shall mean at least 66-2/3% of the
----------------
Shares of the Series A Preferred Stock and Series B
Preferred Stock (taken as a single class) issued and
outstanding at the time any such vote is taken.
(bb) "Majority of the Shares of Series C Preferred Stock"
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shall mean at least 50.1% of the Shares of the Series C
Preferred Stock issued and outstanding at the time any
such vote is taken.
(cc) "OnSite" shall mean OnSite Ventures, L.L.C.
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(dd) "OnSite Agreement" means the agreement to be entered into
----------------
between the Company and OnSite with respect to the
provision of Internet and telecommunications services to
the Company by OnSite.
6
(ee) "Option Plan" shall mean the Company's 1996 Stock Option
-----------
Plan, the Company's 1998 Stock Option Plan, or any other
stock option or phantom interest plan that has received
Super-Majority Approval.
(ff) "Options" shall mean (i) the options to purchase Common
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Stock, each originally dated as of June 30, 1996, issued
to Xxxxx X. Xxxxx, Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxxxx
and Xxxx X. Xxxxxx, (ii) the options to purchase Common
Stock, each originally dated as of November 1, 1996,
issued to Xxxxx X. Xxxxx, Xxxxx Xxxxxxx, Xxxxxxx X.
Xxxxxxxx and Xxxxxx X. Xxxxx, (iii) the option to
purchase Common Stock, originally dated as of August 4,
1998, issued to Xxxxx X. Xxxxx (as all of such options
described in clauses (i), (ii) and (iii) have been
amended and restated as of January 8, 1999), and (iv) any
options to purchase Common Stock granted under an Option
Plan.
(gg) "Option Shares" shall mean the shares of Common Stock of
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the Company issuable (or which may become issuable upon
vesting) upon the exercise of Options.
(hh) "Person" means any individual, proprietorship,
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partnership, corporation, limited liability company,
trust, estate, or other form of entity including, if
applicable, any governmental authority or agency.
(ii) "Prime Rate" shall mean the prime rate publicly announced
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by The Chase Manhattan Bank, N.A. from time to time.
(jj) "Pro Rata Share" with respect to any Securityholder shall
--------------
mean the percentage equal to the fraction obtained by
dividing the number of Common Stock Equivalents such
Securityholder owns by the aggregate number of all Common
Stock Equivalents owned by all Securityholders.
(kk) "Prohibited Business" shall mean the executive office
--------------------
suite business in which the Company is engaged at the
time of determination, taken as a whole and including (i)
on-site and off-site operations and (ii) any product or
service which is part of the executive office suite
business and is being actively pursued for development by
management of the Company and which has been presented to
the Executive Committee of the Company and not been
rejected thereby (provided that if such product or
service has been rejected and thereafter been taken to
the Board and not been rejected, such product or service
shall be considered part of the Prohibited Business). The
time of determination shall be the time of the
development of a business or the making of any investment
in question under Section 9.17 by any of the Persons
subject to the restrictions in Section 9.17.
7
(ll) "Qualified Public Offering" shall mean the consummation
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of a firm-commitment underwritten public offering
pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common
Stock for the account of the Company in which (i) the
aggregate gross proceeds of such offering equal or exceed
$75 million, (ii) the valuation of the Company (as
reflected by the quotient obtained by dividing (A) the
product of (1) the Adjusted Fully Diluted Capitalization
(giving effect to the Qualified Public Offering) and (2)
the aggregate gross proceeds of such offering by (B) the
number of shares of Common Stock sold in such offering)
equals or exceeds a multiple of 20 times the Company's
projected net income for the 12 month period following
the date of the most recent financial statements included
in the registration statement for such offering (which
projected net income shall be based on reasonable
assumptions that have been disclosed to the Board and
shall be determined in a manner consistent with the last
regularly prepared quarterly financial statements of the
Company, except for any change in accounting practices
made subsequent thereto with which the Company's
independent accountants concur and in accordance with
applicable financial standards (e.g. AICPA Professional
----
Standards Section 200 for a Financial Forecast)), and
(iii) the lead managing underwriter is either a "bulge
bracket" firm or BT Alex. Xxxxx Incorporated, NationsBank
Xxxxxxxxxx Securities LLC or Xxxxxxx Xxxxx & Company,
L.L.C. The assumptions used in determining projected net
income may include: (i) consistency in financial
reporting policies and procedures (except as otherwise
required or suggested by GAAP), (ii) the earnings growth
of the Company during the relevant (e.g., prior 2- year)
period, (iii) projected events and transactions during
the projected one year period per the Annual Budget (as
adjusted per variance analysis for the prior four
quarters) and the expected use of funds from the public
offering, (iv) financial effect (pro forma) of any
acquisitions that are likely to be consummated and (v)
such other factors as any investment banking firm
described above might consider in valuing the Company.
(mm) "Qualifying Series C Beneficial Holders" shall mean the
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RSI Beneficial Holders, the JAH Beneficial Holders, the
Xxxxxxxxxx Beneficial Holders, the Xxxxxx Beneficial
Holders and the Xxxxxx Beneficial Holders.
(nn) "Xxxxxxxxxx Beneficial Holders" shall mean (i) Xxxxxx
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Xxxxxxxxxx and any Person Controlled by him, (ii) any
Family Group Member of Xxxxxx Xxxxxxxxxx so long as
Xxxxxx Xxxxxxxxxx has the power to control, by contract
or otherwise, the vote of the Shares of Series C
Preferred Stock or Common Stock Equivalents Beneficially
Owned by such Family Group Member, and (iii) in the event
of the death or Incapacity of Xxxxxx Xxxxxxxxxx, any of
his Family Group Members or any conservator or committee
who, as a result of his death or Incapacity, obtain
Beneficial Ownership of the shares of Series C Preferred
Stock or the Common Stock Equivalents, which were
Beneficially Owned by Xxxxxx Xxxxxxxxxx prior to his
death. Notwithstanding the foregoing provisions of this
definition, no Person shall be deemed a Xxxxxxxxxx
Beneficial Holder with respect to any shares of Series C
Preferred Stock or Common Stock Equivalents which were
not acquired by a Xxxxxxxxxx Beneficial Holder either (i)
pursuant to the Merger Agreements, or (ii) by exercise of
a right to purchase under Article 4 or under Section 7.1
hereof.
8
(oo) "Registered Securities" shall mean securities that (i)
----------------------
have been registered under the Securities Act and (ii)
are of a class (A) listed on a national securities
exchange or designated for quotation on NASDAQ, and (B)
having an aggregate market value (which shall include
securities issued to the holders of the Company's
securities) of at least $50,000,000.
(pp) "Xxxxxx Beneficial Holders" shall mean (i) Xxxxxx Xxxxxx
--------------------------
and any Person Controlled by him, (ii) any Family Group
Member of Xxxxxx Xxxxxx so long as Xxxxxx Xxxxxx has the
power to control, by contract or otherwise, the vote of
the Shares of Series C Preferred Stock or Common Stock
Equivalents, and (iii) in the event of the death or
Incapacity of Xxxxxx Xxxxxx, any of his Family Group
Members or any conservator or committee who, as a result
of his death or Incapacity, obtain Beneficial Ownership
of the shares of Series C Preferred Stock or the Common
Stock Equivalents, which were Beneficially Owned by
Xxxxxx Xxxxxx prior to his death. Notwithstanding the
foregoing provisions of this definition, no Person shall
be deemed a Xxxxxx Beneficial Holder with respect to any
shares of Series C Preferred Stock or Common Stock
Equivalents which were not acquired by a Xxxxxx
Beneficial Holder either (i) pursuant to the Merger
Agreements, or (ii) by exercise of a right to purchase
under Article 4 or under Section 7.1 hereof.
(qq) "RSI" shall mean Reckson Service Industries, Inc.
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(rr) "RSI Beneficial Holders" shall mean RSI and any
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Affiliates of RSI Controlled by RSI, in each case for so
long as an acquisition of Control of RSI of the type
described in Section 4.6 has not occurred.
(ss) "Sale of the Company" shall mean (i) consummation of a
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merger or consolidation (or similar transaction) of the
Company with or into another Person that is not a direct
or indirect parent or subsidiary of the Company pursuant
to which all or substantially all of the then outstanding
shares of capital stock of the Company are converted or
exchanged into the right to receive cash or securities of
another Person, (ii) the consummation of the sale or
other disposition of all or substantially all of the
outstanding Shares, Options and Warrants that are the
subject of this Agreement to a Person that is not a
direct or indirect parent or Subsidiary of the Company or
(iii) the consummation of the sale or other disposition
of all or substantially all of the Company's assets to a
Person that is not a direct or indirect parent or
Subsidiary of the Company; provided, however, that
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notwithstanding anything to the contrary contained
herein, a Sale of the Company shall only be deemed to
have occurred if at least 80% of the consideration to be
received by the Securityholders in connection with such
transaction is payable in (i) cash, (ii) Registered
Securities or (iii) any combination of cash and
Registered Securities.
9
(tt) "Securities Act" shall mean the Securities Act of 1933,
---------------
or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
(uu) "Series A and Series B Preferred Directors" shall mean
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the directors nominated by the Series A Holders and the
Series B Holders pursuant to Section 2.1(a) and (b).
(vv) "Series A Certificate of Designation" shall mean the
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Fourth Amended and Restated Certificate of Designation of
Series A Preferred Stock, dated as of December 29, 1998,
to the Company's Articles of Incorporation.
(ww) "Series A Holders" shall mean the holders of the Series A
----------------
Preferred Stock issued and outstanding at any time.
(xx) "Series A Preferred Stock" shall mean the Company's
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Series A convertible preferred stock, par value $.01 per
share, having such rights, preferences and privileges as
may be in effect from time to time.
(yy) "Series B Certificate of Designation" shall mean the
--------------------------------------
Amended and Restated Certificate of Designation of Series
B Preferred Stock, dated as of December 29, 1998, to the
Company's Articles of Incorporation.
(zz) "Series B Holders" shall mean the holders of the Series B
----------------
Preferred Stock issued and outstanding at any time.
(aaa)"Series B Preferred Stock" shall mean the Company's
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Series B convertible preferred stock, par value $.01 per
share, having such rights, preferences and privileges as
may be in effect from time to time.
(bbb)"Series C Adjusted Fully Diluted Capitalization" shall
------------------------------------------------
mean the Adjusted Fully Diluted Capitalization,
10
(i) decreased by the number of Common Stock Equivalents
(A) issued upon the exercise of options to purchase
Shares granted to directors or employees of or
consultants to the Company pursuant to the Company's
1998 Stock Option Plan or any other stock option
plan of the Company (other than the Company's 1996
Stock Option Plan), (B) issued pursuant to the
exercise of any rights, warrants, options (other
than as described in clause (A) hereof) or other
agreements to purchase Shares, which rights,
warrants, options or other agreements are not
outstanding on the date of this Agreement (except if
and to the extent that the Series C Holders had the
right to exercise preemptive rights under Article 7
with respect to the initial sale or grant by the
Company of such rights, warrants, options or
agreements), (C) issued in an Initial Public
Offering as to which the RSI Beneficial Holders or
the Series C Holders would have had the right to
exercise preemptive rights under Section 7.1(b) but
for the limitation set forth in Section 7.1(b)
relating to the right to acquire up to 30% of the
New Securities sold in such Initial Public Offering
until other Persons have purchased $75,000,000 of
such New Securities, and (D) issued as consideration
for, or in connection with, any merger or
acquisition of the stock or assets of any acquired
entity by the Company, and
(ii) increased in the event there is an issuance of New
Securities (as defined in Section 7.1(a)) or
Additional Securities (as defined in Section 7.1(b))
by the number of Unused Backlog CSE's (as
hereinafter defined) as to which the RSI Beneficial
Holders or any of the Series C Holders have the
right to exercise (as determined below) preemptive
rights under the second paragraph of Section 7.1(a)
or under Section 7.1(b) (the "Testing Sections").
As used herein, "Backlog CSE's" shall mean the aggregate number of Common Stock
Equivalents by which the Adjusted Fully Diluted Capitalization has been
decreased pursuant to clause (i) above of this Section 1.1(bbb), and "Unused
Backlog CSE's" shall mean the number of Backlog CSE's reduced by the number of
Backlog CSE's by which the Adjusted Fully Diluted Capitalization has been
increased pursuant to clause (ii) above of this Section 1.1(bbb). For the
purpose of determining whether the RSI Beneficial Holders or the Series C
Holders have the right to exercise preemptive rights under the Testing Sections
with respect to Unused Backlog CSEs, the RSI Beneficial Holders or the Series C
Holders, as the case may be, shall be deemed to have such rights if and to the
extent that the number of New Securities or Additional Securities which the RSI
Beneficial Holders or any of the Series C Holders have the right to purchase
under the Testing Sections is greater than the number of such New Securities or
Additional Securities which the RSI Beneficial Holders or any Series C Holders
would then have the right to purchase if the RSI Beneficial Holders and the
Series C Holders (x) had actually exercised preemptive rights to the maximum
extent permitted to them under Sections 7.1(a) and 7.1(b) with respect to all
issuances of New Securities or Additional Securities, and (y) had the right to
exercise, and had actually exercised, preemptive rights under the Testing
Sections with respect to all issuances described in clause (i) above of this
Section 1.1(bbb). If at any time the Company requests, and the RSI Beneficial
Holders or the Series C Holders agree to, the waiver of preemptive rights that
the RSI Beneficial Holders or such Series C Holders may then have with respect
to New Securities or Additional Securities, then for purposes of this Agreement,
the RSI Beneficial Holders and the Series C Holders shall not be deemed to have
had the right to exercise preemptive rights with respect to such New Securities
or Additional Securities. A sample calculation of the Series C Adjusted Fully
Diluted Capitalization is attached as Schedule 2 to this Agreement.
11
(ccc) Series C Certificate of Designation" shall mean the
--------------------------------------
Certificate of Designation of the Series C Preferred
Stock, dated as of December 29, 1998, to the Company's
Articles of Incorporation.
(ddd)"Series C Holders" shall mean the holders of the Series
----------------
C Preferred Stock issued and outstanding at any time.
(eee)"Series C Preferred Directors" shall mean the directors
-----------------------------
nominated by the Series C Holders pursuant to Section
2.1(a) and (b).
(fff)"Series C Preferred Stock" shall mean the Company's
---------------------------
Series C convertible preferred stock, par value $.01 per
share, having such rights, preferences and privileges as
may be in effect from time to time.
(ggg)"Shares" shall mean any shares of capital stock of the
------
Company, including, without limitation, Common Stock,
Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Warrant Shares and Option
Shares, now or hereafter issued.
(hhh)"Subsidiary" shall mean any corporation, partnership or
----------
limited liability company of which a majority of the
outstanding voting securities or other voting equity
interests or voting power are owned, directly or
indirectly, by the Company.
(iii)"Super-Majority Approval" shall mean approval of a
-------------------------
majority of the whole Board (which majority shall include
a majority of the Series C Preferred Directors and,
solely with respect to the actions specified in Sections
3.1(e), 3.1(f), and 3.1(j), at least two Series A and
Series B Preferred Directors).
(jjj)"Warrants" shall mean (1) the warrants originally dated
--------
as of November 15, 1996 issued to the Xxxxxx Holders, (2)
the warrants originally dated as of November 15, 1996,
December 31, 1996, February 15, 1997 and April 29, 1998
issued to Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx and G.
Xxxxx Xxxxxxxxxx and the warrants originally dated as of
December 31, 1996 and April 29, 1998 issued to The
Shattan Group, LLC, (3) the warrants originally dated as
of December 31, 1996 and February 15, 1997 issued to the
Northwood Holders, (4) the warrants originally dated as
of December 31, 1996, January 14, 1997 and February 15,
1997 issued to certain of the Other Holders, and (5) the
warrants originally dated as of February 15, 1997 issued
to the Paribas Holder (as all of such warrants described
in clauses (1), (2), (3), (4) and (5) have been amended
and restated as of January 8, 1999).
12
(kkk)"Warrant Shares" shall mean the shares of Common Stock
---------------
of the Company issuable upon the exercise of the
Warrants.
(lll)"Xxxxxx Beneficial Holders" shall mean (i) Xxxxxx Xxxxxx
--------------------------
and any Person Controlled by him, (ii) any Family Group
Member of Xxxxxx Xxxxxx so long as Xxxxxx Xxxxxx has the
power to control, by contract or otherwise, the vote of
the Shares of Series C Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group
Member, and (iii) in the event of the death or Incapacity
of Xxxxxx Xxxxxx, any of his Family Group Members or any
conservator or committee who, as a result of his death or
Incapacity, obtain Beneficial Ownership of the shares of
Series C Preferred Stock or the Common Stock Equivalents,
which were Beneficially Owned by Xxxxxx Xxxxxx prior to
his death. Notwithstanding the foregoing provisions of
this definition, no Person shall be deemed a Xxxxxx
Beneficial Holder with respect to any shares of Series C
Preferred Stock or Common Stock Equivalents which were
not acquired by a Xxxxxx Beneficial Holder either (i)
pursuant to the Merger Agreements, or (ii) by exercise of
a right to purchase under Article 4 or under Section 7.1
hereof.
ARTICLE II
BOARD; COMMITTEES
2.1 Board of Directors.
------------------
(a) The Board shall consist of ten Directors, (i) three
Directors initially nominated by Xxxxx X. Xxxxx (which
nominees shall initially be Xxxxx X. Xxxxx, Xxxxxx X.
Xxxxx, and Xxxxx Xxxxxxx) (collectively, and as may be
reduced pursuant to Section 2.1 (b) hereof, the "Company
-------
Directors"), (ii) three Directors (collectively, along
---------
with any additional Person nominated pursuant to Section
2.1(b) hereof, the "Series A and Series B Preferred
----------------------------------
Directors") initially nominated as follows: two shall be
---------
designated by the Xxxxxx Holders (which nominees shall
initially be Xxxxx X. Xxxxxxx and G. Xxx Xxxx), and one
shall be designated by the Northwood Holders (which
nominee shall initially be Xxxxx X. Xxxxxx), and (iii)
four Directors (collectively, the "Series C Preferred
------------------
Directors") initially nominated by holders of a Majority
---------
of the Shares of Series C Preferred Stock (which
13
nominees shall initially be Xxxxx Xxxxxxx, Xxx Xxxxxxx,
Xxxxxx Xxxxxx and Xxxxxxx X. Xxxxxxxx). Xxxxxxx X.
Xxxxxxxx is sometimes referred to herein as the "Special
-------
Series C Director". The Chairman of the Board shall be a
-----------------
Series C Preferred Director nominated by the holders of a
Majority of the Shares of Series C Preferred Stock and
reasonably acceptable to the Company Directors and the
Series A and Series B Preferred Directors. The Chairman
of the Board shall not serve as an employee or officer of
the Company but shall be vested with the rights and
privileges typically accorded the Chairman of the Board
of Directors under applicable corporate law, including,
without limitation, the right to call special meetings of
the Board or stockholders in accordance with the
Company's By-laws. Notwithstanding the foregoing, the
Chairman of the Board and the Chief Executive Officer of
the Company shall jointly prepare the agenda for and
chair each meeting of the Board. The initial Chairman of
the Board shall be Xxxxx Xxxxxxx.
(b) Upon the earlier to occur of (i) the retirement,
resignation, disability or death of any Company Director
(other than Xxxxx X. Xxxxx) or the Special Series C
Director, after the date hereof and (ii) January 1, 2001,
the Directors shall be reelected, such that there shall
be (A) three Company Directors who shall be nominated by
Xxxxx X. Xxxxx, (B) four Series C Preferred Directors who
shall be nominated by the holders of a Majority of the
Shares of Series C Preferred Stock (which Series C
Preferred Directors shall not be required to include
Xxxxxxx X. Xxxxxxxx), and (C) three Series A and Series B
Preferred Directors who shall be nominated by the Xxxxxx
Holders and the Northwood Holders as set forth in Section
2.1(a). If by January 1, 2001, none of the Company
Directors (other than Xxxxx X. Xxxxx) or the Special
Series C Director has ceased to be a Director by reason
of retirement, resignation, disability or death, then one
of the Company Directors or the Special Series C Director
shall resign as a Director as of that date, and, if such
resignation has not occurred by January 10, 2001, the
Board shall vote to remove one Company Director (other
than Xxxxx X. Xxxxx) or the Special Series C Director
pursuant to a designation to be made by a majority of the
Series C Preferred Directors, following which the Board
shall be re-elected in accordance with the first sentence
of this Section 2.1(b). Upon any retirement, resignation,
disability or death of any Company Director (other than
Xxxxx X. Xxxxx) following the date that the Directors are
reelected pursuant to this Section 2.1(b), the Xxxxxx
Holders shall have the right to appoint his successor
(who shall be reasonably satisfactory to the Northwood
Holders). Thereafter, there shall be (x) four Series A
and Series B Preferred Directors, three of whom shall be
nominated by the Xxxxxx Holders (one of whom shall be
reasonably satisfactory to the Northwood Holder) and one
of whom shall be nominated by the Northwood Holders, (y)
two Company Directors, who shall be nominated by Xxxxx X.
Xxxxx, and (z) four Series C Preferred Directors who
shall be nominated by the holders of a Majority of the
Shares of the Series C Preferred Stock.
14
(c) Notwithstanding anything to the contrary contained
herein, (i) Xxxxx X. Xxxxx shall have the rights set
forth herein to nominate all of the Company Directors (as
the number of Company Directors shall be reduced pursuant
to Section 2.1(b)) only so long as he maintains
Beneficial Ownership of at least 50% of the Common Stock
Equivalents held by him as of the date of this Agreement
and the Xxxxx Employment Agreement has not been
terminated by the Company for Cause (as defined therein);
provided, however, that so long as Xxxxx X. Xxxxx is the
-------- -------
Chief Executive Officer of the Company he shall serve as
a Director, (ii) the Xxxxxx Holders and the Northwood
Holders each shall have the rights set forth herein to
nominate the Series A and Series B Preferred Directors,
and Series A and Series B Preferred Directors shall have
the right to nominate members of the Committees described
in Section 2.3 hereof, only so long as the Xxxxxx Holders
or the Northwood Holders, as the case may be, maintain
Beneficial Ownership in the aggregate of at least 50% of
the Common Stock Equivalents (excluding Warrant Shares)
initially acquired by it pursuant to the First Series A
Stock Purchase Agreement and the Second Series A Stock
Purchase Agreement, and (iii) the holders of a Majority
of the Shares of Series C Preferred Stock shall have the
rights set forth herein to nominate the Series C
Preferred Directors and to designate the Chairman of the
Board, and the Series C Preferred Directors shall have
the right to nominate members of the Committees described
in Section 2.3 hereof, only so long as the Qualifying
Series C Beneficial Holders maintain Beneficial Ownership
of at least 20% of the Series C Adjusted Fully Diluted
Capitalization. If any of Xxxxx X. Xxxxx, the Xxxxxx
Holders, the Northwood Holders or the Series C Holders
loses its rights to designate Directors, the Directors
which such Securityholder was entitled to designate shall
promptly resign and the vacancies created by such
resignations shall be filled by the stockholders of the
Company voting at a meeting or by written consent at any
time after the consummation of the transaction in which
any such Person lost its rights to designate Directors.
If any Directors or Committee members who are required to
resign such positions pursuant to the preceding sentences
fail to promptly tender their written resignations, the
stockholders and the remaining Directors shall promptly
take such steps as may be necessary or appropriate under
the Company's bylaws and applicable law in order to
remove such Directors and/or Committee members. The
Directors designated by the stockholders of the Company
shall appoint successor committee members to fill any
vacancies then existing as a result of the resignations
of the Directors referred to in the two preceding
sentences (other than any vacancy on the Executive
Committee created by the failure of Xxxxx X. Xxxxx to
serve thereon which shall be handled in the manner
provided in Section 2.3(a)).
15
(d) Wherever this Agreement provides that any vote is based
on a majority of the Series C Preferred Directors, the
Special Series C Director shall not be included in either
the numerator or the denominator for purposes of
determining whether there has been such a majority vote
of Series C Preferred Directors.
(e) The Company shall give the PNA Holder notice of (in the
same manner as notice is given to directors), and permit
one Person designated by the PNA Holder to attend as a
non-voting observer, all meetings of the Board and shall
provide to such observer the same information concerning
the Company, and access thereto, provided to members of
the Board. Such observer shall keep all such information
confidential and shall not directly or indirectly use
such information for any purpose other than evaluating
the PNA Holder's continued investment in the Series B
Preferred Stock. The direct out-of-pocket expenses
reasonably incurred by any such designee of the PNA
Holder in attending any board meetings shall be
reimbursed by the Company. The PNA Holder shall have the
rights set forth herein to a non-voting board observer
only so long as the PNA Holder maintains ownership in the
aggregate of at least 50% of the Common Stock Equivalents
initially acquired by it pursuant to the Series B Stock
Purchase Agreement. Notwithstanding the foregoing, the
Company reserves the right to excuse the non-voting board
observer from all or any portion of any meeting of the
Board if the Board determines in its good faith
discretion that there are confidential matters to be
discussed relating to the Company's debt financing.
(f) Election of Nominees. On the date hereof, and at each
---------------------
annual meeting of stockholders of the Company or any
special meeting called for the purpose of electing
Directors of the Company (or by consent of stockholders
in lieu of any such meeting) or at such other time or
times as the Securityholders may agree, the
Securityholders shall vote all of their respective Shares
entitled to vote in favor of the election of all of the
Persons so nominated in accordance with Section 2.1(a)
and Section 2.1(b) and no other Person.
(g) Term. Each of the Series A and Series B Preferred
----
Directors, the Series C Preferred Directors and the
Company Directors shall hold office as a Director of the
Company for a term of one year.
2.2 Removal of Directors. No Securityholder shall vote any Shares, and
--------------------
no Director shall vote, in favor of the removal of a Director designated by
Xxxxx X. Xxxxx, the Xxxxxx Holders, the Northwood Holders or the Series C
Holders unless (i) the right of such other Securityholder(s) to so designate
such Director shall no longer exist as a result of Section 2.1(c), or (ii) such
other Securityholder(s) shall have requested that the Securityholders or
Directors vote for the removal of any such Director (provided the
Securityholder(s) making such request shall at such time remain entitled to
designate a Director pursuant to Section 2.1(c)). In the case of clause (ii) of
the
16
immediately preceding sentence, the (x) Securityholders shall vote all of
their Shares entitled to vote and (y) Directors shall vote, as the case may be,
immediately upon request in favor of the removal of such Director and the
election of any replacement Director as may be designated by requesting
Securityholder(s).
2.3 Committees.
----------
(a) The Executive Committee of the Board shall consist of
four Directors: (i) two Directors nominated by the Series
A and Series B Preferred Directors (which nominees shall
initially be Xxxxx X. Xxxxx, who shall be entitled to
serve on the Executive Committee for so long as he
remains Chief Executive Officer of the Company, and Xxxxx
X. Xxxxxxx) and (ii) two Directors nominated by the
Series C Preferred Directors (which nominees shall
initially be Xxxxx Xxxxxxx and Xxx Xxxxxxx). The Chairman
of the Executive Committee shall be Xxxxx X. Xxxxx, who
shall hold such title for so long as he serves on the
Executive Committee, and, thereafter, the Chairman shall
be any successor Chief Executive Officer to Xxxxx X.
Xxxxx. To the extent permitted by law, the Executive
Committee shall have and may exercise all the powers and
authority of the Board in the management of the business
and affairs of the Company; provided, however, that, in
-------- -------
no event, shall the Executive Committee have the
authority to authorize any action which requires
Super-Majority Approval under this Agreement. If a
majority of the members of the entire Executive Committee
shall not agree on a decision with respect to any matter
over which it has authority to act, such matter shall be
referred to the Board for its determination. Without
limiting the foregoing, it is intended that the Executive
Committee shall be responsible for such matters as
non-annual (project level) budget approvals, commitment
of capital, incurrence of debt and significant
contractual relations. The Executive Committee shall
maintain minutes of its meetings and report to the Board
on all of its proceedings.
(b) The Audit Committee of the Board shall consist of four
Directors: (i) two Directors nominated by the Series A
and Series B Preferred Directors, who shall not be
officers or employees of the Company (which nominees
shall initially be Messrs. Xxxxxx Xxxxx and G. Xxx Xxxx)
and (ii) two Directors nominated by the Series C
Preferred Directors (which nominees shall initially be
Messrs. Xxxxx Xxxxxxx and Xxxxxx Xxxxxx). Subject to
Section 2.1(c), the Series C Preferred Directors shall
have the right to designate the Chairman of the Audit
Committee of the Board. The Audit Committee shall
recommend the engagement of independent auditors, review
and consider actions of management in matters relating to
audit function, review with independent auditors the
scope and results of their audit engagement, review the
system of internal controls and procedures of the Company
and its
17
Subsidiaries, and review the effectiveness of procedures
intended to prevent violations of law and regulations.
The Audit Committee shall also approve the engagement
letter of the Company's independent accountants, direct
the internal control (or internal audit) department, if
any, be authorized to direct agreed upon procedures
review by independent public accountants or consultants
and review and approve all public securities filings and
audited financial statements.
(c) The Compensation Committee of the Board shall consist of
four Directors: (i) two Directors nominated by the Series
A and Series B Preferred Directors, who shall not be
officers or employees of the Company (which nominees
shall initially be Messrs. Xxxxx Xxxxxxx and Xxxxx X.
Xxxxxxx), and (ii) two Directors nominated by the Series
C Preferred Directors (which nominees shall initially be
Messrs. Xxxxx Xxxxxxx and Xxx Xxxxxxx). The grant or
allocation of rights, warrants, options or other
agreements to purchase Common Stock or any security
convertible into or exchangeable for Common Stock under
any Option Plan or as compensation to any employee,
consultant, Director or officer of the Company shall
require approval of a majority of the members of the
Compensation Committee.
(d) The Board shall establish a Strategic Steering Committee,
which shall be a management committee. The Strategic
Steering Committee shall consist of Xxxxx X. Xxxxx, three
members appointed by the Series C Preferred Directors
(which members need not be Directors and which members
shall initially include Xxx X. Xxxxxxx) and three senior
managers of the Company appointed by the Chief Executive
Officer of the Company. The Strategic Steering Committee
shall be responsible for evaluating and recommending new
products, technologies and strategies with a view towards
ensuring the ultimate success of the Company by
continually meeting the changing needs of customers of
the Company. There shall be no chairman of the Strategic
Steering Committee.
2.4 Vacancies. Subject to Sections 2.1(b), 2.1(c) and 2.3, if any
---------
vacancy occurs in the Board or any Committee thereof because of death,
disability, resignation, retirement or removal of a Director or a Committee
member in accordance with this Agreement, the Securityholder or Securityholders
that nominated the Person creating such vacancy (or the Directors who nominated
the Committee member) shall nominate a successor (provided that such
Securityholder shall at such time remain entitled to designate a Director, or
the relevant Directors shall at such time remain entitled to nominate a
Committee member, as the case may be, pursuant to Sections 2.1(a), 2.1(b),
2.1(c) and 2.3), and all Securityholders shall vote the Shares held by them
which are entitled to vote in favor of the election of such successor to the
Board and all of the Directors shall elect or appoint the successors to such
Committee of the Board. Any vacancy that occurs shall be filled as promptly as
possible upon the request of the group having the right to nominate a Person to
fill such vacancy.
18
2.5 Proxies. Neither the Company nor any Securityholder shall give any
-------
proxy or power of attorney to any Person or entity that permits the holder
thereof to vote in his discretion on any matter that may be submitted to the
Company's Securityholders for their consideration and approval, unless such
proxy or power of attorney is made subject to and is exercised in conformity
with the provisions of this Agreement.
2.6 Compensation. Each Director shall be reimbursed by the Company for
------------
all direct out-of-pocket expenses incurred in the reasonable discretion of the
Director in connection with their services as a Director and a committee member
and each Director, other than any Director who is an officer of the Company,
shall receive from the Company an annual Director's fee of $5,000.
2.7 Subsidiary Boards. The board of directors of each Subsidiary shall
------------------
be comprised of a single director who shall be Xxxxx X. Xxxxx or any successor
Chief Executive Officer. No action taken by the board of directors of any
Subsidiary shall be contrary to or inconsistent with the policies,
recommendations or directions of the Board.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 Approval of Certain Board Action. None of the following actions
---------------------------------
shall be taken by the Company or any of its Controlled Affiliates without
Super-Majority Approval (provided that if at the time of the proposed action (i)
the Qualifying Series C Beneficial Holders do not have aggregate Beneficial
Ownership of at least 20% of the Series C Adjusted Fully Diluted Capitalization,
then the approval of a majority of the Series C Preferred Directors shall not be
required as part of the Super-Majority Approval, and (ii) the Xxxxxx Holders and
the Northwood Holders do not have aggregate Beneficial Ownership of 50% of the
Common Stock Equivalents (excluding Warrant Shares) initially acquired by them
pursuant to the First Series A Stock Purchase Agreement and the Second Series A
Stock Purchase Agreement, then the approval of at least two of the Series A and
Series B Preferred Directors shall not be required as part of the Super-Majority
Approval):
(a) any sale, exchange, lease or other disposition (whether
in a single transaction or a series of related
transactions), of any asset, group of assets, division or
Subsidiary of the Company, which would have the effect of
(i) disposing of assets which produce gross revenues
constituting 4% or more of the Company's consolidated
gross revenues (determined in each case as of the date of
the last regularly prepared quarterly financial
statements of the Company but giving effect to all
acquisitions made by the Company and its Subsidiaries on
or after the beginning of the measurement period), (ii)
disposing of the Company's operations in a "metropolitan
statistical area" as such term is defined by the Bureau
of the Census (with respect to domestic
19
operations) or a country (with respect to international
operations), or (iii) terminating or substantially
terminating any material product line (e.g., executive
office suites, Internet services, telecommunications
service, etc.);
(b) any material amendment to or replacement or extension of
the Credit Agreement as it exists as of the date hereof;
(c) incurring any direct or indirect Indebtedness (as such
term is defined in the Credit Agreement as it exists as
of the date hereof) for borrowed money, loaning any
money, guaranteeing the payment of any money or
indebtedness for borrowed money of another Person,
guaranteeing the performance of any other obligation of
another Person (other than a wholly owned subsidiary), or
indemnifying another Person against any losses, damages
or costs, provided that the foregoing shall not include
(i) any borrowing by the Company under its Credit
Agreement for acquisitions which have been approved by
the Board or the Executive Committee, working capital,
letters of credit in connection with leases of real
property by the Company or any Subsidiary, or any other
purpose which is within the then current Annual Budget,
(ii) any Capital Lease permitted under Section 3.1(d),
(iii) any trade debt of the Company or any Subsidiary
incurred in the ordinary course of business, or (iv) any
indemnity which the Company or any Subsidiary may give to
a seller or related entities in connection with an
acquisition that has received the requisite Board
approval, in respect of the liabilities or obligations
which are being assumed by the Company or a Subsidiary in
connection with such acquisition;
(d) making capital expenditures, including Capital Leases, in
an aggregate amount as capitalized on a balance sheet
under GAAP, in any fiscal year which exceeds by more than
$500,000 the amount approved in the Annual Budget for
such year;
(e) entering into any business other than the Core Business;
(f) entering into any material transaction with any Affiliate
of the Company, except any transaction pursuant to the
OnSite Agreement, the Intercompany Agreement or any
Product Agreement entered into pursuant thereto;
(g) any change in the name of the Company;
(h) any voluntary liquidation or dissolution of the Company
or filing of a voluntary petition of the Company under
Chapter 7 or Chapter 11 of the Bankruptcy Act or a
determination to not contest an involuntary petition of
bankruptcy or otherwise institute insolvency proceedings
or otherwise seek any relief under laws relating to the
relief from debts or the protections of
20
debtors generally; seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such entity or all
or any portion of such entity's properties; make any
assignment for the benefit of such entity's creditors;
take any action that would cause the Company to become
insolvent as defined by the Bankruptcy Act; or take any
action which consents to a case in a bankruptcy or other
insolvency proceedings against the Company or waives or
releases any right or claims of the Company in any such
case or proceeding;
(i) any merger, consolidation or reorganization of the
Company with another Person which is not a Subsidiary of
the Company, except if such merger, consolidation or
reorganization is an acquisition transaction that would
not require Super-Majority Approval under Section 3.1(n);
provided, however, that such exception shall not apply to
-------- -------
mergers, consolidations, or reorganizations (i) pursuant
to which the Company is not the surviving corporation and
the shares of the Company's capital stock are converted
or exchanged, or (ii) which would materially and
adversely affect the relative rights or preferences of
the Series C Preferred Stock (including, without
limitation, through the issuance of a security ranking
senior to the Series C Preferred Stock as to payment of
dividends or liquidation preference);
(j) any issuance or sale of equity securities or phantom
interests of the Company or of any security, warrant,
option or right (contingent or otherwise) to purchase or
acquire any equity security of the Company or any phantom
interests, or the adoption of any option, phantom
interests or similar plan (other than the Company's 1996
Option Plan and the Company's 1998 Option Plan), except
(i) any issuance of securities pursuant to a Qualified
Public Offering, (ii) any grant of options pursuant to an
Option Plan, (iii) any issuance of securities upon the
exercise of any Warrant or Option or upon the conversion
of any outstanding convertible security of the Company or
(iv) any issuance of securities as consideration in
connection with any merger, consolidation or acquisition
of stock or assets from any Person (if such merger,
consolidation or acquisition would not otherwise require
Super-Majority Approval under any other clause of this
Section 3.1);
(k) creating, granting, or consenting to any Encumbrances
which secure, individually or in the aggregate, an amount
in excess of $100,000 and which are not otherwise
required or permitted under the terms of the Credit
Agreement, provided that if the Credit Agreement is not
then in effect, under the terms of the Credit Agreement
as such Credit Agreement exists as of the date hereof;
(l) any change in the accounting principles used by the
Company or the adoption of any change to the Company's
financial reporting practices, procedures or
21
standards which would as a normal matter require the
approval of the Board, except for any such changes which
are required by GAAP or the Securities and Exchange
Commission;
(m) retaining any accounting firm other than
PricewaterhouseCoopers, LLP or another "Big Five"
accounting firm which is "independent" as such term is
used in Rule 2-01 of Regulation S-X under the Securities
Act and under GAAP;
(n) any acquisition (in any transaction or series of related
transactions) of all or substantially all of the assets
of, or of a controlling interest in, any other Person,
where such transaction (or related transactions) would
have the effect, on a pro forma basis, assuming such
transaction or related transactions were consummated, of
increasing the consolidated gross revenues of the Company
by 10% or more (in the case of international
acquisitions) or 20% or more, (in the case of domestic
acquisitions) over the existing consolidated gross
revenues of the Company, determined for the immediately
preceding twelve month period ending as of the date of
the most recent quarterly financial statements of the
Company. For this purpose consolidated gross revenues
shall be calculated giving effect to all other
acquisitions made by the Company and its Subsidiaries on
or after the beginning of the measurement period;
(o) entering into any agreement, other than any agreement
that may be entered into under the terms of the
Intercompany Agreement (including the OnSite Agreement),
(i) with a real estate investment trust other than
Reckson Associates Realty Corp., except for leases of
real property and related agreements for services
ancillary to a lease of real property, or (ii) which is a
material agreement with any Person (other than RSI,
OnSite or their respective Affiliates) which directly
competes with RSI as a broad based provider of multiple
outsourced business services (i.e. this clause (ii) shall
not apply to an agreement with a provider of individual
business services which RSI, OnSite or their respective
Affiliates may offer; provided, that each such agreement
is not otherwise violative of the terms and conditions of
the Intercompany Agreement);
(p) any amendment to the Articles of Incorporation (including
the Certificates of Designation) or Bylaws of the
Company, or any change in the number of members of the
Board, any Committee thereof or the Strategic Steering
Committee;
(q) the hiring or termination of employment of any of the
Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer of the Company, or of any other officer
of the Company with a compensation package equal
22
to or greater than the compensation package of the Chief
Executive Officer, Chief Operating Officer or Chief
Financial Officer or the approval of any renewal,
extension or termination of any employment agreement with
any such individual or the waiver by or on behalf of the
Company or any of its Controlled Affiliates of any of the
Company's rights thereunder;
(r) the adoption or amendment of the Annual Budget;
(s) the settlement of any action or proceeding before a
federal regulatory agency, or the commencement or
settlement of any litigation by or against the Company or
any Subsidiary in which the amount at issue involves at
least $500,000;
(t) redemption or other purchase of outstanding Shares,
Warrants or Options except pursuant to the provisions of
this Agreement, the Certificates of Designation or the
terms of the applicable Option Plan; or
(u) any amendment, modification or waiver of any provision of
this Agreement.
3.2 Approval of Certain Stockholders. The Company agrees it shall not,
--------------------------------
without the approval of a Majority of the Shares of Series A and Series B
Preferred Stock and a Majority of the Shares of the Series C Preferred Stock:
(a) issue any class or series of equity security senior to or
on a parity with the Series A Preferred Stock, the Series
B Preferred Stock or the Series C Preferred Stock as to
payment of dividends or senior to or on a parity with the
Series A Preferred Stock, Series B Preferred Stock or the
Series C Preferred Stock as to payments on a dissolution,
liquidation or winding up of the Company;
(b) enter into any agreement or arrangement of any kind that
would restrict the Company's ability to perform its
obligations under (i) this Agreement, (ii) the First
Series A Stock Purchase Agreement, the Second Series A
Stock Purchase Agreement and the Series B Stock Purchase
Agreement (it being agreed that no vote shall be required
from the holders of the Series C Preferred Stock with
respect to the actions specified in this clause (ii)) or
(iii) the Merger Agreements (it being agreed that no vote
shall be required from the holders of the Series A and
the Series B Preferred Stock with respect to the actions
specified in this clause (iii));
(c) amend the Articles of Incorporation (including the
Certificates of Designation) or the By-laws of the
Company in any manner;
(d) merge or consolidate with any other entity or sell all or
substantially all of its assets or issue any voting
securities to a Person or entity not then a holder of
Shares which would result in such Person or entity
acquiring control of the Company; or
23
(e) liquidate or dissolve.
Notwithstanding anything to the contrary contained above,
neither the Paribas Holder, nor any of its affiliated transferees or successors
shall be entitled to participate in any vote needing the approval of a Majority
of the Shares of Series A and Series B Preferred Stock.
3.3 Appointment of Appraiser. Notwithstanding anything to the contrary
------------------------
in this Agreement or in the Certificates of Designation, any Initial Appraiser
(as defined in this Agreement or the Certificates of Designation) to be selected
by the Company shall be selected by a majority of the Directors of the Company
who are not Affiliates of the Securityholders whose Shares are the subject of
the appraisal and such appraiser shall be reasonably acceptable to the majority
of the Series C Preferred Directors.
3.4 Appointment of Certain Executive Personnel. In addition to the
----------------------------------------------
rights contained in Section 3.1(q), the holders of a Majority of the Shares of
Series C Preferred Stock shall have the right to appoint on the Closing Date
those executive officers of Parent designated on Schedule 3 and, thereafter, the
----------
employment of such executive officers shall be governed by the terms of such
agreements as the Company may enter into with such persons.
ARTICLE IV
TRANSFER OF SHARES
4.1 Restrictions on Transfer. So long as this Agreement is in effect,
------------------------
no Securityholder shall sell, assign, transfer, give, encumber, pledge,
hypothecate or in any other way dispose of any Shares, Warrants or Options (any
of which being a "Transfer") except as provided in this Agreement. For purposes
--------
of Section 4.1, Section 4.2, Section 4.3 and Section 4.6 of this Agreement, a
Transfer shall be deemed to include any Transfer by any Person who Beneficially
Owns any shares of Series C Preferred Stock by reason of any Transfer of any
interest (or portion thereof) by or through which such Person holds such
Beneficial Ownership of such shares (any such interest, a "Series C Beneficial
-------------------
Interest"). In addition, each Securityholder agrees that it will not Transfer
--------
any of its Shares, Warrants or Options except as permitted under the Securities
Act or applicable state securities laws or any rule or regulation promulgated
thereunder. No Transfer in violation of this Agreement shall be made or recorded
on the books of the Company and any such Transfer shall be void and of no force
or effect. Subject to the terms of this Agreement, the Securityholders shall be
entitled to exercise all rights of ownership of their Shares and any such
Options or Warrants, and the transferability of any such Options or Warrants
shall, in addition to the terms hereof, be subject to the terms and conditions
contained therein. Except as set forth in Section 4.6 hereof, nothing herein is
intended to restrict the Transfer of any securities issued by RSI or any
interest in JAH Realties, L.P.
24
4.2 Certain Permitted Transfers. The Company and the Securityholders
----------------------------
acknowledge and agree that any of the following Transfers shall be deemed to be
in compliance with this Agreement (subject in each case to compliance with
applicable securities laws):
(a) subject to Section 4.6 and 9.6 hereof, a Transfer in
accordance with the provisions of Section 4.3, 4.5, 4.7
or 4.8 or Article 5 hereof, pursuant to the redemption
provisions applicable to the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock as
in effect from time to time, or through a sale in a
registered offering in accordance with Article 6 hereof;
(b) subject to Section 4.6 and 9.6 hereof, a Transfer (i)
upon the death of a Securityholder or of a Beneficial
Owner of shares of Series C Preferred Stock to his
executors, administrators and testamentary trustees and
beneficiaries of his estate or (ii) by the PNA Holder to
not more than 15 employees of the PNA Holder or any of
the PNA Holder's Affiliates (subject in each case to
compliance with applicable securities laws);
(c) subject to Section 4.6 and 9.6 hereof, a Transfer to (x)
an Affiliate or (y) to members, partners, limited
partners, or stockholders of a Securityholder in the
event of a liquidation or other distribution of or by
such Securityholder, or (z) made for nominal
consideration or as a gift to any of the Securityholder's
Family Group Members; and
(d) subject to Section 4.6 and 9.6 hereof, any Transfer by
any of the Series C Holders (or any member thereof) to
any other Series C Holder or by any Beneficial Owner of
shares of Series C Preferred Stock to any other
Beneficial Owner of shares of Series C Preferred Stock or
to any of their respective members, partners or
stockholders or any Family Group Members (any such
transferee, together with any transferee pursuant to
Section 4.2(b) and (c), being a "Permitted Transferee");
--------------------
(e) anything herein to the contrary notwithstanding, in the
event that any Securityholder or any of its Affiliates
shall deliver to the Company an opinion of counsel to
such Securityholder or such Affiliate, as the case may
be, to the effect that if such Securityholder or such
Affiliate, as the case may be, shall continue to hold
some or all of the Warrants or Shares held by it, there
is a material risk that such ownership will result in the
violation of any statute, regulation or rule of any
governmental authority (including, without limitation,
Regulation Y promulgated under the Bank Holding Company
Act of 1956, as amended (the "BHCA")), such
----
Securityholder or such Affiliate (a "Regulated Holder"),
-----------------
as the case may be, may exchange its Shares or Warrants,
as herein provided. The Company shall cooperate with such
Securityholder or such Affiliate as the case may be, in
exchanging all or any
25
portion of its voting Shares on a share-for-share basis
for Shares of a non-voting security or warrants (which
shall thereafter be deemed Warrants hereunder)
convertible into a nonvoting security of the Company
(such non-voting security shall be identical in all
respects to such voting Shares, except that they shall be
non-voting and shall be convertible or exercisable into
voting securities on such conditions as are requested by
such Securityholder in light of the regulatory
considerations prevailing). Without limiting the
forgoing, at the request of such Securityholder or such
Affiliate, as the case may be, the Company shall use
commercially reasonable efforts to amend this Agreement,
the Articles of Incorporation of the Company, the By-laws
of the Company, and any related agreements and
instruments and shall take such additional actions in
order to effectuate the authorization of the issuance of
nonvoting securities and the exchange of such
Securityholder's voting securities into such nonvoting
securities. The provisions of this Section 4.2(e) shall
inure solely to the benefit of the Securityholders and
their Affiliates which are subject to the provisions of
the BHCA or the Small Business Investment Act of 1958, as
amended (the "SBIA"); and
----
(f) any pledge of a Series C Holder Beneficial Interest to
secure any bona fide indebtedness, but in each case
subject to Section 4.6 and provided that the lender
acknowledges in writing that any sale or Transfer of the
pledged Series C Beneficial Interests shall be subject to
the provisions of this Agreement and that it shall not
have the right to take title, sell or exercise any rights
of ownership of the pledged Series C Holder Beneficial
Interests without first having complied with the
provisions of Article IV hereof (it being agreed and
understood among the Company and the Securityholders that
any transfer of title or sale of such pledged interests
to any Series C Holder or any holder of a Series C Holder
Beneficial Interest shall not be subject to the
provisions of Section 4.3).
4.3 Rights of First Refusal.
-----------------------
(a) Each Securityholder agrees that, subject to the
restrictions on Transfers contained in Sections 4.3(i),
4.4 and 4.6, if any Securityholder (a "Transferring
------------
Securityholder") proposes to Transfer any or all of the
--------------
Shares or Warrants then owned by such Transferring
Securityholder pursuant to a bona fide offer from a third
party (who (x) is not an Affiliate of such Securityholder
and (y) reasonably has the ability to consummate such
offer in accordance with its terms), other than as
provided in Section 4.2, 4.5, 4.7 or 4.8 or Article 5
hereof or pursuant to the redemption provisions in the
Certificates of Designation or through a sale in a
registered offering in accordance with Article 6 hereof
(a "Section 4.3 Transfer"), then such Transferring
----------------------
Securityholder shall first give a written notice (the
"Transfer Notice") to the Company and each of the other
----------------
Securityholders (the
26
"Securityholder Offerees") specifying (i) the number of
------------------------
Shares or Warrants such Transferring Securityholder
proposes to Transfer (the "Transfer Shares"), (ii) the
----------------
consideration to be received for the Transfer Shares in
the proposed Section 4.3 Transfer pursuant to such bona
fide offer, (iii) any other material terms of the
proposed Section 4.3 Transfer, including, without
limitation, the conditions precedent to such offer, and
(iv) whether any purchase of the Transfer Shares by the
Company and the Securityholder Offerees pursuant to this
Section 4.3 is conditioned upon purchase by the Company
and the Securityholder Offerees of all the Transfer
Shares (an "All or Nothing Condition"). The Transfer
--------------------------
Notice shall constitute an irrevocable offer to the
Company and the Securityholder Offerees (the "Transfer
--------
Offer") to sell the Transfer Shares to the Company and
-----
the Securityholder Offerees, pursuant to the provisions
of this Section 4.3, for the consideration and on the
other terms stated in the Transfer Notice (or the
reasonable equivalent thereof in the case of non-monetary
consideration of a type which is personal to the third
party offeror). For purposes of this Section 4.3, in the
case of a Transfer of a Series C Beneficial Interest, the
Transfer Shares shall not be the Series C Beneficial
Interest proposed to be transferred but rather shall be
deemed to be the number of shares of Series C Preferred
Stock as to which the transferee of the Series C
Beneficial Interest would acquire Beneficial Ownership in
such proposed transfer.
(b) The RSI Beneficial Holder shall have the initial right,
exercisable, in RSI's sole discretion, by the Series C
Holders for the benefit of the RSI Beneficial Holders or
directly by any of the RSI Beneficial Holders (provided,
that, if such right is exercised directly by any of the
RSI Beneficial Holders, such Person shall become a party
to this Agreement for all purposes hereunder), to accept
the Transfer Offer as to all or a portion of the Transfer
Shares; provided, however, that in no event shall the
-------- -------
foregoing right to accept the Transfer Offer and purchase
Transfer Shares pursuant to this Section 4.3(b) by or on
behalf of the RSI Beneficial Holders entitle the Series C
Holders or the RSI Beneficial Holders, as the case may
be, to purchase a number of Shares that, immediately
following such purchase, would result in the RSI
Beneficial Holders having Beneficial Ownership of Shares,
Options and Warrants representing, in the aggregate, more
than 30% of the Adjusted Fully Diluted Capitalization.
Within 5 Business Days after the receipt of a Transfer
Notice, the Company shall notify the Transferring
Securityholder and the Securityholder Offerees in writing
of the number of Transfer Shares that the Series C
Holders or the RSI Beneficial Holders, as the case may
be, shall have the right to purchase pursuant to this
Section 4.3(b). Within 15 Business Days after receipt of
such notice from the Company, if the Series C Holders or
the RSI Beneficial Holders, as the case may be, shall be
entitled to purchase any of the Transfer Shares pursuant
to this Section 4.3(b), the Series C Holders or the RSI
Beneficial Holders, as the case may be, shall give a
27
written notice to the Company and the Transferring
Securityholder, accepting the Transfer Offer (an
"Acceptance Notice"), which shall specify the number of
------------------
Transfer Shares that they desire to purchase pursuant to
this Section 4.3(b). The failure of the Series C Holders
or the RSI Beneficial Holders, as the case may be, to
timely give an Acceptance Notice shall be deemed to be an
election by them to not purchase any Transfer Shares
pursuant to this Section 4.3. If the Series C Holders or
the RSI Beneficial Holders, as the case may be, have
given timely Acceptance Notices electing to purchase less
than all, or are not entitled to purchase pursuant to
this Section 4.3(b) all, of the Transfer Shares, the
number of Transfer Shares as to which the Series C
Holders or the RSI Beneficial Holders, as the case may
be, shall have not given timely Acceptance Notices
pursuant to this Section 4.3(b) (the "Initial Remaining
------------------
Transfer Shares") shall be deemed offered by the
-----------------
Transferring Securityholder to the Company pursuant to
Section 4.3(c). The rights set forth in this Section
4.3(b) shall terminate and shall no longer apply in the
event that the Qualifying Series C Beneficial Holders do
not Beneficially Own at least 20% of the Series C
Adjusted Fully Diluted Capitalization. The Series C
Holders shall provide such information as the Company
shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C
Beneficial Holders. In the event that any RSI Beneficial
Holder transfers Beneficial Ownership in any Shares,
Options or Warrants to any Qualifying Series C Beneficial
Holder, then, notwithstanding such transfer, the Shares,
Options or Warrants so transferred shall be deemed to be
Beneficially Owned by the RSI Beneficial Holders for
purposes of this Section 4.3.
(c) The Company shall have the right to accept the Transfer
Offer as to all or a portion of the Initial Remaining
Transfer Shares. Within 15 Business Days after the end of
the 15 Business Day period provided to the Series C
Holders in Section 4.3(b), if the Company elects to
purchase any of the Initial Remaining Transfer Shares,
the Company shall give an Acceptance Notice to the
Transferring Securityholder and each of the
Securityholder Offerees, which shall specify the number
of Initial Remaining Transfer Shares that it desires to
purchase pursuant to this Section 4.3(c), up to the total
of such Initial Remaining Transfer Shares. The failure of
the Company to timely give an Acceptance Notice shall be
deemed to be an election by the Company to not purchase
any Transfer Shares. If the Company has given a timely
Acceptance Notice electing to purchase less than all of
the Initial Remaining Transfer Shares, the number of
Initial Remaining Transfer Shares as to which the Company
has not given a timely Acceptance Notice pursuant to this
Section 4.3(c) (the "Final Remaining Transfer Shares")
----------------------------------
shall be deemed offered by the Transferring
Securityholder to the Securityholder Offerees pursuant to
Section 4.3(d).
28
(d) The Securityholder Offerees shall have the right to
accept the Transfer Offer as to the Final Remaining
Transfer Shares. Within 15 Business Days after the end of
the 15 Business Day period provided to the Company in
Section 4.3(c), each Securityholder Offeree who wishes to
purchase any of the Final Remaining Transfer Shares shall
give an Acceptance Notice to the Company and the
Transferring Securityholder, which shall specify the
number of Final Remaining Transfer Shares (up to such
Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares, which for the RSI Beneficial
Holders shall be calculated including any Transfer Shares
to be acquired by them or by the Series C Beneficial
Holders for their account pursuant to the exercise of the
rights set forth in Section 4.3(b)) which such
Securityholder Offeree desires to purchase). The
Acceptance Notice may, at the Securityholder Offeree's
option, indicate the maximum number of Final Remaining
Transfer Shares such Securityholder Offeree would
purchase in excess of such Securityholder Offeree's Pro
Rata Share of the Final Remaining Transfer Shares (the
"Excess Amount"). If one or more Securityholder Offerees
-------------
does not give a timely Acceptance Notice, or elects in an
Acceptance Notice to purchase less than such
Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares, then the Final Remaining
Transfer Shares shall automatically be deemed to be
accepted by Securityholder Offerees who specified an
Excess Amount in their respective Acceptance Notice,
allocated among such Securityholder Offerees (with
rounding to the nearest whole share to avoid fractional
shares) in proportion to their respective Pro Rata Shares
determined based only on those Securityholder Offerees
who have given timely Acceptance Notices which specified
an Excess Amount. In no event shall an amount greater
than a Securityholder Offeree's Excess Amount be
allocated to such Securityholder Offeree. Any excess
Final Remaining Transfer Shares shall be further
allocated among the Securityholder Offerees whose
specified Excess Amount has not been satisfied (with
rounding to the nearest whole share to avoid fractional
shares) in proportion to their respective Pro Rata
Shares, determined based only on those Securityholder
Offerees whose specified Excess Amount has not yet been
satisfied, and such procedure shall be employed until the
entire Excess Amount of each Securityholder Offeree has
been satisfied or all Final Remaining Transfer Shares
have been allocated.
(e) The closing of the purchase by the Series C Holders or
the RSI Beneficial Holders, as the case may be, the
Company and/or the Securityholder Offerees of the
Transfer Shares pursuant to this Section 4.3 shall take
place at the principal offices of the Company on the
fifteenth Business Day after the end of the 15 Business
Day period set forth in (i) Section 4.3(d) or (ii) if the
Series C Holders are purchasing all of the Transfer
Shares, Section 4.3(c). At such closing, the Series C
Holders or the RSI Beneficial Holders, as the case may
be, the Company and/or the Securityholder Offerees who
have
29
elected to purchase Transfer Shares shall deliver a
certified check or checks in the appropriate amount to
the Transferring Securityholder against delivery of duly
endorsed certificates with all stock transfer tax stamps
attached representing the Transfer Shares to be
purchased. The Transfer Shares shall be delivered free
and clear of all Encumbrances other than those imposed by
this Agreement.
(f) If any Transfer Shares allocated to a Securityholder
Offeree are not purchased by such Securityholder Offeree,
such Transfer Shares may be purchased by the Company
promptly following any such default. Nothing contained
herein shall prejudice any Person's right to maintain any
cause of action or pursue any other remedies available to
it as a result of such default.
(g) If, at the end of the 15 Business Day period set forth in
Section 4.3(d), timely Acceptance Notices have not been
given covering all of the Transfer Shares and the
Transfer Notice contained an All or Nothing Condition,
then the Transferring Securityholder shall have 90 days
in which to complete the sale of all, but not less than
all, of the Transfer Shares. If, at the end of the 15
Business Day period set forth in Section 4.3(d), timely
Acceptance Notices have not been given covering all of
the Transfer Shares and the Transfer Notice did not
contain an All or Nothing Condition, then the
Transferring Securityholder shall have 90 days in which
to complete the sale of any or all of the Transfer Shares
as to which timely Acceptance Notices have not been
given. Any such sale of Transfer Shares shall be to a
third party for a consideration not less than the
consideration, and on terms no more favorable to the
transferee, than those contained in the Transfer Notice.
No such Transfer may be made to any third party unless
and until such third party delivers to the Company an
executed consent to be bound by the provisions of this
Agreement in form and substance reasonably satisfactory
to the Company. Promptly after any Transfer pursuant to
this Section 4.3, the Transferring Securityholder shall
notify the Company of the consummation thereof and shall
furnish such evidence of the completion and time of
completion of such Transfer and of the terms thereof as
the Company may request. If, at the end of such 90 day
period, the Transferring Securityholder has not completed
the Transfer of all of the Transfer Shares, the
Transferring Securityholder shall no longer be permitted
to Transfer such Shares pursuant to this Section 4.3(g)
without again complying with this Section 4.3 in its
entirety. If the Transferring Securityholder determines
at any time within such 90 day period that the Transfer
of all or any part of such Transfer Shares for a
consideration not less than and on terms no more
favorable to the transferee than those contained in the
Transfer Notice is impractical, the Transferring
Securityholder may terminate all attempts to Transfer
such Transfer Shares and recommence the procedures of
this Section 4.3 in their entirety without waiting for
the expiration of such 90 day period by delivering
written notice of such decision to the Company.
30
(h) If any Regulated Holder has the right to purchase any
Transfer Shares but is prohibited from exercising such
right under the BHCA or SBIA or the regulations
promulgated thereunder, such Regulated Holder may assign
such right to the Company and upon such assignment the
Company shall, subject to any legal or contractual
restrictions and at no cost or expense to the Company,
purchase such Transfer Shares and concurrently sell to
such Regulated Holder such Transfer Shares, or if
requested by such Regulated Holder, securities that do
not have voting rights but otherwise have the same terms
as such Transfer Shares, for the purchase price upon
which such Transfer Shares were purchased by the Company.
The Company's obligations under this Section 4.3(h) are
solely as an accommodation to such Regulated Holder and
the Company shall be under no obligation to advance any
funds or to obtain any financing to acquire such Transfer
Shares.
(i) No Transfer of Options may be made in a Section 4.3
Transfer.
(j) Any time periods contained in this Section 4.3 shall be
extended to the extent reasonably necessary to allow any
Securityholder to obtain any requisite approvals under
the Xxxx-Xxxxx-Xxxxxx Act and any other approvals that
may be required under applicable state or federal law.
The Company shall cooperate (at the Securityholder's
expense) in the obtaining of such approvals.
4.4 Restrictions in Connection with Registrations. Each Securityholder
---------------------------------------------
agrees not to effect any public sale or distribution of Shares, including any
sale pursuant to Rule 144, during the seven (7) days prior to the effective date
of a registration statement effected pursuant to the terms hereof and during
such period of time beginning on such effective date as may be required by the
underwriters of such offering and agreed to by the Company, but in no event
exceeding nine (9) months (in each case except as part of such registration).
Each Securityholder hereby acknowledges that such Securityholder shall have no
right to include its Shares in any registration of Shares, except as expressly
provided in Article 6.
4.5 Tag-Along Right. Prior to the effective date of an Initial Public
----------------
Offering (or such longer period as set forth in the second following paragraph),
if any Transferring Securityholder wishes to Transfer any Shares or Warrants,
either in one transaction or a series of related transactions, and any portion
of the Transfer Shares are not purchased by the Series C Holders or the RSI
Beneficial Holders, as the case may be, the Company or the Securityholder
Offerees under Section 4.3 (other than any Transfer pursuant to Section 4.2, 4.7
or 4.8, or through a redemption or put of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, or a sale in a registered offering
or pursuant to Rule 144 under the Securities Act, or through the right of any
Remaining Securityholder (as defined below) to sell Shares provided by this
Section 4.5), then as a condition to such Transfer, the Transferring
Securityholder shall permit (or cause to be permitted)
31
all other Securityholders who did not seek to purchase the Transfer Shares
pursuant to Section 4.3 (other than Securityholders who elected to purchase
Transfer Shares and failed to close on the purchase thereof) or were unable to
purchase the Transfer Shares as a result of the failure of the All or Nothing
Condition to be satisfied (the "Remaining Securityholders") to sell, either to
--------------------------
the prospective purchaser of the Transferring Securityholder's Shares or
Warrants or to another financially reputable purchaser reasonably acceptable to
such Remaining Securityholders, up to the same proportion of the Shares,
Warrants and Options (if then vested) then owned by such Remaining
Securityholder as the proportion that the number of Shares and Warrants the
Transferring Securityholder proposes to Transfer pursuant to this Section 4.5 in
the contemplated sale on the date of the Tag-Along Notice (as defined below)
bears to the total number of Shares and Warrants held by the Transferring
Securityholder on such date prior to any Shares or Warrants sold pursuant to
Section 4.3, on equivalent terms and at an equivalent price and for the same
type of consideration to that offered by the third-party offeror, taking into
account any difference in the type of securities (i.e., Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Common Stock) held
(or acquirable) by the Transferring Securityholder and the Remaining
Securityholders who desire to sell Shares, Warrants or Options. All numbers of
Shares and Warrants and Options (only to the extent then vested) under this
Section 4.5 shall be determined on a fully converted and fully exercised basis.
The Transferring Securityholder shall give written notice (the
"Tag-Along Notice") to the Remaining Securityholders of each proposed Transfer
-----------------
giving rise to the rights referred to in this Section 4.5 (the "Tag-Along
---------
Rights") immediately following the end of the 15 Business Day period provided in
------
Section 4.3(d) and at least 20 days prior to the proposed consummation of such
Transfer, setting forth the name of the prospective purchaser, the maximum
number of Shares and Warrants proposed to be Transferred, the proposed amount
and form of consideration and the other terms and conditions of the proposed
transaction. The Tag-Along Notice shall also provide that each of the Remaining
Securityholders may elect to exercise such rights within 15 days following the
giving of the Tag-Along Notice, by delivery, on or before the expiration of such
time period, of a written notice to the Transferring Securityholder indicating
such Securityholder's desire to exercise its rights under this Section 4.5 and
specifying the number of Shares, Warrants or Options he, she or it desires to
sell. No present or future Tag-Along Rights of a Securityholder shall be
adversely affected by its failure to exercise such rights in the past.
Notwithstanding anything to the contrary contained herein, a holder of
Options shall only be entitled to exercise Tag-Along Rights with respect to such
Options if the Tag-Along Notice relates to the sale or other disposition of a
majority of the outstanding shares of voting capital stock of the Company (based
on the Fully Diluted Capitalization excluding Option Shares and Warrant Shares)
to a Person that is not a parent or Subsidiary of the Company. Notwithstanding
anything to the contrary contained herein, the provisions of this Section 4.5
shall apply to any Transfer following an Initial Public Offering if, at the time
of any such Transfer, the provisions of Rule 144 promulgated under the
Securities Act are not generally applicable to sales of the Company's securities
due to the failure of the condition set forth in Rule 144(c) to be satisfied.
The Company shall use all reasonable efforts to inform the Securityholders if
such condition has not been satisfied at any time following an Initial Public
Offering; provided however, the Company shall have no liability to any
-------- -------
32
Securityholder arising out of the failure of any Transferring Securityholder to
comply with the provisions contained in this Section 4.5.
The Transferring Securityholder's sale of Shares or Warrants in any
sale proposed in a Tag-Along Notice shall be effected on substantially the terms
and conditions set forth in such Tag-Along Notice (except in the case of
non-monetary consideration which is unique to the third party as to which there
shall be paid the reasonable equivalent thereof). The number of Shares or
Warrants to be sold by the Transferring Securityholder shall be reduced by the
aggregate number of Shares, Warrants or Options to be sold by each of the
Remaining Securityholders who have exercised Tag-Along Rights in connection with
such Transfer.
In no event shall any Securityholder transferring Shares, Warrants or
Options pursuant to this Section 4.5 receive any special consideration
(including, without limitation, financial advisory, finders, consulting or other
similar fees) in connection with any sale of Shares, Warrants or Options
pursuant to this Section 4.5, unless such consideration is shared among the
Transferring Securityholder and the other Remaining Securityholders pro rata
based on their respective Shares, Warrants or Options sold (on a fully exercised
and converted basis); provided, however, this sentence shall not apply with
respect to an arms-length negotiated engagement of The Shattan Group LLC or any
of its Affiliates (any such Persons are hereinafter referred to as "Shattan") to
act as the Company's financial advisor with respect to such sale of Shares,
Warrants or Options. Furthermore, no Remaining Securityholder shall be required
to provide any representations or warranties in connection with the sale of
Shares, Warrants or Options pursuant to this Section 4.5, except representations
as to the authority to transfer, and title to, such Shares, Warrants or Options
and the absence of any Encumbrances on the title of such Shares, Warrants or
Options.
4.6 Transfers to a Competitor. Each Securityholder agrees that it shall
-------------------------
not, except in connection with a Sale of the Company, without the approval of at
least two of the Series A and Series B Preferred Directors (in the case of
Transfers described in clauses (i), (iv) and (v) of this Section 4.6) and a
majority of the Series C Preferred Directors, directly or indirectly, Transfer
any of its Shares, Warrants or Options to (any of the Persons described in
clauses (i) through (v) hereof is referred to herein as a "Prohibited
----------
Transferee"): (i) any entity that is engaged in owning, operating and/or
----------
managing executive office suites and providing related business support
services, including secretarial, telecommunications, word processing, printing
and copying; (ii) any real estate investment trust (other than Reckson
Associates Realty Corp.); (iii) any direct competitor of RSI; (iv) any entity
that Beneficially Owns 5 percent or more of the outstanding equity securities or
voting control of a Prohibited Transferee, excluding transfers to an
institutional holder that holds such equity securities or voting control as a
passive investment without the right to Control such Prohibited Transferee; and
(v) any Affiliate, officer or director of any Prohibited Transferee. For
purposes of this Section 4.6, a Transfer shall include any indirect Transfer
arising out of an acquisition of Control of RSI (provided that for this purpose
no presumption of Control shall arise solely from ownership of any specific
percentage of equity securities of RSI) by any of (w) CarrAmerica, (x) HQ Omni,
or (y) Regus, so long as any of such Persons named in clauses (w), (x) or (y) is
engaged in the executive office suite business, or (z) any other Person which
owns or operates 50 executive office suite centers as its primary business (any
of the foregoing Persons, a
33
"Disqualified Transferee"), unless prior to or substantially contemporaneously
-----------------------
with such acquisition Beneficial Ownership of the Series C Preferred Stock shall
have been transferred to a Person that is (x) Controlled by the executive
officers of RSI immediately prior to such acquisition and (y) not an Affiliate
of RSI or the Disqualified Transferee following such acquisition.
4.7 Sales of Xxxxx Securities.
-------------------------
(a) If the employment of Xxxxx X. Xxxxx ("Xxxxx") by the
-----
Company is terminated by reason of the occurrence of any
of the events set forth in Paragraph 7(d) of the Xxxxx
Employment Agreement, then at any time and from time to
time thereafter, Xxxxx shall have the option (the "Xxxxx
-----
Put"), subject to Section 4.7(c), to require the Company
---
to purchase all or any portion of his Common Stock and
Common Stock Equivalents, including the vested portion of
any Options granted to Xxxxx under an Option Plan, and
the non-vested portion of such Options which otherwise
would vest pursuant to the terms of such Plan within two
years of such termination (which unvested portion shall
immediately vest and become exercisable) (all of the
foregoing being referred to as the "Xxxxx Securities"),
-----------------
at the Xxxxx Put Price (as hereinafter defined) by
delivery of written notice to the Company (the "Xxxxx Put
---------
Notice"). Upon receipt of such election(s), the Company
------
will be obligated, subject to Section 4.7(c), to purchase
the Xxxxx Securities specified (collectively the "Offered
-------
Shares") in such Xxxxx Put Notice within ninety (90) days
------
after the receipt by the Company of the Xxxxx Put Notice
(or such longer period as may be reasonably necessary
to determine the Xxxxx Put Price pursuant to the
provisions of Section 4.7(b)) (such date of closing
being hereinafter referred to as the "Xxxxx Put Closing
-----------------
Date").
----
Upon election exercised by Xxxxx to require the Company to
purchase the Offered Shares pursuant to the provisions of this Section 4.7, the
Company will, subject to Section 4.7(c), notify Xxxxx of the Xxxxx Put Closing
Date with respect to such Offered Shares and Xxxxx shall surrender the
certificate or certificates duly endorsed in blank or together with an
acknowledgment of such redemption representing such Offered Shares to the
Company on or before such date. On the Xxxxx Put Closing Date, the Xxxxx Put
Price for such Offered Shares shall be paid to Xxxxx by certified or bank
cashier's check or, at Xxxxx'x option, by wire transfer in immediately available
funds to an account designated by Xxxxx, and each surrendered certificate shall
be canceled and retired. If less than all of the Shares represented by such
certificates are purchased, a new certificate or certificates shall be issued
representing the Shares not purchased by the Company. If the Company does not
have available legal surplus to purchase all of the Offered Shares, the Company
shall purchase the maximum number of Offered Shares that it may purchase with
such legal surplus available, and the Company shall purchase the remainder of
such Offered Shares as soon as it has funds legally available to do so. If
payment of the Xxxxx Put Price shall cause the Company to be in default under
the provisions of any of its loan agreements (a "Default Event"), the Company
--------------
may defer payment of all or such part of the Xxxxx Put Price to Xxxxx in an
amount (a "Xxxxx Deferred Amount") and for such time as is necessary to avoid a
----------------------
Default Event. Interest shall accrue on so
34
much of the Xxxxx Deferred Amount as is outstanding from time to time at a rate
per annum equal to 3-1/2% plus the Prime Rate and such interest shall be payable
by the Company to Xxxxx at the time of payment of the Xxxxx Deferred Amount in
full.
(b) Determination of Xxxxx Put Price. For purposes of this
---------------------------------
Section 4.7, the "Xxxxx Put Price" shall be an amount per
Offered Share equal to the "fair market value" thereof
------------------
(as determined in accordance with this Section 4.7(b)).
For purposes of this Section 4.7(b), fair market value
shall be determined by mutual agreement of the Company
and Xxxxx or, if the Company and Xxxxx are unable to
agree on a fair market value, then the fair market value
shall be determined pursuant to the procedure set forth
in the immediately following paragraph.
If Xxxxx and the Company are unable to mutually agree on a
fair market value within 60 days after the occurrence of the termination event,
Xxxxx and the Company shall each appoint one appraiser (each, an "Appointed
---------
Appraiser") within five (5) business days thereafter (the "Appointment Date"),
--------- -----------------
which Appointed Appraisers shall independently, within 25 days of Appointment
Date (the "Determination Date"), determine a fair market value (collectively the
------------------
"Original Estimates"). If the Original Estimates do not differ in amount by more
------------------
than 10% of the lower market value, then the fair market value shall be deemed
to be the average of such fair market values. If the Original Estimates differ
in amount by more than 10% of the lower market value, the Appointed Appraisers
shall within five (5) business days of the Determination Date appoint a third
appraiser, which third appraiser shall independently, within 25 days of the
Determination Date, determine a fair market value (the "Third Estimate"). The
--------------
Original Estimate that is nearest in amount to the Third Estimate shall be
deemed to be the fair market value, or if the Third Estimate is exactly the mean
of the two Original Estimates the Third Estimate shall be deemed to be the fair
market value, that shall be binding upon the Company and Xxxxx. If either Xxxxx
or the Company fails to appoint an Appointed Appraiser by the Appointment Date,
then the Appointed Appraiser who has been appointed shall be the sole appraiser
and the fair market value determined by such Appointed Appraiser shall be the
fair market value and shall be binding on the parties. All Appointed Appraisers
shall be qualified in valuing companies similar to the Company and shall not be
an Affiliate of either party. Any determination of the fair market value under
this Section 4.7(b) shall be made without any reduction as a result of the lack
of liquidity of the Offered Shares or the fact that the Offered Shares may
represent a minority interest in the Company. The Company and Xxxxx shall
equally bear and be responsible for all costs and expenses of the appraisers
under this Section 4.7(b).
(c) Consent of Required Banks. Upon receipt of a Xxxxx Put
--------------------------
Notice, the Company shall request the Required Banks (as
such term is defined in the Credit Agreement) to consent
to the exercise of the Xxxxx Put. The Company shall not
be required to purchase the Offered Shares pursuant to
Section 4.7(a), the Xxxxx Put Notice shall be deemed
rescinded and withdrawn and of no force and effect and no
beneficiary of the Xxxxx Put shall have any rights
thereunder and shall have no rights or remedies to
enforce the Xxxxx Put until
35
such time as all Obligations (as defined in the Credit
Agreement) shall have been paid in full in cash, unless
the Required Banks have consented in writing to the
exercise of the Xxxxx Put.
(d) Restriction on Sale of Xxxxx Securities. Prior to the
------------------------------------------
earliest to occur of (i) an Initial Public Offering, or
(ii) any termination of Xxxxx'x employment with the
Company, or (iii) any other time approved by
Super-Majority Approval, Xxxxx shall be prohibited from
making any Transfer of any of the Xxxxx Securities, other
than pursuant to Section 4.2(b), Section 4.5, or Section
4.8, to a Permitted Transferee, or a pledge of up to 50%
of the Shares owned by Xxxxx to secure any bona fide
indebtedness, but in each case subject to Section 4.6 and
provided that the lender acknowledges in writing that any
sale or Transfer of the pledged Shares shall be subject
to the provisions of this Agreement. Any such lender also
shall agree in writing that upon the existence and
continuance of an event of default of any such
indebtedness, the Series C Holders shall upon 10 Business
Days' notice have the right to purchase such indebtedness
at an aggregate price equal to the lower of (x) the "fair
market value" or (y) the then principal amount of such
indebtedness and the accrued interest thereon (without
regard to costs, charges or additional interest or fees
accruing as a result of such default provided that, in
connection with such purchase, the Series C Holders
acknowledge in writing that they shall not have the right
to foreclose or otherwise acquire the pledged shares
without first having complied with the transfer
provisions contained in Article IV hereof.
4.8 Sale of the Company. If (i) the Board (by Super-Majority Approval)
-------------------
and the holders of a Majority of the Shares of Series A and Series B Preferred
Stock and a Majority of the Series C Preferred Stock approve a Sale of the
Company of the type described in clauses (i) or (iii) of the definition thereof,
or (ii) if the holders of a Majority of the Shares of the Series A and Series B
Preferred Stock and a Majority of the Series C Preferred Stock approve of a Sale
of the Company of the type described in clause (ii) of the definition thereof,
in each case to a third party which is not an affiliate of any such Person or
the Company, the Company shall deliver a notice to each Securityholder
containing the material terms thereof (a "Sale Notice"). Each Securityholder
------------
agrees to vote, if such a vote is required under applicable law, all of its
Shares in favor of such a Sale of the Company, and to sell all of its Shares,
Warrants and Options on the terms contained in the Sale Notice. Each
Securityholder and the Company agrees to cooperate in any such Sale of the
Company (including, without limitation, by not exercising any appraisal rights
that may be available under applicable law) and agrees to execute and deliver
all documents and instruments as is required in the Sale Notice and which the
holders of a Majority of the Shares of Series A and Series B Preferred Stock or
a Majority of the Series C Preferred Stock request to effect such Sale of the
Company; provided, however, that the Sale Notice (i) shall not require any
-------- -------
Securityholder to provide any representations or warranties in connection with
the Sale of the Company pursuant to this Section 4.8, except representations as
to the authority to transfer such Shares, Warrants or Options and the absence of
any Encumbrances (other than under this Agreement) on the title of such Shares,
36
Warrants and Options, and (ii) shall require that each Securityholder receive
the same percentage of each type of consideration delivered in connection with
the Sale of the Company.
Upon such Sale of the Company, each Securityholder shall receive its
Pro Rata Share of the consideration paid by the purchaser or received from the
sale of securities. In no event shall any Securityholder receive special
consideration (including, without limitation, financial advisory, finders,
consulting or other similar fees) in connection with a Sale of the Company
contemplated by this Section 4.8, unless such consideration is shared among all
Securityholders based on their Pro Rata Shares; provided, however, this sentence
shall not apply with respect to an arms-length negotiated engagement of Shattan
to act as the Company's financial advisor with respect to the Sale of the
Company.
4.9 Repurchase of Equity Interests. The Company covenants and agrees
-------------------------------
that it will not, without giving prior written notice to any Securityholder of
which the Company has written notice is a Regulated Holder, directly or
indirectly, purchase, redeem, retire or otherwise acquire any Shares or Warrants
if, as a result of such purchase, redemption, retirement or other acquisition,
such Regulated Holder, together with its Affiliates, will own, or be deemed to
own, Common Stock Equivalents representing capital equal to 25% or more of the
aggregate equity interests then outstanding of the Company.
4.10 Restrictions Following Qualified Public Offering. In the event of
--------------------------------------------------
the consummation of a Qualified Public Offering that has not been approved by a
majority of the Company Directors and the Series A and Series B Preferred
Directors (taken in the aggregate) then serving, and by a majority of the Series
C Preferred Directors then serving, then, during the Blackout Period, (x) none
of the Xxxxxx Holders or Xxxxx shall Transfer any Shares, Options or Warrants
Beneficially Owned by any of them, (y) the RSI Beneficial Holders shall not, and
shall cause the Series C Holders not to, make any Transfer of any of the RSI
Beneficial Holders' Beneficial Ownership of Shares, Options or Warrants, except
to a Permitted Transferee who agrees in writing to be bound by terms of this
Agreement, including the restrictions contained in this Section 4.10, and (z)
the JAH Beneficial Holders shall not, and shall cause the Series C Holders not
to, make any Transfer of any of the JAH Beneficial Holders' Beneficial Ownership
of Shares, Options or Warrants other than to a Permitted Transferee who agrees
in writing to be bound by this Agreement, including the restrictions contained
in this Section 4.10; provided, however, that (i) the foregoing restrictions
-------- -------
shall not apply to any Shares acquired by any such Person in the open market
following an Initial Public Offering and not directly from the Company, (ii) the
foregoing restrictions shall not apply to any Transfer which is a pledge by any
of (A) the RSI Beneficial Holders, (B) Xxxxx X. Xxxxx, or (c) the JAH Beneficial
Holders of their respective Beneficial Ownership of Shares, Options or Warrants,
provided that such pledgor retains voting control of such pledged Shares,
Options or Warrants, (iii) at any time following the first anniversary of the
consummation of the Qualified Public Offering, the Xxxxxx Holders shall be
entitled to distribute any Shares, Options, or Warrants held by any of them to
any limited partners or non-managing members of such Xxxxxx Holders (provided
such limited partners or non-managing members are not Affiliates of the general
partner or managing member of such Xxxxxx Holders), and such limited partners or
non-managing members, other than Xxxxx X. Xxxxxxx and Xxxxxx Xxxxxx, shall not
be subject to any further restrictions pursuant to this Section 4.10, and
37
(iv) Xxxxx shall be entitled to sell any Shares, Options, or Warrants held by
him in an amount sufficient to provide proceeds to pay any tax liabilities
arising in connection with the exercise of any Options that would expire if not
exercised during the Blackout Period (provided, such exercise is made not more
than five Business Days prior to the expiration date thereof and that all of the
proceeds therefrom will be used to pay such tax liability and provided, further,
that such a sale by Xxxxx shall not be permitted if "cashless exercise" of such
Options is available to him to achieve the same after tax result).
ARTICLE V
PUT
5.1 Ability to Put. (a) If (A) the Company has not, prior to November
--------------
15, 2001, either made an Initial Public Offering, or merged into a public
company and the holders of the then outstanding Series A Preferred Stock, Series
B Preferred Stock and Conversion Stock shall have received Registered Securities
in such merger in exchange for their Shares, or (B) the Series C Holders
Beneficially Own Shares, Options and Warrants representing (on a fully exercised
and converted basis), in the aggregate, 65% or more of the Fully Diluted
Capitalization, then at any time and from time to time thereafter until the
earlier of November 15, 2003 or two years after the occurrence of the event
described in clause (B) of this paragraph, the holders of a Majority of the
Shares of Series A and Series B Preferred Stock shall have the option (the
"Put") to require, subject to Section 5.4, the Company to purchase all of the
---
outstanding Series A Preferred Stock and Series B Preferred Stock held by the
Series A Holders and Series B Holders who have voted in favor of the exercise of
the Put, at the Put Price (as hereinafter defined) by delivery of written notice
to the Company (the "Put Notice"). Upon receipt of the Put Notice, the Company
----------
shall notify each other Series A Holder and Series B Holder, who shall have the
right to join in the Put by written notice to the Company (the "Supplemental Put
----------------
Notice"). The Company shall also provide notice thereof to the holders of the
------
Series C Preferred Stock. The Company shall be obligated to purchase, subject to
Section 5.4, the Series A Preferred Stock and Series B Preferred Stock specified
in the Put Notice and the Supplemental Put Notice within 90 days after the
receipt by the Company of the Put Notice (or such longer period as may be
reasonably necessary to determine the Put Price pursuant to the provisions of
Sections 5.2 and 5.3). The closing of the purchase by the Company of the Series
A Preferred Stock and Series B Preferred Stock shall occur at the Company's
principal office, or at such other place as shall be mutually agreeable to the
Series A Holders, the Series B Holders and the Company as soon as possible (and
in any event within 10 days after the determination of the Put Price in
accordance with Sections 5.2 and 5.3) (such date of closing being hereinafter
referred to as the "Put Closing Date").
----------------
(b) If the holders of a Majority of the Shares of Series A and Series B
Preferred Stock are entitled to exercise the Put pursuant to the preceding
paragraph and shall not have done so, then at any time and from time to time
thereafter until the earlier of November 15, 2003 or two years after the
occurrence of the event described in clause (B) of the preceding paragraph, the
PNA Holder shall have the option, subject to all of the terms and conditions set
forth in this Article 5 (other than those pertaining to the repurchase of all of
the outstanding shares of the Series A Preferred Stock and the
38
Series B Preferred Stock), to require the Company to purchase all of the
outstanding Series B Preferred Stock then held by the PNA Holder at the Put
Price by delivery of written notice to the Company (the "PNA Holder Put
----------------
Notice"). Following the receipt of the PNA Holder Put Notice, the Company shall
------
promptly (and in any event within 10 days after its receipt of the PNA Put
Holder Notice) provide notice thereof to the Xxxxxx Holders, the Northwood
Holders and the holders of the Series C Preferred Stock. Each of the Xxxxxx
Holders and the Northwood Holders shall have the right, subject to all of the
terms and conditions set forth in this Article Five (other than those pertaining
to the repurchase of all of the outstanding shares of the Series A Preferred
Stock and the Series B Preferred Stock), to require the Company to purchase all
of the outstanding shares of Series A Preferred Stock and Series B Preferred
Stock then held by it at the Put Price by delivery of written notice to the
Company within 20 days after such holder's receipt of the PNA Holder Put Notice.
If the Xxxxxx Holders or the Northwood Holders exercise the Put pursuant to this
paragraph, each other Series B Holder shall be entitled to join in the Put by
written notice to the Company. Any repurchase of Series A Preferred Stock or
Series B Preferred Stock pursuant to this paragraph shall be made on one closing
date.
(c) If the Company has not, prior to November 15, 2001, either made an
Initial Public Offering, or merged into a public company and the holders of the
then outstanding Series C Preferred Stock and Conversion Stock shall have
received Registered Securities in such merger in exchange for their Shares, then
at any time and from time to time thereafter until November 15, 2003, the
holders of a Majority of the Shares of Series C Preferred Stock shall have the
option (the "Series C Put") to require, subject to Section 5.4, the Company to
------------
purchase all of the outstanding Series C Preferred Stock held by the Series C
Holders who have voted in favor of the exercise of the Series C Put, at the
Series C Put Price (as hereinafter defined) by delivery of written notice to the
Company (the "Series C Put Notice"). Upon receipt of the Series C Put Notice,
--------------------
the Company shall notify each other Series C Holder, who shall have the right to
join in the Series C Put by written notice to the Company (the "Supplemental
------------
Series C Put Notice"). The Company shall also provide notice thereof to the
--------------------
holders of the Series A Preferred Stock and the Series B Preferred Stock. The
Company shall be obligated to purchase, subject to Section 5.4, the Series C
Preferred Stock specified in the Series C Put Notice and the Series C
Supplemental Put Notice within 90 days after the receipt by the Company of the
Series C Put Notice (or such longer period as may be reasonably necessary to
determine the Series C Put Price pursuant to the provisions of Sections 5.2 and
5.3). The closing of the purchase by the Company of the Series C Preferred Stock
shall occur at the Company's principal office, or at such other place as shall
be mutually agreeable to the Series C Holders and the Company as soon as
possible (and in any event within 10 days after the determination of the Series
C Put Price in accordance with Sections 5.2 and 5.3) (such date of closing being
hereinafter referred to as the "Series C Put Closing Date"). Notwithstanding
---------------------------
anything to the contrary contained herein, in the event of an acquisition of
Control of RSI of the type described in Section 4.6 hereof, the Series C Put may
only be exercised in the event that the Put has been exercised.
(d) The Company shall not be required to purchase Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to this
Section 5.1 to the extent that the Company does not have available legal surplus
pursuant to the General Corporation Law of the State of Nevada from which it can
purchase such stock at the Put Price or the Series C Put Price, as the
39
case may be, provided that the Company shall use all legally permissible methods
in the reduction of capital and in the revaluation of its assets, including
appraisal, in obtaining such legal surplus, and the Company gives written notice
to the electing Securityholders within 30 days after the date of the notice of
exercise of the Put or the Series C Put by such Securityholders that it is not
required to purchase the number of Shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock set forth in such notice by reason
of this clause and setting forth the facts relating thereto.
(e) It is acknowledged and agreed that any Put Notice, Supplemental Put
Notice, PNA Holder Put Notice, Series C Put Notice, and Supplemental Series C
Put Notice received by the Company within any 30 day period shall be treated in
all respects under the terms and provisions of this Agreement as though such
notices were received on the same date at the same time. Accordingly, the Put
Closing Date, the closing date related to a PNA Holder Put Notice and the Series
C Put Closing Date related to such notices shall occur simultaneous on one
closing date and the payments to all such Securityholders shall be made pro rata
on the basis of the Common Stock Equivalents subject to such put rights.
(f) Upon election to require the Company to purchase such Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock pursuant
to the provisions of this Article 5, the Company will, subject to Section 5.4,
notify each Series A Holder, Series B Holder or Series C Holder of the Put
Closing Date or the Series C Put Closing Date, as the case may be, and each such
Series A Holder, Series B Holder or Series C Holder, as the case may be, shall
surrender the certificate or certificates representing such Shares to the
Company on or before such date. On the Put Closing Date or the Series C Put
Closing Date, as the case may be, the Put Price or the Series C Put Price, as
the case may be, for such Shares shall be payable to each such Series A Holder,
Series B Holder or Series C Holder, as the case may be, by certified or bank
cashier's check or, at the option of the Series A Holder, Series B Holder or
Series C Holder, as the case may be, receiving the same, by wire transfer in
immediately available funds to an account designated by each such holder, and
each surrendered certificate shall be canceled and retired. If less than all of
the Shares represented by such certificate are purchased, a new certificate or
certificates shall be issued representing the Shares not purchased by the
Company. If the Company does not have available legal surplus to purchase all of
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock that each such Series A Holder, Series B Holder or Series C Holder has
requested the Company to purchase under this Article 5, the Company shall
purchase the maximum number of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock that it may purchase with such
legal surplus available, pro rata to the Put Price or the Series C Put Price, as
the case may be, thereof, and the Company shall repurchase the remainder of such
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
as the case may be, as soon as it has funds legally available to do so.
(g) The Company shall be permitted to pay the Put Price or the Series C
Put Price, as the case may be, by delivery of a subordinated note payable in
three annual installments of principal commencing on the first anniversary of
the Put Closing Date or the Series C Put Closing Date, as the case may be, with
interest at an annual rate equal to 3-1/2% plus the Prime Rate, it being
40
acknowledged and agreed that with respect to the decision to pay the Put Price
in cash or in such annual installments, the Series A and Series B Directors
shall not be entitled to vote if such decision is with respect to the redemption
or repurchase of the Series A Preferred Stock or the Series B Preferred Stock,
and the Series C Directors shall not be entitled to vote if such decision is
with respect to the redemption or repurchase of the Series C Preferred Stock.
(h) If payment of the Put Price to the Series A Holders and Series B
Holders or the Series C Put Price to the Series C Holders shall cause the
Company to be in default under the provisions of any of its loan agreements (a
"Default Event"), the Company may defer payment of all or such part of the Put
--------------
Price or the Series C Put Price, as the case may be, to each Series A Holder and
Series B Holder or Series C Holder, as the case may be, pro rata to the Put
Price or the Series C Put Price, as the case may be, thereof, in an amount (a
"Deferred Amount") and for such time as is necessary to avoid a Default Event.
----------------
Interest shall accrue on so much of the Deferred Amount as is outstanding from
time to time at a rate per annum (based on the actual number of days elapsed in
a 365 day year) equal to 3-1/2% percent plus the Prime Rate and such interest
shall be payable by the Company to the Series A Holders, Series B Holders or
Series C Holders, as the case may be, at the time of payment of the Deferred
Amount in full. In addition, the Company shall use its best efforts to pay the
Put Price or the Series C Put Price in full on the Put Closing Date or the
Series C Put Closing Date, as the case may be, and, in this regard, the Company
shall (i) seek to negotiate with its lenders to permit the Company, under the
terms of its loan agreements, to perform its obligations under this Article 5
and/or (ii) seek to obtain new financing.
5.2 Put Price. (a) For purposes of this Article 5, the Put Price shall
---------
be the greater of (i) the Appraised Value of the Conversion Stock underlying the
Series A Preferred Stock or Series B Preferred Stock, as the case may be, or
(ii) the Adjusted Value of the Series A Preferred Stock or Series B Preferred
Stock, as the case may be. The "Appraised Value" shall mean the fair market
value of the Conversion Stock issuable upon conversion of the Series A Preferred
Stock or Series B Preferred Stock, as the case may be, determined pursuant to
the appraisal procedure set forth in the immediately succeeding section (the
"Appraised Value"). The "Adjusted Value" shall be an amount per share equal to
----------------
the Adjusted Purchase Price of the Series A Preferred Stock (determined in
accordance with the Series A Certificate of Designation), or of the Series B
Preferred Stock (determined in accordance with the Series B Certificate of
Designation), as the case may be, plus a cumulative accretion computed on the
Adjusted Purchase Price at the rate of 8% per annum (compounded annually) from
the date of issue up to the date of the Put Notice, reduced by an amount equal
-------
to the aggregate of all declared and paid cash dividends, if any.
(b) For purposes of this Article 5, the Series C Put Price
shall be the greater of (i) the Series C Appraised Value of the Conversion Stock
underlying the Series C Preferred Stock, or (ii) the Series C Adjusted Value.
The "Series C Appraised Value" shall mean the fair market value of the
Conversion Stock issuable upon conversion of the Series C Preferred Stock
determined pursuant to the appraisal procedure set forth in the immediately
succeeding section (the "Series C Appraised Value"). The "Series C Adjusted
-------------------------
Value" shall be an amount per share equal to the Adjusted Purchase Price of the
Series C Preferred Stock (determined in accordance with the Series C Certificate
of Designation), plus a cumulative accretion computed on the Adjusted Purchase
Price
41
at the rate of 8% per annum (compounded annually) from the date of issue up to
the date of the Series C Put Notice, reduced by an amount equal to the aggregate
-------
of all declared and paid cash dividends, if any.
5.3 Appraisal Procedure. In order to determine the Appraised Value or
--------------------
the Series C Appraised Value, the holders of a Majority of the Shares of Series
A and Series B Preferred Stock (in the case of determinations of the Appraised
Value) or the holders of a Majority of the Shares of Series C Preferred Stock
(in the case of determinations of the Series C Appraised Value), on the one
hand, and the Board (excluding the Series A and Series B Preferred Directors, in
the case of the determination of the Appraised Value of the Series A Preferred
Stock or the Series B Preferred Stock, and excluding the Series C Preferred
Directors, in the case of the determination of the Appraisal Value of the Series
C Preferred Stock), on the other hand, shall each appoint one appraiser
(collectively, the "Initial Appraisers"), within 20 days after delivery of the
------------------
Put Notice or the Series C Put Notice, as the case may be, which appraisers
shall promptly determine a fair market value based on the going concern value of
the Company as a whole and without adjustment for minority interest or lack of
liquidity, within 30 days. In the event that the fair market values determined
by the Initial Appraisers (collectively, the "Original Estimates") do not differ
------------------
in amount by more than 10 percent, the fair market value for purposes of this
Section 5.3 shall be the amount equal to the average of the Original Estimates.
In the event that the Original Estimates differ in amount by more than 10
percent, the holders of a Majority of the Shares of Series A and Series B
Preferred Stock (in the case of determinations of the Appraised Value) or the
holders of a Majority of the Shares of Series C Preferred Stock (in the case of
determinations of the Series C Appraised Value) and the Company shall mutually
agree on a third appraiser within 5 days thereafter, provided that if such
holders and the Company fail to appoint a third appraiser within such 5-day
period, then the Initial Appraisers shall appoint a third appraiser within 5
days thereafter. The third appraiser shall independently, within 30 days of such
third appraiser's appointment, determine such a fair market value (the "Third
-----
Estimate"). The Original Estimate that is nearest in amount to the Third
--------
Estimate shall be deemed to be the fair market value that shall be binding on
the Company and the holders of the Shares subject to the Put. The Company shall
bear all costs of appraisers under this Section 5.3. All appraisers appointed
pursuant to this Section 5.3 shall be qualified in valuing companies similar to
the Company and shall be unaffiliated with any party hereto. Any determination
of the Appraised Value or the Series C Appraised Value under this Section 5.3
shall be made without reduction resulting from the lack of liquidity of the
Shares subject to Put or the Series C Put or the fact that such Shares may, at
such time, represent a minority interest in the Company.
5.4 Consent Required to Put. Upon receipt of a Put Notice or a Series C
-----------------------
Put Notice, the Company shall request the Required Banks to consent to the
exercise of the Put or the Series C Put, as the case may be. The Company shall
not be required to purchase Series A Preferred Stock and Series B Preferred
Stock or Series C Preferred Stock, as the case may be, pursuant to Section 5.1,
and the Put Notice or the Series C Put Notice, as the case may be, shall be
deemed rescinded and withdrawn and of no force and effect and no beneficiary of
any Put or Series C Put, as the case may be, shall have any rights thereunder,
and no beneficiary of any Put or Series C Put, as the case may be, shall have
any rights or remedies to enforce any Put or Series C Put, as the case may be,
until such time as all Obligations shall have been paid in full in cash, unless
the Required Banks have consented in writing to the exercise of the Put or
Series C Put, as the case may be.
42
ARTICLE VI
REGISTRATION RIGHTS
6.1 Public Offering Shares.
----------------------
(a) Demand Registration Rights. (i) Subject to Section
-----------------------------
6.1(a)(ii), at any time and from time to time following
the one year anniversary of an Initial Public Offering,
if the Company receives written notice from either (A)
holders of Class A Common Stock (as defined in Section
8.1(e)) who, immediately prior to the Initial Public
Offering, constituted the holders of a majority of the
Shares of the Series A and Series B Preferred Stock, or
(B) holders of Class B Common Stock (as defined in
Section 8.1(e)) who immediately prior to the Initial
Public Offering, constituted the holders of a Majority of
the Shares of the Series C Preferred Stock, which notice
demands the registration of all or any portion of the
Common Stock, Conversion Stock or Warrant Shares held by
such Series A Holders, Series B Holders or Series C
Holders and specifies the intended methods of disposition
thereof (which may include a delayed and continuous
offering pursuant to Rule 415 promulgated under the
Securities Act), then the Company shall promptly (and in
any event within 10 days after its receipt of such
demand) provide notice thereof to the other
Securityholders in accordance with this Section 6.1
(which other Securityholders shall have the right,
subject to Section 6.1(c)(ii) to include in such
registration any shares of Common Stock, and any shares
of Common Stock issuable upon conversion of Series A
Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock or upon exercise of Warrants or Options
held by them) and cause to be prepared a registration
statement, file and obtain a receipt for the registration
statement as soon as practicable (but not later than 90
days after the date of such demand), and exercise its
best efforts to file a final registration statement, to
obtain a receipt therefor as soon as practicable
thereafter and to have such registration statement
declared effective as soon as practicable thereafter,
under the Securities Act and such other securities laws
as shall be directed by such Securityholders, to the end
that the Shares (including Shares issuable upon
conversion of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock or upon
exercise of Warrants or Options) held by all demanding
Securityholders, may be sold thereunder as soon as
practicable after the receipt of such notice, and the
Company will use its best efforts to ensure that a
distribution of such Shares pursuant to the registration
statement may continue for up to six months from the date
of the effective date of the registration statement or
such later time pursuant to the method of disposition
specified in the demand for registration; provided,
--------
however, that the Company shall not be obligated
-------
43
to take any action to effect such registration,
qualification or compliance pursuant to this Section
6.1(a) unless the Company shall have received requests
for such registration of such Shares having a minimum
anticipated aggregate net offering price (based on the
then market price of the Common Stock and customary
underwriter's discounts and commissions, if applicable)
of $20.0 million, subject, however, to the right of the
Company pursuant to Section 6.1(c)(ii), upon advice of
the managing underwriters, to reduce the number of Shares
that are requested to be registered by such holders (a
"Market Cut Back"). Notwithstanding the foregoing, the
---------------
holders of Class B Common Stock shall be entitled to
exercise the registration rights contained herein solely
with respect to the Class A Common Stock issuable upon
conversion of such Class B Common Stock. The Class B
Common Stock shall be automatically converted into Class
A Common Stock upon the consummation of an underwritten
offering for such Class A Common Stock or upon the sale
of such Class A Common Stock pursuant to any delayed and
continuous offering pursuant to Rule 415 promulgated
under the Securities Act. Each such registration shall
hereinafter be called a "Demand Registration." The Series
-------------------
A Holders and the Series B Holders shall be entitled to
request one Demand Registration and the Series C Holders
shall be entitled to request two Demand Registrations;
provided, however, that if all of the Series C Preferred
-------- -------
Stock may have been (x) included in the registration
statement prepared upon the exercise of the Series C
Holders' first exercised right for a Demand Registration
and (y) offered and sold in such offering in accordance
with the plan of distribution described therein (after
giving full force and effect to the Company's right to a
Market Cut Back and the Company's rights under Section
6.1(a)(ii)), then the Series C Holders shall not have the
right to the second Demand Registration (but will
continue to have the rights provided under Section
6.1(b)). A Demand Registration shall not count as such
until a registration statement becomes effective;
provided, that if, after such registration statement has
--------
become effective, the offering pursuant to the
registration statement is interfered with by any stop
order, injunction or other order or requirement of the
Commission or any other governmental authority, such
registration shall be deemed not to have been effected
unless such stop order, injunction or other order shall
subsequently have been vacated or otherwise removed. The
holders of a Majority of the Shares of the Series A and
Series B Preferred Stock or the holders of a Majority of
the Shares of the Series C Preferred Stock requesting
such registration shall select the underwriters of any
underwritten offering pursuant to a registration
statement filed pursuant to this Section 6.1(a).
(ii) (A) If, upon receipt of a registration request
pursuant to Section 6.1(a)(i), the Company is advised in writing (with a copy to
the person(s) requesting registration pursuant to Section 6.1(a)) by a
nationally recognized investment banking firm selected by the
44
Company that, in such firm's opinion, a registration at the time and on the
terms requested would materially and adversely affect any immediately planned
underwritten public equity financing by the Company for the primary purpose of
raising capital for the Company that had been contemplated by the Board prior to
receipt of notice requesting registration pursuant to Section 6.1(a)(i) (a
"Transaction Blackout"), the Company shall not be required to effect a
---------------------
registration pursuant to Section 6.1(a)(i) until the earliest of (1) the
abandonment of such financing, (2) 90 days after the completion of such
financing, (3) the termination of any "hold back" or "lock-up" period obtained
by the underwriter(s) selected by the Company from any person in connection with
such financing, or (4) 180 days after notice to the Securityholders requesting
registration of written notice of such Transaction Blackout (together with a
copy of the investment banking firm opinion referred to above in this Section
6.1(a)(ii)(A)); provided, however, that the Company shall be entitled to
-------- -------
exercise this right on only one occasion during any twelve-month period; or
(B) If, while a registration request is pending
pursuant to Section 6.1(a), counsel to the Company has determined in good faith
that the filing of a registration statement would require the disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential and which has not been disclosed to the public (which
determination shall be made promptly), the Company shall not be required to
effect a registration pursuant to Section 6.1(a) until the earlier of (1) the
date upon which such material information is disclosed to the public or ceases
to be material and (2) 45 days after counsel to the Company makes such good
faith determination.
(iii) For purposes of this Article VI, whenever there are
references to Series A Holders, Series B Holders or Series C Holders at a time
following an Initial Public Offering, such terms shall be deemed to refer to the
same Persons but in their capacity as holders of Class A Common Stock or Class B
Common Stock, as the case may be.
(b) "Piggyback" Registration Rights. Subject to applicable
--------------------------------
stock exchange rules and securities regulations, at least
30 days prior to the filing of any registration statement
for any public offering of any of its Common Stock for
the account of the Company or any other Person (other
than a registration statement on Form S-4 or S-8 (or any
successor forms under the Securities Act) or other
registrations relating solely to employee benefit plans
or any transaction governed by Rule 145 of the Securities
Act), the Company shall give written notice of such
proposed filing and of the proposed date thereof to each
Securityholder and if, on or before the twentieth (20th)
day following the date on which such notice is given, the
Company shall receive a written request from any such
Securityholder requesting that the Company include among
the securities covered by such registration statement any
Shares (including Shares issuable upon conversion of
Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock or upon exercise of Warrants or
Options) held by such Securityholder for offering for
sale in a manner and on terms set forth in such request,
the Company shall include such Shares in such
registration statement, if filed, so as to permit such
45
Shares to be sold or disposed of in the manner and on the
terms of the offering thereof set forth in such request.
Each such registration shall hereinafter be called a
"Piggyback Registration." The holders of a majority of
-----------------------
the Shares of the Series A Preferred Stock, Series B
Preferred Stock and the Series C Preferred Stock (taken
as a single class) participating in the registration
shall have the right to select an underwriter of any
offering pursuant to a registration statement filed
pursuant to this Section 6.1(b).
(c) Terms and Conditions of Registration or Qualification. In
-----------------------------------------------------
connection with any registration statement filed pursuant
to Section 6.1(a) or 6.1(b) hereof, the following
provisions shall apply:
(i) Each selling Securityholder shall, if requested by
the managing underwriter, agree not to sell any
Shares held by such selling Securityholder (other
than the Shares so registered) for such period of
time following the effective date of the
registration statement relating to such offering,
but in no event in excess of three (3) months in the
case of a secondary offering, or such other longer
period as the managing underwriter may require and
the Company shall agree.
(ii) If the managing underwriter advises in writing that
the inclusion in such registration or qualification
of some or all of the Shares sought to be registered
exceeds the number (the "Saleable Number") that can
----------------
be sold in an orderly fashion within a price range
acceptable to the Company, if such registration is
being effected at the Company's determination, or
holders of a Majority of the Shares of the Series A
and Series B Preferred Stock, if such registration
is being effected at the request of the holders of a
Majority of the Shares of Series A Preferred Stock
and Series B Preferred Stock, or the holders of a
Majority of the Shares of the Series C Preferred
Stock, if such registration is being effected at the
request of the holders of a Majority of the Shares
of Series C Preferred Stock, then the number of
Shares offered shall be limited to the Saleable
Number and shall be allocated as follows:
(A) If such registration is being effected at the
Company's determination to sell Shares for its own account, (1) first, all the
Shares the Company proposes to register and (2) second, the difference between
the Saleable Number and the number to be included pursuant to clause (1) above,
allocated first to the Series A Holders, Series B Holders and Series C Holders
pro rata on the basis of the relative number of Shares offered for sale by each
such Securityholder, and then among all other selling Securityholders pro rata
on the basis of the relative number of Shares offered for sale by each such
other Securityholder; and
46
(B) in all other cases, including if the
registration is being effected pursuant to a Demand Registration, (1) first, the
entire Saleable Number allocated first to the holders of the Series A and Series
B Preferred Stock, if the Demand Registration was initiated by the holders of a
Majority of the Shares of the Series A and Series B Preferred Stock, or to the
holders of the Series C Preferred Stock, if the Demand Registration was
initiated by the holders of a Majority of the Shares of the Series C Preferred
Stock, and then among all other selling Securityholders pro rata on the basis of
the relative number of Shares offered for sale by each such Securityholder and
(2) second, the difference (if positive) between the Saleable Number and the
number to be included pursuant to clause (1) above, allocated to the Company.
(iii) The selling Securityholders will promptly provide
the Company with such information concerning the
selling Securityholder, its ownership of Shares and
its intended methods of distribution as the Company
shall reasonably request in order to prepare such
registration statement and, upon the Company's
request, each selling Securityholder shall provide
such information in writing and signed by such
Securityholder and stated to be specifically for
inclusion in the registration statement. If the
distribution of the Shares covered by the
registration statement shall be effected by means of
an underwriting, the right of any selling
Securityholder to include its Shares in such
registration shall be conditioned on such
Securityholder's execution and delivery of a
customary underwriting agreement with respect
thereto; provided, however, that except with respect
-------- -------
to information concerning such Securityholder and
its ownership of Shares to be included in such
registration and such Securityholder's intended
manner of distribution of the Shares, no selling
Securityholder shall be required to make any
representations or warranties in such agreement as a
condition to the inclusion of its Shares in such
registration.
(iv) The Company shall bear all expenses in connection
with the preparation of any registration statement
filed pursuant to Section 6.1(a), including the fees
and disbursements of one counsel for the selling
Securityholders, except for the underwriting
discounts or commissions with respect to Shares of
the selling Securityholders which shall be borne by
the selling Securityholders.
(v) The Company shall bear all expenses in connection
with the preparation of any registration statement
filed pursuant to Section 6.1(b), including the fees
and disbursement of one counsel to the selling
Securityholders, except for the underwriting
discounts or commissions with respect to Shares of
the selling Securityholders, which shall be borne by
the selling Securityholders.
47
(vi) Following the effective date of such registration
statement, the Company shall, upon the request of
the selling Securityholders, forthwith supply such
number of prospectuses (including preliminary
prospectuses and amendments and supplements thereto)
meeting the requirements of the Securities Act or
such other securities laws where the registration
statement or prospectus has been filed and such
other documents as are referred to in the
registration statement as shall be requested by the
selling Securityholders to permit such
Securityholders to make a public distribution of
their Shares, provided that the selling
Securityholders furnish the Company with such
appropriate information relating to such
Securityholders' intentions in connection therewith
as the Company shall reasonably request in writing.
(vii) The Company shall prepare and file such amendments
and supplements to such registration statement as
may be necessary to keep such registration statement
effective and to comply with the provisions of the
Securities Act or such other securities laws where
the registration statement has been filed with the
respect to the offer and sale or other disposition
of the Shares covered by such registration statement
during the period required for distribution of the
Shares, which period shall not be in excess of six
(6) months from the effective date of such
registration statement or such longer period
specified in the demand for registration.
(viii)The Company shall use its best efforts to register
or qualify the Shares of the selling Securityholders
covered by any such registration statement under
such securities or Blue Sky laws in such
jurisdictions as the Securityholders may request;
provided, however, that the Company shall not be
-------- -------
required to execute a general consent to service of
process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so
qualified in order to comply with such request.
(ix) The Company will as expeditiously as possible:
(A) cause the Shares covered by such registration
statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company to enable the selling Securityholders to consummate the disposition
of such Shares;
(B) notify each selling Securityholder at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or
48
necessary to make the statements therein not misleading, and the Company will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(C) cause all Shares covered by the registration
statement to be listed on each securities exchange or designated for quotation
on NASDAQ on which similar securities issued by the Company are then so listed
or designated and, unless the same already exists, provide a transfer agent,
registrar and CUSIP number for all such Shares not later than the effective date
of the registration statement;
(D) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such other actions as
the holders of a majority of the voting power of the Shares being sold or the
underwriters retained by such holders, if any, reasonably request in order to
expedite or facilitate the disposition of such Shares;
(E) make available for inspection by any selling
Securityholder, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the "Inspectors"), all
----------
financial and other records, pertinent corporate documents and properties of the
Company as shall be necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information requested by any such Inspector in connection with such
registration statement;
(F) obtain "cold comfort" letters and updates
thereof from the Company's independent public accountants and an opinion from
the Company's counsel, in each case addressed to the selling Securityholders, in
customary form and covering such matters of the type customarily covered by
"cold comfort" letters and opinion of counsel, respectively, as the holders of a
majority of the voting power of the Shares of the selling Securityholders shall
request;
(G) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its Securityholders, as
soon as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(H) cause its officers to use their reasonable best
efforts to support the marketing of the Shares covered by the registration
statement (including, without limitation, the participation in "road shows," at
the request of the managing underwriter) taking into account the Company's
business needs.
(x) Each selling Securityholder agrees that, upon
receipt of any notice from the Company of the
happening of any event of the kind described in
Section 6.1(c)(ix)(B), such Securityholder will
forthwith
49
discontinue disposition of its Shares pursuant to
the registration statement covering such Shares
until such Securityholder's receipt of the copies of
the supplemented or amended prospectus contemplated
by such Section 6.1(c)(ix)(B) and, if so directed by
the Company, such Securityholder will deliver to the
Company (at the Company's expense) all copies, other
than permanent file copies then in such
Securityholder's possession, of the prospectus
covering such its Shares current at the time of
receipt of such notice.
(d) Transfer Restrictions. The transfer restrictions
-----------------------
contained in Article 4, including, without limitation,
those set forth in Section 4.3, of this Agreement shall
not apply to any offering of Shares pursuant to this
Section 6.1.
(e) Indemnification.
---------------
(i) In the event of the registration or qualification of
any Shares of the Securityholders under the
Securities Act or any other applicable securities
laws pursuant to the provisions of this Section 6.1,
the Company agrees to indemnify and hold harmless
each Securityholder thereby offering such Shares for
sale (a "Seller") and each of their officers,
------
directors, partners, members or agents, the
underwriter, broker or dealer, if any, of such
Shares, and each other Person, if any, who controls
any such Seller, underwriter, broker or dealer
within the meaning of the Securities Act or any
other applicable securities laws (each an
"Indemnified Seller"), from and against any and all
------------------
losses, claims, damages or liabilities (or actions
in respect thereof), joint or several, to which such
Indemnified Seller may become subject under the
Securities Act or any other applicable securities
laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in any registration
statement under which such Shares were registered or
qualified under the Securities Act or any other
applicable securities laws, any preliminary
prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereto,
offering circular or other document or any amendment
or supplement thereto or arise out of or are based
upon the omission or alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, or any violation by the Company of
any rule or regulation under the Securities Act, the
Exchange Act or any other applicable securities laws
applicable to the Company or relating to any action
or inaction required by the Company in connection
with any such registration or qualification and will
promptly reimburse each such Indemnified Seller for
any legal or
50
other expenses reasonably incurred by such
Indemnified Seller in connection with investigating
or defending any such loss, claim, damage, liability
or action; provided, however, that the Company will
-------- -------
not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission
made in such registration statement, such
preliminary prospectus, such final prospectus or
such amendment or supplement thereto in reliance
upon and in conformity with written information
furnished to the Company by such Indemnified Seller
specifically and expressly for use in the
preparation thereof, or to the extent that an
Indemnified Seller sold securities to a Person to
whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the
final prospectus as then amended or supplemented if
the Company previously furnished copies thereof to
such Indemnified Seller and the loss, claim, damage,
liability or action results from an untrue statement
or omission contained in the preliminary prospectus
that was corrected in the final prospectus.
(ii) In the event of the registration or qualification of
any Shares of the Securityholders under the
Securities Act or any other applicable securities
laws for sale pursuant to the provisions of this
Section 6.1, each selling Securityholder, each
underwriter, broker and dealer, if any, of such
Shares, and each other Person, if any, who controls
any such selling Securityholder, underwriter, broker
or dealer within the meaning of the Securities Act,
agrees severally, and not jointly, to indemnify and
hold harmless the Company, each Person who controls
the Company within the meaning of the Securities
Act, and each officer and director of the Company
from and against any and all losses, claims, damages
or liabilities (or actions in respect thereof),
joint or several, to which the Company, such
controlling Person or any such officer or director
may become subject under the Securities Act or any
other applicable securities laws or otherwise,
insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement of any
material fact contained in any registration
statement under which such Shares were registered or
qualified under the Securities Act or any other
applicable securities laws, any preliminary
prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereto, or
arise out of or are based upon an untrue statement
or the omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, which untrue
statement or omission was made therein in reliance
upon and in conformity with written information
furnished to the Company by such selling
Securityholder, underwriter, broker, dealer or
controlling
51
Person specifically for use in connection with the
preparation thereof, and will reimburse the Company,
such controlling Person and each such officer or
director for any legal or any other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim,
damage, liability or action; provided, however, that
-------- -------
no selling Securityholder will be liable under this
Section 6.1(e)(ii) for any amount in excess of the
net proceeds paid to such selling Securityholder in
respect of Shares sold by it.
(iii)Promptly after receipt by a Person entitled to
indemnification under this Section 6.1(e) (an
"Indemnified Party") of notice of the commencement
------------------
of any action or claim relating to any registration
statement filed under Section 6.1(a) or 6.1(b) or as
to which indemnity may be sought hereunder, such
indemnified party will, if a claim for
indemnification hereunder in respect thereof is to
be made against any other party hereto (an
"Indemnifying Party"), give written notice to such
-------------------
Indemnifying Party of the commencement of such
action or claim, but the omission to so notify the
Indemnifying Party will not relieve the Indemnifying
Party from any liability that it may have to any
Indemnified Party otherwise than pursuant to the
provisions of this Section 6.1(e) and shall also not
relieve the Indemnifying Party of its obligations
under this Section 6.1(e) except to the extent that
the Indemnifying Party is actually prejudiced
thereby. In case any such action is brought against
an Indemnified Party, and it notifies an
Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that
it may wish, jointly with any other Indemnifying
Party similarly notified, to assume the defense,
with counsel reasonably satisfactory to such
Indemnified Party, of such action and/or to settle
such action and, after notice from the Indemnifying
Party to such Indemnified Party of its election so
to assume the defense thereof, the Indemnifying
Party will not be liable to such Indemnified Party
for any legal or other expenses subsequently
incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable
cost of investigation; provided, however, that no
-------- -------
Indemnifying Party shall enter into any settlement
agreement without the prior written consent of the
Indemnified Party unless such Indemnified Party is
fully released and discharged from any such
liability. Notwithstanding the foregoing, the
Indemnified Party shall have the right to employ its
own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of
such Indemnified Party unless (A) the employment of
such counsel shall have been authorized in writing
by the Indemnifying Party in connection with the
defense of such suit,
52
action, claim or proceeding, (B) the Indemnifying
Party shall not have employed counsel (reasonably
satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or
proceeding, or (C) such Indemnified Party shall have
reasonably concluded, based upon the advice of
counsel, that there may be defenses available to it
that are different from or additional to those
available to the Indemnifying Party which, if the
Indemnifying Party and the Indemnified Party were to
be represented by the same counsel, could result in
a conflict of interest for such counsel or
materially prejudice the prosecution of the defenses
available to such Indemnified Party. If any of the
events specified in clauses (A), (B) or (C) of the
preceding sentence shall have occurred or shall
otherwise be applicable, then the reasonable fees
and expenses of one counsel or firm of counsel
selected by a majority in interest of the
Indemnified Parties (and reasonably acceptable to
the Indemnifying Party) shall be borne by the
Indemnifying Party. If, in any such case, the
Indemnified Party employs separate counsel, the
Indemnifying Party shall not have the right to
direct the defense of such action, suit, claim or
proceeding on behalf of the Indemnified Party and
the Indemnified Party shall assume such defense
and/or settle such action; provided, however, that
-------- -------
an Indemnifying Party shall not be liable for the
settlement of any action, suit, claim or proceeding
effected without its prior written consent, which
consent shall not be unreasonably withheld.
ARTICLE VII
PREEMPTIVE RIGHTS
7.1 Preemptive Rights.
-----------------
(a) Prior to an Initial Public Offering. If, after the date
------------------------------------
hereof and prior to an Initial Public Offering, the
Company shall propose to issue or sell New Securities (as
hereinafter defined) or enter into any contracts,
commitments, agreements, understandings or arrangements
of any kind relating to the issuance or sale of any New
Securities, then subject to the immediately following
paragraph, each Securityholder shall have the right to
purchase that number of New Securities, at the same price
and on the same terms proposed to be issued or sold by
the Company, so that each such Securityholder would,
after the issuance or sale of all such New Securities
(and after giving effect to the preference given to the
Series C Holders set forth in the immediately following
paragraph), hold the same proportionate interest of the
Fully Diluted Capitalization as was held by each such
Securityholder immediately after any issuance or sale of
New Securities as set forth in the immediately
53
following paragraph and immediately prior to the issuance
or sale of the balance of such New Securities (the
"Proportionate Percentage"). "New Securities" shall mean
------------------------ --------------
any Shares or other securities or other rights
convertible or exchangeable into or exercisable for
Shares; provided, however, that "New Securities" does not
-------- -------
include: (i) any Warrants, Options or Common Stock issued
or issuable on conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred
Stock, or upon the exercise of Warrants or Options (other
than options referred to in clause (v) below); (ii)
Shares issued pursuant to the exercise of any rights,
warrants, options (other than options referred to in
clause (v) below) or other agreements not outstanding on
the date of this Agreement including, without limitation,
any security convertible or exchangeable, with or without
consideration, into or for any stock, options and
warrants, provided that the rights established by this
Section 7.1 apply with respect to the initial sale or
grant by the Company of such rights or agreements; (iii)
securities issued by the Company as part of any public
offering pursuant to an effective registration statement
under the Securities Act; (iv) Shares issued in
connection with any stock split, stock dividend or
recapitalization of the Company; (v) Shares issued to
management, directors or employees of, or consultants to,
the Company pursuant to options outstanding as of the
date hereof and options to purchase Shares issued
pursuant to any Option Plan or as otherwise approved by
the Compensation Committee and Shares issuable upon
exercise thereof; and (vi) securities issued as
consideration for, or in connection with, any merger or
acquisition of the stock or assets of any acquired entity
by the Company.
Notwithstanding the provisions of the foregoing paragraph, if, at the
time of any proposed issuance or sale by the Company of New Securities prior to
an Initial Public Offering, the RSI Beneficial Holders have Beneficial Ownership
of Shares, Options and Warrants (which in the case of Options or Warrants shall
include only those Options or Warrants that are Exercisable) representing (on a
fully exercised and converted basis), in the aggregate, less than 30% of the
Adjusted Fully Diluted Capitalization, then the RSI Beneficial Holders shall
have the initial right, exercisable, in the sole discretion of RSI, by the
Series C Holders for the benefit of the RSI Beneficial Holders or directly by
any of the RSI Beneficial Holders (provided, that, if such right is exercised
directly by any of the RSI Beneficial Holders, such Person shall become a party
to this Agreement for all purposes hereunder), to purchase that number of New
Securities (subject to the maximum number of New Securities proposed to be
issued or sold) at, except as set forth in the two immediately following
sentences, the same price and on the same terms proposed to be issued or sold by
the Company so that after such priority purchase under this paragraph the RSI
Beneficial Holders would have Beneficial Ownership of Shares, Options and
Warrants representing (on a fully exercised and converted basis), in the
aggregate, 30% of the Adjusted Fully Diluted Capitalization on a pro forma basis
giving effect to the maximum number of New Securities proposed to be issued or
sold. If, at the time of any issuance of New Securities, there are Unused
Backlog CSE's that are derived from a previous issuance of shares as
consideration for, or in connection with, any merger or
54
acquisition of the stock or assets of any acquired entity by the Company
("Merger Shares"), then, notwithstanding the proposed price of the New
--------------
Securities to be issued, the price per share of the New Securities (only for
that number of New Securities as are purchasable under this paragraph with
respect to such Unused Backlog CSE's derived from the Merger Shares which number
of New Securities shall be deemed to be the first New Securities issued unless
there are at the time Unused Backlog CSE's derived from In-the-Money Option
Shares with respect to which such Unused Backlog CSE's came into existence prior
to the Unused Backlog CSE's derived from the Merger Shares) acquirable by the
Series C Holders or the RSI Beneficial Holders, as the case may be, shall be
equal to the price per share at which the Merger Shares were valued at the time
of issuance, as determined in good faith by the Board at the time of such
acquisition (provided that if RSI disagrees with such valuation, then the
Company and RSI shall utilize the appraisal procedures set forth in Section 5.3
hereof to determine such fair market value). If, at the time of any issuance of
New Securities, there are Unused Backlog CSE's that are derived from the
issuance of rights, warrants, options or other agreements to purchase Common
Stock or any security convertible or exchangeable therefor (other than options
granted under the Company's 1996 Option Plan) which such rights, warrants,
options or other agreements were either (x) issued as consideration for, or in
connection with, any merger or acquisition of the stock or assets of any
acquired company (other than such issuances which are made as incentive
compensation for future services and are approved by the Compensation
Committee), or (y) issued with an exercise price below the then fair market
value of the Common Stock, as determined in good faith by the Board (provided
that if RSI disagrees with such valuation, then the Company and RSI shall
utilize the appraisal procedures set forth in Section 5.3 hereof to determine
such fair market value and provided further that the exercise price of any
options issued pursuant to any Option Plan or as compensation to any consultant
to the Company shall be deemed to be at or above fair market value and shall not
be subject to the appraisal procedures if such exercise price has been
established by the Compensation Committee), and which rights, warrants, options
or other agreements described in clause (x) or clause (y) are Exercisable
("In-the-Money Option Shares"), then, notwithstanding the proposed price of the
--------------------------
New Securities to be issued, the price per share (only for that number of New
Securities as are purchasable under this paragraph with respect to such Unused
Backlog CSE's derived from the In-the-Money Option Shares which number of New
Securities shall be deemed to be the first New Securities issued unless there
are at the time Unused Backlog CSE's derived from Merger Shares with respect to
which such Unused Backlog CSE's came into existence prior to the Unused Backlog
CSE's derived from the In-the-Money Option Shares) of the New Securities
acquirable by the Series C Holders or the RSI Beneficial Holders, as the case
may be, shall be equal to the exercise price for such In-the-Money Option
Shares. The failure of the RSI Beneficial Holders to exercise or to cause the
Series C Holders to exercise such preemptive rights shall constitute an
irrevocable waiver of the RSI Beneficial Holders' preemptive rights with respect
to such New Securities. The Company shall comply with the procedural
requirements of this Section 7.1 in connection with the offer of New Securities
to the Series C Holders or the RSI Beneficial Holders, as the case may be. The
rights set forth in this paragraph shall terminate and shall be of no force and
effect at such time as the Qualifying Series C Beneficial Holders shall no
longer maintain Beneficial Ownership of at least 20% of the Series C Adjusted
Fully Diluted Capitalization. The Series C Holders shall provide such
information as the Company shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C Beneficial Holders. In the event
that any RSI Beneficial Holder transfers
55
Beneficial Ownership in any Shares, Options or Warrants, then, notwithstanding
such transfer, the Shares, Options or Warrants so transferred shall be deemed to
be Beneficially Owned by the RSI Beneficial Holders for purposes of this Section
7.1.
Subject to the immediately preceding paragraph, the Company shall give
the Securityholders written notice of its intention to issue and sell New
Securities, describing the type of New Securities, the price and the general
terms and conditions upon which the Company proposes to issue the same. Subject
to the immediately preceding paragraph, the Securityholders shall have 15 days
from the giving of such notice to agree to purchase all (or any part) of its
Proportionate Percentage of New Securities for the price and upon the terms and
conditions specified in the notice by giving written notice of the Company and
stating therein the quantity of New Securities to be purchased.
If the Securityholders fail to exercise in full such right within such
15 days, the Company shall have 120 days thereafter to sell the New Securities
in respect of which the Securityholders' rights were not exercised, at a price
and upon general terms and conditions no more favorable to the purchasers
thereof than specified in the Company's notice to the Securityholders pursuant
to this Section 7.1(a). If the Company has not sold the New Securities within
such 120 days, the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Securityholders in the
manner provided above.
If a Securityholder which is a SBIC has the right to acquire any voting
New Securities under this Section 7.1(a), the Company shall, at such
Securityholder's request, offer to sell to such Securityholder, New Securities
that do not have voting rights but otherwise have the same terms as such voting
New Securities.
Prior to the consummation of an Initial Public Offering, if there
remain any Unused Backlog CSE's that are derived from Merger Shares or
In-the-Money Option Shares, upon request of the RSI Beneficial Holders, the
Company shall issue to the RSI Beneficial Holders or the Series C Holders, as
determined by RSI in its sole discretion, that number of shares of Series C
Preferred Stock as are purchasable under the second paragraph of this Section
7.1(a) with respect to such Unused Backlog CSE's derived from the Merger Shares
and the In-the-Money Option Shares. The per share price for such shares to be
issued shall be calculated in the manner set forth in the second and third
sentences, as applicable, contained in the second paragraph of this Section
7.1(a). The Company shall notify the Series C Holders of the consummation of an
Initial Public Offering at least 30 days, prior thereto and the Series C Holders
or the RSI Beneficial Holders, as the case may be, shall have 15 days after
receipt of such notice to exercise the rights contained in this paragraph. The
rights set forth in this paragraph, if not exercised by the RSI Beneficial
Holders or the Series C Holders for the account of the RSI Beneficial Holders,
prior to the consummation of an Initial Public Offering, shall terminate upon
the effectiveness of an Initial Public Offering.
(b) Initial Public Offering and Following an Initial Public
---------------------------------------------------------
Offering. If, in connection with an Initial Public
--------
Offering or thereafter, the Company shall propose to
issue or sell Additional Securities or enter into any
contracts, commitments, agreements, understandings or
arrangements of any kind
56
relating to the issuance or sale of any Additional
Securities, then the Series C Holders shall have the
right to purchase that number of Additional Securities,
at the same price and on the same terms proposed to be
issued or sold by the Company, so that the Series C
Holders would, after the issuance or sale of all such
Additional Securities, Beneficially Own the greater of
(i) 46% of the Adjusted Fully Diluted Capitalization or
(ii) the same percentage of the Adjusted Fully Diluted
Capitalization as they held immediately prior to such
issuance or sale of all such Additional Securities,
provided, however, that (x) in connection with an Initial
Public Offering, the right of the Series C Holders to
purchase Additional Securities pursuant to this Section
7.1(b) also shall be limited to a right to acquire 30% of
the Additional Securities until the dollar amount of such
Additional Securities sold in such Initial Public
Offering to Persons other than the Series C Holders (or
any Beneficial Owner of the Series C Preferred Stock or
Shares acquired by conversion thereof) is at least
$75,000,000 and thereafter shall be exercisable to the
extent provided above. Notwithstanding the immediately
preceding sentence, if, at the time of issuance of any
Additional Securities, the Series C Holders Beneficially
Own less than 46% of the Adjusted Fully Diluted
Capitalization and the Series C Holders do not exercise
their right in full to acquire Additional Securities
pursuant to the previous sentence, then, in any
subsequent issuance of Additional Securities, the Series
C Holders shall have the rights to purchase only that
number of Additional Securities, at the same price and on
the same terms proposed to be issued or sold by the
Company, so that the Series C Holders would, after the
issuance or sale of all such Additional Securities,
Beneficially Own the same percentage of the Adjusted
Fully Diluted Capitalization as such Series C Holders
Beneficially Owned after the issuance of Additional
Securities in which such Series C Holders did not so
exercise their right in full (for these purposes any
capital stock of the Company subsequently acquired by the
Series C Holders other than pursuant to a direct issuance
by the Company shall not be deemed to be Beneficially
Owned by such Series C Holders). For purposes of this
Section 7.1(b), the term "Additional Securities" shall
mean New Securities plus all securities issued by the
Company as part of any public offering pursuant to an
effective registration statement under the Securities Act
("Additional Securities").
---------------------
Subject to the immediately preceding paragraph, the Company shall give
the Series C Holders written notice of its intention to issue and sell
Additional Securities, describing the type of Additional Securities, the price
and the general terms and conditions upon which the Company proposes to issue
the same. Subject to the immediately preceding paragraph, the Series C Holders
shall have 15 days from the giving of such notice to agree to purchase all (or
any part) of the Additional Securities which they are entitled to purchase
pursuant to this Section 7.1(b) for the price and upon the terms and conditions
specified in the notice by giving written notice of the Company and stating
therein the quantity of Additional Securities to be purchased.
57
If the Series C Holders fail to exercise in full such right within such
15 days, the Company shall have 180 days thereafter to sell the Additional
Securities in respect of which the Series C Holders' rights were not exercised,
at a price and upon general terms and conditions no more favorable to the
purchasers thereof than specified in the Company's notice to the Series C
Holders pursuant to this Section 7.1(b). If the Company has not sold the
Additional Securities within such 180 days, the Company shall not thereafter
issue or sell any Additional Securities, without first offering such securities
to the Series C Holders in the manner provided above. The rights set forth in
this Section 7.1(b) shall terminate and shall be of no force and effect at such
time as the Qualifying Series C Beneficial Holders shall no longer maintain
Beneficial Ownership of at least 20% of the Series C Adjusted Fully Diluted
Capitalization.
7.2 Standstill. Except as expressly provided in Section 7.1, no Series
----------
A Holder, Series B Holder or Series C Holder or any Affiliate thereof shall
purchase or otherwise acquire any securities of the Company that are not subject
to the provisions of this Agreement, without the prior approval of a majority of
the Series A and Series B Preferred Directors and the Company Directors (taken
in the aggregate) and a majority of the Series C Preferred Directors.
Notwithstanding the generality of the foregoing, this Section 7.2 shall not
apply to restrict the granting by the Company to any Person of Options pursuant
to any Option Plan and/or to the exercise of any such Options.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement shall terminate automatically upon the
-----------
consummation of (i) an Initial Public Offering, or (ii) a Sale of the Company;
provided, however, that, notwithstanding the foregoing:
-------- -------
(a) the provisions of Section 4.5 shall survive an Initial
Public Offering and shall terminate upon the third anniversary thereof;
(b) the provisions of Section 4.10 shall survive in accordance
with the terms thereof;
(c) the provisions of Article 6 shall survive an Initial
Public Offering until each Securityholder has disposed of its Shares that are
the subject of this Agreement; provided, however, that the provisions of Section
-------- -------
6.1(a) shall terminate upon the third anniversary of the date of consummation of
such Initial Public Offering and the provisions of Section 6.1(b) shall
terminate when each Securityholder is eligible to sell all of the securities
held by it and covered by this Agreement in a single transaction pursuant to
Rule 144 promulgated under the Securities Act (taking into account the volume
limitations contained therein); and
(d) the provisions of (i) Section 7.1(b), (ii) Section 2.1(a)
solely as it relates to the right to nominate the Chairman of the Board, (iii)
Section 3.1(e), (iv) Section 3.1(h), (v) Section 3.1(o), and (vi) Section
3.1(p), in each case, shall survive an Initial Public Offering and continue
until such time as the RSI Beneficial Holders no longer have Beneficial
58
Ownership of 15% of the Series C Adjusted Fully Diluted Capitalization;
provided, however, that following the fifth anniversary of the Initial Public
-------- -------
Offering, such percentage shall be increased to 23%. Notwithstanding the
foregoing, from and after an Initial Public Offering, Section 3.1(e) and Section
3.1(p) shall be modified to read as follows:
(A) Section 3.1(e): "entering into any business other than
the Core Business if, as a result of the entering into
such business, the Core Business would no longer be the
predominant business of the Company;" and
(B) Section 3.1(p): "any amendment to the Articles of
Incorporation (including the Certificates of Designation)
or By-laws of the Company or any change in the number of
members of the Board, any Committee thereof, or the
Strategic Steering Committee, which amendment or change
would materially and adversely affect the rights of the
Series C Holders under this Agreement that survive an
Initial Public Offering (it being agreed and understood
that any amendment that increases the authorized capital
stock of the Company shall not be deemed to materially
and adversely affect such rights)";
(e) upon an Initial Public Offering, the Shares of Series C
Preferred Stock shall automatically be converted pursuant to and in accordance
with the Series C Certificate of Designation into shares of the Company's Class
B Common Stock, par value $.01 per share (the "Class B Common Stock"), to be
---------------------
issued solely to the Series C Holders (provided that, to the extent that any
-------- ----
Shares of Series C Preferred Stock are Beneficially Owned by Persons who are not
Qualifying Series C Beneficial Holders, such Shares of Series C Preferred Stock
shall be converted pursuant to and in accordance with the Series C Certificate
of Designation into Shares of Class A Common Stock, and such Persons who are not
Qualifying Series C Beneficial Holders, by their execution of a consent pursuant
to Section 9.6 hereof, irrevocably elect such conversion to Shares of Class A
Common Stock, provided further however, that if any such Person shall not have
executed such a consent for any reason, such Person shall nonetheless be deemed
bound by the obligation set forth herein to convert Shares of Series C Preferred
Stock to Shares of Class A Common Stock; and provided, further, that the
-------- -------
Qualifying Series C Beneficial Holders shall be deemed to have irrevocably
elected to receive Shares of Class B Common Stock). Prior to such Initial Public
Offering, the Board shall by resolution grant the Shares of Class B Common Stock
the rights set forth in the immediately following sentence and shall provide for
the automatic conversion of Shares of Class B Common Stock into Shares of Class
A Common Stock upon any transfer thereof to a Person who is not a Qualifying
Series C Beneficial Holder or upon the events set forth in clause (y) of the
second sentence of Section 9.17(d). Shares of Class B Common Stock shall (i)
carry the right to elect that number of Directors, but in no event more than
four, as are equal to (A) 1, if the outstanding shares of the Class B Common
Stock then represent 10% or more but less than 20% of the Series C Adjusted
Fully Diluted Capitalization, (B) 2, if the outstanding shares of the Class B
Common Stock then represent 20% or more but less than 30% of the Series C
Adjusted
59
Fully Diluted Capitalization, (C) 3, if the outstanding shares of the Class B
Common Stock then represent 30% or more but less than 40% of the Series C
Adjusted Fully Diluted Capitalization, or (D) 4, if the outstanding shares of
the Class B Common Stock then represent 40% or more of the Series C Adjusted
Fully Diluted Capitalization, (ii) automatically convert into Common Stock upon
any Person that is not a Qualifying Series C Beneficial Holder acquiring
Beneficial Ownership thereof, and (iii) otherwise be identical to the Common
Stock in all respects. From and after an Initial Public Offering, the reference
to the Series C Preferred Directors in the definition of SuperMajority Approval
shall mean the Directors elected by the holders of the Class B Common Stock.
Nothing in this paragraph shall diminish any other rights of such holders
contained in this Agreement that shall survive an Initial Public Offering which
provisions shall survive in accordance with the terms thereof, notwithstanding
the conversion of Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock into Class A Common Stock or Class B Common Stock, as the case
may be; and
(f) the provisions of Section 9.17 shall survive in accordance
with their terms.
ARTICLE IX
MISCELLANEOUS
9.1 Information. The Company covenants and agrees to deliver to each
------------
Securityholder who continues to own at least 2% of the Fully Diluted
Capitalization (any such Securityholder, a "Large Securityholder") the
----------------------
information specified in this Section 9.1 unless any such Large Securityholder
at any time specifically requests that such information not be delivered to it.
(a) Monthly and Quarterly Financial Statements. As soon as
--------------------------------------------
available, but in any event not later than forty-five
(45) days after the end of each monthly or quarterly
fiscal period as the case may be (other than the last
quarterly fiscal period in any fiscal year of the
Company), the unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of each such
period and the related unaudited consolidated statements
of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period
in such fiscal year, all in reasonable detail and
stating, in comparative form (i) the figures as of the
end of and for the comparable periods of the preceding
fiscal year and (ii) the figures reflected in the
operating budget for such period as specified in the
financial plan of the Company delivered pursuant to
Section 9.1(e) hereof. All such financial statements
shall be prepared in accordance with GAAP applied on a
consistent basis throughout the periods reflected therein
except as stated therein and shall be accompanied by a
certificate of the Company's president or chief financial
officer to such effect.
60
(b) Annual Financial Statements. As soon as available, but in
---------------------------
any event within ninety (90) days after the end of each
fiscal year of the Company, a copy of the audited
consolidated (and unaudited consolidating) balance sheets
of the Company and its Subsidiaries as at the end of such
fiscal year and the related audited consolidated (and
unaudited consolidating) statements of operations,
stockholders' equity and cash flows of the Company and
its Subsidiaries for such fiscal year, all in reasonable
detail and stating in comparative form the figures as at
the end of and for the immediately preceding fiscal year,
accompanied (in the case of the audited consolidated
financial statements) by an opinion of an accounting firm
of recognized national standing selected by or such
Subsidiary, which opinion shall state that such
accounting firm's audit was conducted in accordance with
generally accepted auditing standards. All such financial
statements shall be prepared in accordance with GAAP
applied on a consistent basis throughout the periods
reflected therein except as stated therein.
(c) Material Litigation. Within ten (10) days after the
--------------------
Company learns of the commencement or written threat of
commencement of any litigation or proceeding against the
Company or any of its Subsidiaries or any of their
respective assets that could reasonably be expected to
have a material adverse effect on the Company, written
notice of the nature and extent of such litigation or
proceeding.
(d) Material Agreement. Within five (5) days after the
-------------------
receipt by the Company of written notice of the
occurrence of a default by the Company or any of its
Subsidiaries under any material contract, agreement or
document that could reasonably be expected to have a
material adverse effect on the Company, written notice of
the nature and extent of such default.
(e) Budgets. As soon as available, but in any event not later
-------
than thirty (30) days prior to the beginning of each
fiscal year of the Company, the Annual Budget as well as
any updates or revisions to such plan as soon as
available.
(f) Accountants' Management Letters, Etc. Promptly after
----------------------------------------
receipt by the Company, copies of all accountants'
management letters and all management and board responses
to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material
litigation or similar matters relating to the Company and
its Subsidiaries, which shall be prepared by the Company
or its officers and delivered to the third parties.
(g) Stockholders' Lists. Within sixty (60) days after the end
-------------------
of each fiscal year, a stockholders' list, showing the
authorized and outstanding shares by class (including the
Common Stock equivalents of any convertible security),
the holders of all outstanding shares (both before giving
effect to dilution and on
61
a fully diluted basis) and all outstanding options,
warrants and convertible securities, and detailing all
options and warrants granted, exercised or lapsed
(including in each case, without limitation, all option
and warrant exercise prices, stock issuance prices and
other terms) and all shares issued or sold (whether to
directors or managers, in connection with financing or
otherwise).
(h) Other Information and Access. From time to time, and
-------------------------------
promptly, such additional information regarding results
of operations, financial condition or business of the
Company and its Subsidiaries, including, without
limitation, cash flow analyses, projections and minutes
of any meetings of the Board, as any Large Securityholder
may reasonably request. The Company shall also afford to
any Large Securityholder (and its representatives)
access, at reasonable times and on reasonable prior
notice, to the books, records and properties of the
Company and its Subsidiaries.
9.2 Certificate Legend. Upon execution of this Agreement, the stock
-------------------
certificates representing Shares held by the Securityholders shall contain
substantially the following legend, in addition to any other legends deemed
reasonably appropriate or necessary by the Company:
"This certificate is transferable only upon compliance with and subject
to the provisions of a Stockholders' Agreement among the Company and
certain Securityholders, a copy of which Agreement is on file in the
office of the Secretary of the Company at its principal place of
business. The Company will furnish a copy of such Agreement to the
record holder of this Certificate, without charge, upon written request
to the Company at its principal place of business or registered
office."
9.3 Negotiable Form. Whenever any Shares, Warrants or Options are to be
---------------
delivered or sold pursuant to this Agreement, the Person selling such Shares,
Warrants or Options shall deliver such certificates or other instruments duly
endorsed or accompanied by appropriate stock powers or assignments separate from
the instrument along with attached stock transfer tax stamps.
9.4 Enforcement. No Shares, Warrants or Options shall be transferred on
-----------
the books of the Company and no Transfer thereof shall be effective unless and
until the terms and provisions of this Agreement are complied with, and in cases
of violation of this Agreement by the attempted Transfer of the Shares, Warrants
or Options without compliance with the terms and provisions thereof, such
Transfer shall be invalid and of no effect and be deemed in all respects void ab
--
initio, and the Company and/or any of the Securityholders who are not attempting
------
to Transfer the Shares, Warrants or Options shall have the right to compel the
Securityholder who is attempting to Transfer the Shares, Warrants or Options,
and/or the purported transferee, to Transfer and deliver the same in accordance
with the applicable provisions of this Agreement.
9.5 Specific Performance. The parties hereto recognize that the Shares,
--------------------
Warrants or
62
Options cannot be readily purchased or sold on the open market and that it is to
the benefit of the Company and the Securityholders that this Agreement be
carried out; and for those and other reasons, the parties hereto would be
irreparably damaged if this Agreement is not specifically enforced in the event
of a breach hereof. If any controversy concerning the rights or obligations to
purchase or sell any Shares, Warrants or Options arises, or if this Agreement is
breached, the parties hereto hereby agree that remedies at law might be
inadequate and that, therefore, such rights and obligations, and this Agreement,
shall be enforceable by specific performance. The remedy of specific performance
shall not be an exclusive remedy, but shall be cumulative of all other rights
and remedies of the parties hereto at law, in equity or under this Agreement.
9.6 Transferees. The Company and the Securityholders shall cause any
-----------
transferee of any Shares, Warrants or Options held by any Securityholder to
execute a consent, in form and substance reasonably acceptable to the Company,
to be bound by the terms and conditions of this Agreement and upon execution
thereof such future Securityholder shall be entitled to the rights of an owner
of the Shares, Warrants or Options held by such transferee hereunder, provided
that the foregoing shall not apply to Shares that have been sold pursuant to an
effective registration statement under the Securities Act or Rule 144
thereunder.
9.7 Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if in writing and delivered in person,
transmitted by telecopier or sent by registered or certified mail (return
receipt requested) or recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address as any such party may notify to
the other parties in writing:
(a) if to the Company:
ALLIANCE National Incorporated
00 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
63
(b) if to the Xxxxxx Holders:
Xxxxxx, Xxxxxxx & Company LLC
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xx.
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esquire
Facsimile No.: (000) 000-0000
(c) if to the Northwood Holders:
Northwood Ventures LLC
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Cost, Esquire
Facsimile No.: (000) 000-0000
and a copy to:
Xxxx, Xxxx & Co.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
64
(d) if to the Paribas Holder or the PNA Holder:
Paribas, acting through its
Cayman Island Branch
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Paribas North America
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
(e) if to the Series C Holders:
InterOffice Superholdings LLC
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx, Esq.
Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
Reckson Office Centers LLC
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
65
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
and to:
JAH I/O LLC
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxxx
and to:
Battle, Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(f) if to any of the Other Holders, to the respective
Other Holder as set forth below:
Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxx Xxxxxx Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxx and
Xxxx Xxxxxx Xxxxxxx Trust
FBO Xxxxxx Bay Xxxxxxx,
Xxxxxxx X. Xxxxxx, Trustee
000 Xxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
66
Xxxxxx X. Xxxxxxx and
Xxxx Xxxxxx Xxxxxxx Trust
FBO Xxxx Xxxxxxxx Xxxxxxx,
Xxxxxxx X. Xxxxxx, Trustee
000 Xxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxxxxx Mendel
Cust for Xxxxx Xxxxxx Xxxxxx UTMA NJ
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxxxxx Xxxxxx
Cust for Xxxxx Xxxx Mendel UTMA NJ
000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
G. Xxxxx Xxxxxxxxxx
0 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
The Shattan Group LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxx
000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx
000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
67
Xxxxx Xxxxxxx XXX Rollover,
Gruntal & Co., LLC Custodian
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxxxx
000 Xxxxx Xxxx Xxxx
Xxx Xxxxxxxx, Xxxxxxxxxxx 00000
Xxxxxxx Xxxxxxxx
00 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxxxx 00000
Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx
00 Xxxxxxxx Xxxx
Xxx Xxxxxx, Xxxxxxxxxxx 00000
Xxxxxx Xxxxxx and Xxxxx Xxxxxx
X.X. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxx
Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxx X. Xxxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx. 000
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxxxxxx
00 00xx Xxxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxx Xxxxxxxxxx
0 Xxxxxx Xxxx
Xxx. 0-X
Xxxxxxx, Xxx Xxxx 00000
68
Xxxxxxx Xxxxx
00 Xxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
M.L.P.F. & S. Custodian for Xxxxxxx Xxxxx
00 Xxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Xxxxx X. Xxxxxxxx
00000 Xxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx. 00X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxxx Xxxxxx
00 Xxxxxxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Xxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx, # 0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxxx
0000 Xxxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
G. Xxx Xxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxx X. Xxxxxxx
c/x Xxxxxx, Xxxxxxx & Co.
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Xxxxxxx Xxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx. 0X/0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxx
00 Xxxx 000xx Xxxxxx
Xxxxxxxxx 0X
Xxx Xxxx, Xxx Xxxx 00000
69
Xxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx
Xxx X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxxxx Xxxxxx & Xxxxxxxx
Custodian for Xxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxx Xxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxx
000-00 00xx Xxxxxx
Xxxxxx Xxxxx, Xxx Xxxx 00000
Rommel Mapa
00-00 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxx
000 Xxxxx Xxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxx Xxxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxx
000 Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
70
Xxxx Xxxxxxxx
00 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxx, Xx.
0000 Xxxxx Xxxxxxxxxx
Casita No. 6
Xxxxxxxxxx, Xxxxxxx 00000
Xxxxxxxxx Xxxx
0 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx
Xxx Xxxx 00xx Xxxxxx, Xxx. 0-X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Xxxxx X. Xxxxxxxx, Trustee
for Xxxxx Xxxxxxxxxxx
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxx X. Xxxxxxxx, Trustee
for Xxxxxxxx Xxxxxxxxxxx
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Tippet Partners
Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxx Xxxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxxxxxx 00000
71
Xxxxxxx Xxxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxxxxxx 00000
Xxxxx Xxx Xxxxxxxx
00 Xxx Xxxx
Xxxxxx, Xxx Xxxx 00000
The Xxxxxxxx Group
c/o Xxxxx Xxx Xxxxxxxx
General Partner
00 Xxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxx
Fortrend International, LLC
0000 X'Xxxxxx Xxx, Xxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
0000 Xxxxx Xxxxxx Realty, Inc. Profit Sharing Plan
c/o Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx, Trustees
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxxx, XXX
0 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxxxx
00 Xxxxxx Xxxx
Xxxxxx Xxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
72
Xxxxx Xxxxxxx
00 Xxxxxx Xxxx
Xxxxxx Xxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, 3 business days
after dispatch.
9.8 Binding Effect; Assignment. This Agreement, including the rights
---------------------------
and conditions contained herein in connection with disposition of Shares,
Warrants or Options shall be binding upon the parties hereto, together with
their respective executors, administrators, successors, Personal
representatives, heirs and assigns permitted under this Agreement.
9.9 Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York for contracts executed and
to be fully performed in such state and without regard to principles regarding
conflict of laws.
9.10 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.11 Entire Agreement. This Agreement together with the Certificates of
----------------
Designation and the Warrants and Options embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to the subject
matter hereof. To the extent that any provision contained herein conflicts or is
otherwise inconsistent with any provision contained in the Warrants or Options,
including, without limitation, any provision relating to preemptive rights, the
provisions contained herein shall be controlling.
9.12 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one instrument.
9.13 Amendment; Waiver. This Agreement may be amended, modified or
------------------
supplemented only by a written instrument executed by the Company and
Securityholders holding Common Stock Equivalents in excess of 66-2/3% of the
Common Stock Equivalents that are then subject to this Agreement (which
approving Securityholders shall include each Securityholder who, either alone
73
or together with its Affiliates, holds 2% or more of the Common Stock
Equivalents that are then subject to this Agreement); provided, however, that
-------- -------
any amendment, modification or supplement that would (i) impose additional
restrictions on any Securityholder's right to transfer its Options, Warrants or
Shares or eliminate any Securityholder's rights under the Agreement to transfer
its Options, Warrants or Shares pursuant to Article 4, in each case in a manner
that does not affect all similarly situated Securityholders equally, or (ii)
materially and adversely affect any Securityholder's registration rights (other
than as a result of any increase in the number of shares that may be covered by
such registration rights), in each case in a manner that does not affect all
similarly situated Securityholders equally, or preemptive rights shall, in each
case, require the approval of each such affected Securityholder. Section 4.7(c)
and Section 5.4 of this Agreement shall not be permitted to be amended without
the consent of the Required Banks.
9.14 Captions. The captions of this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
9.15 Waivers. (a) By executing this Agreement, each Securityholder
-------
shall be deemed to have waived any preemptive rights such Securityholder may
have had under this Agreement or under any other instrument or agreement in
connection with the issuance and sale of Series C Preferred Stock pursuant to
the Merger Agreements.
(b) By executing this Agreement, each Securityholder who had the right
to receive information concerning the Company pursuant to the provisions of the
First Series A Stock Purchase Agreement, the Second Series A Stock Purchase
Agreement or the Series B Stock Purchase Agreement shall be deemed to have
irrevocably waived the right to receive any such information. The foregoing
waiver shall not limit the rights of any Securityholder to receive information
pursuant to Section 9.1 hereof.
9.16 Subsequent Option Grants. In the event of any grant by the Company
------------------------
of any Option pursuant to the Company's 1996 Stock Option Plan, (i) if the
grantee is a party to this Agreement, such Options and Option Shares shall
automatically, and without any action on the part of such grantee, become
subject to the provisions of this Agreement, and (ii) if the grantee is not a
party to this Agreement, such grantee shall become a party with respect to such
Options and Option Shares by executing a signature page hereto. Schedule 1
hereto shall be amended by the Company, without any action on the part of any
Securityholder, from time to time to reflect such additions. The Company shall
not be required to give notice to any Securityholder of any such amendments to
Schedule 1 but shall, upon the request of any Securityholder, provide a copy of
Schedule 1, as so amended.
9.17 Non-Competition. (a) Each of the Xxxxxx Holders, the Northwood
----------------
Holders, the RSI Beneficial Holders and the JAH Beneficial Holders (each of the
foregoing Persons, a "Non-Competing Party" and collectively, the "Non-Competing
------------------- -------------
Parties") shall not, and shall cause each of its Affiliates Controlled by such
-------
Person not to, directly or indirectly, (i) "Compete" with the Company, or act as
a director, officer, consultant to, or as an employee of, any Person that
directly or indirectly Competes with the Company, or (ii) knowingly own or
control any voting securities or
74
other securities convertible into voting securities in any Person that Competes
with the Company. A Person shall be deemed to "Compete" with the Company, for
purposes of this Section 9.17, if a business conducted by such Person is
materially competitive with the Prohibited Business. In determining whether a
business conducted by a Person is materially competitive with the Prohibited
Business, the factors to be considered shall include, without limitation, the
respective customer base and distribution channels of such Person and the
Prohibited Business with respect to the specific products and services which
compete with each other. Notwithstanding the foregoing, a Person shall not be
deemed to Compete with the Company if it offers for sale one or more products or
services which are part of the Prohibited Business so long as the provision of
any such products or services taken in the aggregate are not materially
competitive with the Prohibited Business. In the event that the Company believes
that any proposed investment or the conduct of any business by any Non-Competing
Party would violate such restrictions, it shall so notify such Non-Competing
Party within six months after receipt of written notice from the Non-Competing
Party of such investment or business. The failure of the Company to so notify
such Non-Competing Party within such six-month period shall constitute an
irrevocable waiver of the Company's right to contest such investment or
business.
(b) Notwithstanding the foregoing, each of the Non-Competing
Parties shall be permitted to make an investment in any Person whose business
Competes with the Company, provided that within 9 months after the consummation
of such investment, such Person ceases to engage in the business which Competes
with the Company provided, that if there is a dispute with respect to whether an
investment Competes, then any required divestiture shall not be required until
nine (9) months after the date of final determination of such Dispute adverse to
the Non-Competing Party. If such Person ceases to engage in the business which
Competes with the Company through the divestiture of the competing business
lines (including any divestiture following a final determination described
above), the Non-Competing Party shall use and cause each of its Affiliates
Controlled by it to use its reasonable good faith efforts to offer the Company
the first opportunity to acquire such business lines which such Person is
divesting.
(c) Nothing in this Section 9.17 shall limit the right of (i)
the RSI Beneficial Holders to provide products and services under the terms of
the Intercompany Agreement, or (ii) any Non-Competing Party to own not more than
4.9% of the outstanding shares of a corporation or other entity whose shares or
other equity or debt interests are listed on any United States national or
regional securities exchange or reported by NASDAQ or any successor thereto. In
the event of a final determination by a court of competent jurisdiction that any
Non-Competing Party has breached the covenants in this Section 9.17, then,
except as set forth in Section 9.17(d) below, the Company shall be entitled to
all available remedies at law and in equity for such breach. It is acknowledged
and agreed that no provision of this Section 9.17 shall require any
Non-Competing Party to divest or refrain from conducting any investment or
business (a "Pre-Existing Business") which it acquired or developed prior to the
---------------------
time that, as a result of developments of or modifications to the Prohibited
Business, such Pre-Existing Business taken as a whole Competes with the
Prohibited Business. However, the restrictions set forth in Section 9.17 shall
apply to such Pre-Existing Business if, as a result of developments of or
modifications to such Pre-Existing Business, such Pre-Existing Business taken as
a whole then Competes with the Prohibited Business.
75
(d) In the event of a final determination by a court of
competent jurisdiction that any of the RSI Beneficial Holders or the JAH
Beneficial Holders has breached the covenants in this Section 9.17, then,
without duplication or limitation of any rights and remedies that may be
available to the Company under the Intercompany Agreement, the Company shall
have the right to recover the profits (taking into account the consideration set
forth in the last sentence of this Section 9.17(d)), to the RSI Beneficial
Holders and their Affiliates (in the case of a breach of this Section 9.17 by
any of the RSI Beneficial Holders) or the JAH Beneficial Holders and their
Affiliates (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) derived from the operations of the business or investment
that has been determined to Compete with the Company for the period commencing
on the notification of a dispute with respect to such business or investment
pursuant to Section 9.17 hereof and ending on the earlier to occur of (i) the
date of divestiture of the business line that Competes with the Company, (ii)
the termination of the Intercompany Agreement in accordance with the terms
thereof (solely in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders), and (iii) the exercise of the Call Right (as defined below)
or the conversion of the Class B Common Stock described below, as applicable
(which right to recover profits (taking into account the consideration set forth
in the last sentence of this Section 9.17(d)) shall be Alliance's sole and
exclusive remedy at law and in equity for such breach other than Alliance's
rights set forth in this Section 9.17(d), (e) and (f) and in the Intercompany
Agreement). Further, in the event that such final determination occurs (x) prior
to an Initial Public Offering, the Company shall have the right to acquire all
of the Shares, Options and Warrants then Beneficially Owned by the RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders) in accordance with
the provisions of Section 9.17(e) and the rights granted to the Series C Holders
pursuant to this Agreement shall terminate to the extent provided in Section
9.17(e), or (y) after an Initial Public Offering: (1) all of the shares of Class
B Common Stock shall automatically, and without any action on the part of any
Person, convert into an equal number of shares of Class A Common Stock;
provided, however, that if only the JAH Beneficial Holders are the parties that
-------- -------
have been determined to breach the provisions of this Section 9.17, then only
the shares of Class B Common Stock then Beneficially Owned by such JAH
Beneficial Holders shall be converted as described above; (2) all of the rights
of the RSI Beneficial Holders and the Series C Holders that survive an Initial
Public Offering shall automatically terminate and be of no further force and
effect; provided, however, that if only the JAH Beneficial Holders are the
-------- -------
parties that have been determined to breach the provisions of this Section 9.17,
then such rights shall survive in accordance with their terms; and (3) any
Directors then serving that are Affiliates or appointees (other than Xxx X.
Xxxxxxx who shall continue to serve as a Director if the JAH Beneficial Holders
would then remain entitled to designate a Director under the provisions of
Section 9.17(e) (assuming for the purpose of applying said Section 9.17(e) to
this clause (3) that an Initial Public Offering has not occurred) and other than
the Special Series C Director if he is then serving), of the RSI Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the JAH Beneficial Holders) shall immediately resign
or shall be removed from the Board. Nothing herein shall preclude the RSI
Beneficial Holders or the JAH Beneficial Holders from exercising their rights as
holders of Common Stock following any automatic conversion of the Class B Common
Stock, including, without limitation, the right to vote for, and nominate
Directors, in accordance with the
76
Company's Articles of Incorporation and By-Laws and applicable law. The Company
agrees that, following any automatic conversion of the Class B Common Stock, it
shall continue to hold its annual meetings for stockholders in accordance with
the Company's By-laws. Notwithstanding the foregoing, the Company shall not have
the rights described in clause (x) of the second preceding sentence and the
actions described in clause (y) of the second preceding sentence shall not occur
if, within thirty days after the final determination referred to in the first
sentence of this Section 9.17(d), the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders), at its option, delivers written notice to the Company
that the business line which Competes with the Company will be divested, and
such divestiture is actually completed within nine months after the date of such
final determination. If a breach of the covenant contained in this Section 9.17
arises out of an investment in an entity that is not a wholly owned subsidiary
of a Non-Competing Party or its Affiliates (an "Acquired Competing Party"),
--------------------------
then, for purposes of this Section 9.17(d), the profits referred to herein shall
include only those profits that a Non-Competing Party or its Affiliates (other
than the Acquired Competing Party and its Affiliates Controlled by such Acquired
Competing Party) shall have received and the portion of the profits of the
Acquired Competing Party as to which such Non-Competing Party or its Affiliates
(other than the Acquired Competing Party and its Affiliates Controlled by such
Acquired Competing Party) would be entitled by virtue of their proportionate
ownership in the Acquired Competing Party (whether or not such profits have been
distributed to a Non-Competing Party or its Affiliates).
(e) The Company shall have the right (the "Call Right") to
-----------
acquire, upon written notice delivered to RSI Beneficial Holders (in the case of
a breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders) within 30 days after the final determination referred to
in the first sentence of Section 9.17(d) (only if such final determination
occurs prior to an Initial Public Offering), all (but not less than all) of the
Shares (including any Class B Common Stock acquired upon conversion of the
Series C Preferred Stock), Options and Warrants then Beneficially Owned by the
RSI Beneficial Holders (in the case of a breach of this Section 9.17 by any of
the RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the JAH Beneficial Holders) at the fair
market value of such Shares, Options and Warrants at the time of exercise of the
Call Right (without giving effect to any actions that the Company may take to
effectuate the payment of the Call Purchase Price (as defined below) and without
giving effect to the impact, if any, of any termination of the Intercompany
Agreement) as determined pursuant to and in accordance with the appraisal
procedures set forth in Section 5.3 hereof. The aggregate amount payable to RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders) upon exercise of the
Call Right shall be referred to herein as the "Call Purchase Price." Upon
---------------------
exercise of the Call Right with respect to the RSI Beneficial Holders, the
Company shall be required to pay to such RSI Beneficial Holders in immediately
available funds an amount equal to the lesser of (1) 10% of the estimated Call
Purchase Price, and (ii) $7,000,000, which amount shall be refunded to the
Company in the event that the Call Right shall not be consummated due to the
failure of the RSI Beneficial Holders to deliver the Shares, Options and
Warrants that are the subject of the Call Right. Upon exercise of the Call Right
77
with respect to the JAH Beneficial Holders, the Company shall be required to pay
to such JAH Beneficial Holders in immediately available funds an amount equal to
the lesser of (i) 10% of the estimated Call Purchase Price, and (ii) $2,800,000,
which amount shall be refunded to the Company in the event that the Call Right
shall not be consummated due to the failure of the JAH Beneficial Holders to
deliver the Shares, Options and Warrants that are the subject of the Call Right.
Following any exercise of the Call Right, the Series C Holders and the Series C
Preferred Directors shall not utilize any of the rights granted to any of them
pursuant to this Agreement or under the Series C Certificate of Designation to
prohibit the Company from taking any actions reasonably necessary to effect the
consummation of the Call Right. The closing of the purchase by the Company of
the Shares, Options and Warrants that are the subject of the Call Right shall
occur at the Company's principal office, or at such other place as shall be
mutually agreeable to the RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) and the Company as soon as possible (and in any event within
9 months after the final determination referred to in Section 9.17) (such date
of closing being hereinafter referred to as the "Call Closing Date").
-------------------
Notwithstanding anything to the contrary contained herein, if the Call Right has
been exercised and an Initial Public Offering (as evidenced by a filing of a
registration statement with the Securities and Exchange Commission) or a Rule
144A offering is pending or is being undertaken in connection with the exercise
of the Call Right, then, (x) the Call Closing Date shall occur prior to or
contemporaneous with the consummation of such offering, and (y) the payment of
the Call Purchase Price shall be made in immediately available funds at a price
per share equal to the greater of (i) the price per share of Common Stock in
such offering and (ii) the fair market value of a share of Common Stock as
determined in accordance with the first sentence of this Section 9.17(e). At the
Call Closing Date, each of the RSI Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) shall surrender to the Company any Options, Warrants and the
certificate or certificates representing its Shares, in each case free and clear
of all Encumbrances and the Company shall pay the Call Purchase Price by wire
transfer in immediately available funds to an account designated by the RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders). Notwithstanding the
foregoing, the Company shall be permitted to pay the Call Purchase Price by
delivery of a subordinated note payable in three annual installments of
principal commencing on the first anniversary of the Call Closing Date, with
interest at an annual rate equal to 3-1/2% plus the Prime Rate. Upon payment of
the Call Purchase Price, any Directors then serving that are Affiliates or
appointees (other than Xxx X. Xxxxxxx if the JAH Beneficial Holders remain
entitled to designate a director under the provisions of this Section 9.17(e)
and other than the Special Series C Director if he is then serving) of the RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders) shall immediately
resign or shall be removed from the Board. In the event of a breach of this
Section 9.17 by any of the RSI Beneficial Holders and upon payment of the Call
Purchase Price to the RSI Beneficial Holders, all of the rights of the RSI
Beneficial Holders and the Series C Holders contained in this Agreement shall
automatically terminate and be of no further force and effect; provided,
--------
however, that (x) the JAH Beneficial
-------
78
Holders shall have the right to designate that number of Directors as are equal
to the number of Directors they would have had the right to designate pursuant
to Section 8.1(e), assuming that the shares of Series C Preferred Stock
Beneficially Owned by such JAH Beneficial Holders had been converted to Class B
Common Stock as provided therein and that there were no other outstanding shares
of Class B Common Stock, (y) for purposes of any Super-Majority Approval
requirements thereafter, any Directors designated by the JAH Beneficial Holders
or any other Series C Holders shall not be considered Series C Preferred
Directors but any actions specified in Sections 3.1(e), 3.1(f), and 3.1(j) shall
require the approval of a majority of the Directors then designated by the JAH
Beneficial Holders and (z) the JAH Beneficial Holders shall remain entitled to
exercise the rights granted to all Securityholders generally as set forth in
Section 3.2, Article IV, Article V, Article VI, and Section 7.1(a) which rights
shall survive in accordance with their terms. Notwithstanding the previous
sentence, if the JAH Beneficial Holders shall Beneficially Own less than 10% of
the Series C Adjusted Fully Diluted Capitalization but shall not have disposed
of any shares of Series C Preferred Stock originally issued to them pursuant to
the Merger Agreements and shall have exercised in full all rights previously
available to them under Section 4.3 and Section 7.1 hereof, then the JAH
Beneficial Holders shall be entitled to designate one Director. In the event of
a breach of this Section 9.17 by any of the JAH Beneficial Holders, all of the
rights of the RSI Beneficial Holders and the Series C Holders contained in this
Agreement shall survive in accordance with their respective terms. In the event
of the Company's failure to exercise the Call Right or pay the Call Purchase
Price, the rights of the Series C Holders shall remain unaffected.
(f) Upon exercise of the Call Right, the Company shall request
the Required Banks to consent to such exercise. The Company shall not be
required to consummate the Call Right, and the exercise of such Call Right shall
be deemed rescinded and withdrawn and of no force and effect and no RSI
Beneficial Holder or JAH Beneficial Holder, as the case may be, shall have any
rights or remedies to enforce the Call Right, until such time as all Obligations
(as defined in the Credit Agreement) shall have been paid in full in cash,
unless the Required Banks have consented in writing to the exercise of the Call
Right. The Company may assign the Call Right, in whole or in part, to any Person
provided that such Person must pay the Call Purchase Price with respect to any
Shares, Options or Warrants acquired by it in immediately available funds.
(g) The prohibitions set forth in this Section 9.17 shall
apply to each of the Xxxxxx Holders and the Northwood Holders only so long such
Xxxxxx Holders or Northwood Holders maintain Beneficial Ownership in the
aggregate of 50% or more of the Common Stock Equivalents (excluding Warrant
Shares) initially acquired by them pursuant to the First Series A Stock Purchase
Agreement and the Second Series A Stock Purchase Agreement. The prohibitions set
forth in this Section 9.17 shall apply to the JAH Beneficial Holders for so long
as such JAH Beneficial Holders maintain Beneficial Ownership in the aggregate of
50% or more of the Common Stock Equivalents initially acquired by them pursuant
to the merger of a wholly owned subsidiary of the Company and Interoffice
Superholdings Corporation. The prohibitions set forth in this Section 9.17 shall
apply to the RSI Beneficial Holders for so long as such RSI Beneficial Holders
maintain Beneficial Ownership in the aggregate of 15% or more of the Series C
Adjusted Fully Diluted Capitalization.
79
[NO FURTHER TEXT ON THIS PAGE]
[SIGNATURE PAGES FOLLOW]
80
SCHEDULE 1
TO
FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JANUARY 8, 1999
HOLDINGS OF SECURITYHOLDERS
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
XXXXXX-
XXXXXXX
STRATEGIC 0 4,448,096 593,327 0 667,214 0
PARTNERS FUND,
L.P.
STRATEGIC 0 246,464 32,875 0 36,970 0
ASSOCIATES, L.P.
NORTHWOOD 0 1,833,813 240,681 0 183,382 0
VENTURES LLC
NORTHWOOD
CAPITAL 0 352,092 45,692 0 35,210 0
PARTNERS LLC
XXXX, XXXX & 0 146,705 21,523 0 14,670 0
CO.
XXXXX X. 0 14,670 1,098 0 1,466 15,000
XXXXXX
PARIBAS, acting
through its Cayman 0 0 0 0 90,958 0
Islands Branch
PARIBAS NORTH 0 0 662,350 0 0 0
AMERICA
INTEROFFICE
SUPERHOLDINGS 0 0 0 11,567,247 0 0
LLC
1
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
RECKSON OFFICE 0 0 0 1,318,633 0 0
CENTERS LLC
XXXXXX XXXXXX 0 0 0 439,544 0 0
XXXXX X. XXXXX 1,173,653 0 200,000 0 0 1,275,000
XXXXXX X. 0 0 16,196 0 273,310 0
SHATTAN
XXXX XXXXXXX 0 0 429 0 0 0
XXXXXX
XXXXXXX AND
XXXX XXXXXXX 0 0 1,895 0 0 0
TRUST FBO
XXXX XXXXXXX
XXXXXX
XXXXXXX AND
XXXX XXXXXXX 0 0 1,895 0 0 0
TRUST FBO
XXXXXX XXXXXXX
XXXXXXX X. 0 0 40,670 0 163,986 0
MENDEL
XXXXX XXXXXX
(CUST. FOR XXXXX
XXXXXX 0 0 4,210 0 0 0
MENDEL)
XXXXX XXXXXX
(CUST. FOR
XXXXX XXXX 0 0 4,210 0 0 0
MENDEL)
G. XXXXX 0 0 0 0 109,324 0
FECHTMEYER
THE SHATTAN 0 0 0 0 3,680 0
GROUP LLC
2
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
XXXXXX X. 230,000 116,506 59,739 0 11,652 100,000
XXXXX
XXXXXXX XXXXX 0 50,000 1,938 0 5,000 0
XXXXX XXXXXXX 1,011,205 66,506 0 0 6,652 330,000
XXXXX XXXXXXX 0 0 100,000 0 0 0
XXX ROLLOVER
XXXXX XXXXXXX 0 100,000 0 0 10,000 0
XXXXXXX X. 178,333 43,034 0 0 4,302 50,000
XXXXXXXX
XXXXXXX 10,000 0 0 0 0 0
XXXXXXXX
XXXXXX AND 10,000 0 0 0 0 0
XXXXX XXXXXXXX
XXXXXX AND 10,000 0 0 0 0 0
XXXXX XXXXXX
XXXX X. XXXXXX 80,000 76,287 95,825 0 7,628 205,000
XXXXX X. 0 50,000 10,526 0 5,000 160,000
XXXXXXXXXX
XXXXXX M. 0 10,000 5,211 0 1,000 15,000
XXXXXXXXX
XXXXXX XXXXX 0 5,868 0 0 586 7,500
XXXXXXXXXX
XXXXXXX XXXXX 0 14,670 3,789 0 1,466 0
MLPF&S CUST
FOR XXXXXXX 0 0 12,000 0 0 0
XXXXX
3
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
XXXXX X. 0 0 1,500 0 0 150,000
XXXXXXXX
XXXXX XXXXXXX 0 0 108,813 0 0 150,000
XXXXXXXX 0 0 11,000 0 0 25,000
XXXXXX
XXXXX XXXXXX 0 0 13,801 0 0 25,000
XXXXXX 0 0 2,500 0 0 50,000
XXXXXXXXX
XXXXX L. 0 0 0 0 0 15,000
XXXXXXX
G. XXX XXXX 0 0 7,068 0 0 15,000
XXXXXXX 0 0 2,500 0 0 0
XXXXXXX
XXXXX XXXXXX 0 0 0 0 0 9,500
XXXXX XXXXXX 0 0 11,801 0 0 50,000
XXXXXXXXX
LUFKIN
XXXXXXXX CUST. 0 0 10,000 0 0 0
FOR XXXXXX
XXXXX
XXXXXX XXXXX 0 0 0 0 0 5,000
XXXXXX XXXXX 0 0 0 0 0 1,000
ROMMEL MAPA 0 0 0 0 0 1,000
XXXXXX XXXXX 0 0 0 0 0 1,000
4
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
XXXX 0 0 0 0 0 250
XXXXXXXXXX
XXXXX 0 0 66,635 0 0 0
XXXXXXXX
XXXXXX 0 0 26,780 0 0 0
XXXXXXXX
XXXXXXX 0 0 23,914 0 0 0
XXXXXXXX
XXXX XXXXXXXX 0 0 47,179 0 0 0
XXXXX XXXXXX 0 0 284,488 0 0 0
PEGGYANNE 0 0 20,426 0 0 0
XXXX
XXXXXXX XXXXX 0 0 23,590 0 0 0
XXXXXX 0 0 42,294 0 0 0
XXXXXXXXX
XXXXX XXXXXXXX
(TRUSTEE FOR
ELIZA 0 0 23,907 0 0 0
XXXXXXXXXXX)
XXXXX XXXXXXXX
(TRUSTEE FOR
XXXXXXXX 0 0 23,914 0 0 0
XXXXXXXXXXX)
TIPPET 0 0 17,541 0 0 0
PARTNERS
XXXXX 0 0 28,954 0 0 0
XXXXXXXXXX
XXXXXXX 0 0 18,732 0 0 0
SCHARFBERG
5
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON COMMON
STOCK STOCK
NUMBER NUMBER OF NUMBER OF NUMBER OF ISSUABLE ISSUABLE
OF SHARES SHARES OF SHARES OF SHARES OF ON ON
OF SERIES A SERIES B SERIES C EXERCISE EXERCISE
COMMON PREFERRED PREFERRED PREFERRED OF OF OPTIONS
NAME: STOCK: STOCK: STOCK: STOCK: WARRANTS: GRANTED:
---- ----- ----- ----- ----- -------- -------
XXXXXXXX 0 0 25,035 0 0 0
GROUP
XXXXXX 0 0 61,346 0 0 0
XXXXXXXX
XXXXXX 0 0 62,898 0 0 0
XXXXXXXX
XXXXX XXXXXXXX 0 0 20,426 0 0 0
KASSO CIRCLE
REALTY, INC.
PROFIT SHARING 0 0 22,238 0 0 0
PLAN
XXXXXXX 0 0 18,380 0 0 0
XXXXXXXX
XXXXXXX 0 0 8,771 0 0 0
XXXXXXXX, XXX
XXXXXXX 0 0 18,380 0 0 0
WITOVER
XXXXX XXXXXXX 0 0 11,961 0 0 0
TOTALS 2,703,191 7,574,711 3,222,851 13,325,424 1,633,456 2,655,250
6
SCHEDULE 2
SERIES C ADJUSTED FULLY DILUTED
CAPITALIZATION SAMPLE CALCULATION
---------------------------------
Fully Diluted Adjusted Fully Diluted Series C Adjusted Fully
Class of Security Capitalization Capitalization Diluted Capitalization
----------------- -------------- ----------------------------- ----------------------
Class A Common 4,901,868 4,901,868 4,901,868
Series A Preferred 7,574,711 7,574,711 7,574,711
Series B Preferred* 3,222,851 3,222,851 3,222,851
Series C Preferred 13,325,424 13,325,424 13,325,424
1996 Plan Options 1,375,250 1,375,250 1,375,250
Other Pre Merger
Options & Warrants 2,913,456 2,913,456 2,913,456
----------- ----------- -----------
33,313,560 33,313,560 33,313,560
1998 Option Plan** 2,701,099 300,000 0
----------- ----------- -----------
36,014,659 33,613,560 33,313,560
Other Post Merger
Rights, Options &
Warrants*** 0 0 0
Merger Shares**** 2,000,000 2,000,000 0
----------- ----------- -----------
38,014,659 35,613,560 33,313,560
IPO Shares***** 9,000,000 9,000,000 8,103,186
----------- ----------- -----------
Total 47,014,659 44,613,560 41,416,746
______________
* Includes 1,930,062 shares issued in connection with the
initial offering of Series B Preferred in April 1998 and
1,292,789 shares issued in connection with the LP Roll Up and
related transactions.
** Assumes that all options available for grant under the 1998
Plan (7.5% of the Fully Diluted capitalization) have been
granted, and that 300,000 of those options are exercisable and
"in the money".
*** Assumes that no rights, options or warrants have been granted
post Merger other than under the 1998 Plan.
**** Assumes an acquisition has been made by merger in which
2,000,000 shares of common stock were issued.
***** Assumes an IPO of 9,000,000 shares at $15 per share
($135,000,000 total). Under Section 7.1(b), of the first
7,142,857 shares ($107,142,855), the Series C Holders can
purchase 30% or 2,142,857 shares ($32,142,855), leaving
5,000,000 shares for the public ($75,000,000), and the Series
C Holders can purchase all of the balance of 1,857,143 shares
($27,857,145), for total purchases by the Series C Holders of
4,000,000 shares ($60,000,000).
1
The computation of Series C Adjusted Fully Diluted Capitalization, Backlog CSE's
and Unused Backlog CSE's is as follows (the explanation of the calculation of
the numbers is in the following paragraphs):
Adjusted Fully Diluted Capitalization 44,613,560
Less clause (i) of definition (Backlog CSE's):
1998 Plan Options 300,000
Merger shares 2,000,000
Initial Public Offering shares 3,196,814 (5,496,814)
--------- ----------
39,116,746
Plus clause (ii) of definition:
Backlog CSE's as to which
Series C Holders have the
opportunity to exercise
preemptive rights in the
Initial Public Offering 2,300,000
----------
Series C Adjusted Fully Diluted Capitalization 41,416,746
==========
Backlog CSE's (computed above) 5,496,814
Less shares under clause (ii) of definition (2,300,000)
---------
Unused Backlog CSE's 3,196,814
=========
Pursuant to the second paragraph of Section 7.1(a), the RSI Beneficial Holders
have special preemptive rights to purchase New Securities to increase their
Beneficial Ownership to 30% of the Adjusted Fully Diluted Capitalization
(assuming for the purposes of this example that such Beneficial Ownership,
immediately prior to the merger transaction set forth in this example in which
2,000,000 shares are issued, is 7,995,254 shares (i.e. 60% of the original
Series C shares issued)). Therefore, based on the 300,000 exercisable and "in
the money" options under the 1998 Plan and the issuance of 2,000,000 shares in
the merger transaction, but for the exceptions to the definition of New
Securities set forth in clause (v) and (vi) of Section 7.1(a), the RSI
Beneficial Holders would have had the right to subscribe to 2,688,726 shares
(30% of the Adjusted Fully Diluted Capitalization following the merger of
35,613,560 shares, equals 10,684,068 shares, minus the 7,995,254 shares already
2
Beneficially Owned, equals 2,688,814 shares). Since this is more than the
2,300,000 shares represented by the 1998 options and the shares being issued in
the merger, the full 2,300,000 shares are Unused Backlog CSE's. Note that this
example does not give effect to the right of the RSI Beneficial Holders and/or
the Series C Holders under the last paragraph of Section 7.1(a) to exercise
certain premptive rights with respect to Unused Backlog CSE's prior to an
Initial Public Offering.
Pursuant to Section 7.1(b), upon an Initial Public Offering, the Series C
Holders are entitled to increase their total Beneficial Ownership to 46% of the
Adjusted Fully Diluted Capitalization, subject to the 30% limitation in that
provision (assuming for the purposes of this example that such Beneficial
Ownership, immediately prior to the Initial Public Offering set forth in this
example in which 9,000,000 shares are issued, is 13,325,424 shares (i.e. all of
the original Series C Shares issued)). Therefore, upon the issuance of 9,000,000
shares in the Initial Public Offering, but for the 30% limitation, the Series C
Holders would have had the right to subscribe to 7,196,814 shares (46% of the
Adjusted Fully Diluted Capitalization following the Initial Public Offering of
44,613,560 shares, equals 20,522,238 shares minus the 13,325,424 shares already
Beneficially Owned, equals 7,196,814 shares). As result of the 30% limitation,
the Series C Holders were only able to purchase 4,000,000 shares in the Initial
Public Offering. The difference of 3,196,814 shares is the new total of Unused
Backlog CSE's (the calculation has been done inclusive of the previous total of
Unused Backlog CSE's). So the increase in Unused Backlog CSE's (from the
previous total of 2,300,000 shares) resulting from the Initial Public Offering
is 896,814 shares, and the balance of the 9,000,000 shares issued in the Initial
Public Offering, 8,103,186 shares, are included in the Series C Adjusted Fully
Diluted Capitalization. The difference of 3,196,814 between the total Adjusted
Fully Diluted Capitalization and the total Series C Adjusted Fully Diluted
Capitalization shown on the first page hereof equals the total Unused Backlog
CSE's calculated above in this paragraph.
3
SCHEDULE 3
TO
FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JANUARY 8, 1999
LIST OF CERTAIN EXECUTIVE PERSONNEL PURSUANT TO SECTION 3.4
X.X. Xxxxx
Xxxxxx XxXxxxxx
Xxxxx Xxxxxxxxx
1