SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
-------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 1, 1999
RECKSON SERVICE INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
(State of Incorporation)
1-14183 11-3383642
(Commission File Number) (IRS Employer Id. Number)
225 Broadhollow Road 11747
Melville, New York (Zip Code)
(Address of principal executive offices)
(516) 719-7400
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On July 1, 1999, Reckson Service Industries, Inc. ("RSI") funded $5.2
million of a $15.75 million commitment to OnSite Access, Inc. ("OnSite") in
connection with the closing of a preferred stock financing with an aggregate
commitment of $60 million from RSI and a private equity investor group which
included Spectrum Equity Investors, AT&T Ventures, Crosspoint Venture Partners
and JP Morgan Investment Corporation. The preferred stock is convertible into
OnSite's common stock and will convert automatically in the event OnSite
completes an initial public offering within certain parameters. RSI and the
other investors also entered into an Investors Rights Agreement and a Voting
Agreement in respect of certain governance, voting and stockholders rights,
including rights with respect to board representation, rights of first offer
with respect to their OnSite stock, pre-emptive rights, registration rights and
other matters.
OnSite is a privately-held company that upgrades telecommunications
infrastructures of multi-tenant office buildings and provides tenants of such
buildings with cost-effective access to broadband Internet, data and voice
network services through the use of DSL technology. After giving effect to the
financing, RSI is the largest shareholder of OnSite with an approximate 33%
interest on a diluted basis.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
4.1 Certificate of Designation of Series A, Series B, Series C and
Series D Preferred Stock
10.1 Investor Rights Agreement, by and among OnSite Access, Inc. and
certain investors and individuals within management
10.2 Voting Agreement, by and among OnSite Access, Inc. and certain
investors.
10.3 Series B, Series C and Series D Preferred Stock Purchase Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Michael Maturo
-----------------------------------
Michael Maturo
Executive Vice President, Chief Financial
Officer and Treasurer
Date: July 16, 1999
Exhibit 4.1
ONSITE ACCESS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A, SERIES B, SERIES C AND SERIES D PREFERRED STOCK
OnSite Access, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in its Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors (the
"Board of Directors") has adopted the following resolution creating (i) a
series of its Preferred Stock, par value $.01 per share, designated as Series A
Convertible Preferred Stock, (ii) a series of its Preferred Stock, par value
$.01 per share, designated as Series B Redeemable Preferred Stock, (iii) a
series of its Preferred Stock, par value $.01 per share, designated as Series C
Convertible Redeemable Preferred Stock and (iv) a series of its Preferred
Stock, par value $.01 per share, designated as Series D Convertible Redeemable
Preferred Stock:
RESOLVED, that four separate series of the class of authorized
Preferred Stock, par value $.01 per share, of the Corporation be hereby
created, and that the designations and amounts thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
1. DESIGNATION AND NUMBER. The Preferred Stock authorized by this
Certificate of Designation may be issued from time to time in one or more
series. The first series of Preferred Stock shall be designated "Series A
Convertible Preferred Stock" and shall consist of 5,869,000 shares. The second
series of Preferred Stock shall be designated "Series B Redeemable Preferred
Stock" and shall consist of 50,000,000 shares. The third series of Preferred
Stock shall be designated "Series C Convertible Redeemable Preferred Stock" and
shall consist of 25,069,634 shares. The fourth series of Preferred Stock shall
be designated "Series D Convertible Redeemable Preferred Stock" and shall
consist of 392,111 shares. The rights, preferences, privileges and restrictions
granted to and imposed on the Series A Convertible Preferred Stock, Series B
Redeemable Preferred Stock, Series C Convertible Redeemable Preferred Stock and
Series D Convertible Redeemable Preferred Stock are as set forth below. Unless
stated otherwise herein, the Series A Convertible Preferred Stock, the Series B
Redeemable Preferred Stock, the Series C Convertible Redeemable Preferred Stock
and the Series D Convertible Redeemable Preferred Stock shall be referred to
collectively as "Preferred Stock."
2. DIVIDEND PROVISIONS. The holders of shares of Series B Redeemable
Preferred Stock, the holders of shares of Series C Convertible Redeemable
Preferred Stock and the holders of shares of Series D Convertible Redeemable
Preferred Stock shall be entitled to receive cumulative dividends, out of any
assets legally available therefor, prior and in preference to any declaration
or payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) on the Series A Convertible Preferred Stock or the Common Stock of
the Corporation, at an annual rate equal to 12% of the relevant Investment
Amount (as defined in Section 3(a) hereof), as applicable, compounded annually
(adjusted to reflect subsequent stock dividends, stock splits,
recapitalizations or similar transactions), payable (x) in the case of the
Series B Redeemable Preferred Stock, upon the earliest of (i) redemption
thereof, (ii) any liquidation, dissolution or winding up of the Corporation or
(iii) when, as and if declared by the Board of Directors (to the extent
declared) and (y) in the case of the Series C Convertible Redeemable Preferred
Stock and the Series D Convertible Redeemable Preferred Stock, upon the earlier
of (i) redemption thereof, (ii) any liquidation, dissolution or winding up of
the Corporation, (iii) when, as and if declared by the Board of Directors (to
the extent declared) or (iv) conversion of the Series C Convertible Redeemable
Preferred Stock or Series D Convertible Redeemable Preferred Stock into Common
Stock. Such dividends on the Preferred Stock shall accrue whether or not they
have been declared by the Board of Directors and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends and, as to any share of Preferred Stock, shall only accrue
from such share's date of issuance. The date on which the Corporation initially
issues any share of Preferred Stock which will be denoted on all certificates
evidencing such Preferred Stock, will be deemed to be its "date of issuance"
regardless of the number of times transfer of such shares is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such shares. Unless all dividends
on the outstanding shares of Series B Redeemable Preferred Stock, Series C
Convertible Redeemable Preferred Stock and Series D Convertible Redeemable
Preferred Stock that shall have accrued and become payable as of any date shall
have been paid, or declared and funds set apart for payment thereof, no
dividend or other distribution (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) shall be paid to the holders of Series A Convertible Preferred
Stock or Common Stock and no shares of Series A Convertible Preferred Stock or
Common Stock shall be purchased, redeemed or otherwise acquired by the
Corporation or any of its subsidiaries (except by conversion into or exchange
for Common Stock), nor shall any monies be paid or made available for a
purchase, redemption or sinking fund for the purchase or redemption of any
Series A Convertible Preferred Stock or Common Stock; PROVIDED, HOWEVER, that
this restriction shall not apply to the repurchase of shares of Common Stock
from employees, officers, directors, consultants or other persons performing
services for the Corporation or any subsidiary pursuant to agreements under
which the Corporation has the option to repurchase such shares upon the
occurrence of certain events, such as the termination of employment; AND
PROVIDED FURTHER that this restriction may be waived upon the written consent
of the holders of at least a majority of the then outstanding shares of Series
C Convertible Redeemable Preferred Stock and Series D Convertible Redeemable
Preferred Stock voting together as a single class. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Convertible Preferred Stock or Common Stock which may
be in arrears. No dividend may be declared or paid on the Series C Convertible
Redeemable Preferred Stock unless a corresponding dividend is declared or paid,
as the case may be, on the Series D Convertible Redeemable Preferred Stock such
that the total amount paid is divided ratably between the Series C Convertible
Redeemable Preferred Stock and the Series D Convertible Redeemable Preferred
Stock based upon the relative aggregate amounts of the Series C Investment
Amount and the Series D Investment Amount represented by the outstanding shares
of each such Series.
The holders of shares of Series A Convertible Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
after and subordinate to the declaration and payment of all dividends then due
and owing on any of the Series B Redeemable Preferred Stock, the Series C
Convertible Redeemable Preferred Stock and the Series D Convertible Redeemable
Preferred Stock. No dividend may be declared or paid on the Series A
Convertible Preferred Stock unless a corresponding dividend is declared or
paid, as the case may be, on the Common Stock such that the total amount paid
is divided ratably between the Series A Convertible Preferred Stock and the
Common Stock based on the relative number of shares of Common Stock into which
the Series A Convertible Preferred Stock would convert and the number of
outstanding shares of Common Stock.
3. LIQUIDATION.
(a) SERIES A, SERIES B, SERIES C AND SERIES D PREFERENCE. In the
event of any liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary, the holders of the Series B Redeemable Preferred
Stock, the Series C Convertible Redeemable Preferred Stock and the Series D
Convertible Redeemable Preferred Stock shall be entitled to receive, prior and
in preference to any payment of cash or distribution of any of the assets of
the Corporation to the holders of Series A Convertible Preferred Stock or
Common Stock by reason of their ownership thereof (i) in the case of the Series
B Redeemable Preferred Stock, an amount (the "Series B Preference") equal to
$1.00 per share (the "Series B Investment Amount") (as adjusted to reflect
subsequent stock dividends, stock splits, recapitalizations or similar
transactions) for each share of Series B Redeemable Preferred Stock then held
by them and (ii) in the case of the Series C Convertible Redeemable Preferred
Stock and the Series D Convertible Redeemable Preferred Stock, an amount (the
"Series C Preference" and the "Series D Preference", as applicable) equal to
the greater of (x) $0.39 per share (the "Series C Investment Amount" and the
"Series D Investment Amount", as applicable) (as adjusted to reflect subsequent
stock dividends, stock splits, recapitalizations or similar transactions) for
each share of Series C Convertible Redeemable Preferred Stock or Series D
Convertible Redeemable Preferred Stock then held by them and (y) the amount per
share that the holders of the Series C Convertible Redeemable Preferred Stock
or Series D Convertible Redeemable Preferred Stock would have received had they
converted their shares of Series C Convertible Redeemable Preferred Stock or
Series D Convertible Redeemable Preferred Stock into Common Stock immediately
prior to such liquidation, dissolution or winding up of the Corporation, plus
in the case of the Series B Redeemable Preferred Stock, the Series C
Convertible Redeemable Preferred Stock and the Series D Convertible Redeemable
Preferred Stock, an additional amount equal to any accrued but unpaid dividends
on such shares of Preferred Stock. If, upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series B Redeemable
Preferred Stock, the Series C Convertible Redeemable Preferred Stock and the
Series D Convertible Redeemable Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then
the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series B
Redeemable Preferred Stock, the Series C Convertible Redeemable Preferred Stock
and the Series D Convertible Redeemable Preferred Stock based upon the relative
amounts of the Series B Investment Amount, the Series C Investment Amount and
the Series D Investment Amount. With respect to distributions under this
Section 3 or dividends under Section 2 hereof on the Series B Redeemable
Preferred Stock, Series C Convertible Redeemable Preferred Stock and Series D
Convertible Redeemable Preferred Stock, such distribution on the Series B
Redeemable Preferred Stock, Series C Convertible Redeemable Preferred Stock or
Series D Convertible Redeemable Preferred Stock shall be divided ratably among
all shares based upon the relative Series Preferences of such series of
Preferred Stock.
In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series A
Convertible Preferred Stock shall be entitled to receive, after and subordinate
to any payment in cash or distribution of any assets of the Corporation to
which holders of the Series B Redeemable Preferred Stock, the Series C
Convertible Redeemable Preferred Stock and the Series D Convertible Redeemable
Preferred Stock shall be entitled and prior and in preference to any payment of
cash or distribution of any of the assets of the Corporation to the holders of
Common Stock by reason of their ownership thereof an amount (the "Series A
Preference") equal to the greater of (x) $1.11 per share (the "Series A
Investment Amount") (as adjusted to reflect subsequent stock dividends, stock
splits, recapitalizations or similar transactions) for each share of Series A
Convertible Preferred Stock then held by them and (y) the amount per share that
the holders of the Series A Convertible Preferred Stock would have received had
they converted their shares of Series A Convertible Preferred Stock into Common
Stock immediately prior to such liquidation, dissolution or winding up of the
Corporation, plus an additional amount equal to any accrued but unpaid
dividends on the Series A Convertible Preferred Stock.
The term "Investment Amount" with respect to a series of Preferred
Stock shall mean, if such series is the Series A Convertible Preferred Stock,
the Series A Investment Amount, if such series is the Series B Redeemable
Preferred Stock, the Series B Investment Amount, if such series is the Series C
Convertible Redeemable Preferred Stock, the Series C Investment Amount and if
such series is the Series D Convertible Redeemable Preferred Stock, the Series
D Investment Amount.
(b) REMAINING ASSETS. Upon the completion of the distributions
required by Section 3(a) above, the holders of Preferred Stock shall receive no
further distributions from the remaining assets of the Corporation.
(c) DEEMED LIQUIDATION. For purposes of this Section 3, a
liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of a majority of the capital
stock or voting power of the Corporation by another person or entity by means
of any transaction or series of related transactions (including, without
limitation, any reorganization, merger, consolidation or purchase of stock) but
excluding the sale of shares of securities of the Corporation to underwriters
in connection with an underwritten public offering; or (B) a sale, exchange or
other disposition of all or substantially all of the assets of the Corporation,
UNLESS the Corporation's stockholders of record as constituted immediately
prior to such acquisition or sale will, immediately after such acquisition or
sale (by virtue of securities issued as consideration for the Corporation's
acquisition or sale or otherwise) hold more than 50% of the voting power of the
surviving or acquiring entity in substantially the same relative percentages
after such acquisition or sale as before such acquisition or sale.
(d) NOTICE OF TRANSACTION. The Corporation shall give each holder
of record of Preferred Stock written notice of any impending transaction
described in Section 3(c) hereof not later than 20 days prior to the
stockholders' meeting called to approve such transaction, or 20 days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than 20 days after the
Corporation has given the first notice provided for herein or sooner than 10
days after the Corporation has given notice of any material changes provided
for herein; PROVIDED, HOWEVER, that such periods may be shortened upon the
written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority
of the then outstanding shares of Series B Redeemable Preferred Stock, Series C
Convertible Redeemable Preferred Stock and Series D Convertible Redeemable
Preferred Stock. Nothing herein shall be deemed to limit any right of approval
that any holder of Preferred Stock may have hereunder or otherwise.
(e) EFFECT OF NONCOMPLIANCE. In the event the requirements of
Section 3(d) are not complied with, the Corporation shall forthwith either
cause the closing of the transaction to be postponed until such requirements
have been complied with, or cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert
to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section 3(d)
hereof.
(f) VALUATION OF CONSIDERATION. Whenever a distribution provided
for in this Section 3 shall be payable in property other than cash, the value
of the property will be deemed its fair market value as determined in good
faith by the Board of Directors of the Corporation. Any securities shall be
valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three days prior to the closing;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three days prior to the closing;
and
(C) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and
the holders of at least a majority of the outstanding shares of Series B
Redeemable Preferred Stock, Series C Convertible Redeemable Preferred Stock and
Series D Convertible Redeemable Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 3(f)(i) to reflect the approximate fair
market value thereof, as mutually determined by the Board of Directors of the
Corporation and the holders of at least a majority of the outstanding shares of
Series B Redeemable Preferred Stock, Series C Convertible Redeemable Preferred
Stock and Series D Convertible Redeemable Preferred Stock.
4. REDEMPTION. The holders of the Preferred Stock shall have
redemption rights as follows (the "Redemption Rights"):
(a) RIGHT TO REDEEM. At any time after the earlier of (i) the
closing of the Corporation's sale of its Common Stock in a public offering
pursuant to a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
(excluding a registration relating to warrants, or to securities issuable in
respect of warrants, which warrants are sold in connection with an offering of
debt securities), or (ii) the fifth anniversary of the first issuance of any
share of the Series B Redeemable Preferred Stock, the Series C Convertible
Redeemable Preferred Stock, or the Series D Convertible Redeemable Stock, as
the case may be, upon election (the "Redemption Election") by the holders of a
majority of the outstanding shares of (x) the Series B Redeemable Preferred
Stock, voting separately as a class, or (y) the Series C Convertible Redeemable
Preferred Stock and Series D Convertible Redeemable Stock, voting together as a
single class, as the case may be, the Corporation shall redeem all shares of
Series B Redeemable Preferred Stock or all shares of the Series C Convertible
Redeemable Preferred Stock and the Series D Convertible Redeemable Preferred
Stock, as the case may be, in three (3) equal annual installments on the 45th
day (the "Initial Redemption Date") following the date of delivery of the
Redemption Election to the Corporation and on the first and second
anniversaries of such Initial Redemption Date, by paying the redemption price
therefor set forth in Section 4(b) hereof (unless such Initial Redemption Date
or such first or second anniversary is not a business day in New York, New
York, in which event the redemption shall be made on the next business day),
UNLESS such redemption has otherwise previously occurred pursuant to the terms
of the Series B Redeemable Preferred Stock, the Series C Convertible Redeemable
Preferred Stock or the Series D Convertible Redeemable Preferred Stock, as the
case may be; AND PROVIDED FURTHER that in the case of an election pursuant to
Section 4(a)(i) above, the redemption price shall be paid in full on such
Initial Redemption Date. An Initial Redemption Date, the first and second
anniversaries thereof, and any other alternative redemption date specified in
this Section 4(a) are sometimes referred to herein as a "Redemption Date."
(b) REDEMPTION PRICE. The redemption price (the "Redemption Price")
for each share of Preferred Stock to be redeemed will be equal to the
Investment Amount for the series being redeemed (as adjusted to reflect
subsequent stock dividends, stock splits, recapitalizations and similar
transactions) on the Initial Redemption Date, plus any accrued but unpaid
dividends on such shares of Preferred Stock.
(c) The Redemption Price with respect to all shares of Series B
Redeemable Preferred Stock, Series C Convertible Redeemable Preferred Stock or
the Series D Convertible Redeemable Preferred Stock, as the case may be, shall
be paid before any redemption payment is made in respect of any other capital
stock of the Corporation (or any securities convertible into or exercisable or
exchangeable into capital stock of the Corporation), other than Excluded
Redemptions. "Excluded Redemptions" shall mean any repurchases of shares of
Common Stock from employees, officers, directors, consultants or other persons
performing services for the Corporation or any subsidiary pursuant to
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, such as the termination of employment.
(d) At least fifteen (15) days prior to an Initial Redemption Date
for a series of Preferred Stock, written notice shall be mailed by the
Corporation, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of such shares of Preferred Stock to be redeemed at the address last
shown on the records of the Corporation for such holder or given by the holder
to the Corporation for the purpose of notice or if no such address appears or
is given at the place where the principal executive office of the Corporation
is located, notifying such holder of the redemption to be effected, specifying
the Redemption Date, the Redemption Price, the place at which payments may be
obtained and, in the case of the Series C Convertible Redeemable Preferred
Stock or the Series D Convertible Redeemable Preferred Stock, the date on which
such holder's Conversion Rights (as defined in Section 5 hereof) as to such
shares terminate and calling upon such holder to surrender to the Corporation,
in the manner and at the place designated, his certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Each holder
of Preferred Stock being redeemed shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price
of such shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled.
(e) From and after the Redemption Date for a series of Preferred
Stock unless there shall have been a default in payment of the Redemption
Price, all rights of the holders of such shares of such series that are to be
redeemed on the Redemption Date (except the right to receive the Redemption
Price) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares on any Redemption Date, are insufficient to
pay in full the cash portion of the Redemption Price for the total number of
shares to be redeemed on such date, those funds which are legally available
will be used to redeem the maximum possible number of shares of Series B
Redeemable Preferred Stock, Series C Convertible Redeemable Preferred Stock or
Series D Convertible Redeemable Preferred Stock, as the case may be, to be
redeemed on such Redemption Date, first, ratably among such series of Preferred
Stock to be redeemed on such Redemption Date based upon the relative Investment
Amount of such series and, second, ratably among the holders of the shares
within each series to be redeemed based upon the relative number of shares held
by each such holder. The shares of Series B Redeemable Preferred Stock, Series
C Convertible Redeemable Preferred Stock or Series D Convertible Redeemable
Preferred Stock, as the case may be, not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series B Redeemable Preferred Stock, Series C
Convertible Redeemable Preferred Stock or Series D Convertible Redeemable
Preferred Stock, as the case may be, such funds will immediately be used to
redeem the balance of the shares which the Corporation has become obligated to
redeem on any Redemption Date, but which it has not redeemed.
(f) Three (3) days prior to any Redemption Date, the Corporation
shall deposit the cash Redemption Price (or portion thereof then due) of all
outstanding shares of the series of Preferred Stock designated for redemption
in the Redemption Notice, and not yet redeemed or converted, with a bank or
trust company having aggregate capital and surplus in excess of $50,000,000 as
a trust fund for the benefit of the respective holders of the shares designated
for redemption and not yet redeemed. Simultaneously, the Corporation shall
deposit irrevocable instruction and authority to such bank or trust company to
publish the notice of redemption thereof (or to complete such publication if
theretofore commenced) and to pay, on and after the date fixed for redemption,
the Redemption Price of the series of Preferred Stock to be redeemed to the
holders thereof upon surrender of their certificates. Any monies deposited by
the Corporation pursuant to this subsection (f) remaining unclaimed at the
expiration of six (6) months following the applicable Redemption Date, shall
thereafter be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors; PROVIDED, HOWEVER, that the Corporation's
obligations to pay the Redemption Price shall continue.
5. CONVERSION. The holders of the Series A Convertible Preferred
Stock, Series C Convertible Redeemable Preferred Stock and the Series D
Convertible Redeemable Preferred Stock (the "Convertible Preferred Stock")
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Subject to Section 5(d), each share of each
series of the Convertible Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of the Corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Investment Amount of such share of Preferred Stock to be
converted by the Conversion Price applicable to such share, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price per share shall be $1.11 per share of
Series A Convertible Preferred Stock, and $0.39 per share of Series C
Convertible Redeemable Preferred Stock or Series D Convertible Redeemable
Preferred Stock. The initial Conversion Price shall be subject to adjustment as
set forth in Section 5(d).
(b) AUTOMATIC CONVERSION. Each share of a series of Convertible
Preferred Stock shall automatically be converted without any action by a holder
of such share into shares of Common Stock at the then effective Conversion
Price for such share immediately upon (i) the consummation of a firm commitment
underwritten public offering registered under the Securities Act (x) based upon
a Corporation valuation exceeding Three Hundred Million Dollars ($300,000,000)
prior to the offering, (y) resulting in gross proceeds to the Company of at
least Thirty Million Dollars ($30,000,000), and (z) managed by a nationally
recognized underwriter reasonably acceptable to the holders of a majority of
the then outstanding shares of Series C Convertible Redeemable Preferred Stock
and the Series D Convertible Redeemable Preferred Stock, voting together as a
single class, or (ii) the affirmative vote of the holders of at least a
majority of the then outstanding Series C Convertible Redeemable Preferred
Stock and the Series D Convertible Redeemable Preferred Stock, voting together
as a single class.
(c) MECHANICS OF CONVERSION. Before any holder of Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock pursuant to Section 5(a) hereof, he or she shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Preferred Stock to be converted,
and shall give written notice to the Corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are
to be issued. In the case of an automatic conversion under Section 5(b) hereof,
in order for a holder of any series of Preferred Stock automatically converted
to receive certificates for the shares of Common Stock into which the holder's
Preferred Stock was converted, the holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Preferred Stock being converted and shall state
therein the name or names in which the certificate or certificates for shares
of Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock
to be converted, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. In the case of a conversion pursuant to Section
5(a), such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Preferred
Stock to be converted and, in the case of a conversion pursuant to Section
5(b), such conversion shall be deemed to have been made immediately prior to
the close of business on the date of the event triggering automatic conversion
under Section 5(b), and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such date.
(d) CONVERSION PRICE ADJUSTMENTS FOR CERTAIN DILUTIVE ISSUANCES,
SPLITS AND COMBINATIONS. The Conversion Price of the Convertible Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) ISSUANCE OF ADDITIONAL STOCK BELOW CONVERSION PRICE. If the
Corporation shall issue, after the date on which shares of Series C Convertible
Redeemable Preferred Stock or Series D Convertible Redeemable Preferred Stock
are first issued by the Corporation (the "Purchase Date"), any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series C Convertible Redeemable Preferred
Stock or the Series D Convertible Redeemable Preferred Stock, as applicable, in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for the Series C Convertible Redeemable Preferred Stock or the
Series D Convertible Redeemable Preferred Stock, as applicable, in effect
immediately prior to each such issuance shall automatically be adjusted as set
forth in this Section 5(d)(i), unless otherwise provided in this Section
5(d)(i).
(A) ADJUSTMENT FORMULA. Whenever the Conversion Price for
the Series C Convertible Redeemable Preferred Stock or the Series D Convertible
Redeemable Preferred Stock, as applicable, is adjusted pursuant to this Section
5(d)(i), the new Conversion Price for the Series C Convertible Redeemable
Preferred Stock or the Series D Convertible Redeemable Preferred Stock, as
applicable, shall be determined by multiplying the Conversion Price for the
Series C Convertible Redeemable Preferred Stock or the Series D Convertible
Redeemable Preferred Stock, as applicable, then in effect by a fraction, (x)
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (the "Outstanding Common") plus
the number of shares of Common Stock that the aggregate consideration received
by the Corporation for such issuance would purchase at such Conversion Price
for the Series C Convertible Redeemable Preferred Stock or the Series D
Convertible Redeemable Preferred Stock, as applicable; and (y) the denominator
of which shall be the number of shares of Outstanding Common plus the number of
shares of such Additional Stock. For purposes of the foregoing calculation, the
term "Outstanding Common" shall include shares of Common Stock deemed issued
pursuant to Section 5(d)(i)(E) below.
(B) DEFINITION OF "ADDITIONAL STOCK". For purposes of this
Section 5(d)(i), "Additional Stock" shall mean any shares of Common Stock or
capital stock, securities, options, warrants to purchase or other instruments
of similar effect convertible into or exchangeable for Common Stock issued (or
deemed to have been issued pursuant to Section 5(d)(i)(E)) by the Corporation
after the Purchase Date other than
(1) Common Stock issued pursuant to a transaction
described in Section 5(d)(ii) hereof,
(2) Shares of Common Stock and options therefor
issuable or issued upon exercise of options granted or to be granted under the
Corporation's 1999 Stock Option Plan adopted by the Company's Board of
Directors providing for the grant of options to purchase not more than
9,096,309 shares of Common Stock or any subsequent stock option plan approved
by the affirmative vote of the holders of at least a majority of the
outstanding shares of Series C Convertible Redeemable Preferred Stock,
(3) Shares of Common Stock and warrants or options
therefor issued to brokers, owners or operators of buildings that contract for
services from the Company pursuant to a grant or issuance (or a plan providing
for such grant or issuance) if and to the extent such grant or issuance (or the
plan providing for such grant or issuance) is approved by the affirmative vote
of the holders of at least a majority of the then outstanding Series C
Convertible Redeemable Preferred Stock, and
(4) Shares of Common Stock issued or issuable upon
conversion of the Convertible Preferred Stock.
(C) NO FRACTIONAL ADJUSTMENTS. No adjustment of the
Conversion Price for the Series C Convertible Redeemable Preferred Stock or the
Series D Convertible Redeemable Preferred Stock shall be made in an amount less
than one cent per share, provided that any adjustments which are not required
to be made by reason of this sentence shall be carried forward and shall be
either taken into account in any subsequent adjustment made prior to three
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of three years from the date of the event
giving rise to the adjustment being carried forward.
(D) DETERMINATION OF CONSIDERATION. In the case of the
issuance of Common Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the Corporation for
any underwriting or otherwise in connection with the issuance and sale thereof.
In the case of the issuance of Common Stock for a consideration in whole or in
part other than cash, the consideration other than cash shall be deemed to be
the fair value thereof as determined in good faith by the Board of Directors.
(E) DEEMED ISSUANCES OF COMMON STOCK. In the case of the
issuance (whether before, on or after the applicable Purchase Date) of options
to purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 5(d)(i):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
5(d)(i)(D)), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any such securities
and related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Section
5(d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to the Corporation
upon exercise of such options or rights or upon conversion of or in exchange
for such convertible or exchangeable securities, including, but not limited to,
a change resulting from the antidilution provisions thereof, the Conversion
Price for the Series C Convertible Redeemable Preferred Stock or the Series D
Convertible Redeemable Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price for the Series C Convertible Redeemable Preferred Stock or
the Series D Convertible Redeemable Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities or options or
rights related to such securities, shall be recomputed, but only to the extent
the Corporation did not pay any consideration in connection with such
expiration or termination, to reflect the issuance of only the number of shares
of Common Stock (and convertible or exchangeable securities which remain in
effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options
or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Sections 5(d)(i)(E)(1)
and 5(d)(i)(E)(2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 5(d)(i)(E)(3)
or 5(d)(i)(E)(4).
(F) NO INCREASED CONVERSION PRICE. Notwithstanding any
other provisions of this Section 5(d)(i), except to the limited extent provided
for in Sections 5(d)(i)(E)(3) and 5(d)(i)(E)(4), no adjustment of the
Conversion Price for the Series C Convertible Redeemable Preferred Stock or the
Series D Convertible Redeemable Preferred Stock pursuant to this Section
5(d)(i) shall have the effect of increasing the Conversion Price for the Series
C Convertible Redeemable Preferred Stock or the Series D Convertible Redeemable
Preferred Stock above (i) the Conversion Price for the Series C Convertible
Redeemable Preferred Stock or the Series D Convertible Redeemable Preferred
Stock in effect immediately prior to such adjustment or (ii) the initial
Conversion Price for the Series C Convertible Redeemable Preferred Stock or the
Series D Convertible Redeemable Preferred Stock specified in Section 5(a). No
readjustment pursuant to Sections 5(d)(i)(E)(3) and 5(d)(i)(E)(4) above shall
have the effect of increasing the Conversion Price for the Series C Convertible
Redeemable Preferred Stock or the Series D Convertible Redeemable Preferred
Stock to an amount which exceeds the Conversion Price for the Series C
Convertible Redeemable Preferred Stock or the Series D Convertible Redeemable
Preferred Stock on the original adjustment date.
(ii) STOCK SPLITS AND DIVIDENDS. In the event the Corporation
should at any time or from time to time after the date hereof fix a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of each series of Convertible Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents
with the number of shares issuable with respect to Common Stock Equivalents
determined from time to time in the manner provided for deemed issuances in
Section 5(d)(i)(E).
(iii) REVERSE STOCK SPLITS. If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for each series of
Convertible Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall declare
a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 5(d)(i), then, in
each such case for the purpose of this Section 5(e), the holders of each series
of Convertible Preferred Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of shares
of Common Stock of the Corporation into which their shares of such series of
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there
shall be a recapitalization, reclassification, combination, subdivision,
merger, transfer, exchange, sale or other disposition of assets, stock split,
stock dividend, reverse stock split or other distribution in respect of the
Common Stock (other than as provided for elsewhere in this Section 5 or in
Section 3) provision shall be made so that the holders of each series of
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of such series of Preferred Stock the number of shares of stock or
other securities or property of the Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
recapitalization as though they were the holders of the number of shares of
Common Stock of the Corporation into which their shares of such series of
Preferred Stock are convertible as of the record date fixed for such
transaction. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of any series of Convertible Preferred Stock after the
recapitalization to the end that the provisions of this Section 5 (including
adjustment of the Conversion Prices then in effect and the number of shares
purchasable upon conversion of such Series of Preferred Stock) shall be
applicable after that event and be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed under this
Section 5 by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Convertible Preferred Stock against
impairment and dilution consistent with the terms hereof.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of
any share or shares of Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock of all series the holder
is at the time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of any series of Convertible Preferred Stock pursuant to
this Section 5, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such series of Convertible Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (A) such adjustment and readjustment, (B) the Conversion Price for each
series of the Convertible Preferred Stock at the time in effect, and (C) the
number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of a share of each
series of the Convertible Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of each series of Convertible Preferred
Stock, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of shares of Convertible Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Convertible Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of
Convertible Preferred Stock, in addition to such other remedies as shall be
available to the holders of Convertible Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this Section
5 to be given to the holders of shares of Convertible Preferred Stock shall be
in writing and shall be mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand, by messenger or by facsimile
(subsequently confirmed by telephone), addressed or transmitted to each holder
of record at his or her address appearing on the books of the Corporation. Each
such notice or other communication shall be treated as effective or having been
given when delivered if delivered personally, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and postage prepaid as aforesaid.
(l) REGISTRATIONS AND APPROVALS. If any shares of Common Stock
which would be issuable upon conversion of a series of Convertible Preferred
Stock hereunder require registration with or approval of any governmental
authority before such shares may be issued upon conversion, the Corporation
will in good faith and as expeditiously as possible cause such shares to be
duly registered or approved, as the case may be. The Corporation will use
commercially reasonable efforts to list the shares of (or depository shares
representing fractional interests in) Common Stock required to be delivered
upon conversion of shares of such series of Convertible Preferred Stock prior
to such delivery upon the principal national securities exchange or quotation
system upon which the outstanding Common Stock is listed or eligible for
trading at the time of such delivery, if any.
(m) TAXES. The Corporation shall pay any and all issue or other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Convertible Preferred Stock. The
Corporation shall not, however, be required to pay any tax which is payable in
respect of any transfer involved in the issue or delivery of Common Stock in a
name other than that in which the shares of Convertible Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person or entity requesting such issue has paid to the
Corporation the amount of such tax, or has established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
6. VOTING RIGHTS. The holders of Preferred Stock shall have voting
rights as follows:
(a) IN GENERAL. The holder of each share of Series B Redeemable
Preferred Stock or Series D Convertible Redeemable Preferred Stock will have
the right to one vote for such share of Preferred Stock and shall only have the
right to vote on those matters expressly provided for elsewhere in this
Certificate of Designation or in the Company's Certificate of Incorporation or
Bylaws, or as provided in the Delaware General Corporation Law. The holder of
each share of Series A Convertible Preferred Stock and Series C Convertible
Redeemable Preferred Stock shall have the right to one vote for (x) each such
share of Preferred Stock on those matters expressly provided for elsewhere in
this Certificate of Designation or in the Company's Certificate of
Incorporation or Bylaws, or as provided in the Delaware General Corporation Law
and (y) each share of Common Stock into which such share of Preferred Stock
could then be converted, and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any other
provision hereof, to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation, and shall be entitled to vote, together with holders
of Common Stock as a single class, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of such
series of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
7. PROTECTIVE PROVISIONS.
(a) So long as any shares of Series C Convertible Redeemable
Preferred Stock or Series D Convertible Redeemable Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series C Convertible Redeemable
Preferred Stock and Series D Convertible Redeemable Preferred Stock voting
together as a single class:
(i) issue equity securities of any kind in the Corporation or
any of its subsidiaries or options, warrants or other rights to purchase or
other securities exchangeable for or convertible into equity securities of the
Corporation or any of its subsidiaries other than equity securities of the
Corporation or other securities exchangeable for or convertible into equity
securities of the Corporation or any other similar rights or securities which
if issued, exchanged, converted or granted (after obtaining any relevant
corporate or shareholder approval thereof), would not constitute "Additional
Stock" pursuant to Sections 5(d)(i)(B)(1) through (4) hereof;
(ii) incur any indebtedness for borrowed money which, when
combined with all other then outstanding indebtedness for borrowed money of the
Corporation, exceeds $5,000,000 in aggregate principal amount;
(iii) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of capital
stock of the Corporation other than a redemption of shares of Preferred Stock
in accordance with the terms of the Preferred Stock; PROVIDED, HOWEVER, that
this restriction shall not apply to the repurchase of up to $250,000 in the
aggregate of Common Stock from employees, officers, directors, consultants or
other persons performing services for the Corporation or any subsidiary
pursuant to agreements under which the Corporation has the option to repurchase
such shares upon the occurrence of certain events, such as the termination of
employment;
(iv) pay any dividends or make any distributions with respect
to the capital stock of the Corporation;
(v) increase or decrease (except pursuant to Section 8 hereof)
the total number of authorized shares of Series A Convertible Preferred Stock
or Series B Redeemable Preferred Stock;
(vi) sell, convey or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect any
other transaction or series of related transactions in which more than 50% of
the Common Stock is disposed of;
(vii) dissolve, liquidate or wind up the Corporation;
(viii) change the number of authorized members of the Board of
Directors of the Corporation to a number other than seven;
(ix) create any subsidiary that is not wholly owned, directly
or indirectly, by the Corporation or permit any subsidiary of the Corporation
to issue any membership or equity interests other than to the Corporation or
any subsidiary of the Corporation; or
(x) amend the Bylaws or Certificate of Incorporation of the
Corporation, other than an amendment to the Certificate of Incorporation
pursuant to Section 8 hereof to reflect a reduction in the Corporation's
authorized capital stock.
As used in Section 7(a)(ii) above, "indebtedness for borrowed money"
means with respect to the Corporation or any of its subsidiaries, all
indebtedness in respect of money borrowed, including without limitation all
capital leases and the deferred purchase price of any property or asset,
evidenced by a promissory note, bond, debenture or similar written obligation
for the payment of money (including conditional sales or similar title
retention agreements), other than trade payables incurred in the ordinary
course of business.
(b) So long as any shares of Series A Convertible Preferred Stock
are outstanding, the Corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series A Convertible Preferred
Stock:
(i) alter or change, or take any action to alter or change, the
rights, preferences or privileges of the shares of Series A Convertible
Preferred Stock so as to affect adversely such shares;
(ii) increase or decrease (except pursuant to Section 8 hereof)
the total number of authorized shares of Series A Convertible Preferred Stock;
or
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Convertible Preferred Stock with respect to voting,
dividends, distributions, redemption or upon liquidation (other than the shares
of Series B Redeemable Preferred Stock, Series C Convertible Redeemable
Preferred Stock and Series D Convertible Redeemable Preferred Stock authorized
for issuance hereunder).
(c) So long as any shares of Series B Redeemable Preferred Stock
are outstanding, the Corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Redeemable Preferred Stock:
(i) alter or change, or take any action to alter or change, the
rights, preferences or privileges of the shares of Series B Redeemable
Preferred Stock so as to affect adversely such shares;
(ii) increase or decrease (except pursuant to Section 8 hereof)
the total number of authorized shares of Series B Redeemable Preferred Stock;
or
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series B Redeemable Preferred Stock with respect to voting,
dividends, distributions, redemption or upon liquidation (other than shares of
Series C Convertible Redeemable Preferred Stock and the Series D Convertible
Redeemable Preferred Stock authorized for issuance hereunder).
(d) So long as any shares of Series C Convertible Redeemable
Preferred Stock or Series D Convertible Redeemable Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series C Convertible Redeemable
Preferred Stock and the Series D Convertible Redeemable Preferred Stock, voting
together as a single class:
(i) alter or change, or take any action to alter or change, the
rights, preferences or privileges of the shares of Series C Convertible
Redeemable Preferred Stock or Series D Convertible Redeemable Preferred Stock
so as to affect adversely such shares;
(ii) increase or decrease (except pursuant to Section 8 hereof)
the total number of authorized shares of Series C Convertible Redeemable
Preferred Stock or Series D Convertible redeemable Preferred Stock; or
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series C Convertible Redeemable Preferred Stock or Series D
Convertible Redeemable Preferred Stock with respect to voting, dividends,
distributions, redemption or upon liquidation (other than shares of Series B
Redeemable Preferred Stock authorized for issuance hereunder).
8. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares of
Preferred Stock shall be redeemed pursuant to Section 4 hereof or otherwise or
shares of Convertible Preferred Stock shall be converted pursuant to Section 5
hereof or otherwise, the shares so redeemed or converted shall be canceled and
shall not be issuable by the Corporation. The Certificate of Incorporation of
the Corporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized capital stock.
* * *
<PAGE>
The foregoing Certificate of Designation has been duly adopted by the
Corporation's Board of Directors and stockholders in accordance with the
applicable provisions of Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware.
Executed at New York, New York, on April ___, 1999.
Exhibit 10.1
ONSITE ACCESS, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is entered into as
of April 16, 1999, by and among OnSite Access, Inc., a Delaware corporation
(the "COMPANY"), the individuals and entities listed on Exhibit A attached
hereto (collectively, the "INVESTORS") and the individuals listed on Exhibit B
attached hereto (collectively, "MANAGEMENT").
AGREEMENT
In consideration of the mutual promises and covenants hereinafter set
forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the terms
defined in the preamble to this Agreement shall have the meanings given therein
and the following terms shall have the following respective meanings:
"AFFILIATE" shall mean as to any person or entity, a person or entity
that directly or indirectly though one or more intermediaries, controls, or is
controlled by, or is under common control with, such person or entity.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"COMMON HOLDER" shall mean any person (x) who holds of record
Registrable Common Securities and (y) to whom the registration rights conferred
by this Agreement have been granted herein or transferred thereto in compliance
with Section 11 hereof.
"COMMON STOCK" shall mean all shares of Common Stock of the Company.
"DISQUALIFIED PREFERRED SECURITIES" means shares of Preferred Stock
with respect to which there shall then exist a loss of rights as described in
clause (ii) of the first sentence of Section 2.4(a) of the Preferred Stock
Purchase Agreement or with respect to which there shall then exist a Rights
Forfeiture as defined in Section 2.4(c) of the Preferred Stock Purchase
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor Federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"HOLDER" shall mean any Common Holder or Preferred Holder.
"INITIATING COMMON HOLDERS" shall mean any Common Holder or Common
Holders of twelve percent (12%) or more of the then outstanding Registrable
Common Securities assuming full conversion into Common Stock of all then
outstanding Series A Preferred.
"INITIATING PREFERRED HOLDERS" shall mean any Preferred Holder or
Preferred Holders of twenty percent (20%) or more of the then outstanding
Registrable Preferred Securities (assuming full conversion of the Series C
Preferred and Series D Preferred into Common Stock) excluding Disqualified
Preferred Securities.
"IPO" shall mean an underwritten public offering pursuant to an
effective registration statement under the Securities Act, covering the initial
offer and sale of Common Stock for the account of the Company to the public (i)
based upon a Company valuation exceeding Three Hundred Million Dollars
($300,000,000) prior to the offering, (ii) resulting in gross proceeds to the
Company of at least Thirty Million Dollars ($30,000,000), and (iii) managed by
a nationally recognized underwriter reasonably acceptable to the Investors.
"PREFERRED HOLDER" shall mean any person (x) who holds of record
Registrable Preferred Securities or holds shares of Series C Preferred and (y)
to whom the registration rights conferred by this Agreement have been granted
herein or transferred thereto in compliance with Section 11 hereof.
"PREFERRED STOCK" shall mean the Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred.
"REGISTRABLE COMMON SECURITIES" shall mean (i) all shares of Common
Stock held by parties to this Agreement on the First Closing Date (as defined
in the Stock Purchase Agreement), excluding shares of Common Stock held by
Management, (ii) all shares of Common Stock of the Company issued or issuable
upon conversion of the Series A Preferred and (iii) all shares of Common Stock
issued as a dividend or other distribution, or issuable upon exercise of a
warrant, option or other right issued as a dividend or distribution, or upon
conversion of any convertible security issued as a dividend or other
distribution, in each case with respect to or in exchange for or in replacement
of the shares of Common Stock described in the foregoing clauses (i) and (ii).
"REGISTRABLE PREFERRED SECURITIES" shall mean (i) all shares of Common
Stock issued or issuable upon conversion of the Series C Preferred and Series D
Preferred and (ii) all shares of Common Stock issued as a dividend or other
distribution, or issuable upon exercise of a warrant, option or other right
issued as a dividend or distribution, or upon conversion of any convertible
security issued as a dividend or other distribution, in each case with respect
to or in exchange for or in replacement of the Series B Preferred, the Series C
Preferred or Series D Preferred.
"REGISTRABLE SECURITIES" shall mean Registrable Common Securities or
Registrable Preferred Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in compliance with Sections 3, 4 and 6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company which shall include any fees and
disbursements for legal services provided by counsel for the Company on behalf
of the Holders, blue sky fees and expenses for state qualifications or
registrations, and the expense of any audit of the Company's fiscal year-end
financial statements incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and regulations thereunder,
all as the same shall be in effect from time to time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and expense allowances applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder (other than
the fees and disbursements of the Company's counsel included in Registration
Expenses, and the fees of one special counsel to the Common Holders and one
special counsel to the Preferred Holders, which shall be borne by the Company).
"SERIES A PREFERRED" shall mean shares of Series A Convertible
Preferred Stock of the Company.
"SERIES B PREFERRED" shall mean shares of Series B Redeemable
Preferred Stock of the Company.
"SERIES C PREFERRED" shall mean shares of Series C Convertible
Redeemable Preferred Stock of the Company.
"SERIES D PREFERRED" shall mean shares of Series D Convertible
Redeemable Preferred Stock of the Company.
"SHARES" shall mean all Registrable Securities.
"STOCK OPTION PLAN" shall mean the Company's 1999 Stock Option Plan to
be approved and adopted by the Company's Board of Directors providing for the
grant of options to purchase not more than 9,096,309 shares of Common Stock in
substantially the form attached hereto as Exhibit C or any subsequent stock
option plan approved by Holders of a majority of the outstanding Series C
Preferred.
2. Restrictive Legend. Each certificate representing the Common Stock
or the Preferred Stock held by any Investor Holder and any other securities
issued in respect of the foregoing upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable law or other agreement):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO, AND MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH, THAT CERTAIN INVESTOR RIGHTS
AGREEMENT AMONG THE COMPANY, THE HOLDER OF THESE
SECURITIES AND CERTAIN OTHER HOLDERS OF THE
COMPANY'S STOCK, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
3. Requested Registrations.
(a) Request for Registration. If at any time beginning at the
earlier of (i) six months after the closing of a public offering by the Company
of its Common Stock pursuant to a registration statement under the Securities
Act (excluding a registration relating to warrants, or to securities issuable
in respect of warrants, which warrants are sold in connection with an offering
of debt securities) and (ii) the third anniversary of the date of this
Agreement, the Company shall receive from Initiating Common Holders or
Initiating Preferred Holders a written request that the Company file a
registration statement under the Securities Act to effect a registration of
some or all of the Registrable Common Securities or Registrable Preferred
Securities held by such Initiating Common Holders or Initiating Preferred
Holders, the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) diligently use its commercially reasonable efforts to
effect, as soon as practicable, such registration, and in any event use its
commercially reasonable efforts to effect such registration within 90 days of
the receipt of the request from Initiating Common Holders or Initiating
Preferred Holders, as the case may be, as may be so requested and as would
permit or facilitate the sale and distribution of the Registrable Common
Securities or Registrable Preferred Securities requested to be registered by
the Initiating Common Holders or Initiating Preferred Holders and by any Common
Holder or Preferred Holder joining with the Initiating Common Holder or
Initiating Preferred Holder, respectively, in such request as are specified in
a written request given within 30 days after receipt of such written notice
from the Company. In the event that holders of a majority of the outstanding
Registrable Common Securities or Registrable Preferred Securities (assuming
full conversion into Common Stock of all Series C Preferred and Series D
Preferred) requesting registration elect to limit the number of Registrable
Common Securities or Registrable Preferred Securities to be registered, the
number of Registrable Common Securities or Registrable Preferred Securities
that are included in the registration shall be allocated among all Holders of
Registrable Common Securities or Registrable Preferred Securities requesting
registration in proportion, as nearly as practicable, to the respective amounts
of Registrable Common Securities or Registrable Preferred Securities held by
each such Holder at the time of the filing of the registration statement.
The Company shall not be obligated to effect, or to take any action to
effect, any registration of Registrable Preferred Securities pursuant to this
Section 3 after the Company has effected three such registrations pursuant to
this Section 3 and such registrations have been declared or ordered effective
by the Commission and have remained effective for the periods required under
Section 7(a) without giving effect to the provisos of such Section.
The Company shall not effect or take any action to effect, any
registration of Registrable Common Securities pursuant to this Section 3 until
(x) the Company has effected three registrations of Registrable Preferred
Securities pursuant to this Section 3 and such registrations have been declared
or ordered effective by the Commission and have remained effective for the
periods required under Section 7(a) without giving effect to the provisos of
such Section or (y) all Registrable Preferred Securities held by all Preferred
Holders, if converted into Common Stock, would constitute less than two percent
(2%) of the Company's outstanding Common Stock. The Company shall not be
obligated to effect, or to take any action to effect, any registration of
Registrable Common Securities pursuant to this Section 3 after the Company has
effected two such registrations pursuant to this Section 3 and such
registrations have been declared or ordered effective by the Commission and
have remained effective for the periods required under Section 7(a) without
giving effect to the provisos of such Section.
(b) Underwriting. If the Initiating Common Holders or Initiating
Preferred Holders intend to distribute the Registrable Common Securities or
Registrable Preferred Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 3(a) and the Company shall include such information in the
written notice referred to in Section 3(a)(i) above. The Company, together with
all Holders of Registrable Common Securities or Registrable Preferred
Securities proposing to distribute their securities through such underwriting,
shall enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by a majority in interest of the
Initiating Common Holders or Initiating Preferred Holders, as the case may be,
which underwriter(s) shall be reasonably acceptable to the Company; PROVIDED,
HOWEVER, that no Holder shall be required to make any representations,
warranties or indemnities except as they relate to such Holder's ownership of
shares and authority to enter into the underwriting agreement and to such
Holder's intended method of distribution, and the liability of such Holder
shall be limited to an amount equal to the net proceeds from the offering
received by such Holder.
Notwithstanding any other provision of this Section 3, if the managing
underwriter(s) have informed the Initiating Common Holders or Initiating
Preferred Holders in writing that in such underwriter's or underwriters' good
faith opinion the total number of Registrable Common Securities or Registrable
Preferred Securities which the Holders intend to include in such offering is
such as to affect adversely the success of such offering, including the price
at which such securities can be sold, then the Initiating Common Holders or
Initiating Preferred Holders shall so advise all Holders intending to include
Registrable Common Securities or Registrable Preferred Securities in the
underwritten offering and the number of shares of Registrable Common Securities
or Registrable Preferred Securities that may be included in the underwritten
offering shall be allocated among all Holders requesting registration thereof
in proportion (as nearly as practicable) to the amount of Registrable Common
Securities or Registrable Preferred Securities, as the case may be, owned by
each such Holder, PROVIDED, HOWEVER, that the number of shares of Registrable
Common Securities or Registrable Preferred Securities to be included in the
underwritten offering by the Initiating Common Holders or the Initiating
Preferred Holders, as the case may be, shall not be reduced unless all other
securities are excluded entirely from the offering.
If the Company, any Holder or any other person registering securities
in the registration in its sole discretion disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the underwriter and the Initiating Common Holders or the Initiating Preferred
Holders, as the case may be. The securities so withdrawn shall also be
withdrawn from registration.
4. Piggyback Registration.
(a) If, at any time, the Company shall determine to register any of
its equity securities either for its own account or the account of a security
holder or holders (other than Holders of Registrable Preferred Securities),
other than (i) a registration relating solely to employee benefit plans, or
(ii) a registration relating solely to a Commission Rule 145 transaction
involving the acquisition of a business (but not a Rule 145 transaction
designed solely to exchange restricted securities for registered securities in
a manner that is the functional equivalent of registration rights), or (iii) a
registration relating to warrants, or to securities issuable in respect of
warrants, which warrants are sold in connection with an offering of debt
securities (each, an "EXCEPTED REGISTRATION"), the Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request or requests made by any Holder within 30 days after receipt of the
written notice from the Company described in clause (i) above, except as set
forth in Section 4(b) below. Such written request may specify all or a part of
a Holder's Registrable Securities.
(b) If a registration statement under which the Company gives
notice under Section 4(a)(i) is for an underwritten offering, and if the
managing underwriter or underwriters of such underwritten offering have
informed the Company and the Holders of Registrable Securities requesting
inclusion in such offering, in writing, that in such underwriter's or
underwriters' good faith opinion the total number of securities which the
Company, such Holders and any other persons desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the number of securities which it is so advised should be included in such
registration which shall be allocated as follows: (x) in cases involving the
registration for sale of securities for the Company's own account only,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register
(subject to reduction if applicable, as provided in the following clause
second), (ii) second, the Registrable Preferred Securities which have been
requested to be included in such registration by the Holders of Registrable
Preferred Securities pro rata based upon the aggregate amount of Registrable
Preferred Securities then held by such Holder (PROVIDED, HOWEVER, that other
than in connection with the registration of Common Stock in an IPO, the number
of Registrable Preferred Securities included in such registration shall not be
reduced to less than 30% of the total number of securities included in such
registration and the number of securities which the Company proposes to
register in such offering shall be reduced to the extent necessary to assure
that the number of Registrable Preferred Securities included in such
registration shall not be reduced to less than that amount), (iii) third,
provided that no securities sought to be included by the Company and the
Holders of Registrable Preferred Securities have been excluded from such
registration, the securities of other persons entitled to exercise "piggyback"
registration rights pursuant to contractual commitments of the Company,
including Holders of Registrable Common Securities (pro rata based on the
respective numbers of securities sought to be registered by such persons); (y)
in cases involving the registration for sale of securities for the account of a
Holder of Registrable Preferred Securities pursuant to Section 3 hereof,
securities shall be registered in such offering in the following order of
priority: (i) first, the Registrable Preferred Securities which have been
requested to be included in such registration by the Holders of Registrable
Preferred Securities pro rata based upon the aggregate amount of Registrable
Preferred Securities then held by such Holder, (ii) second, provided that no
securities sought to be included by the Holders of Registrable Preferred
Securities have been excluded from such registration, the securities of other
persons entitled to exercise "piggyback" registration rights pursuant to
contractual commitments of the Company, including Holders of Registrable Common
Securities (pro rata based on the respective numbers of securities sought to be
registered by such persons); and (z) in cases not involving the registration
for sale of securities for the Company's own account only or for the account of
any Holder of Registrable Preferred Securities, which may include the
registration for sale of securities by Holders of Registrable Common
Securities, securities shall be registered in such offering in the following
order of priority: (i) first, the securities of any person whose exercise of a
"demand" registration right pursuant to a contractual commitment of the Company
is the basis for the registration, (ii) second, provided that no securities of
such person referred to in the immediately preceding clause (i) have been
excluded from such registration, the securities which have been requested to be
included in such registration by the Holders of Registrable Preferred
Securities pro rata based upon the aggregate amount of Registrable Preferred
Securities held by such Holder, (iii) third, provided that no securities of
such persons referred to in the immediately preceding clauses (i) or (ii) have
been excluded from such registration, the securities which have been requested
to be included in such registration by the Holders of Registrable Common
Securities, pro rata based upon the aggregate amount of Registrable Common
Securities held by such Holder, (iv) fourth, provided that no securities of
such person referred to in the immediately preceding clauses (i), (ii) or (iii)
or of the Holders of Registrable Securities have been excluded from such
registration, securities of other persons entitled to exercise "piggyback"
registration rights pursuant to contractual commitments (pro rata based on the
respective numbers of securities sought to be registered by such persons) and
(v) fifth, provided that no securities of any other person have been excluded
from such registration, the securities which the Company proposes to register.
If, as a result of the provisions of this Section 4(b), any
Holder of Registrable Securities shall not be entitled to include all
Registrable Securities in a "piggyback" registration that such Holder of
Registrable Securities has requested to be included, such Holder of Registrable
Securities may elect to withdraw his request to include Registrable Securities
in such registration.
5. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement and all underwriting discounts, selling
commissions and expense allowances applicable to the sale of any securities by
the Company for its own account in any registration. All Selling Expenses shall
be borne by the Holders, if any, whose securities are included in such
registration pro rata on the basis of the number of their Registrable
Securities so registered, PROVIDED, HOWEVER, that if in such registration, the
Company pays any expenses included in the defined term "Selling Expenses" for
other security holders, the Company will pay such expenses for the Holders.
6. Registration on Form S-3.
(a) The Company shall use its commercially reasonable efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms and remain so qualified following the closing of the first registration
of any securities of the Company under the Securities Act. So long as the
Company is qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of
Registrable Preferred Securities and, after the Company has effected three
registrations of Registrable Preferred Securities pursuant to Section 3 hereof
and such registrations have been declared or ordered effective by the
Commission and have remained effective for the periods required under Section
7(a) (without giving effect to the provisos of such Section), or all
Registrable Preferred Securities held by all Preferred Holders, if converted
into Common Stock, would constitute less than two percent (2%) of the Company's
outstanding Common Stock, the Holders of Registrable Common Securities, shall
have unlimited rights to request from time to time registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Preferred Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders) PROVIDED, HOWEVER, that
in each case the required registration (1) is reasonably expected to have
aggregate gross proceeds exceeding $2,000,000 or (ii) includes all shares held
by the Holder or Holders requesting registration.
7. Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder
who is entitled to registration rights hereunder advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
(a) Except as otherwise provided herein, keep such registration
effective for a period of six months (which period shall be extended by any
periods during which effectiveness may be suspended as provided in Section 7(m)
below) or until Holders including shares in such registration, if any, have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; PROVIDED, HOWEVER, that in the case of any
registration of Registrable Preferred Securities on Form S-3 that are intended
to be offered on a continuous or delayed basis, such six-month period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold; PROVIDED, FURTHER, that after such six
month period in case of a Registration Statement on Form S-3, the Company may
suspend the use of such registration statement from time to time if the Company
furnishes to such Holders a certificate signed by the President or Chief
Executive Officer of the Company stating that the negotiation or consummation
of a transaction by the Company is pending or an event has occurred, which
negotiation, consummation or event in the reasonable judgment of the Company
would require additional disclosure by the Company in a registration statement
of material information which the Company (in the good faith judgment of its
Board of Directors) has a bona fide business purpose for keeping confidential
and the nondisclosure of which in the registration statement would cause the
registration statement to fail to comply with applicable disclosure
requirements;
(b) Prepare and file with the Commission such amendments and
supplements, including, without limitation, post-effective amendments, to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of securities covered by such
registration statement and, subject to Section 7(m)(i), prepare and file with
all necessary documents in order to qualify the sale of such Registrable
Securities under the blue sky law or other state securities laws for each state
in the United States requested by such Holders or the underwriter;
(c) Furnish such reasonable number of prospectuses and other
documents incident thereto, including supplements and amendments, as a Holder
may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement 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, as
then in effect, includes an untrue statement of a material fact or omits to
state a fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing (in which case each person who can sell under such registration
statement will immediately suspend use of such registration statement until it
is supplemented or amended as provided herein), and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchaser of such shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in the light of the circumstances then existing;
(e) Use its commercially reasonable efforts to cause all such
Registrable Securities to be listed on each securities exchange or interdealer
quotation system on which the same securities issued by the Company are then
listed;
(f) Provide a transfer agent and registrar for all such Registrable
Securities and a CUSIP number for all such Registrable Securities not later
than the effective date of such registration;
(g) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney or accountant retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers and
directors to supply all information reasonably requested by any such seller,
underwriter, attorney or accountant in connection with such registration
statement; PROVIDED, HOWEVER, that such seller, underwriter, attorney or
accountant shall agree to hold in confidence and trust all information so
provided;
(h) Furnish to each selling Holder a signed counterpart, addressed
to the selling Holder, of (1) an opinion of counsel for the Company, dated the
effective date of the registration statement, and (2) "comfort" letters signed
by the Company's independent public accountants who have examined and reported
on the Company's financial statements included in the registration statement,
to the extent permitted by the standards of the AICPA or other relevant
authorities, covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in the case
of the accountants' "comfort" letters, with respect to events subsequent to the
date of the financial statements), in each case as are customarily covered in
opinions of issuer's counsel and in accountants' "comfort" letters delivered to
the underwriters in underwritten public offerings of securities;
(i) Furnish to each selling Holder a copy of all documents filed
with and all correspondence from or to the Commission in connection with any
such offering other than nonsubstantive cover letters and the like;
(j) Otherwise use its commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act;
(k) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Sections 3 or 4 hereof, the Company
will enter into any underwriting agreement reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary indemnification
and contribution provisions;
(l) From and after the date of this Agreement, the Company shall
not, without the prior written consent of a majority in interest of the Holders
(assuming full conversion into Common Stock of all Series C Preferred and
Series D Preferred), enter into any agreement with any holder or prospective
holder of any securities of the Company giving such holder or prospective
holder rights that are superior to, or which adversely affect or are
inconsistent with, the rights given to the holders of Registrable Securities
hereunder to require the Company to initiate registration of any securities of
the Company or to require the Company, upon any registration of any of its
securities, to include, among the securities that the Company is then
registering, securities owned by such holder; and
(m) Notwithstanding the foregoing, the Company shall not be
obligated to take any action:
(i) pursuant to Sections 3, 4 or 6 of this Agreement (A) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act, (B) in
any non-U.S. jurisdiction in which the Company would be required to qualify as
a foreign corporation eligible to do business in such jurisdiction, if the
Company shall not then be so qualified in that jurisdiction or (C) in any
non-U.S. jurisdiction that would subject the Company to taxation where it would
not otherwise be subject to tax;
(ii) pursuant to Section 3 or 6 of this Agreement if the
Company, within ten (10) days of the receipt of the request of the Initiating
Common Holders or Initiating Preferred Holders, gives notice of its bona fide
intention to file a registration statement with the Commission within sixty
(60) days of receipt of such request (other than an Excepted Registration);
(iii) pursuant to Section 3 or 6 of this Agreement with respect
to any request for registration made by Initiating Common Holders or Initiating
Preferred Holders during the period starting with the date of filing of, and
ending on the date 90 days immediately following the effective date of, any
registration statement pertaining to equity securities of the Company (other
than an Excepted Registration), provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective; or
(iv) pursuant to Section 3 or 6 of this Agreement if the
Company shall furnish to such Holder or Holders a certificate signed by the
President or Chief Executive Officer of the Company stating that the
negotiation or consummation of a transaction by the Company is pending or an
event has occurred, which negotiation, consummation or event would require
additional disclosure by the Company in the registration statement of material
information which the Company (in the good faith judgment of its Board of
Directors) has a bona fide business purpose for keeping confidential and the
nondisclosure of which in the registration statement in the reasonable judgment
of the Company would cause the registration statement to fail to comply with
applicable disclosure requirements, in which case the Company's obligation
hereunder to file a registration statement, pursue its effectiveness or
maintain its effectiveness, shall be deferred for a period or periods not to
exceed ninety (90) consecutive days or a total of one hundred and twenty (120)
days in any 12-month period, PROVIDED, HOWEVER, that the Company may not
exercise this deferral right more than twice in any 12-month period, AND
PROVIDED, FURTHER, that the Company may suspend the use of any effective
registration statement filed pursuant to Section 3, 4 or 6 of this Agreement
during any period the Company's obligation to file a registration statement or
to pursue or maintain its effectiveness is deferred as provided herein; or
(v) pursuant to Section 3 or 6 of this Agreement if the Holder
requires an audit of the Company's financial statements in connection with the
registration of the Registrable Securities other than any audit required by the
Securities Act or any rules or regulations thereunder.
8. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors, agents, employees and partners, and each person controlling such
Holder, with respect to each registration, qualification or compliance effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document prepared by
the Company (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such Holder, each of its officers,
directors, agents, employees and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement (or alleged untrue
statement) or omission (or alleged omissions) based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder whose Registrable Securities are included in any
registration, qualification or compliance effected pursuant to this Agreement
will indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such Holder and each of their officers, directors and partners, and each
person controlling such Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such Holders, directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses as they are reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein; PROVIDED,
HOWEVER, that the obligations of a Holder hereunder shall be limited to an
amount equal to the net proceeds to such Holder from shares sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at the Indemnifying Party's expense; and
provided further that if any Indemnified Party reasonably concludes that there
may be one or more legal defenses available to it that are not available to the
Indemnifying Party, or that such claim or litigation involves or could have an
effect on matters beyond the scope of this Agreement, then the Indemnified
Party may retain its own counsel at the expense of the Indemnifying Party; and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement unless and only to the extent that such failure to give
notice results in material prejudice to the Indemnifying Party. In no event
shall an Indemnifying Party be liable for fees and expenses of more than one
counsel (in addition to one local counsel for each relevant jurisdiction)
separate from their own counsel for all Indemnified Parties in connection with
any one action or separate but similar or related actions. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 8 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding anything to the contrary in this
Section 8, no Indemnifying Party shall be required, pursuant to this Section 8,
to contribute any amount in excess of the net proceeds received by such
Indemnifying Party from the sale of securities in the offering to which the
losses, claims, damages, liabilities or expenses of the Indemnified Party
relate.
9. Information by Holder. Each Holder of Registrable Securities to be
included in a registration referred to in this agreement shall furnish in
writing to the Company such information regarding such Holder, the securities
to be offered and sold and the intended plan of distribution of the securities
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement and shall promptly advise the Company
in writing of any material changes to such information while the registration
is in effect. If any registration statement or comparable statement under the
Securities Act refers to a Preferred Holder or any of its affiliates, by name
or otherwise, as the holder of any securities of the Company then, unless
counsel to the Company advises the Company that the Securities Act requires
that such reference be included in any such statement, each such Preferred
Holder shall have the right to require the deletion of such reference to itself
and its affiliates.
10. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) Use commercially reasonable efforts to make and keep public
information available, as those terms are understood and defined in Rule 144
under the Securities Act, at all times from and after the effective date of the
first registration under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) Use its commercially reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(c) So long as a Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
as an Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investor to sell any such securities
without registration.
11. Transfer of Rights; Termination of Rights. The rights to cause the
Company to register a Holder's securities granted by the Company under this
Agreement may only be transferred or assigned by a Holder to a transferee of
some or all of such Holder's Registrable Securities, provided that the Company
is given written notice prior to the time that such right is exercised, stating
the name and address of said transferee or assignee and identifying the
Registrable Securities with respect to which such registration rights are being
transferred or assigned, and provided further that the transferee or assignee
of such rights assumes in an agreement reasonably acceptable to the Company the
obligations of the Holder under this Agreement.
12. "Lock-Up" Agreement. Each Holder agrees, if requested by the
Company and an underwriter of Common Stock of the Company in connection with
the initial underwritten public offering of the Company's Common Stock, not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company or request registration thereof held by such Holder during a
period of time determined by the Company and its underwriters (not to exceed
180 days) following the date the related registration statement under the
Securities Act relating to such initial public offering becomes effective,
provided that all officers and directors of the Company (other than designees
of such Holders) who then hold Common Stock (or other securities) of the
Company enter into similar agreements, and provided further that, in no event,
shall a Holder be prohibited from transferring or selling Common Stock or other
securities of the Company to an affiliate of such Holder.
Such agreement shall be in writing in a form reasonably satisfactory
to the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the Shares (or securities) subject to the
foregoing restriction until the end of said period. The Company agrees that any
release of shares subject to the foregoing lock-up agreement shall be made on a
pro rata basis among all Holders based upon their percentage ownership of the
outstanding shares of Common Stock of the Company.
13. Preemptive Rights.
(a) New Issuances. The Company hereby agrees not to issue or sell
any "NEW SECURITIES" (as defined in this Section 13) in a transaction in which
the Company receives any consideration other than cash without the prior
written consent of holders of a majority of the outstanding shares of Series C
Preferred. The Company hereby grants to the Investors a right (the "PREEMPTIVE
RIGHT") to purchase all or any part of their pro rata share of any New
Securities that the Company may, from time to time, propose to sell and issue
solely for cash. Such pro rata share, for purposes of this Preemptive Right, is
the ratio of (x) the number of shares of Common Stock then held by such
Investor immediately prior to the issuance of the New Securities, assuming the
full conversion of any Series C Preferred held by such Investor (but not
including options or warrants to acquire Common Stock or Preferred Stock) to
(y) the total number of shares of Common Stock then outstanding immediately
prior to the issuance of the New Securities, assuming the full conversion of
outstanding Preferred Stock (but not including options or warrants to acquire
Common Stock or Preferred Stock). This Preemptive Right shall be subject to the
following provisions:
(i) "NEW SECURITIES" shall mean any Common Stock or Preferred
Stock of the Company, whether or not authorized on the date hereof, and rights,
options or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock
or Preferred Stock; PROVIDED, HOWEVER, that "NEW SECURITIES" does not include
the following:
(A) shares of capital stock of the Company issuable upon
conversion or exercise of any outstanding securities as of the date hereof or
any New Securities issued in accordance with this Agreement;
(B) shares or options granted pursuant to the Stock Option
Plan;
(C) shares of Common Stock or Preferred Stock issued in
connection with any pro rata stock split, stock dividend or recapitalization by
the Company (in which case, all numbers of shares and per share amounts
referenced in this Section 13(a)(i) will be adjusted accordingly);
(D) shares of Common Stock or Preferred Stock issued by the
Company in consideration for the acquisition of another company, partnership or
other business entity; or
(E) shares of Common Stock and warrants or options therefor
issued to brokers, owners or operators of buildings that contract for services
from the Company if and to the extent such issuance or a plan providing for
such issuance is approved by the holders of at least a majority of the Series C
Preferred.
(ii) In the event that the Company proposes to undertake an
issuance of New Securities for cash, it shall give each Investor written notice
(the "Notice") of its intention, describing the type of New Securities, the
price, and the general terms upon which the Company proposes to issue the same.
Each Investor shall have twenty (20) business days after receipt of such notice
to agree to purchase all or any portion of its pro rata share of such New
Securities at the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New
Securities to be purchased. If any Investor fails to agree to purchase its full
pro rata share within such twenty (20) business day period, the Company will
give each Investor who did so agree (the "Electing Investors") notice of the
number of shares that were not subscribed for. Such notice may be provided by
telephone if followed by written confirmation within two days. The Electing
Investors shall have twenty (20) business days from the date of receipt of such
notice to agree to purchase all or any share of any Investor's pro rata share
of the New Securities not purchased in response to the Notice.
(iii) In the event that any New Securities subject to the
Preemptive Right are not purchased by the Investors within the twenty (20)
business day plus twenty (20) business day period specified above, the Company
shall have one hundred and twenty (120) days thereafter to sell (or enter into
an agreement pursuant to which the sale of New Securities that had been subject
to the Preemptive Right shall be closed, if at all, within ninety (90) days
from the date of said agreement) the New Securities with respect to which the
rights of the Investors were not exercised at a price and upon terms, including
manner of payment, no more favorable to the purchasers thereof than specified
in the Notice. In the event the Company has not sold all offered New Securities
within such one hundred and twenty (120) day period (or sold and issued New
Securities in accordance with the foregoing within ninety (90) days from the
date of such agreement) the Company shall not thereafter issue or sell any New
Securities, without first again offering such New Securities to the Investors
in the manner provided above.
(iv) This Preemptive Right is nonassignable except to any
transferee to whom rights under Section 14 may be transferred under Section
14(g) of this Agreement.
(v) This Preemptive Right shall terminate on the earlier of (i)
immediately prior to the closing of the Company's IPO; or (ii) as to any
Investor at such time as such Investor holds less than 2.5% of the number of
shares of Common Stock held by all Investors (after giving effect to the
conversion of all shares of Series C Preferred and Series D Preferred held by
all Investors). Notwithstanding the foregoing, the Preemptive Right granted
hereby shall not apply with respect to an IPO by the Company.
14. Rights of First Offer and Co-Sale Respecting Shares.
(a) Rights of First Offer and Co-Sale.
(i) In the event that any one or more of the Company's
directors, officers or managers listed on Exhibit B hereto (collectively,
"MANAGEMENT") proposes to sell or otherwise transfer any shares of stock of the
Company, or any interest in such shares ("TRANSFER SHARES"), now held by or
hereafter acquired by Management to any person or entity, the Investors shall
have a right of first offer on the terms described below to purchase the
Transfer Shares proposed to be transferred, and each of the Investors shall
have a right of co-sale on the terms described below. Before effecting any sale
or transfer of Transfer Shares, the member of Management desiring to sell or
transfer such Transfer Shares shall give a written notice (the "TRANSFER
NOTICE") to each of the Investors at such Investors' respective addresses as
shown on the Company's records. The Transfer Notice shall describe the number
of Transfer Shares proposed to be transferred and the proposed transfer price
in cash.
(ii) The Investors shall have twenty (20) business days
following receipt of the Transfer Notice to agree to purchase all or any
portion of their respective First Offer Pro Rata Shares (as hereinafter
defined) of such Transfer Shares by giving written notice to Management and the
Company and stating the number of shares to be purchased. Any Transfer Shares
not purchased by the Investors pursuant to this Section 14(a)(ii) are
hereinafter referred to as the "UNSOLD TRANSFER SHARES." Thereafter, for a
period of eighty (80) days, the member of management proposing such sale or
transfer shall have the right to sell or transfer such shares to any person all
or any part of the Unsold Transfer Shares, subject to Section 14(a)(iii), in
cash at a price equal to or greater than the price set forth in the Transfer
Notice. If such member desires to sell or transfer Unsold Transfer Shares
during this eighty (80) day period, such member shall give twenty (20) business
days prior written notice (the "SECOND TRANSFER NOTICE") to the Company and to
each of the Investors at such Investors' respective addresses as shown on the
Company's records identifying the proposed transferees (the "TRANSFEREE") and
the number of Unsold Transfer Shares to be sold.
(iii) Each Investor shall have the right to sell to the
Transferee (or, upon the unwillingness of any Transferee to purchase directly
from such Investor, to the member of Management proposing such sale) not more
than its Co-Sale Pro Rata Share (as hereinafter defined) of the Unsold Transfer
Shares to be sold subject to the Second Transfer Notice on the terms set forth
in the Second Transfer Notice. To the extent that any prospective Transferee
prohibits such assignment or otherwise refuses to purchase shares or other
securities from an Investor exercising its right of co-sale hereunder, such
member of Management whose proposed sale gave rise to a right of co-sale shall
not sell such prospective purchaser or purchasers any Transfer Shares to be
sold unless and until, simultaneously with such sale, such member of Management
shall purchase such shares or other securities from such Investor for the same
consideration and on the same terms and conditions as the proposed transfer
described in the Second Transfer Notice. An Investor may exercise his right of
co-sale by delivering a notice to Management, with a copy to the Company,
within twenty (20) business days after receipt by such Investor of the Second
Transfer Notice.
(iv) Each Investor's "FIRST OFFER PRO RATA SHARE" is the ratio
of (i) the number of shares of Common Stock held by such Investor as of the
date of the Transfer Notice (after giving effect to the conversion of all
shares of Series C Preferred and Series D Preferred held by such Investor) to
(ii) the number of shares of Common Stock held by Management and all other
Investors as of such date (after giving effect to the conversion of all shares
of Series C Preferred and Series D Preferred held by all Investors).
(v) Each Investor's "CO-SALE PRO RATA SHARE" is the ratio of
(i) the number of shares of Common Stock held by such Investor as of the date
of the Transfer Notice (after giving effect to the conversion of all shares of
Series C Preferred and Series D Preferred held by such Investor) to (ii) the
number of shares of Common Stock held by Management and all other Investors as
of such date (after giving effect to the conversion of all shares of Series C
Preferred and Series D Preferred held by all Investors).
(b) Transfer of Shares Upon Failure to Exercise Right of First
Offer or Co-Sale. Any proposed transfer for a price lower than that stated in
the Transfer Notice or for a greater number of shares, as well as any
subsequent proposed transfer, including after expiration of the ninety (90) day
period in Section 14(a)(ii) above, of any of the Transfer Shares by Management,
shall again be subject to the rights of first refusal and rights of co-sale
provided in Section 14(a) hereof and shall require compliance with the
procedures described in this Section.
(c) Binding Effect of Right of Co-Sale. The rights of first offer
and co-sale provided in Section 14(a) hereof shall be binding upon any
transferee of Transfer Shares other than a transferee acquiring Transfer Shares
in a transaction which complies with this Section.
(d) Termination of Right of Co-Sale. Notwithstanding anything in
this Section to the contrary, the rights of first offer and of co-sale provided
in Section 14(a) hereof shall terminate on the earlier of (i) immediately prior
to the closing of the Company's IPO; or (ii) as to any Investor at such time as
such Investor holds less than 2.5% of the number of shares of Common Stock held
by all Investors (after giving effect to the conversion of all shares of Series
C Preferred and Series D Preferred held by all Investors).
(e) Exceptions. Without regard and not subject to the provisions of
this Section, a member of Management may transfer all or part of his or her
Shares (i) to such member's spouse, ancestors, descendants, siblings or their
descendants or a trust for any of their benefit or (ii) in transactions
involving the distribution without consideration of Shares by such member to
any of his or her partners or retired partners or to the estate of any of his
or her partners or retired partners (each an "EXEMPT TRANSACTION" and
collectively, "EXEMPT TRANSACTIONS"); PROVIDED, HOWEVER, that this Agreement
shall be binding upon each transferee in any such Exempt Transaction and, prior
to the completion of such transfer, each transferee or his or her legal
representative shall have executed documents in form and substance satisfactory
to the Company and to a majority in interest of the Investors evidenced by
their written acknowledgment of such satisfaction, assuming the obligations of
the member of Management under this Agreement with respect to the Transfer
Shares. Such Transfer Shares shall remain subject to this Section hereunder,
and references to "Management" hereunder shall be deemed thereafter to apply to
and include the transferor or transferees of any such shares.
(f) Conditions to Exercise of Rights. Exercise of the Investor's
rights under this Section shall be subject to and conditioned upon, and
Management and the Company shall use commercially reasonable efforts to assist
the Investors in, compliance with applicable laws.
(g) Transferability. The rights of first offer and co-sale rights
granted to the Investors pursuant to this Section shall be transferable only to
a transferee to whom registration rights may be transferred hereunder and who
following such transfer will hold no less than 2.5% of the total number of
shares of Common Stock held by all Investors (after giving effect to the
conversion of all shares of Series C Preferred and Series D Preferred held by
all Investors).
(h) Rights of First Refusal and Co-Sale Among the Investors with
Respect to Preferred Stock. In the event that any Investor proposes to sell or
otherwise transfer any shares of Series B Preferred, Series C Preferred or
Series D Preferred, or any interest in such shares, now held by or hereafter
acquired by such Investor, each of the other Investors shall have (a) a right
of first offer to purchase the shares proposed to be sold or transferred, and
(b) a right of co-sale, in each case exercisable in the same manner and on the
same terms described in this Section 14 with respect to the first offer and
co-sale rights granted by Management to the Investors; PROVIDED, HOWEVER, that
this Section 14(h) shall not apply to sales or transfers between an Investor
and any of such Investor's partners or Affiliates.
15. Put Right.
(a) Put Right. At any time during the one-year period after the
sixth anniversary of the date hereof, in the event the Common Stock is not then
traded on any national securities exchange or the Nasdaq National Market (or
any successor thereof), each Preferred Holder, with the consent of Preferred
Holders holding at least a majority of the Registrable Preferred Securities
(assuming full conversion into Common Stock of all Series C Preferred and
Series D Preferred) then outstanding (the "MAJORITY HOLDERS"), shall have the
right (the "PUT RIGHT") to sell to the Company, and upon the exercise of the
Put Right the Company shall have the obligation to purchase, all (and not less
than all) of the shares of Registrable Preferred Securities, Series C Preferred
and Series D Preferred then held by the Preferred Holders exercising the Put
Right on the terms and conditions hereafter provided in this section. Any
Preferred Holders intending to exercise a Put Right shall deliver written
notice thereof to the Company (the "PUT NOTICE"), which Put Notice shall be
effective only if consented to or joined in by the Majority Holders (which may
include for such purpose the Preferred Holder(s) intending to exercise its Put
Right).
(b) Participation by Other Holders. The Company shall within 10
days of its receipt of the Put Notice deliver to each Preferred Holder (other
than the Preferred Holder initially delivering the Put Notice) written notice
of its receipt of such Put Notice (the "COMPANY NOTICES"). Each Preferred
Holder shall have the right to participate in the exercise of the Put Right by
delivering notice thereof (a "PARTICIPATION NOTICE") to the Company on or
before the 30th day following the Company's delivery of the Company Notice
(such 30th day being referred to as the "DETERMINATION DATE"). Each Preferred
Holder electing to exercise its Put Right hereunder (each a "PARTICIPATING
HOLDER") shall exercise its rights with respect to all (and not less than all)
of its Registrable Preferred Securities, Series C Preferred and Series D
Preferred. Each Preferred Holder that does not elect to participate in the
exercise of the Put Right by delivering a Participation Notice shall thereafter
be precluded from exercising its Put Right until the earlier of (i) 180 days
after the Determination Date and (ii) the 30th day following the determination
of the Put Price with respect to the then pending exercise of the Put Rights.
No Participating Holder may rescind its election to exercise its Put Rights,
and each Participating Holder shall be obligated to sell its Registrable
Preferred Securities in accordance with this section unless (i) such rescission
is consented to by the Majority Holders (which may include for such purpose the
Preferred Holder intending to rescind its exercise of its Put Right) or (ii)
the Company fails to purchase such Participating Holder's Registrable Preferred
Securities in accordance with this section on the date of the Put Closing
(defined below).
(c) Put Price. The purchase price to be paid by the Company for the
Registrable Securities shall be the "fair market value" thereof as of the
Determination Date determined in accordance with Sections 15(d) and (e) hereof.
(d) Fair Market Value. The "fair market value" of the Registrable
Securities means the product of (i) the total consideration that would be
received by a holder of one share of Common Stock (assuming full conversion
into Common Stock of all Series C Preferred and Series D Preferred) upon the
sale of all of the Company's issued and outstanding equity securities in a
single transaction or series of related transactions to a buyer willing to pay
the highest purchase price that would be received in an auction conducted by a
nationally recognized investment banking firm that has experience valuing
businesses of the type then engaged in by the Company, which buyer is under no
compulsion to buy and the holders of such equity securities are under no
compulsion to sell, all parties having reasonable knowledge of all relevant
facts, with no discount being applied for any other reason and (ii) the
percentage equity ownership of the Company represented by the Registrable
Securities (assuming full conversion into Common Stock of all Series C
Preferred and Series D Preferred), calculated on a fully diluted basis.
(e) Determination of Fair Market Value. The fair market value of
the Registrable Securities (assuming full conversion into Common Stock of all
Series C Preferred and Series D Preferred) shall be that which is agreed upon
by the Company and a majority in interest of the Participating Holders
(assuming full conversion into Common Stock of all Series C Preferred and
Series D Preferred) (the "MAJORITY PARTICIPATING HOLDERS"). If the Company and
the Majority Participating Holders fail to agree on the fair market value
within 30 days of the Determination Date, then, at the election of the Majority
Participating Holders, either (i) the Majority Participating Holders shall then
have the right to require a sale of the Company by asset sale, merger or
otherwise (a "SALE OF THE COMPANY") in accordance with the provisions of
Section 15(g) and (h) hereof by delivering to the Company an Exit Instruction
Notice or (ii) the Company and the Majority Participating Holders shall attempt
to agree upon an appraiser to determine the fair market value, which appraiser
shall be a nationally recognized investment banking firm that has experience
valuing businesses of the type then engaged in by the Company (the firm or
firms engaged to determine the fair market value hereunder having such
qualifications being referred to as an "APPRAISER"). If, within the 10-day
period after the expiration of such 30-day period, the Company and the Majority
Participating Holders agree upon an Appraiser to determine the fair market
value in accordance with Section 15(d) above, then such Appraiser shall make
such determination within 30 days after the date of such Appraiser's
engagement, and such determination shall govern. If the Company and the
Majority Participating Holders do not, within such 10-day period, agree as to a
single Appraiser, or if the Appraiser appointed as provided above fails to
determine such fair market value within 30 days of the date of such Appraiser's
engagement, then each of the Company and the Majority Participating Holders, by
notice to the other, shall appoint one Appraiser. If either the Company or the
Majority Participating Holders shall fail to appoint such an Appraiser within
10 days after the lapse of such 10 or 30 day period, as applicable, then the
Appraiser appointed by the party that does so appoint an Appraiser shall make
the determination of such fair market value and such determination shall
govern. If two Appraisers are appointed and they agree upon such fair market
value, their joint determination shall govern. If said two Appraisers cannot
reach an agreement within 30 days after the appointment of the last Appraiser
to be appointed, the two Appraisers selected shall promptly select a third
Appraiser who shall within 15 days following such Appraiser's appointment,
select one of the two other appraisals as constituting fair market value. All
decisions of the Appraiser(s) shall be rendered in writing and shall be signed
by the Appraiser(s). The fair market value determined as herein provided shall
be conclusive, final and binding on the parties and shall be enforceable in any
court having jurisdiction over a proceeding brought to seek such enforcement.
The cost of the fair market value determination shall not be taken into account
in determining fair market value and shall be borne by the Company and the
Participating Holders, with the Participating Holders bearing such portion of
such cost as equals their percentage equity ownership of the Company on a fully
diluted basis.
(f) Put Closing. The Company shall purchase from the Participating
Holders, and each Participating Holder shall sell to the Company (the "PUT
CLOSING"), all of each Participating Holder's Registrable Preferred Securities,
Series C Preferred and Series D Preferred at such time and place as may be
agreed upon by the Company and the Majority Participating Holders, but in no
event shall the Put Closing occur more than 120 days after the determination of
the fair market value in accordance herewith. In the absence of an agreement,
the Put Closing shall occur at the offices of the Company's principal outside
counsel. At the Put Closing, each Participating Holder shall deliver to the
Company certificates representing such Holder's Registrable Securities, Series
C Preferred and Series D Preferred (free and clear of all liens and
encumbrances other than those granted in favor of and held by the Company's
creditors), and the Company shall pay to each Participating Holder the purchase
price therefor as provided herein by wire transfer of immediately available
funds. Upon the consummation of the Put Closing as contemplated hereby, the
Company's obligations under this Section 15 shall terminate with respect to
such Participating Holders.
(g) Remedies. If, for any reason, the Company fails to purchase all
of the Registrable Preferred Securities, Series C Preferred and Series D
Preferred of the Participating Holders as provided in this section, then, in
addition to whatever rights and remedies that may arise at law or in equity as
a result thereof, (i) the Company shall pay each Participating Holder on demand
interest on the unpaid balance of the amount due under clause (c) above (the
"PUT PRICE") at the rate of 15% per annum (or the highest rate permitted under
applicable law, if lower), until the unpaid balance of the Put Price is paid in
full and (ii) the Majority Holders shall have the right, exercisable by giving
notice hereof to the Company (such notice being referred to as an "EXIT
INSTRUCTION NOTICE"), to require a Sale of the Company yielding consideration
to the Company or the stockholders consisting of at least 90% cash or readily
marketable securities, whereupon the primary mandate and duty of the Company's
Board of Directors and stockholders shall be to effect a sale of the Company,
subject to Section 15(i). No Holder or any director or officer of the Company
may participate as a buyer (whether directly or indirectly as the holder of any
existing or prospective equity interest) in any such transaction without the
consent of the Majority Holders. If the Company fails to enter into one or more
definitive agreements with one or more third parties that are not affiliates of
the Company or any Holder contemplating a Sale of the Company on or before the
180th day following the delivery of the Exit Instruction Notice or if such
definitive agreements shall have been terminated, then, subject to obtaining
any required governmental consent with respect thereto, the Majority Holders
shall have all requisite right, power and authority, as the Company's agent, to
bind the Company and effect a Sale of the Company.
(h) Exit Transaction. In exercising its rights, as the Company's
agent, to effect a Sale of the Company, the Majority Holders shall have full
and plenary power and authority, as the agent of the Company, to cause the
Company to enter into a transaction providing for a Sale of the Company (an
"EXIT TRANSACTION") and to take any and all such further action in connection
therewith as the Majority Holders may deem necessary or appropriate in order to
consummate any such Exit Transaction. The Major Holders, in exercising their
rights under this section shall have complete discretion over the terms and
conditions of any Exit Transactions effected thereby, including, without
limitation, price, payment terms, conditions to closing, representations,
warranties, affirmative covenants, negative covenants, indemnification,
holdbacks and escrows. Without limitation of the foregoing, the Majority
Holders may execute on behalf of the Company such agreements, documents,
applications, authorizations and instruments (collectively, "EXIT DOCUMENTS")
as they shall deem necessary or appropriate in connection with any Exit
Transaction, and each third party with whom the Majority Holders contracts on
behalf of the Company or any Subsidiary may rely on the authority vested in the
Majority Holders under this section for all purposes.
(i) Business Judgment Rule. In conducting an Exit Transaction, the
Majority Holders shall be guided by corporate law principles and decisions
governing the sale of a Delaware corporation or its assets with a goal of
maximizing such corporation's value at a sale or liquidation for its
stockholders' benefit. Without limitation of the foregoing, the Majority
Holders shall enjoy the benefit of the "business judgment rule" and other
protections afforded directors under Delaware law with respect to all of their
decisions and actions in connection with any Exit Transaction to the maximum
extent permitted by law.
16. Visitation. The Company shall permit each Investor (or a
representative thereof), so long as such Investor owns no less than five
percent (5%) of the total number of shares of Series C Preferred Stock
outstanding, during such periods as no designee of such Investor is a member of
the Company's Board of Directors, to attend all meetings of the Board of
Directors and committees thereof and will provide to such Investor copies of
written materials provided to all members of the Board of Directors or
committees thereof at the same time and in the same manner that such materials
are provided to the members of the Board of Directors.
17. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York, without giving effect to the conflicts of
laws principles thereof.
18. Entire Agreement. This Agreement, the Preferred Stock Purchase
Agreement, the Certificate of Designation and the Voting Agreement delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
19. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto.
20. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by First Class mail,
postage prepaid, addressed (a) if to an Investor, at the Investor's address as
set forth on Exhibit A hereto, or (b) if to any other holder of any securities,
at such address as such holder shall have furnished the other parties hereto in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Shares who has so furnished an
address to the Company, or (c) if to the Company, to OnSite Access, Inc., 680
Fifth Avenue, New York, New York 10019, and addressed to the attention of the
President, or at such other address as the Company shall have furnished to the
Investors.
21. Amendments or Waivers. This Agreement may not be amended, waived,
discharged or terminated other than by written instrument signed by the Company
and (a) holders of more than a majority of the outstanding Registrable
Securities (on an as-converted to Common Stock basis).
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
23. Confidentiality. Each party hereto agrees that, except with the
prior written permission of the other parties, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone (other than
its Affiliates, partners, shareholders, employees, counsel, agents and
representatives who have been advised of the confidentiality obligations
hereunder) any confidential information, knowledge or data concerning or
relating to the business or financial affairs of the other parties to which
such party has been or shall become privy by reason of this Agreement, except
as required by law or under applicable rules of any self regulatory
organization under the Exchange Act. The parties hereto further agree that
there shall be no press release or other public statement issued by either
party relating to this Agreement or the transactions contemplated hereby,
unless the parties otherwise agree in writing and except as required by law, or
by applicable rules of any self regulatory organization under the Exchange Act.
24. General Conditions to a Transaction. Notwithstanding the terms and
conditions of this Agreement, no Holder shall transfer any of its Shares or any
voting rights associated with such Shares unless in each case the Company shall
have first received all required approvals, licenses or permits of, or shall
have provided all required notifications to, any federal or state regulatory
authority which are required to validly effect such transfer, and such
approvals, licenses or permits are in full force and effect at the time of such
transfer. Any attempt by a Holder to transfer its Shares in violation of the
terms of this Section 24 shall be void AB INITIO.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ONSITE ACCESS, INC.
By:_______________________________________
Name:
Title:
SPECTRUM EQUITY INVESTORS III, L.P.
By: Spectrum Equity Associates III, L.P.,
its General Partner
By:_______________________________________
Name:
Title:
JP MORGAN INVESTMENT CORPORATION
By:_______________________________________
Name:
Title:
SIXTY WALL STREET SBIC FUND, L.P.
By: Sixty Wall Street SBIC Corporation,
its General Partner
By:_______________________________________
Name:
Title:
CROSSPOINT VENTURE PARTNERS
By:_______________________________________
Name:
Title:
RSI-ONSITE HOLDINGS LLC
By: Reckson Service Industries, Inc.,
its sole member
By:_______________________________________
Name:
Title:
VERITECH VENTURES LLC
By:_______________________________________
AT&T VENTURE FUND II, LP
3000 Sand Hills Road
Building 1, Suite 285
Menlo Park, CA 94025
By: Venture Management, LLC
its General Partner
___________________________________________
Neal M. Douglas
Manager
MANAGEMENT:
SCOTT JARUS
By:_______________________________________
BRANDON KNICELY
By:_______________________________________
LOU MARTINEZ
By:_______________________________________
BRIAN BENZ
By:_______________________________________
DAREN HORNIG
By:_______________________________________
COMMON STOCK AND SERIES A PREFERRED:
RSI-OSA HOLDINGS, INC.
By:_______________________________________
VERITECH VENTURES LLC
By:_______________________________________
MARTIN RABINOWITZ
By:_______________________________________
Martin Rabinowitz
ARTHUR SIMON
By:_______________________________________
Arthur Simon
[INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>
NOEL RAHN
By:_______________________________________
Noel Rahn, as Investor
[Investor Rights Agreement Signature Page]
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
Holders of Series B Preferred Stock Number of Shares
- ----------------------------------- ----------------
Spectrum Equity Investors III, L.P. 12,416,667
JP Morgan Investment Corporation 7,000,000
Sixty Wall Street SBIC Fund, L.P. 1,750,000
Crosspoint Venture Partners 8,750,000
RSI-OnSite Holdings LLC 13,125,000
Veritech Ventures LLC 3,541,667
AT&T Venture Fund II, LP 3,333,333
Noel Rahn 83,333
Holders of Series C Preferred Stock Number of Shares
- ----------------------------------- ----------------
Spectrum Equity Investors III, L.P. 5,930,889
JP Morgan Investment Corporation 3,564,644
Sixty Wall Street SBIC Fund, L.P. 891,161
Crosspoint Venture Partners 4,455,806
RSI-OnSite Holdings LLC 6,683,708
Veritech Ventures LLC 1,803,540
AT&T Venture Fund II, LP 1,697,450
Noel Rahn 42,436
Holders of Series D Preferred Stock Number of Shares
- ----------------------------------- ----------------
Spectrum Equity Investors III, L.P. 392,111
<PAGE>
EXHIBIT B
MANAGEMENT
Scott Jarus
Brandon Knicely
Lou Martinez
Brian Benz
Daren Hornig
<PAGE>
EXHIBIT C
STOCK OPTION PLAN
Exhibit 10.2
ONSITE ACCESS, INC.
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into April 16,
1999 by and among OnSite Access, Inc., a Delaware corporation (the "Company"),
and the individuals and entities listed on Exhibit A attached hereto (each an
"Investor" and collectively, the "Investors").
AGREEMENT
The parties hereby agree as follows:
1. BOARD REPRESENTATION.
(a) With respect to the six (6) members of the Company's Board of
Directors the Company's Certificate of Incorporation provides are to be elected
by the holders of the Company's Series C Convertible Redeemable Preferred Stock
("Preferred Stock"), the Investors agree to vote or act with respect to the
shares of Preferred Stock owned by them and to cause the directors designated
by each of them to act so as to elect (or appoint to fill a vacancy): (i) one
(1) member of the Company's Board of Directors designated by Spectrum Equity
Investors III, L.P. ("Spectrum"), (ii) one (1) member of the Company's Board of
Directors designated by JP Morgan Investment Corporation ("JP Morgan"), (iii)
one (1) member of the Company's Board of Directors designated by Crosspoint
Venture Partners ("Crosspoint"), (iv) two (2) members of the Company's Board of
Directors designated by RSI-OnSite Holdings LLC ("RSI") and (v) a person
independent of the Company, its Subsidiaries and, to the knowledge of Spectrum,
JP Morgan, Crosspoint, RSI and Jon Halpern, all shareholders of the Company,
and who is familiar with the industry in which the Company operates, selected
by Spectrum, JP Morgan, Crosspoint, RSI and Jon Halpern, by a vote of a
majority of the shares of Preferred Stock held by all of them (the "Independent
Director") (collectively, the "Investor Directors").
(b) The Board of Directors shall designate a Compensation Committee and
an Audit Committee, and the Investors agree to cause the directors designated
by each of them or their affiliates to act so as to establish these committees
consisting of three (3) directors and to appoint to these committees (i) one
director to be designated by Spectrum, JP Morgan and Crosspoint, by a vote of a
majority of the shares of Preferred Stock held by all of them, (ii) one
director to be designated by RSI and (iii) one director to be designated by the
Board of Directors as a whole by a vote of the majority of the authorized
number of directors. Any party or parties with a right to designate a director
to the Compensation Committee pursuant to this Section 1(b) shall have the
right to remove such director, and the Investors agree to cause the directors
designated by each of them, to the extent permitted by applicable law, to cause
the removal of such director; PROVIDED that such directors shall not be
required to violate their duties under law as a director of the Company.
(c) The Board of Directors shall designate a Funding Committee, and the
Investors agree to cause the directors designated by each of them or their
affiliates to act so as to establish these committees consisting of three (3)
directors and to appoint to these committees (i) one director to be designated
by Spectrum, JP Morgan and Crosspoint, by a vote of a majority of the shares of
Preferred Stock held by all of them, (ii) one director to be designated by RSI
and (iii) the Management Director (as defined in Section 1(d) hereof). Any
party or parties with a right to designate a director to the Funding Committee
pursuant to this Section 1(c) shall have the right to remove such director, and
the Investors agree to cause the directors designated by each of them, to the
extent permitted by applicable law, to cause the removal of such director;
PROVIDED that such directors shall not be required to violate their duties
under law as a director of the Company.
(d) With respect to the one (1) member of the Company's Board of
Directors the Company's Certificate of Incorporation provides are to be elected
by the holders of Common Stock (including Common Stock, if any, issuable upon
conversion of Preferred Stock), the Investors agree to vote or act with respect
to their shares of Preferred Stock having the right to vote with the Common
Stock and Common Stock of the Company and to cause the directors designated by
each of them to act so as to elect (or appoint to fill a vacancy) as a member
of the Company's Board of Directors the Company's Chief Executive Officer or,
if there is then no Chief Executive Officer, the President (the "Management
Director").
(e) The Company agrees to reimburse the Investor Directors and the
Independent Director and Jon Halpern (or his representative) for reasonable
out-of-pocket expenses incurred by them in attending meetings of the Board of
Directors. In addition, so long as Mr. Halpern (or his representative) is not a
board member, but is invited to attend meetings of the Board of Directors and
committees thereof pursuant to paragraph (f) below, Mr. Halpern shall be
compensated (whether in cash or options or other equity securities) to the same
extent as the Investor Directors.
(f) Jon Halpern (or his representative) shall be invited to attend all
meetings of the Board of Directors and committees (and any executive sessions)
thereof and will be provided information and copies of written materials
provided to all members of the Board of Directors or any committee thereof at
the same time and in the same manner that such materials are provided to the
members of the Board of Directors or any committee thereof. The Investors will
nominate Jon Halpern to the Board of Directors and agree to vote on or act with
respect to their shares of Preferred Stock having the right to vote with the
Common Stock and Common Stock of the Company to elect Jon Halpern to the Board
of Directors:
(i) if any seat committed to the designee of an Investor (or the
designee of an Investor's affiliate) becomes vacant and such
Investor (or its designee) is no longer entitled to designate
the individual to fill such director seat, unless one (but only
one) such seat that becomes available is made available to a
person described in Section 1(f)(ii)(C) hereof; or
(ii) if the size of the Board of Directors is increased and any
additional seat thereby created is not made available to
(A) a person appointed by a new investor in the Company that
holds an aggregate investment in the Company in excess of
the investment held by Mr. Halpern and entities he
controls, or
(B) a person appointed by a strategic investor in the Company;
or
(C) a person who is either (i) appointed by RSI or (ii)
unaffiliated with (and is not a member of) management of
the Company and who is unaffiliated with the Investors; or
(D) a person appointed by a new investor in the Company, but
only in the case of a new investor that invests in the
Company after the Investors have purchased $60 million of
Company securities pursuant to the Series B, Series C and
Series D Stock Purchase Agreement, dated the date hereof,
among the Company, the Investors and certain other parties.
2. CHANGE IN NUMBER OF DIRECTORS. The Investors will not vote for any
amendment or change to the Bylaws or Certificate of Incorporation of the
Company providing for the election of more or less than seven (7) directors, or
any other amendment or change to the Bylaws or Certificate of Incorporation of
the Company inconsistent with the terms of this Agreement, unless such
amendment or change is approved by (a) Investors holding at least eighty-five
percent (85%) of the Preferred Stock and (b) RSI.
3. LEGENDS. Each certificate representing shares of the Company's capital
stock held by Investors shall be endorsed by the Company with a legend reading
as follows: "The Shares evidenced hereby are subject to a Voting Agreement by
and among the Company and the Investors (a copy of which may be obtained from
the COMPANY), and by accepting any interest in such shares the person accepting
such interest shall be deemed to agree to and shall become bound by all the
provisions of said Voting Agreement."
4. TERMINATION. This Agreement shall terminate upon the earlier of (a) the
consummation of the Company's initial public offering on a firm commitment
underwriting basis of any of its Common Stock (i) based upon a Company
valuation exceeding Three Hundred Million Dollars ($300,000,000) prior to the
offering, (ii) resulting in gross proceeds to the Company of at least Thirty
Million Dollars ($30,000,000), and (iii) managed by a nationally recognized
underwriter reasonably acceptable to the Investors; or (b) ten (10) years from
the date hereof.
5. AMENDMENTS; WAIVERS. Any term hereof may be amended or waived with the
written consent of Investors holding at least eighty-five percent (85%) of the
Preferred Stock; PROVIDED, HOWEVER, notwithstanding the foregoing, Sections
1(e) and 1(f) hereof may not be amended without the prior written consent of
Veritech Ventures LLC. Any amendment or waiver effected in accordance with this
Section 5 shall be binding upon the Company and the Investors, and each of
their respective successors and assigns.
6. NOTICES. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient on the date of delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth on the books of the Company, or as subsequently
modified by written notice.
7. SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c)
the balance of the Agreement shall be enforceable in accordance with its terms.
8. GOVERNING LAW. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law.
9. COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
10. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. An investor may assign its rights hereunder
only to (i) any of its affiliates as defined in Rule 405 promulgated under the
Securities Act of 1933 or (ii) with the consent of Investors holding at least
eighty-five percent (85%) of the Preferred Stock. Any Investor who transfers
any of its interest in the Company's Common Stock or Preferred Stock and
thereafter (together with its affiliates) no longer holds at least five percent
(5%) of the Company's Common Stock (assuming the conversion of Preferred Stock
convertible into Common Stock) will no longer have any rights to designate
directors under this Agreement but shall be obligated to vote as provided
herein; PROVIDED, HOWEVER, that with respect to any provisions of this
Agreement requiring the vote or consent of an Investor, in the event of any
assignment of this Agreement by an Investor to permitted assignees in
accordance with the terms hereof, such Investor and its permitted assignees
shall designate one holder of the Preferred Stock (or Common Stock issued in
respect thereof) originally held by the Investor as a representative for
purposes of all consents and determinations hereunder. Any attempted assignment
of this Agreement in violation of the terms of this Section 10 shall be void AB
INITIO. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
11. ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements (including all fees, costs and expenses of appeals) in
addition to any other relief to which such party may be entitled.
[Signature Page Follows]
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above.
COMPANY:
ONSITE ACCESS, INC.
By:______________________
Title:__________________
Address:
680 Fifth Avenue
New York, New York 10019
INVESTORS:
SPECTRUM EQUITY INVESTORS III, L.P.
By: Spectrum Equity Associates III, L.P.,
its General Partner
By: _____________________________________
Name:
Title:
JP MORGAN INVESTMENT CORPORATION
By: ____________________________________
Name:
Title:
CROSSPOINT VENTURE PARTNERS
By: ____________________________________
RSI-ONSITE HOLDINGS LLC
By: Reckson Service Industries, Inc.,
its sole member
By: ____________________________________
VERITECH VENTURES LLC
By: ____________________________________
<PAGE>
EXHIBIT A
Investors
Spectrum Equity Investors III, L.P.
JP Morgan Investment Corporation
Crosspoint Venture Partners
RSI-OnSite Holdings LLC
Veritech Ventures LLC
Exhibit 10.3
ONSITE ACCESS, INC.
SERIES B, SERIES C AND SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Series B, Series C and Series D Preferred Stock Purchase Agreement is
made as of April 16, 1999 by and between OnSite Ventures, L.L.C., a Delaware
limited liability company (the "Company"), OnSite Access, Inc., a Delaware
corporation (the "Successor"), and the parties listed on Attachment 1 to this
Agreement (each, a "Purchaser" and collectively, the "Purchasers"). AGREEMENT
The parties hereby agree as follows:
Section 1. The Merger; Authorization and Sale of Series B, Series C and
Series D Preferred Stock.
1.1. The Merger. On the first business day after the Company has received
all regulatory approvals from the Federal Communications Commission (the "FCC")
and the New York Public Service Commission (the "NYPSC") necessary to effect
the transactions contemplated by this Agreement, the Company will merge (the
"Merger") with and into the Successor, and the Successor will succeed to all of
the business and assets of the Company in the manner and with the effect
specified in the Delaware General Corporation Law.
1.2. Authorization. The Successor will authorize the sale and issuance of
up to (i) 50,000,000 shares of its Series B Redeemable Preferred Stock (the
"Series B Preferred"), (ii) 25,069,634 shares of its Series C Convertible
Redeemable Preferred Stock (the "Series C Preferred") and (iii) 392,111 shares
of its Series D Convertible Redeemable Preferred Stock (the "Series D
Preferred" and, together with the Series B Preferred and Series C Preferred,
the "Shares"), having the rights, privileges and preferences as set forth in
the Certificate of Designation of Series B, Series C and Series D Preferred
Stock (the "Certificate of Designation") in the form attached to this Agreement
as Exhibit A.
1.3. Sale of Series B Preferred, Series C Preferred and Series D Preferred.
Subject to the terms and conditions of this Agreement, each Purchaser,
severally, agrees to purchase, as set forth on Attachment 1, and the Successor
will sell and issue to each Purchaser (i) the number of shares of the
Successor's Series B Preferred set forth opposite such Purchaser's name on
Attachment 1 at a purchase price of $1.00 per share, (ii) the number of shares
of the Successor's Series C Preferred set forth opposite such Purchaser's name
on Attachment 1 at a purchase price of $0.39 per share and (iii) the number of
shares of the Successor's Series D Preferred set forth opposite such
Purchaser's name on Attachment 1 at a purchase price of $0.39 per share.
Section 2. The Closings.
2.1. The First Closing. The first closing of the purchase and sale of the
Shares under this Agreement (the "First Closing") shall be held at the offices
of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022 at
10:00 a.m., Eastern Standard Time, on the first business day following
consummation of the Merger, or at such other time and place as the Successor
and the Purchasers may mutually agree upon. The date of the First Closing is
hereinafter referred to as the "First Closing Date." At the First Closing, the
Successor will deliver to the Purchasers certificates representing the number
of Shares set forth under the caption "First Closing" on Attachment 1 to be
purchased by the Purchasers registered in the name of the Purchasers (or their
respective nominees) against payment to the Successor of the full purchase
price for such Shares set forth under the caption "First Closing" on Attachment
1 to be by wire transfer of immediately available funds or by cancellation of
indebtedness or any combination thereof; PROVIDED, HOWEVER, that the ratio of
the aggregate purchase price of the Series B Preferred purchased at the First
Closing to the aggregate purchase price of the Series C Preferred and Series D
Preferred purchased at the First Closing shall be 5 to 1, and for any Purchaser
who is committed to purchase Series D Preferred as set forth on Attachment 1,
the ratio of the purchase price for such Purchaser's Series C Preferred
purchased at such closing to the purchase price for such Purchaser's Series D
Preferred purchased at such closing shall equal the ratio of such Purchaser's
committed number of Series C Preferred to such Purchaser's committed number of
Series D Preferred, each as set forth opposite such Purchaser's name on
Attachment 1.
2.2. Subsequent Closings. From time to time, the Funding Committee of the
Successor may by written notification require the Purchasers to purchase, or
the Purchaser upon the election of the holder of a majority of the aggregate
number of outstanding shares of Series B Preferred, Series C Preferred and
Series D Preferred, shall have the right to purchase, any or all of the Shares
not purchased at the First Closing. Upon receipt of such a demand for funding
or the making of such election, the Purchasers shall purchase the amount of
Shares set forth in such notification or subject to such election; PROVIDED,
HOWEVER, that each Purchaser's obligation to purchase such Shares shall be
several and not joint; AND PROVIDED FURTHER that each Purchaser's obligation
shall be to purchase that number of such Shares that bears the same ratio to
the total number of such Shares as such Purchaser's committed number of Shares
bears to the total number of Shares as set forth on Attachment 1. The closing
of the purchase and sale of such Shares under this Agreement (each, a
"Subsequent Closing" and collectively, the "Subsequent Closings") shall be held
at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New
York 10022 at 10:00 a.m., Eastern Standard Time, on the fifth business day
following the Purchaser's receipt of notice of the Successor's request or
delivery to Successor of the Purchasers' election, or at such other time and
place as the Successor and the Purchasers may mutually agree upon. The date of
any such Subsequent Closing is hereinafter referred to as a "Subsequent Closing
Date." At any such Subsequent Closing, the Successor will deliver to the
Purchasers certificates representing the amount of Shares purchased by the
Purchasers registered in the name of the Purchasers (or their respective
nominees) against payment to the Successor of the full purchase price for such
amount of Shares by wire transfer of immediately available funds or by
cancellation of indebtedness or any combination thereof; PROVIDED, HOWEVER,
that the ratio of the aggregate purchase price of the Series B Preferred
purchased at any such Subsequent Closing to the aggregate purchase price of the
Series C Preferred and Series D Preferred purchased at such Subsequent Closing
shall be 5 to 1, and for any Purchaser who is committed to purchase Series D
Preferred as set forth on Attachment 1, the ratio of the purchase price for
such Purchaser's Series C Preferred purchased at such closing to the purchase
price for such Purchaser's Series D Preferred purchased at such closing shall
equal the ratio of such Purchaser's committed number of Series C Preferred to
such Purchaser's committed number of Series D Preferred, each as set forth
opposite such Purchaser's name on Attachment 1.
2.3. Conditions to Obligations. If at the First Closing or any Subsequent
Closing any of the conditions specified in Section 5.1 of this Agreement shall
not have been fulfilled, the Purchasers shall, at their election, be relieved
of all of their obligations under this Agreement in connection with the First
Closing or such Subsequent Closing, as applicable, without thereby waiving any
other rights the Purchasers may have by reason of such failure or such
non-fulfillment. If at the First Closing or any Subsequent Closing any of the
conditions specified in Section 6 of this Agreement shall not have been
fulfilled, the Successor shall, at its election, be relieved of all of its
obligations under this Agreement in connection with the First Closing or such
Subsequent Closing, as applicable, without thereby waiving any other rights it
may have by reason of such failure or non-fulfillment.
2.4. Failure to Purchase.
(a) Notwithstanding any other remedy available to the Company or any
other Purchaser or any other provision of this Agreement, the Rights Agreement
or the Voting Agreement, the failure by a Purchaser to pay in full the amount
due from such Purchaser (the "Defaulting Purchaser") at the First Closing or
any Subsequent Closing shall result in the Defaulting Purchaser's loss of (i)
rights to designate and maintain a director under the Voting Agreement and (ii)
with respect to the Series B Preferred, Series C Preferred and Series D
Preferred held by the Defaulting Purchaser, all observation rights under
Section 17 of the Rights Agreement; PROVIDED, HOWEVER, that the loss of the
rights described in the foregoing clause (ii) and the Rights Forfeiture (as
defined in Section 2.4(c) hereof) shall not apply to any Series B Preferred,
Series C Preferred or Series D Preferred which any Purchaser (other than a
Defaulting Purchaser) shall have purchased from a Defaulting Purchaser pursuant
to the provisions of this Section 2.4 (and to the extent that there shall have
been a loss of those rights, including a loss of rights as a result of a Rights
Forfeiture, prior to such purchase, those rights shall be retroactively
reinstated) if one or more Purchasers shall have paid to the Company on behalf
of the Defaulting Purchaser, through the purchase of Shares at or subsequent to
the First Closing or a Subsequent Closing, as the case may be, pursuant to the
procedures set forth in this Agreement, the amount due from the Defaulting
Purchaser. In the event of any such failure by a Defaulting Purchaser to so
fund, (i) all Purchasers who have not failed to fund as required hereunder
shall have the right, which right shall continue for a period of one year from
the occurrence of such failure, to purchase their pro rata share of the Shares
previously purchased pursuant to this Agreement by the Defaulting Purchaser, at
a price equal to 50% of the aggregate price paid by the Defaulting Purchaser
for such Shares, plus any accrued and unpaid dividends thereon, or if such
price is not legally enforceable, the minimum price enforceable under law (and
shall have the right to purchase their pro rata share of any Shares not so
purchased by other Purchasers entitled to purchase such Shares) and (ii) all
Purchasers who have not so failed to fund shall have the right, but not the
obligation, to purchase their pro rata share of such unpurchased Shares (and
shall have the right to purchase their pro rata share of any Shares not so
purchased by other Purchasers entitled to purchase such Shares).
(b) Upon a Defaulting Purchaser's failure to purchase Shares at the
First Closing or any Subsequent Closing, the Successor shall give written
notice of such failure to each of the other Purchasers. Each of the other
Purchasers shall have ten (10) business days from its receipt of such notice to
purchase a portion or all of such unpurchased Shares (the Shares so purchased
by the other Purchasers pursuant to this Section 2.4(b) being referred to
herein as the "Purchased Default Shares"). The penalties set forth in the first
sentence of Section 2.4(a) shall only apply to a Defaulting Purchaser if any of
such Defaulting Purchaser's unpurchased Shares have not been purchased by the
other Purchasers at the end of the tenth (10th) business day after the last
Purchaser receives notice under this Section 2.4(b).
(c) If a Defaulting Purchaser shall fail to purchase Shares at the
First Closing or any Subsequent Closing and the Shares which the Defaulting
Purchaser shall fail to purchase are not purchased by the Defaulting Purchaser
or do not become Purchased Default Shares, in each case, within twenty (20)
days following the date of the First Closing or Subsequent Closing, as the case
may be, then the Successor may, at any time subsequent to the expiration of the
foregoing twenty (20) day period, provide the Defaulting Purchaser with notice
of its intention to elect to impose the Rights Forfeiture (as defined below) if
the Shares are not purchased by the Defaulting Purchaser or the Shares do not
become Purchased Default Shares within sixty (60) days following the date on
which such notice is given to the Defaulting Purchaser. If upon expiration of
the foregoing sixty (60) day period, any such Shares have not been purchased by
the Defaulting Purchaser or become Purchased Default Shares, such Shares shall
automatically, upon expiration of such sixty (60) day period, be subject to the
Rights Forfeiture. For purposes of this Section 2.4, the term "Rights
Forfeiture" shall mean the forfeiture of (i) the Preemptive Right set forth in
Section 13 of the Rights Agreement, (ii) the rights of first offer and co-sale
set forth in Section 14 of the Rights Agreement, and (iii) the right to be an
Initiating Preferred Holder (as defined in the Rights Agreement).
Section 3. Representations and Warranties of the Company.
Except as set forth on the Disclosure Schedule attached hereto as Exhibit
B, the Company and the Successor hereby represent and warrant to each of the
Purchasers as follows:
3.1. Organization and Standing; Certificate and Bylaws; Subsidiaries.
(a) The Company is a limited liability company duly organized and
validly existing under, and by virtue of, the laws of the State of New York and
is in good standing under such laws. As of the date of this Agreement, the
Company has three subsidiaries: OnSite Access LLC, a New York limited liability
company, OnSite Access Local LLC, a New York limited liability company, and
Glass Circuits LLC, a New York limited liability company (each, a "Subsidiary"
and together, the "Subsidiaries") and the Company does not own, directly or
indirectly, any capital stock or equity securities of any corporation or have
any direct or indirect equity or ownership interest in any business,
corporation, partnership, limited liability company, joint venture or entity
other than the Subsidiaries. The Subsidiaries were duly formed in compliance
with and are validly existing and in good standing under the laws of the State
of New York and none of the securities or ownership interests issued, offered
or sold by any of the Subsidiaries was issued, offered or sold in violation of
any applicable federal or state laws, including, without limitation, all
federal securities and state securities or blue sky laws or the rules or
regulations promulgated thereunder and all federal, state and local licensing
regulations. The Company owns 100% of the ownership interests in the
Subsidiaries free and clear of any liens, security interests or other
encumbrances other than any liens, security interest or encumbrance relating to
or granted in connection with the Bridge Financing or the Interim Financing
(each as defined below) or any restrictions on transfer imposed by law. There
are no agreements, contracts or obligations (whether written or oral), options,
rights or other commitments of any character relating to the issuance of any
membership interests or other securities by any of the Subsidiaries. The
Company and the Subsidiaries have the requisite corporate power to own and
operate their properties and assets, and to carry on their businesses as
presently conducted, except where the failure to have such power would not have
a material adverse effect (financial or otherwise) on the business, property,
prospects, assets or liabilities of the Company, the Successor and the
Subsidiaries taken as a whole (such an effect, a "Material Adverse Effect").
The Company and the Subsidiaries are qualified or licensed as a foreign limited
liability company in all jurisdictions where the nature of their businesses or
property makes such qualification or licensing necessary except where the
failure to do so would not have a Material Adverse Effect. The Company has made
available to the Purchasers copies of its operating agreement and other
governing documents, copies of the operating agreements and other governing
documents of the Subsidiaries, copies of the Certificate of Incorporation and
Bylaws of the Successor and the documents to be used to effect and govern the
Merger. Said copies are true, correct and complete and contain all amendments,
modifications and restatements. The current officers and directors (or
equivalent) of the Company and each of the Subsidiaries are as set forth in
Section 3.1(a) of the Disclosure Schedule. (b) ______ The Successor is on the
First Closing Date, and immediately following the consummation of the Merger
will be, a corporation duly organized and validly existing under, and by virtue
of, the laws of the State of Delaware and will be in good standing under such
laws. Upon consummation of the Merger, all right, title and interest in and to
all of the business and assets of the Company, including all interests of the
Company in the Subsidiaries will be transferred to the Successor. Upon
consummation of the Merger, the Merger will have been consummated in accordance
with all applicable law, including, without limitation, all federal securities
and state securities or blue sky laws, federal, state and local licensing
regulations and the governing documents of the Company. Upon consummation of
the Merger, (i) the Successor will own 100% of the ownership interests in the
Subsidiaries free and clear of all liens, security interests or other
encumbrances other than any liens, security interest or encumbrance relating to
or granted in connection with the Bridge Financing or the Interim Financing
(each as defined below), or any restrictions on transfer imposed by law and
will not own, directly or indirectly, any capital stock or equity securities of
any corporation or have any direct or indirect equity or ownership interest in
any business, corporation, partnership, limited liability company, joint
venture or entity other than the Subsidiaries, (ii) there will be no
agreements, contracts or obligations (whether written or oral), options, rights
or other commitments of any character relating to the issuance of any
membership interests or other securities by any of the Subsidiaries, (iii) the
Successor will have the requisite corporate power to own and operate its
properties and assets, and to carry on its business as then conducted and as
proposed to be conducted, except where the failure to have such power would not
have a Material Adverse Effect, (iv) the Successor will be qualified or
licensed as a foreign corporation in all jurisdictions where the nature of its
business or property makes such qualification or licensing necessary, except
where the failure to do so would not have a Material Adverse Effect, (v) the
directors of the Successor will be as set forth in Exhibit I attached hereto
and the officers and managers of each of the Subsidiaries will be as set forth
in Section 3.1(a) of the Disclosure Schedule, except to the extent changes have
been approved by the Purchasers, and (vi) all persons who will have observation
rights at meetings of the board of directors of the Successor will be those
persons specified in Section 3.1(b) of the Disclosure Schedule.
3.2. Corporate Power.
(a) The Company has all requisite legal power to execute and deliver
this Agreement and to carry out and perform its obligations under the terms of
this Agreement.
(b) Following the consummation of the Merger, the Successor will have
all requisite legal and corporate power to sell and issue the Shares hereunder,
to issue the Common Stock issuable upon conversion of the Series C Preferred
and Series D Preferred and to carry out and perform its obligations under the
terms of the Related Documents (as herein defined).
3.3. Capitalization. The authorized capital stock of the Successor will
consist, immediately prior to the First Closing, of (i) 75,000,000 shares of
Common Stock, of which 4,131,000 shares will be issued and outstanding, and
(ii) 81,330,745 shares of Preferred Stock, 5,869,000 of which will be
designated Series A Preferred Stock, of which 5,869,000 shares will be
outstanding, 50,000,000 of which will be designated Series B Preferred, none of
which will be outstanding, 25,069,634 of which will be designated Series C
Preferred, none of which will be outstanding and 392,111 of which will be
designated Series D Preferred, none of which will be outstanding. Immediately
prior to the First Closing, all issued and outstanding shares will have been
duly authorized and validly issued, and with respect to the Series B Preferred,
Series C Preferred and Series D Preferred, upon payment in accordance with this
Agreement, will be fully paid and nonassessable. Upon consummation of the
Merger, the Successor will have reserved (i) 5,869,000 shares of Common Stock
for issuance upon conversion of the Series A Preferred Stock (ii) 25,069,634
shares of Common Stock for issuance upon conversion of the Series C Preferred
and (iii) 392,111 shares of Common Stock for issuance upon conversion of the
Series D Preferred. Upon consummation of the merger, the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred will have the
rights, preferences, privileges and restrictions set forth in the Certificate
of Designation. All outstanding securities of the Company were issued in
compliance with applicable federal and state securities laws. Upon consummation
of the Merger, (i) the Successor will have reserved 9,096,309 shares of Common
Stock for issuance under the 1999 Stock Option Plan which will have been
approved and adopted by the board of directors of the Successor, and (ii)
options to purchase an aggregate of 2,596,309 shares of Common Stock will be
outstanding under the 1999 Stock Option Plan, none of which will have been
exercised. Except for options outstanding under the 1999 Stock Option Plan as
described above, the Series A Preferred, the Series C Preferred, the Series D
Preferred and any preemptive rights provided in the Related Documents, there
will not be any preemptive rights, options or warrants or other conversion or
exchange privileges or rights outstanding on the First Closing Date to purchase
any securities of the Successor. Upon consummation of the Merger, the Successor
will not be obligated to repurchase any shares of its capital stock or any
other securities pursuant to any contract, commitment or arrangement
(contingent or otherwise) other than as provided in the Certificate of
Designation. On the First Closing Date, the Successor will not be a party to,
or subject to, any agreement or understanding which affects or relates to the
voting or giving of written consents with respect to any security of the
Successor other than the Voting Agreement (as defined herein).
3.4. Authorization.
(a) All action on the part of the Company, its officers, directors and
members necessary for the authorization, execution, delivery and, to the extent
applicable, performance of this Agreement, the Certificate of Designation, the
Investor Rights Agreement in the form attached hereto as Exhibit C (the "Rights
Agreement"), the Voting Agreement in the form attached hereto as Exhibit D (the
"Voting Agreement"), and any other agreements, certificates, instruments or
documents to be executed and delivered in connection herewith or therewith or
pursuant hereto or thereto (collectively, with the Certificate of Designation,
the Rights Agreement and the Voting Agreement, the "Related Documents") by the
Company has been taken. Prior to the First Closing, all corporate action on the
part of the Successor and its officers, directors and stockholders necessary
for the authorization, sale, issuance and delivery of the Shares (and the
Common Stock issuable upon conversion of the Series C Preferred and the Series
D Preferred) and the performance of all of the Successor's obligations under
this Agreement and the Related Documents will have been taken. This Agreement,
when executed and delivered by the Company and the Successor, shall constitute
the valid and binding obligation of the Company and the Successor, enforceable
against the Company and the Successor in accordance with its terms, except to
the extent that enforceability may be limited by (i) applicable bankruptcy,
insolvency, moratorium, fraudulent conveyance and other similar laws affecting
creditors' rights and remedies generally, and (ii) general principles of
equity. The Related Documents, when executed and delivered by the Company and
the Successor, as the case may be, shall constitute valid and binding
obligations of the Company and the Successor, as applicable, enforceable
against the Company and the Successor, as the case may be, in accordance with
their terms except to the extent that enforceability may be limited by (i)
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance and other
similar laws affecting creditors' rights and remedies generally, and (ii)
general principles of equity. The Shares, when issued in compliance with the
provisions of the Certificate of Designation, will be validly issued and will
be fully paid and nonassessable and will have the rights, preferences and
privileges described in the Certificate of Designation.
(b) Upon the issuance of the Series C Preferred and Series D
Preferred, the shares of Common Stock issuable upon conversion of the Series C
Preferred and the Series D Preferred will be duly and validly reserved and,
when issued in compliance with the provisions of the Certificate of
Designation, will be validly issued, fully paid and nonassessable, and the
Shares and such Common Stock will be free of all liens or encumbrances other
than those created by or imposed upon the holders thereof through no action of
the Company or the Successor; PROVIDED, HOWEVER, that the Shares (and the
Common Stock issuable upon conversion of the Series C Preferred and the Series
D Preferred) may be subject to restrictions on transfer under state or federal
securities laws as set forth herein or other federal or state regulatory laws
and restrictions under the Related Documents. The Shares will not be subject to
any preemptive rights and will not be subject to any rights of first refusal
other than as provided in the Related Documents. Following consummation of the
Merger, no further corporate action on the part of the Successor, its directors
or its stockholders will be necessary in connection with the issuance and
delivery of the shares of Common Stock by the Successor issuable upon
conversion of the Series C Preferred and the Series D Preferred. Section 3.4 of
the Disclosure Schedule contains a true and accurate list of holders of record
of all shares of capital stock of the Successor that will be outstanding
immediately following consummation of the Merger and any other securities that
will be outstanding immediately following consummation of the Merger which are
convertible or exchangeable into any capital stock of the Successor, including,
without limitation, any warrants or options to purchase Common Stock or any
such securities, together with the number of shares or other securities held by
each.
3.5. Financial Statements. The Company has made available to the Purchasers
draft forms of the consolidated financial statements (including balance sheet,
income statement and statement of cash flows) of the Company as of December 31,
1998 and for the fiscal year ended December 31, 1998 and the Company's
unaudited consolidated financial statements (including balance sheet, income
statement and statement of cash flows) as of February 28, 1999 and for the
two-month period ended February 28, 1999 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and fairly present the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein, except that the unaudited Financial Statements for the
two-month period ended February 28, 1999 may not contain all footnotes required
by generally accepted accounting principles. Except as set forth in any of the
Financial Statements or the notes thereto, the Company has no liabilities,
contingent or otherwise, other than (i) the Bridge Financing or the Interim
Financing, (ii) liabilities incurred in the ordinary course of business
subsequent to February 28, 1999 and (iii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate are not
material to the financial condition or operating results of the Company. The
Company maintains a system of internal accounting controls that will enable it
to prepare financial statements in accordance with generally accepted
accounting principles.
3.6. Changes. Except for the consummation of the bridge financing provided
to the Predecessor by RSI-OSA Holdings, Inc. and JAH Realties, L.P., on
February 10, 1999 (the "Bridge Financing") and the Interim Financing, since
February 28, 1999, there has not been:
(a) any change in the business, assets, properties, liabilities,
condition (financial or otherwise) or operating results of the Company or any
of the Subsidiaries from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not been, in the
aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, assets, properties,
liabilities, prospects, condition (financial or otherwise) or operating results
of the Company or any of the Subsidiaries;
(c) any waiver (or partial waiver) or compromise by the Company or any
of the Subsidiaries of a material right or of a material debt owed to it, other
than waivers granted in the ordinary course of business which, individually and
in the aggregate, would not have a Material Adverse Effect;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or any of the Subsidiaries, except in
the ordinary course of business and that is not material to the business,
properties, prospects or financial condition of the Company and the
Subsidiaries taken as a whole;
(e) any change to a material contract, agreement or arrangement of the
Company or any of the Subsidiaries by which the Company or any of the
Subsidiaries or any of their assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director, stockholder, member or consultant;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Company or any of
the Subsidiaries;
(h) any sale, assignment or transfer of any tangible assets of the
Company or any of the Subsidiaries except for the sale of inventory in the
ordinary course of business in amounts consistent with past practices;
(i) any resignation or termination of employment of any officer or key
employee of the Company or any of the Subsidiaries; and the Company is not
aware of any impending resignation or termination of employment of any such
officer or key employee;
(j) any mortgage, pledge, transfer of a security interest in or lien,
created by the Company or any of the Subsidiaries with respect to any of their
properties or assets, except liens for taxes not yet due or payable;
(k) any declaration, setting aside or payment or other distribution
with respect to any of the membership interests in the Company or any of the
Subsidiaries or any direct or indirect redemption, purchase or other
acquisition of any of such membership interests by the Company or any of the
Subsidiaries;
(l) any receipt by the Company or any of the Subsidiaries of notice
that there has been a cancellation of an order for their services or a loss of
a customer (or any building owner under contract) or any supplier or service
provider of the Company or any of the Subsidiaries, the cancellation or loss of
which would have a Material Adverse Effect;
(m) any labor trouble at the Company or any of the Subsidiaries which
could have a Material Adverse Effect;
(n) any change in the line of business of the Company or any of the
Subsidiaries;
(o) any payment, loan or advance of any amount by the Company or any
of the Subsidiaries to, or any sale, transfer or lease of any properties or
assets by the Company or any of the Subsidiaries, or any other agreement or
arrangement entered into by the Company or any of the Subsidiaries with, any of
its officers, directors, stockholders, members or other affiliates or any
consultants, except (i) for normal business advances to employees consistent
with past practice, (ii) pursuant to written agreements existing as of February
28, 1999 (all of which are listed in Section 3.6(o) of the Disclosure
Schedule), and (iii) for payment of compensation to officers.
(p) to the knowledge of the Company, any other event or condition of
any character which has or could be reasonably expected to have a Material
Adverse Effect; or
(q) any binding arrangement or commitment by the Company to do any of
the things described in subsections (a) through (p) of this Section 3.6.
3.7. Patents and Other Intangible Assets.
(a) The Company and the Subsidiaries have, and immediately following
the consummation of the Merger the Successor will have, sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for
their businesses as now conducted by the Company. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company, the Successor or any of the Subsidiaries bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
(b) Neither the Company nor the Successor nor any of the Subsidiaries
has received any written communications alleging that the Company, the
Successor or any of the Subsidiaries have violated or, by conducting their
businesses as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. Neither the Company nor the Successor nor any of
the Subsidiaries is aware that any of their employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or the Successor or the
Subsidiaries or that would conflict with the Company's or the Successor's or
the Subsidiaries' businesses as proposed to be conducted. Neither the execution
nor the delivery of this Agreement, the Rights Agreement or the Voting
Agreement, nor the carrying on of the Company's or the Successor's or the
Subsidiaries' businesses by the employees of the Company or the Successor or
the Subsidiaries, nor the conduct of the Company's or the Successor's or the
Subsidiaries' businesses as proposed, will, to the knowledge of the Company or
the Successor, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which, to the knowledge of the Company or the Successor, any
of such employees is now obligated. Neither the Company nor the Successor
believes it is or will be necessary to utilize any inventions of any of the
Company's or the Successor's or the Subsidiaries' employees (or people they
currently intend to hire) made prior to their employment by the Company or the
Successor or the Subsidiaries.
3.8. Compliance with Other Instruments, None Burdensome, Etc. Neither the
Company nor the Successor nor any of the Subsidiaries is in violation, breach
or default (with or without the passage of time and giving of notice or both)
of (i) any term of its operating agreement, certificate of incorporation or
bylaws or other organizational document, each as amended and in effect on and
as of the First Closing Date or (ii) of any term or provision of any material
mortgage, indebtedness, indenture, contract, agreement or instrument to which
the Company, the Successor or any of the Subsidiaries or their properties are
bound which violation, breach or default could have a Material Adverse Effect.
The Company, the Successor and the Subsidiaries are in compliance with all
judgments, decrees, governmental orders, laws, statutes, rules and regulations
by which they are bound or to which they or any of their properties or assets
is subject, except where the failure to be in such compliance would not have a
Material Adverse Effect. The execution, delivery and performance of and
compliance with this Agreement and the Related Documents, and the issuance of
the Shares and the Common Stock issuable upon conversion of the Series C
Preferred and the Series D Preferred, have not resulted and will not result in
any violation of, or conflict with, or constitute a breach or default (with or
without the passage of time and giving of notice or both) under, (a) the
operating agreement of the Company or any of the Subsidiaries or the
certificate of incorporation or bylaws of the Successor or (b) any mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment, decree,
order, statute, rule, law or regulation applicable to the Company or any of the
Subsidiaries, which violation, conflict, breach or default could have a
Material Adverse Effect, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the material properties or assets of
the Company or any of the Subsidiaries.
3.9. Litigation, Etc. There are no actions, suits, proceedings or
investigations pending against the Company, the Successor or any of the
Subsidiaries or their properties before any court or governmental agency. There
are no actions, suits, proceedings or investigations overtly threatened against
the Company, or to the knowledge of the Company, overtly threatened or pending
against the officers, managing members or directors of the Company, the
Successor or any of the Subsidiaries before any court or governmental agency,
which would have a Material Adverse Effect. There are no actions, suits,
proceedings or investigations pending or overtly threatened against the
Company, the Successors or any of the Subsidiaries or their properties (nor, to
the knowledge of the Company, against officers, managing members or directors
of the Company or any of the Subsidiaries) which question the validity of this
Agreement, the Rights Agreement, the Voting Agreement or any other Related
Document or any action taken or to be taken in connection herewith or
therewith. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor
known to the Company), involving the prior employment of any of the Company's,
the Successor's or the Subsidiaries' employees, their use in connection with
the Company's, the Successor's or the Subsidiaries' businesses of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Neither the Company, the Successor nor any of the Subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation commenced by the Company, the Successor or any of
the Subsidiaries currently pending or that the Company, the Successor or any of
the Subsidiaries intend to initiate.
3.10. Employees. No employee or consultant of the Company, the Successor or
any of the Subsidiaries is in violation of any term of any employment,
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such person with the Company, the
Successor or any of the Subsidiaries or, to the knowledge of the Company or the
Successor, with any other party because of the nature of the business conducted
or to be conducted by the Company, the Successor or the Subsidiaries. There are
no Employee Plans or Compensation Arrangements (each as defined below) which
are not listed in Section 3.10 of the Disclosure Schedule. To the knowledge of
the Company and the Successor, each Employee Plan (as defined below) and
Compensation Arrangement (as defined below) has been administered in compliance
with its own terms and in material compliance with the provisions of ERISA, the
Code (each as defined below) and any other applicable federal, state or other
laws. Neither the Company, the Successor, any of the Subsidiaries nor any ERISA
Affiliate (as defined below) is contributing to, is required to contribute to,
or has contributed within the last six (6) years to or otherwise has any
liability with respect to, any: (i) Employee Plan subject to Title IV of ERISA;
(ii) Employee Plan or Compensation Arrangement that provides medical or death
benefit coverage to former employees of the Company or the Successor or any of
the Subsidiaries, except to the extent required by Section 4980B of the Code;
or (iii) multiple employer welfare arrangement as defined in ERISA Section
3(40). Neither the Company, the Successor nor any of the Subsidiaries has
entered into any agreement with any employee, member or director which provides
for any payment or acceleration of benefits upon the occurrence of (i) any sale
of membership or other ownership interests, stock or assets of the Company, the
Successor or any of the Subsidiaries; (ii) any change of control of the
Company, the Successor or any of the Subsidiaries; or (iii) any registration of
the Company's or the Successor's securities under the Securities Act. Neither
the execution and delivery of this Agreement and the Related Documents nor the
consummation of the transactions contemplated hereby or thereby will (i) result
in any payment (including, without limitation, severance or unemployment
compensation) becoming due to any director, member or employee of the Company,
the Successor or any of the Subsidiaries; (ii) result in the acceleration of
vesting under any Employee Plan or Compensation Arrangement; or (iii) increase
any benefits otherwise payable under any Employee Plan. For purposes of this
Agreement, the following terms shall have the meaning indicated: (i) "Employee
Plan" shall mean any retirement or welfare plan or arrangement, or any other
employee benefit plan as defined in Section 3(3) of ERISA to which the Company,
the Successor, any of the Subsidiaries or any ERISA Affiliate contributes or
contributed or to which the Company, the Successor, any of the Subsidiaries or
any ERISA Affiliate sponsors or sponsored, maintains or maintained or otherwise
is or was bound; (ii) "Code" shall mean the Internal Revenue Code of 1986, as
amended, any successor thereto and any regulations promulgated thereunder;
(iii) "Compensation Arrangement" shall mean any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to present or former employees, officers, directors, members and
stockholders of the Company, the Successor, any of the Subsidiaries or any
ERISA Affiliate any compensation or other benefits, whether deferred or not,
including, but not limited to, any bonus or incentive plan, stock rights plan,
deferred compensation arrangement, life insurance, stock purchase plan,
severance pay plan and any other employee fringe benefit plan; (iv) "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as amended, any
successor thereto and any regulations promulgated thereunder; and (v) "ERISA
Affiliate" shall mean any trade or business related to the Company, the
Successor or the Subsidiaries under the terms of Sections 414(b), (c), (m) or
(o) of the Code.
3.11. Consent, Etc. No consent, approval, license or authorization of or
designation, declaration, registration or filing with any court or governmental
authority or any party to any Contract (as defined in Section 8.14(a) hereof)
or any other third party is or was required to be obtained by the Company, the
Successor or any of the Subsidiaries in connection with (i) the valid execution
and delivery of this Agreement and the Related Documents, (ii) the Merger,
(iii) the offer, sale or issuance of the Shares (and the Common Stock issuable
upon conversion of the Series C Preferred and the Series D Preferred) or (iv)
the consummation of any other transaction contemplated by this Agreement, the
Rights Agreement or the Voting Agreement, except for filing of the Certificate
of Designation in the office of the Secretary of State of the State of
Delaware, and the compliance with applicable blue sky laws, each of which will
have been, as of the First Closing, duly and timely obtained.
3.12. Offering. Subject to the accuracy of the Purchasers' representations
in Section 4 of this Agreement, the offer, sale and issuance of the Shares to
be issued in conformity with the terms of this Agreement and the issuance of
the Common Stock to be issued upon conversion of the Series C Preferred and the
Series D Preferred, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"). Neither the Company, the Successor nor anyone acting on
behalf of the Company or the Successor has sold Shares or similar securities or
will sell, offer to sell or solicited offers to buy the Shares or similar
securities to, or solicit offers with respect thereto from, any Person so as to
bring the issuance and sales of the Shares and the shares of Common Stock
issuable upon conversion of the Series C Preferred and the Series D Preferred
under the registration provisions of the Securities Act or applicable state
securities laws.
3.13. Brokers or Finders. Neither the Company, the Successor nor any of the
Subsidiaries has incurred, and neither the Company, the Successor nor any of
the Subsidiaries will incur, directly or indirectly, as a result of any action
taken by the Company, the Successor or any of the Subsidiaries, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
3.14. Disclosure. Except with respect to the Projections (as defined in
Section 3.24 hereof), no information provided by the Company to any Purchaser
in connection with such Purchaser's due diligence review of the Company or the
Successor or the transactions contemplated by this Agreement or the Related
Documents contains any untrue statement of a material fact or knowingly omits
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
3.15. No Conflict of Interest. Neither the Company, the Successor nor any
of the Subsidiaries is indebted, directly or indirectly, to any of their
officers, directors, members or holders of 5% or more of the equity or voting
power of the Company, the Successor or any of the Subsidiaries or to their
respective spouses, parents, children or siblings or their respective
affiliates, in any material amount whatsoever, except for reimbursement for
ordinary business travel and other expenses reasonably incurred in the ordinary
course of business, indebtedness resulting from the Bridge Financing and the
financing provided to the Company by RSI-OSA Holdings, Inc. on February 20,
1998 (the "1998 Reckson Financing"). None of said officers, directors, members
or holders, or any members of their immediate families or, to the knowledge of
the Company or the Successor, any of their affiliates, are indebted, directly
or indirectly, to the Company, the Successor or any of the Subsidiaries or, to
the knowledge of the Company or the Successor, has any direct or indirect
ownership interest (other than the ownership of less than 2.5% of the
outstanding shares of common stock of a publicly traded company) in any firm or
corporation with which the Company or the Successor or any of the Subsidiaries
is affiliated or with which the Company or the Successor or any of the
Subsidiaries has a business relationship, or any firm or corporation which
competes with the Company or the Successor or the Subsidiaries except that
officers, directors, members or stockholders of the Company or the Successor or
the Subsidiaries may own stock in publicly traded companies which may compete
with the Company or the Successor or the Subsidiaries. To the knowledge of the
Company and the Successor, no officer, director, member or holder of 5% or more
of the equity or voting power of the Company or the Successor or any of the
Subsidiaries or any member of their immediate families or any of their
respective affiliates, is, directly or indirectly, interested in any agreements
or contracts with the Company, the Successor or any of the Subsidiaries, except
(i) to the extent any of the foregoing is a party to the Related Documents,
(ii) for agreements with respect to the purchase of the Successor's common
stock by such persons pursuant to options outstanding under the Successor's
1999 Stock Option Plan, (iii) for agreements relating to the 1998 Reckson
Financing, the Bridge Financing or the Intercompany Agreement dated as of
February 20, 1998 between OnSite Ventures, L.L.C. and OnSite Commerce and
Content LLC (the "Intercompany Agreement"), and (iv) for contracts between the
Company and Reckson Associates and its subsidiaries relating to the wiring of
buildings owned by Reckson Associates and its subsidiaries, all of which are
listed in Section 3.15 of the Disclosure Schedule. Neither the Company, the
Successor nor any of the Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.16. Agreements.
(a) Except as relates to the Bridge Financing, the Interim Financing
and the 1998 Reckson Financing, neither the Company, the Successor nor any
Subsidiary is a party to or bound by:
(i) any note, bond, debenture or other evidence of indebtedness,
or any contract, agreement, instrument, judgment, order, writ, decree,
commitment or understanding under which it has borrowed any money or issued any
note, bond, debenture or other evidence of indebtedness, or any mortgage,
pledge, security agreement, deed of trust, financing statement or other
document granting any lien, encumbrance or security interest (including liens,
encumbrances or security interests upon properties acquired under conditional
sales, capital leases and other title retention or security devices), or any
guaranty or endorsement (other than endorsements for collection in the ordinary
course of business) of, or other contingent obligations in respect of,
indebtedness for borrowed money or other liabilities or obligations of others,
in any case in excess of $10,000 in principal amount;
(ii) any Contract, instrument, judgment, order, writ, decree,
commitment, arrangement or understanding relating to any joint venture,
partnership or sharing of profits or losses with any person or permitting any
person to utilize any technology, know-how or proprietary information of the
Company, the Successor or any Subsidiary;
(iii) any Contract, instrument, judgment, order, writ, decree,
commitment for the future purchase by the Company, the Successor or any
Subsidiary of any materials, equipment, services, or supplies, which (w)
involves the payment of more than $50,000, (x) continues for a period of more
than six months, (y) by its terms requires the Company, the Successor or any
Subsidiary to purchase the entire output or services of a supplier or (z)
provides that any supplier will be the exclusive supplier of the Company, the
Successor or any Subsidiary;
(iv) any Contract, instrument, proposed transaction, judgment,
order, writ or decree for the sale or other disposition by the Company, the
Successor or any Subsidiary of its assets or properties other than in the
ordinary course of business, or for the merger or consolidation of the Company,
the Successor or any Subsidiary with any other person or entity other than the
Merger;
(v) any Contract, instrument, judgment, order, writ or decree
containing covenants purporting to limit the freedom of the Company, the
Successor or any Subsidiary to compete in any line of business or in any
geographic area;
(vi) any Contract, instrument, judgment, order, writ or decree not
elsewhere specifically disclosed pursuant to this Agreement involving the
payment or receipt by the Company, the Successor or any Subsidiary of more than
$50,000 per year or $150,000 over the term thereof;
(vii) any Contract with a building owner which provides for
payment during the term of the Contract of more than $25,000 or, when combined
with any other such Contracts and the Contracts referred to in clauses (viii)
and (ix) of this Section 3.16, of more than $100,000 in the aggregate;
(viii) any Contract with a consultant which provides for payment
during the term of the Contract of more than $25,000 or, when combined with any
other such Contracts and the Contracts referred to in clauses (vii) and (ix) of
this Section 3.16, of more than $100,000 in the aggregate; or
(ix) any Contract with an incumbent local exchange carrier which
provides for payment during the term of the Contract of more than $25,000 or,
when combined with any other such Contracts and the Contracts referred to in
clauses (vii) and (viii) of this Section 3.16, of more than $100,000 in the
aggregate.
(b) Copies of all Contracts identified in Section 3.16 of the
Disclosure Schedule have been made available to counsel for the Purchasers.
Each of such Contracts, (collectively, the "Scheduled Contracts") constitutes a
valid and binding obligation of the Company, the Successor or a Subsidiary and
is in full force and effect and the consummation of the transactions
contemplated by the Merger or this Agreement will not (i) result in any breach,
default, impairment or forfeiture of any rights thereunder or (ii) require the
approval, consent, or act of, or the making of any declaration, filing or
registration with, any other party. The Company, the Successor or its
Subsidiary, as the case may be, has fulfilled and performed in all material
respects its obligations under each of the Scheduled Contracts required to be
performed prior to the date hereof and will so fulfill and perform such
obligations required to be performed on or prior to the First Closing Date and
neither the Company, the Successor nor any Subsidiary has received any written
notification of any breach, or default under any of the Scheduled Contracts
and, to the knowledge of the Company and the Successor, no other party to any
of the Scheduled Contracts has materially breached or defaulted thereunder,
and, to the knowledge of the Company and the Successor, no event has occurred
and no condition or state of facts exists which, with the passage of time or
the giving of notice or both, would constitute such a default or breach by any
such other party. Neither the Company, the Successor nor any Subsidiary is
currently paying liquidated damages in lieu of performance thereunder.
(c) The conduct of the business of the Company, the Successor and the
Subsidiaries as now conducted or as proposed to be conducted does not and will
not violate or breach any provision of any Contract which violation or breach
could result in a Material Adverse Effect.
(d) For the purposes of subsections (a)(i), (a)(iii) and (a)(vii)
through (ix) of this Section 3.16, all indebtedness, liabilities, agreements,
instruments and contracts involving the same person or entity (including
persons or entities the Company knows are affiliated therewith) shall be
aggregated for the purpose of meeting the individual dollar amounts of such
subsections.
3.17. Permits. The Company and the Subsidiaries have, and the Successor
upon consummation of the Merger will have, all franchises, permits, licenses,
and similar authority necessary for the conduct of their businesses as now
being conducted by them (and in the case of the Successor, to be conducted by
it following the Merger), the lack of which could result in a Material Adverse
Effect. Neither the Company, the Successor nor any of the Subsidiaries is in
default under nor, following the Merger, will the Successor be in default
under, any of such franchises, permits, licenses, or other similar authority
which could result in a Material Adverse Effect. The execution, delivery and
performance of and compliance with this Agreement and the Related Documents,
the consummation of the Merger and the issuance of the Shares and the Common
Stock issuable upon conversion of the Series C Preferred and the Series D
Preferred, have not resulted in and will not result in suspension, revocation,
impairment, forfeiture or nonrenewal of any such franchise, permit, license or
similar authority which could result in a Material Adverse Effect.
3.18. Registration Rights, Preemptive Rights and Voting Rights. Except as
provided in the Rights Agreement, neither the Company nor the Successor has
granted or agreed to grant any registration rights, including piggyback
registration rights or preemptive rights, to any person or entity.
3.19. Title to Property and Assets. Except for liens securing obligations
incurred in connection with the Bridge Financing or the Interim Financing, the
Company, the Successor and the Subsidiaries own their properties and assets
free and clear of all mortgages, liens and encumbrances, except such
encumbrances and liens created with the consent of the Company or, that arise
in the ordinary course of business and do not materially impair the Company's,
the Successor's or the Subsidiaries' ownership or use of such properties or
assets. With respect to the properties and assets they lease, the Company, the
Successor and the Subsidiaries are in material compliance with such leases and,
to the knowledge of the Company and the Successor, the other party to any such
lease has not given notice of any material default thereunder. The Real
Property (as defined in Section 8.14(e) hereof) includes sufficient access to
the facilities necessary to conduct the operations of the Company, the
Successor and the Subsidiaries in the manner in which they are currently
conducted. There is no pending or, to the best knowledge of the Company or the
Successor, threatened condemnation or similar proceeding affecting any Real
Property. The use of the Real Property owned by the Company as currently used
is in compliance with applicable zoning and land use laws in all material
respects.
3.20. Insurance.
(a) On the First Closing Date, the Company and the Subsidiaries will
have obtained casualty and liability insurance policies issued by insurers of
recognized responsibility, with extended coverage in such amounts as are (i)
carried by companies in positions similar to the Company and the Subsidiaries
with respect to liability insurance and (ii) sufficient to satisfy any
contracts to which the Company or any of the Subsidiaries are bound and have
paid all premiums due and owing on such policies. Neither the Company nor any
of the Subsidiaries have been refused any insurance coverage sought or applied
for, and the Company has no reason to believe that it will be unable to renew
its existing insurance coverage.
(b) Upon consummation of the Merger, all of the insurance policies
issued to the Company and referred to in Section 3.20(a) will be transferred to
the Successor and Successor will thereafter be entitled to all of the benefits
thereunder to which the Company was entitled immediately prior to the
consummation of the Merger.
3.21. Minute Books. The copies of the minutes of the Company, the Successor
and the Subsidiaries made available to the Purchasers contain an accurate
summary of all actions taken or approved at meetings of members, managers,
stockholders and directors, as the case may be, of the Company, the Successor
and the Subsidiaries and all actions by written consent without a meeting by
the directors, managers, members and stockholders of the Company, the Successor
and Subsidiaries since the respective times of creation of the Company, the
Successor and the Subsidiaries.
3.22. Taxes. The Company, the Successor and the Subsidiaries have filed or
caused to be filed all required Tax Returns with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be
filed by the Company, the Successor or any of the Subsidiaries and all Taxes
shown on such Tax Returns payable by such entity have been properly accrued or
paid to the extent such Taxes have become due or are being contested in good
faith, and for which reserves therefor have been established by the Company in
accordance with generally accepted accounting principles. None of the Company,
the Successor nor any Subsidiary has executed any waiver or extensions of any
statute of limitations on the assessment or collection of any Tax or with
respect to any liability arising therefrom. None of the federal, state or local
income Tax Returns for the Company, the Successor or any of the Subsidiaries
have been audited by any taxing authority, including the United States Internal
Revenue Service. The Merger will qualify as a tax-free reorganization under
Section 368(a) of the Code. For purposes of this Section 3.22, "Taxes" means
any federal, state, or local taxes, assessments, interest, penalties,
deficiencies, fees and other governmental charges or impositions; and "Tax
Return" means any federal, state, or local tax return, report, statement and
other similar filings required to be filed by the Company with respect to
Taxes.
3.23. Labor Agreements and Actions. Neither the Company, the Successor nor
any of the Subsidiaries is bound by or subject to any contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company or the Successor, has sought to represent any of the
employees, representatives or agents of the Company, the Successor or any of
the Subsidiaries. Neither the Company, the Successor nor any of the
Subsidiaries has any collective bargaining agreements covering any of their
employees. Neither the Company, the Successor nor any of the Subsidiaries is
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, the Successor or any of
the Subsidiaries, nor do the Company, the Successor or any of the Subsidiaries
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company, the Successor or
the Subsidiaries is terminable at the will of the Company, the Successor or the
Subsidiaries to the extent permitted by law. The Company, the Successor and the
Subsidiaries have complied with all applicable state and federal equal
employment opportunity and other laws related to employment. Neither the
Company, the Successor nor any of the Subsidiaries has any deferred
compensation, pension, profit sharing, bonus, issuance, severance or other
similar employee benefit plan or obligation covering any of their employees or
plans subject to the Employee Retirement Income Security Act of 1974. Neither
the Company, the Successor nor any of the Subsidiaries has any agreements or
arrangements with persons titled as independent contractors or consultants, as
a result of which, by virtue of the control exercised by the Company, the
Successor or the Subsidiaries, the type of work performed by the persons or any
other circumstances, said persons could reasonably be deemed to be employees of
the Company, the Successor or the Subsidiaries. Neither the Company, the
Successor nor any of the Subsidiaries is engaged in, nor has the Company, the
Successor or any of the Subsidiaries engaged in, any unfair labor practice
which could result in a Material Adverse Effect.
3.24. Projections. All projections and expressions of opinion or
predictions relating to the future sales and financial performance of the
Company, the Successor or the Subsidiaries previously delivered to the
Purchasers by the Company or the Subsidiaries or their representatives (the
"Projections") were made in good faith and prepared on a reasonable basis at
the time prepared by the Company or the Subsidiaries.
3.25. Environmental. Neither the Company, the Successor nor any of the
Subsidiaries has ever caused or permitted any Hazardous Material (as defined in
Section 8.14(c) hereof) to be disposed of on or under any real property owned,
leased or operated by the Company, the Successor or any of the Subsidiaries in
any manner not permitted by all applicable laws and no such real property has
ever been used by the Company, the Successor or any of the Subsidiaries as (a)
a disposal site or permanent storage site for any Hazardous Material or (b) a
temporary storage site for any Hazardous Material. All Hazardous Materials used
or generated by the Company, the Successor or any of the Subsidiaries or, to
the knowledge of the Company and the Successor, any business merged into or
otherwise acquired by the Company and the Successor or any of the Subsidiaries,
have been generated, accumulated, stored, transported, treated, recycled and
disposed of in compliance with all applicable laws and regulations, the
violation of which could result in a Material Adverse Effect. Neither this
Agreement, the Related Documents nor the transactions contemplated hereby and
thereby will result in any obligations for site assessment or cleanup, or
notification to or consent of any governmental agency or third party under any
transaction-triggered Environmental Law (as defined in Section 8.14(b) hereof)
known to the Company or the Successor.
3.26. Confidentiality Agreements. Each Manager (as defined in Section
8.14(d) hereof) of the Company, the Successor and each Subsidiary has entered
into a confidentiality agreement in the form attached to this Agreement as
Exhibit E.
3.27. Compliance with Law. The Company, the Successor and the Subsidiaries
have conducted their businesses and are in compliance with all applicable
federal, state and local laws, statutes, licensing requirements, rules and
regulations, and, to the knowledge of the Company and the Successor, judicial
or administrative decisions applicable to the conduct of their businesses, in
any case, except where such noncompliance would not result in the termination
of, the material impairment or forfeiture of any of the Company's, the
Successor's or the Subsidiaries' rights under, or any payments being made by
the Company, the Successor or its Subsidiaries with respect to any of the
Contracts (as defined in Section 8.14(a) hereof). Neither the Company, the
Successor nor any Subsidiary has received any citations, complaints, consent
orders, compliance schedules or other similar enforcement orders or received
any other notice from any governmental authority or person regarding the
violation of, or failure to comply with, any legal requirements relating to the
operations or any assets or properties of the Company, the Successor and any of
the Subsidiaries that could result in a Material Adverse Effect.
3.28. Business. Neither the Company, the Successor nor any Subsidiary is
(a) engaged in any business other than (i) building riser systems, installing
horizontal wiring to the customers, and installing associated equipment in
multi-tenant office buildings to provide integrated voice, data and enhanced
services to tenants within the buildings, (ii) providing similar integrated
voice, data and enhanced services to small and medium-sized businesses not
within the foregoing buildings, and (iii) paying referral fees to approved
vendors and strategic partners for certain sales brought to the Company; or (b)
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
3.29. Absence of Certain Commercial Practices. Neither the Company, the
Successor nor any of the Subsidiaries nor, to the knowledge of the Company or
the Successor, any officer, director, employee or agent of the Company, the
Successor or any of the Subsidiaries (or any person acting on behalf of any of
the foregoing), has (i) given or agreed to give any gift or similar benefit of
more than nominal value on behalf of the Company, the Successor or any
Subsidiary to any official of any governmental authority (domestic or foreign),
to induce the recipient or his employer to do business, grant favorable
treatment or compromise or forego any claim, (ii) made any payment which is
illegal under prevailing law (regardless of the jurisdiction in which such
payment was made) to promote or retain sales or to help procure or maintain
good relations with suppliers, (iii) engaged in any activity which constitutes
a violation of the Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations promulgated thereunder, (iv) engaged in any practice
violating any United States federal law prohibiting compliance with an
unsanctioned foreign boycott or (v) failed to perform its obligations in any
respect under any contract with, or violated in any material respect any
federal law known to the Company, the Successor or any of the Subsidiaries in
its dealings with, the federal government or any agency or department thereof,
including, but not limited to, any law with respect to conspiracy to defraud,
false claims, conspiracy to defraud the United States, embezzlement or theft of
public money, fraud and false statements, false demands against the United
States, mail fraud, wire fraud, RICO, and truth in negotiations, which failure
or violation would result in a Material Adverse Effect. No such gift or benefit
is required in connection with the operations of the Company, the Successor or
any of the Subsidiaries or their businesses to avoid any fine, penalty, cost,
expense or change in the business, assets, properties, operations or financial
condition of the Company, the Successor or any of the Subsidiaries which would
result in a Material Adverse Effect.
3.30. Small Business Investment Act.
(a) The Company, together with its "affiliates" (as that term is
defined in Title 13 of the United States Code of Federal Regulations) is a
"Small Business" within the meaning of the Small Business Investment Act of
1958, as amended (the "Small Business Investment Act"), and the regulations
promulgated thereunder (including Parts 107 and 121 of Title 13 of the United
States Code of Federal Regulations). The information provided by the Company on
SBA Forms 480, 652 and 1031 delivered in connection herewith is true and
correct.
(b) The proceeds of the transactions contemplated by this Agreement
will be used by the Successor solely to fund working capital and for general
corporate purposes. No portion of such proceeds (i) will be used to purchase
stock in, provide capital to or repay any indebtedness incurred for the purpose
of investing in a company licensed under the Small Business Investment Act,
(ii) will be used to acquire realty or to discharge an obligation relating to
the prior acquisition of realty, (iii) will be used outside the United States
(except to acquire abroad materials and equipment or property rights for use or
sale in the United States), or (iv) will be used for any purpose contrary to
the public interest (including but not limited to activities which are in
violation of law) or inconsistent with free competitive enterprise, in each
case, within the meaning of ss. 107.720 of Title 13 of the United States Code
of Federal Regulations.
(c) Neither the Company's, the Successor's nor any Subsidiary's
primary business activity involves, directly or indirectly, providing funds to
others, the purchase or discounting of debt obligations, factoring or long-term
leasing of equipment with no provision for maintenance or repair, and neither
the Company, the Successor or any Subsidiary is classified under Major Group 65
(Real Estate) or Industry No. 1531 (Operative Builders) of the SIC Manual. None
of the Company's, the Successor's nor any Subsidiary's employees or tangible
assets are located outside of the United States.
3.31. Year 2000. The Company and the Successor have reviewed their
respective operations and those of the Subsidiaries to evaluate the extent to
which the business or operations of the Company, the Successor or any of the
Subsidiaries will be affected by the Year 2000 Problem. As a result of such
review, the Company and the Successor have no reason to believe, and do not
believe, that the Year 2000 Problem will have a Material Adverse Effect;
PROVIDED, HOWEVER, that the Company does not make any representation or
warranty as to the operation of any telecommunications network operated by an
incumbent or competing local exchange carrier which may be affected by the Year
2000 Problem. The "Year 2000 Problem" as used herein means any significant risk
that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems of
any kind will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000.
Section 4. Representations, Warranties and Covenants of the Purchasers.
4.1. Representations and Warranties of the Purchasers. Each Purchaser
hereby represents and warrants to the Company with respect to itself only and
not with respect to any other Purchaser with respect to the purchase of the
Shares to be purchased by it as follows:
(a) Experience. Purchaser has substantial experience in evaluating and
investing in private placement transactions so that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company.
Purchaser, by reason of its business or financial experience or the business or
financial experience of its professional advisors who are unaffiliated with and
who are not compensated by the Company or any affiliate or selling agent of the
Company, directly or indirectly, is aware of the risks and has the capacity to
protect its own interests in connection with the purchase of the Shares under
this Agreement.
(b) Investment. Purchaser is acquiring the Shares and the Common Stock
issuable upon conversion of the Series C Preferred and the Series D Preferred
for investment for Purchaser's own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof in
violation of the federal securities laws. Purchaser understands that the Shares
and the Common Stock issuable upon conversion of the Series C Preferred and the
Series D Preferred have not been, and will not be, registered under the
Securities Act by reason of a specific exemption therefrom, and that any such
exemption will depend, among other things, upon the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement. Purchaser has not been formed for the specific
purpose of acquiring the Shares or the Common Stock issuable upon conversion of
the Series C Preferred and the Series D Preferred.
(c) Rule 144. Purchaser acknowledges that the Shares and the Common
Stock issuable upon conversion of the Series C Preferred and the Series D
Preferred must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration and any applicable state
laws is available. Purchaser is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Successor, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations.
(d) No Public Market. Purchaser understands that no public market now
exists for any of the securities issued by the Company, that the Company has
made no assurances that a public market will ever exist for the Shares or the
Common Stock issuable upon conversion of the Series C Preferred and the Series
D Preferred and that, even if such a public market exists at some future time,
the Company may not then be satisfying the current public information
requirements of Rule 144.
(e) Access to Data. Purchaser and its representatives have met with
representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions raised by Purchaser or
its representatives concerning the transaction have been answered to the
satisfaction of Purchaser and its representatives. Purchaser's decision to
purchase the Shares is based in part on the answers to such questions as
Purchaser and its representatives have raised concerning the transaction and on
its own evaluation of the risks and merits of the purchase and the Company's
proposed business activities. Notwithstanding the foregoing, no investigation
made by or on behalf of any Purchaser shall in any way affect any
representations, warranties, covenants or agreements made by the Company
pursuant to this Agreement and the Related Documents. The Purchaser also hereby
acknowledges that the Projections, including the basis therefor, were subject
to change following the date of the preparation thereof due to a change in
facts or circumstances subsequent to such time of preparation and that the
performance of the Company subsequent to their preparation has not been as
projected.
(g) Legal Power. Purchaser has all requisite legal power to execute
and deliver this Agreement and the Related Documents to which it is a party, to
purchase the Shares hereunder and to carry out and perform its obligations
under the terms of this Agreement and the Related Documents to which it is a
party.
(h) Authorization. All action on the part of the Purchaser under its
constituent agreements, its directors, members, partners or stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Related Documents to which it is a party by the Purchaser and
the performance of all of the Purchaser's obligations under this Agreement and
the Related Documents to which it is a party has been taken. This Agreement,
and the Related Documents to which it is a party, when executed and delivered
by the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies.
(i) Compliance with Other Instruments, Etc.. The execution, delivery
and performance of this Agreement and the Related Documents by the Purchaser
have not resulted and will not result in any violation of, or conflict with, or
constitute a breach or default (with or without the passage of time and giving
of notice or both) under, (a) the constituent documents of the Purchaser or (b)
any mortgage, indebtedness, indenture, contract, agreement, instrument,
judgment or decree, order, statute, rule, law or regulation applicable to the
Purchaser.
(j) Consent, Etc. Except for the consent of the FCC and state public
utility commissions, no consent, approval, license or authorization of or
designation, declaration, registration or filing with any court or governmental
authority or any party to any contract to which the Purchaser is a party or any
other third party is required to be obtained by the Purchaser in connection
with the valid execution and delivery by the Purchaser of this Agreement and
the Related Documents to which it is a party or the consummation by the
Purchaser of any transaction contemplated by this Agreement that has not been
obtained.
(k) Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Purchaser
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
(l) Accredited Investor. Purchaser is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
4.2. Legends. Each Purchaser hereby agrees that each certificate
representing shares of Series B Preferred, Series C Preferred or Series D
Preferred issuable to the Purchasers hereunder shall bear a legend containing
the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH SUCH ACT."
The requirement that the foregoing legend be placed upon certificates
evidencing any such securities shall cease and terminate upon the earliest of
the following events: (i) when such shares are transferred in a public offering
under the Securities Act, (ii) when such shares are transferred pursuant to
Rule 144 under the Securities Act or (iii) when such shares are transferred in
any other transaction if the seller delivers to the Successor an opinion of its
counsel, which counsel and opinion shall be reasonably satisfactory to the
Successor, or a "no-action" letter from the staff of the SEC, in either case to
the effect that such legend is no longer necessary in order to protect the
Successor against a violation by it of the Securities Act upon any sale or
other disposition of such shares without registration thereunder. Upon the
occurrence of any event requiring the removal of a legend hereunder, the
Successor, upon the surrender of certificates containing such legend, shall, at
its own expense, deliver to the holder of any such shares as to which the
requirement for such legend shall have terminated, one or more new certificates
evidencing such shares not bearing such legend.
Section 5. Conditions to Closing of the Purchasers.
Each Purchaser's obligations to purchase its Shares at the First Closing
and each Subsequent Closing are subject to the fulfillment or waiver as of the
First Closing Date and each Subsequent Closing Date, as applicable, of the
following conditions:
5.1. Representations and Warranties.
(a) The representations and warranties set forth in Section 3 of this
Agreement shall be true and correct as of the date of this Agreement.
(b) The representations and warranties set forth in Sections 3.1(b),
3.2(b), 3.3, 3.4(b), 3.7(a), 3.11, 3.17 and 3.20(b) of this Agreement shall be
true and correct, with the same force and effect as if they had been made on
the First Closing Date.
5.2. Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the First Closing Date
shall have been performed or complied with in all material respects.
5.3. Qualifications and Consents. All authorizations, approvals and
permits, if any, of any governmental authority or regulatory body and all
consents and approvals of any third party required for the lawful consummation
of the transactions provided for herein (including the issuance of shares of
Common Stock upon conversion of the Series C Preferred and the Series D
Preferred) shall have been duly obtained and effective as of the First Closing
Date and each Subsequent Closing Date, as applicable, without the imposition of
any conditions materially adverse to the Purchasers.
5.4. Compliance Certificate. On the First Closing Date, the Successor shall
have delivered to the Purchasers a certificate of the Successor, executed by
the President of the Successor, dated the First Closing Date and certifying,
among other things, the fulfillment of the conditions specified in Sections
5.1, 5.2 and 5.3 of this Agreement.
5.5. Certificate of Designation; Corporate Proceedings. Prior to the First
Closing, the Certificate of Designation shall have been filed with the
Secretary of State of the State of Delaware and all corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be satisfactory in form and substance
to the Purchasers' legal counsel and the Purchasers shall have received all
counterpart original and certified or other copies of such documents as they
may reasonably request.
5.6. Rights Agreement. Prior to or at the First Closing, the Successor and
the Purchasers shall have executed and delivered the Rights Agreement.
5.7. Opinions of Company Counsel. At the First Closing, the Purchasers
shall have received from Herrick, Feinstein LLP, counsel for the Successor, an
opinion, dated as of the First Closing Date, in substantially the form of
Exhibit F attached hereto. At the First Closing, the Purchasers shall have
received from Fried, Frank, Harris, Shriver & Jacobson, special counsel for the
Successor, an opinion, dated as of the First Closing Date, in substantially the
form of Exhibit G attached hereto. At the First Closing, the Purchasers shall
have received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., special
counsel for the Successor, an opinion, dated as of the First Closing Date, in
substantially the form of Exhibit H attached hereto.
5.8. Voting Agreement. Prior to or at the First Closing, the Successor and
the Purchasers shall have executed and delivered the Voting Agreement.
5.9. Secretary's Certificate. On the First Closing Date, the Successor
shall have delivered to the Purchasers a certificate of the Successor, executed
by the Secretary of the Successor, dated the First Closing Date, and
certifying, among other things, copies of resolutions of the stockholders and
board of directors of the Successor authorizing and approving the execution,
delivery and performance by the Company and the Successor of this Agreement and
each of the Related Documents to which it is a party, including, without
limitation, the issuance and sale of the Shares and the issuance of the shares
of Common Stock upon conversion of the Series C Preferred and the Series D
Preferred.
5.10. Board of Directors. On the First Closing Date, the Successor shall
have secured any necessary resignations of directors and shall have validly
elected directors such that immediately upon consummation of the First Closing,
the board of directors of the Successor shall consist of the directors
specified in Exhibit I attached hereto.
5.11 February 10, 1999 Letter Agreement. On or prior to the First Closing
Date, that certain letter agreement by and among RSI-OSA Holdings, Inc., a
Delaware corporation ("RSI"), and Veritech Ventures LLC, a New York limited
liability company ("Veritech"), dated as of February 10, 1999, shall have been
terminated.
Section 6. Conditions to Closing of the Successor.
The Successor's obligation to sell and issue the Shares at the First
Closing and each Subsequent Closing is, at the option of the Successor, subject
to the fulfillment or waiver of the following conditions:
6.1. Representations. The representations and warranties set forth in
Section 4 of this Agreement shall be true and correct as of the date of this
Agreement.
6.2. Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the First Closing
Date shall have been performed or complied with in all material respects.
6.3. Rights Agreement. The Purchasers shall have executed and delivered the
Rights Agreement.
Section 7. Covenants of the Company and the Successor.
7.1. Consummation of Merger. The Company and the Successor shall consummate
the Merger on the first business day after the Company has received all
regulatory approvals from the FCC and the NYPSC necessary to effect the
transactions contemplated by this Agreement.
7.2. Information Rights. The Company and the Successor hereby covenant and
agree as follows:
(a) The Successor will mail by first class, postage prepaid the
following reports to the Purchasers:
(i) As soon as practicable after the end of each fiscal month, and
in any event within thirty-five (35) days thereafter, an unaudited consolidated
balance sheet of the Successor and the Subsidiaries, as of the end of such
fiscal month, and unaudited consolidated statements of income and unaudited
consolidated statements of cash flows and notes thereto of the Successor and
the Subsidiaries, for such month and for the current fiscal year to date. Such
financial statements shall be prepared in accordance with generally accepted
accounting principles consistently applied (other than for accompanying notes),
all in reasonable detail.
(ii) As soon as practicable after the end of each fiscal year, and
in any event within seventy-five (75) days thereafter, a consolidated balance
sheet of the Successor and the Subsidiaries, as of the end of each such fiscal
year, and consolidated statements of income and consolidated statements of cash
flows and notes thereto of the Successor and the Subsidiaries, for such fiscal
year. Such financial statements shall be prepared in accordance with generally
accepted accounting principles consistently applied (other than for
accompanying notes), all in reasonable detail and shall be audited by an
independent public accounting firm reasonably acceptable to the Purchasers.
(iii) As soon as practicable, but in any event forty-five (45)
days prior to the end of each fiscal year, a budget for the next fiscal year,
prepared on a monthly basis, including balance sheets, income statements and
statements of cash flows for such months and, as soon as prepared, any
revisions to such budget prepared by the Successor, and describing in detail,
at a minimum, management's assumptions with respect to (1) revenues, (2)
customers and contracts, (3) operating costs and (4) capital expenditures.
(b) Purchasers shall have access to the Company's, the Successor's and
the Subsidiaries' books, records and facilities during normal business hours
which does not unduly interfere with the operation of the Company, the
Successor and the Subsidiaries, and reasonable access to the Company's, the
Successor's and the Subsidiaries' officers or managing members or similar
representatives to discuss the Company's, the Successor's and the Subsidiaries'
accounts, finances and affairs.
(c) The information rights set forth in this Section 7.2 may not be
transferred, except to an affiliate, partner, member or former partner or
member of a Purchaser which holds Shares, without the prior written consent of
the Successor, not to be unreasonably withheld.
(d) The information rights set forth in this Section 7.2 shall
terminate on and be of no further force or effect upon the earlier of (i) the
consummation of the Successor's sale of its Common Stock in an underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act (PROVIDED, that the offering results in aggregate gross cash
proceeds to the Successor of at least $30,000,000, and immediately subsequent
to which the Successor shall be obligated to file annual and quarterly reports
with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or (ii) the registration by the
Successor of a class of its equity securities under Section 12(b) or 12(g) of
the Exchange Act.
7.3. Certain Affirmative and Negative Covenants. Except as set forth in
Section 7.3 of the Disclosure Schedule or unless otherwise agreed to in writing
by Purchasers who will hold eighty percent (80%) or more of the Series C
Preferred and the Series D Preferred immediately following the Subsequent
Closings, the Company and the Successor covenant and agree that except for the
consummation of the interim financing provided to the Company concurrently with
the execution of this Agreement and pending consummation of the Merger (the
"Interim Financing"), from and after the date hereof and until the First
Closing Date:
(a) Each will conduct its business, and will cause each Subsidiary to
conduct its business, only in the ordinary course of business in a manner
consistent with past practices.
(b) Each will, and will cause each Subsidiary to, use their reasonable
commercial efforts to maintain and preserve their respective business
organizations, relationships with customers, suppliers and others having
business dealings with them, and all assets, employees, regulatory licenses and
approvals.
(c) Other than the adoption by the Successor of the 1999 Stock Option
Plan or the issuance of options thereunder, neither of them will, and each of
them will cause the Subsidiaries not to, directly or indirectly (i) issue,
sell, transfer, pledge, dispose of or encumber, or authorize or agree to the
issuance, sale, pledge, transfer, disposition or encumbrance of, any membership
or ownership interests in or capital stock of the Company, the Successor or any
of the Subsidiaries (except for shares issuable upon exercise of options
outstanding under the 1999 Stock Option Plan), (ii) issue, sell, pledge,
transfer or dispose of, or authorize or agree to the issuance, sale, pledge,
transfer or disposition of any options, warrants or rights of any kind to
acquire any membership or ownership interest in or any shares of capital stock
or any other equity securities of or any securities convertible into or
exchangeable for any membership or ownership interest in or shares of capital
stock or any other equity securities of the Company, the Successor or any
Subsidiary, (iii) authorize any change in its capitalization, or (iv) adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the
Merger).
(d) Neither of them will, and each of them will cause the Subsidiaries
not to, directly or indirectly (i) except in the ordinary course of business
and consistent with past practices, sell, pledge, transfer, lease, sell and
leaseback, assign, license, dispose of or encumber any asset or (ii) whether or
not in the ordinary course of business, sell, pledge, transfer, lease, sell and
leaseback, assign, license, dispose of or encumber any material asset of the
Company, the Successor or any subsidiary.
(e) Neither of them will, and each of them will cause the Subsidiaries
not to, directly or indirectly (i) split, combine or reclassify any ownership
or membership interests or shares of capital stock or declare, set aside or pay
any dividend or distribution, payable in cash, stock, property or otherwise
with respect to any of its ownership or membership interests or capital stock
other than dividends and distributions by a Subsidiary to the Company, or (ii)
redeem, purchase or otherwise acquire or offer or agree to redeem, purchase or
otherwise acquire any membership or ownership interest or shares of capital
stock.
(f) Neither of them shall, and each of them shall cause the
Subsidiaries not to, directly or indirectly, acquire (by merger, consolidation
or acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof or make any investment either by
purchase of stock or securities, contributions to capital, loans, advances,
property transfer or purchase of any amount of property or assets, in any other
individual or entity or form any subsidiaries.
(g) Neither of them shall, and each of them shall cause the
Subsidiaries not to, directly or indirectly, incur any indebtedness for
borrowed money (other than the Interim Financing), issue any debt securities or
enter into any capitalized leases other than entered into in the ordinary
course of business or assume, guarantee, endorse, secure or otherwise as an
accommodation become responsible for, the obligations of any other person or
entity (other than a Subsidiary). For purposes of this subsection,
"indebtedness for borrowed money" means with respect to the Company or any of
the Subsidiaries, all indebtedness in respect of money borrowed, including
without limitation all capital leases and the deferred purchase price of any
property or asset, evidenced by a promissory note, bond, debenture or similar
written obligation for the payment of money (including conditional sales or
similar title retention agreements), other than trade payables incurred in the
ordinary course of business.
(h) Neither of them shall, and each of them shall cause the
Subsidiaries not to, take any action with respect to the grant of any severance
or termination pay (other than pursuant to policies or written agreements of
the Company in effect on the date hereof) or with respect to any increase of
benefits payable under its severance or termination pay policies or written
agreements in effect on the date hereof.
(i) Other than the adoption by the Successor of the 1999 Stock Option
Plan or the issuance of options thereunder, neither of them shall, and each of
them shall cause the Subsidiaries not to, adopt, enter into or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance, retention or stay or other employee
benefit plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer, member or employee or increase in any manner
the compensation or fringe benefits of any director, officer, member or
employee or pay any benefit not required by any plan, arrangement or agreement
in effect on the date hereof.
(j) Neither of them shall, and each of them shall cause the
Subsidiaries not to, enter into any contract or agreement other than in the
ordinary course of business. (k) Neither of them shall, and each of them shall
cause the Subsidiaries not to:
(i) waive or compromise any material right or material debt owed
to it, other than waivers granted in the ordinary course of business which,
individually and in the aggregate, would not have a Material Adverse Effect;
(ii) satisfy or discharge any material lien, claim or encumbrance
or pay any obligation except in the ordinary course of business or in
accordance with the terms of the Bridge Financing and litigation disclosed in
Section 3.9 of the Disclosure Schedule;
(iii) modify any material contract, agreement or arrangement to
which the Company, the Successor or any Subsidiary is a party or by which any
of their respective assets is bound or subject; and
(iv) make any payment, loan or advance to, or sell, transfer or
lease any properties or assets to, or enter into any other agreement or
arrangement with, any officer, director, stockholder, member or other
affiliates of or any consultant to the Company, the Successor or any
Subsidiary, except (i) for normal business advances to employees consistent
with past practice, (ii) pursuant to written agreements listed in Section
3.6(o) of the Disclosure Schedule, and (iii) for the payment of compensation to
officers in a manner and in amounts consistent with past practice.
(l) Neither of them shall take any action, and each of them shall
cause the Subsidiaries not to take any action, that will result in a violation,
breach or default (with or without the passage of time and giving of notice for
both) in (i) any term of their operating agreement, certificate of
incorporation or bylaws, or (ii) any term or provision of any material
mortgage, indebtedness, indenture, contract, agreement or instrument to which
the Company, the Successor or any of the Subsidiaries is a party or their
property is bound, which violation, breach or default could have a Material
Adverse Effect. Each of them shall take such action as shall be necessary to
assure that the Company, the Successor and the Subsidiaries are and remain in
compliance with all judgments, decrees, governmental orders, laws, statutes,
rules and regulations by which they are bound or to which they or any of their
properties or assets is subject, except where the failure to do so would not
have a Material Adverse Effect.
(m) Each of them shall, and shall cause each Subsidiary to, keep
adequate books and records with respect their respective business activities in
which proper entries, reflecting all financial transactions, are made in
accordance with generally accepted accounting principles and on a basis
consistent with the financial statements previously delivered to the
Purchasers.
(n) Each of them shall, and shall cause the Subsidiaries to, conduct
their business in compliance with all applicable federal, state, local and
foreign laws and regulations, except to the extent that a failure to comply,
individually or in the aggregate, would not have a Material Adverse Effect.
(o) Neither of them shall, and each shall cause the Subsidiaries not
to, take any action that will result in the Company, the Successor or any of
the Subsidiaries incurring, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the transactions contemplated by this Agreement.
(p) Neither of them shall, and each of them shall take such action as
shall be necessary to assure that neither of the Subsidiaries will, become
indebted, directly or indirectly, to any officer, director, member or holder of
5% or more of the equity or voting power of the Company, the Successor or any
Subsidiary or to their respective spouses, parents, children or siblings or
their respective affiliates, in any material amount exclusive of any
obligations existing on the date of this Agreement.
(q) Neither of them shall, and each of them shall take such action as
shall be necessary to assure that no Subsidiary will, become a party to or
bound by any of the Contracts, agreements, instruments, documents, commitments
and similar items described in Section 3.16(a)(i) through (ix) other than in
the ordinary course of business.
(r) They shall conduct the business of the Company, the Successor and
the Subsidiaries in a manner that does not result in a violation or breach any
provision of any Contract, which violation or breach could have a Material
Adverse Effect.
(s) Neither of them shall, and each of them shall take such action as
shall be necessary to assure that neither of the Subsidiaries will, grant or
agree to grant any registration rights or preemptive rights to any person or
entity.
(t) Each of them shall, and shall cause the Subsidiaries to, file all
required Tax Returns with the appropriate governmental agencies in all
jurisdictions in which the Tax Returns are required to be filed by the Company,
the Successor or any of the Subsidiaries and pay all Taxes shown on such Tax
Returns as and when due.
(u) Neither of them shall, and each of them shall cause the
Subsidiaries not to, engage in any business other than the business described
in Section 3.28 hereof.
7.4. Protective Rights. If, after the First Closing Date, the Successor
grants to any holder of shares of the Successor's Preferred Stock any rights
regarding anti-dilution protection on terms more favorable than those set forth
in the Certificate of Designation, then the Successor shall take such action as
may be necessary to grant the Purchasers equivalent rights.
7.5. Other Actions. The Company and the Successor shall take all actions
reasonably necessary to fulfill the conditions to closing to be fulfilled by it
set forth in Section 5 of this Agreement, and shall refrain from taking any
action that would prevent satisfaction of any such condition.
7.6. Consents. The Successor shall effect the filing of the Certificate of
Designation in the office of the Secretary of State of the State of Delaware
and filing of such notice as required by Section 25102(f) of the California
Corporate Securities law of 1968, and the compliance with other applicable blue
sky laws within the applicable time periods therefor in accordance with
applicable law.
7.7. Use of Proceeds. The Successor shall use the proceeds from the sale of
the Shares for working capital and general corporate purposes, including, but
not limited to, acquisitions, joint ventures, strategic partnerships and
investments in businesses, products and technologies that are complimentary to
those of the Company (but excluding any acquisitions, joint ventures, strategic
partnerships and investments that are not consistent with the Successor's
business plan as then in effect). The Successor shall not use the proceeds from
the sale of the Shares to repay or redeem any indebtedness of the Company
outstanding as of the date hereof, except for repayment of amounts owed under
the Bridge Financing.
7.8. Reimbursement of Directors' Expenses. The Successor shall reimburse
the Investor Directors (as defined in the Voting Agreement) for out-of-pocket
expenses incurred by them in attending meetings of the board of directors of
the Successor.
7.9. Confidentiality Agreements. The Company and the Successor will seek to
obtain from each employee of the Company and Successor and the Subsidiaries a
confidentiality agreement in the form attached to this Agreement as Exhibit E.
7.10. Small Business Investment Act.
(a) The Company and the Successor will provide to JP Morgan Investment
Corporation ("JPMIC") (upon reasonable notice and during normal business hours)
and the U.S. Small Business Administration access to the Company's or the
Successor's books and records for the purpose of confirming the use of the
proceeds of the transactions contemplated by this Agreement and for all other
purposes required by the U.S. Small Business Administration. Upon the request
of JPMIC, the Successor will promptly provide to JPMIC and the U.S. Small
Business Administration a certificate of the chief financial officer (or other
executive officer) of the Successor verifying the use of such proceeds and
certifying compliance by the Successor with the provisions of Section 3.30 of
this Agreement.
(b) Upon the reasonable request of JPMIC, the Company and the
Successor promptly (and in any event within twenty (20) days of such request)
will use commercially reasonable efforts to provide to JPMIC all information
reasonably requested by JPMIC in order for JPMIC to prepare and file SBA Form
468.
(c) For a period of one year following the date hereof, neither the
Company nor the Successor will change its business activity if such change
would result in (i) its primary business activity being, directly or
indirectly, providing funds to others, the purchase or discounting of debt
obligations, factoring or long-term leasing of equipment with no provision for
maintenance or repair, (ii) it being classified under Major Group 65 (Real
Estate) or Industry No. 1531 (Operative Builders) of the SIC Manual, or (iii) a
majority of its tangible assets or employees being located outside of the
United States.
(d) The Company and the Successor promptly will provide to JPMIC such
financial statements and other information as JPMIC may from time to time
reasonably request for the purpose of assessing the financial condition of the
Company or the Successor, as applicable, and complying with any requirements of
any governmental agency asserting jurisdiction over JPMIC.
7.11. Videoconferencing Equipment. Following the execution and delivery of
this Agreement, the Company shall install videoconferencing equipment at its
headquarters within a reasonable period of time.
7.12. Transactions in Securities. The Company and the Successor shall not,
and they shall cause each of the Subsidiaries and all persons acting on behalf
of the Company, the Successor or any of the Subsidiaries not to, sell or offer
to sell the Shares or similar securities to, or solicit offers to buy the
Shares or similar securities from, any Person so as to bring the issuance and
sales of the Shares and the shares of Common Stock issuable upon conversion of
the Series C Preferred and the Series D Preferred under the registration
provisions of the Securities Act or applicable state securities laws.
7.13. OnSite Commerce and Content LLC. The Company shall, and shall cause
OnSite Commerce and Content LLC to, execute an amendment to the Intercompany
Agreement between the Company and OnSite Commerce and Content LLC, a New York
limited liability corporation, dated as of February 20, 1998, in the form
attached hereto as Exhibit J.
Section 8. Miscellaneous.
8.1. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of New York.
8.2. Survival; Termination. Subject to the last sentence of this Section
8.2, the representations and warranties made in this Agreement shall survive
the execution and delivery of this Agreement and the First Closing and each
Subsequent Closing and shall in no way be limited, diminished or affected by
any investigation made by or on behalf of the Purchasers. The covenants and
agreements contained herein shall survive until the termination of this
Agreement. This Agreement, including the representations and warranties made
herein, will terminate on the closing of an 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 Successor to
the public (i) based upon a Successor valuation exceeding Three Hundred Million
Dollars ($300,000,000) prior to the offering, (ii) resulting in gross proceeds
to the Successor of at least Thirty Million Dollars ($30,000,000), and (iii)
managed by a nationally recognized underwriter reasonably acceptable to the
Purchasers (a "Qualified IPO").
8.3. Successors and Assigns. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, heirs, executors and administrators of the
parties to this Agreement. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties to this Agreement
and prior to obtaining all necessary approvals; PROVIDED, HOWEVER, that this
Agreement may be assigned to any affiliate of a Purchaser or any subsequent
holder of the Shares prior to a Qualified IPO, AND PROVIDED, FURTHER, that no
such assignment will release the assignor from its obligations hereunder. Any
attempted assignment of this Agreement in violation of the terms of this
Section 8.3 shall be void AB INITIO.
8.4. Entire Agreement, Amendment. This Agreement and the other documents
delivered pursuant to this Agreement and in connection herewith, including the
Related Documents, at the First Closing, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and supersede all prior agreements, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein. Except as expressly provided in this Agreement, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought.
8.5. Notices, Etc. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand,
by messenger or by facsimile (subsequently confirmed by telephone), addressed
or transmitted (a) if to a Purchaser, at such address or facsimile number as
the Purchaser shall have furnished to the Company in writing, or (b) if to any
other holder of any Shares, at such address or facsimile number as such holder
shall have furnished the Company in writing, or, until any such holder so
furnishes an address or facsimile number to the Company, then to and at the
address or facsimile number of the last holder of such Shares who has so
furnished an address or facsimile number to the Company, or (c) if to the
Company, one copy should be sent to its offices and addressed to the attention
of the President, or at such other address or facsimile number as the Company
shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by facsimile, or, if sent by mail, upon receipt.
8.6. Delays or Omissions. Except as expressly provided in this Agreement,
no delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
8.7. California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
8.8. Expenses. At the First Closing, the Successor shall pay the (i) fees
and expenses of Latham & Watkins and Proskauer Rose LLP, (ii) accountants'
fees, (iii) consultants' fees and (iv) reasonable travel and other
diligence-related expenses, in each case, incurred by Purchasers in connection
with this Agreement, the documents referred to herein and the transactions
contemplated hereby and thereby, in an amount not to exceed $200,000 in the
aggregate.
8.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; PROVIDED that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
8.11. Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and shall not be considered in construing or
interpreting this Agreement.
8.12. Further Assurances. Upon request of the Company or any of the
Purchasers, all parties hereto agree to promptly execute and deliver all such
other instruments and take all such other actions as any party hereto may
reasonably request from time to time in order to effectuate and carry out the
purposes, privileges, restrictions, rights and duties of the parties and the
other provisions of this Agreement and the Related Documents.
8.13. Specific Performance. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement
and that a breach hereof shall cause irreparable injury and, in addition to any
other right or remedy available to the parties hereto at law or in equity, any
injured party hereunder shall be entitled to enforcement by court injunction or
specific performance of the obligations of the parties hereunder, without the
necessity for posting a bond. Notwithstanding the foregoing sentence, nothing
herein shall be construed as prohibiting any injured party hereunder from also
pursuing any other rights or remedies for such breach or threatened breach,
including receiving damages and attorneys' fees. The election of any remedy
shall not be construed as a waiver on the part of any injured party hereunder
of any right such party might otherwise have at law or in equity, which rights
and remedies shall be cumulative.
8.14. Defined Terms. For purposes of this Agreement:
(a) "Contracts" means all contracts, leases, licenses, mortgages,
evidences of indebtedness, indentures, instruments, arrangements,
understandings, commitments and other agreements (including leases for personal
or real property and employment agreements and including all amendments and
other modifications thereto) of the Company, the Successor or any of the
Subsidiaries or to which the Company, the Successor or any of the Subsidiaries
is a party or that are binding upon the Company, the Successor or any of the
Subsidiaries and that relate to or affect the business or operations of the
Company, the Successor or any of the Subsidiaries, and that are in effect on
the date of this Agreement or on the First Closing Date.
(b) "Environmental Law" shall mean the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
Act of 1986, the Federal Water Pollution Control Act, the Toxic Substances
Control Act and any other federal, state or local statue, regulation,
ordinance, order or decree relating to the environment, as now or hereafter in
effect.
(c) "Hazardous Material" shall mean (i) any asbestos or insulation or
other material composed of or containing asbestos and (ii) any petroleum
product and any hazardous, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, any so-called "Superfund" or
"Superlien" law, or any other Environmental Law, now or hereafter in effect.
(d) "Manager" shall mean each of Scott Jarus, Brandon Knicely, Lou
Martinez, Brian Benz and Daren Hornig.
(e) "Real Property" means (a) all fee estates in real property, and
all buildings and other improvements thereon, owned, leased or held by the
Company or a Subsidiary that are used or useful in the business or operations
of the Company or a Subsidiary; and (b) leases of any real property under which
the Company or a Subsidiary is the lessee that are used or useful in the
business or operations of the Company or a Subsidiary; together with any
additions thereto between the date of this Agreement and the First Closing.
[Signature Pages Follow]
<PAGE>
The foregoing Series B, Series C and Series D Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
"COMPANY"
ONSITE VENTURES, L.L.C.
a Delaware limited liability company
By:____________________________________
Title:_________________________________
"SUCCESSOR"
ONSITE ACCESS, INC.
a Delaware corporation
By:____________________________________
Title:_________________________________
"PURCHASERS"
SPECTRUM EQUITY INVESTORS III, L.P.
By: Spectrum Equity Associates III, L.P.,
its General Partner
By:____________________________________
Name:
Title:
JP MORGAN INVESTMENT CORPORATION
By:____________________________________
____________________________________
(Print Name)
____________________________________
Title
SIXTY WALL STREET SBIC FUND, L.P.
By: Sixty Wall Street SBIC Corporation, its General Partner
By: ____________________________________
____________________________________
(Print Name)
____________________________________
Title
CROSSPOINT VENTURE PARTNERS
By: ____________________________________
____________________________________
(Print Name)
____________________________________
Title
RSI-ONSITE HOLDINGS LLC
By: Reckson Service Industries, Inc.,
its sole member
By: ____________________________________
____________________________________
(Print Name)
____________________________________
Title
VERITECH VENTURES LLC
By: ____________________________________
____________________________________
(Print Name)
____________________________________
Title
AT&T VENTURE FUND II, LP
3000 Sand Hills Road
Building 1, Suite 285
Menlo Park, CA 94025
By: Venture Management, LLC
its General Partner
Neal M. Douglas
Manager
NOEL RAHN
By: ____________________________________
<PAGE>
ONSITE ACCESS, INC.
SERIES B, SERIES C AND SERIES D PREFERRED STOCK PURCHASE AGREEMENT
April 16, 1999
<PAGE>
ATTACHMENT 1
SCHEDULE OF PURCHASERS
SERIES B PREFERRED:
<TABLE>
<CAPTION>
TOTAL FIRST CLOSING
PURCHASER NO. OF SHARES PURCHASE PRICE NO. OF SHARES PURCHASE PRICE
<S> <C> <C> <C> <C>
Spectrum Equity Investors III, L.P. 12,416,667 $12,416,667 4,138,889 $4,138,889
JP Morgan Investment Corporation 7,000,000 $7,000,000 2,333,333 $2,333,333
Sixty Wall Street SBIC Fund, L.P. 1,750,000 $1,750,000 583,333 $583,333
Crosspoint Venture Partners 8,750,000 $8,750,000 2,916,667 $2,916,667
RSI-OnSite Holdings LLC 13,125,000 $13,125,000 4,375,000 $4,375,000
Veritech Ventures LLC 3,541,667 $3,541,667 1,180,556 $1,180,556
AT&T Venture Fund II, LP 3,333,333 $3,333,333 1,111,111 $1,111,111
Noel Rahn 83,333 $83,333 27,778 $27,778
TOTAL: 50,000,000 $50,000,000 16,666,667 $16,666,667
- ----- ---------- ----------- ---------- -----------
</TABLE>
<PAGE>
SERIES C PREFERRED:
<TABLE>
<CAPTION>
TOTAL FIRST CLOSING
PURCHASER NO. OF SHARES PURCHASE PRICE NO. OF SHARES PURCHASE PRICE
<S> <C> <C> <C> <C>
Spectrum Equity Investors III, L.P. 5,930,889 $2,329,333 1,976,963 $776,444
JP Morgan Investment Corporation 3,564,644 $1,400,000 1,188,215 $466,667
Sixty Wall Street SBIC Fund, L.P. 891,161 $350,000 297,054 $116,667
Crosspoint Venture Partners 4,455,806 $1,750,000 1,485,269 $583,333
RSI-OnSite Holdings LLC 6,683,708 $2,625,000 2,227,903 $875,000
Veritech Ventures LLC 1,803,540 $708,333 601,180 $236,111
AT&T Venture Fund II, LP 1,697,450 $666,667 565,817 $222,223
Noel Rahn 42,436 $16,667 14,145 $5,556
TOTAL: 25,069,634 $9,846,000 8,356,546 $3,282,001
- ----- ---------- ---------- --------- ----------
</TABLE>
<PAGE>
SERIES D PREFERRED:
<TABLE>
<CAPTION>
TOTAL FIRST CLOSING
PURCHASER NO. OF SHARES PURCHASE PRICE NO. OF SHARES PURCHASE PRICE
<S> <C> <C> <C> <C>
Spectrum Equity Investors III, L.P. 392,111 $154,000 130,704 $51,333
TOTAL: 392,111 $154,000 130,704 $51,333
- ----- ------- -------- ------- -------
GRAND TOTAL: 75,461,745 $60,000,000 25,153,917 $20,000,001
- ----------- ---------- ----------- ---------- -----------
</TABLE>
<PAGE>
EXHIBIT A
Certificate of Designation of
Series A, Series B, Series C and Series D Preferred Stock
<PAGE>
EXHIBIT B
Disclosure Schedule
<PAGE>
EXHIBIT C
Rights Agreement
<PAGE>
EXHIBIT D
Voting Agreement
<PAGE>
EXHIBIT E
Form of Confidentiality Agreement
ONSITE ACCESS, INC.
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
DATED AS OF APRIL __, 1999
As a condition of my employment with OnSite Access, Inc., its subsidiaries,
affiliates, successors or assigns (together the "Company"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I, _______________ agree
to the following:
1. AT-WILL EMPLOYMENT. I understand and acknowledge that my employment with
the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated
at any time, with or without good cause or for any or no cause, at the option
either of the Company or myself.
2. CONFIDENTIAL INFORMATION.
(a) COMPANY INFORMATION. I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly in
writing, orally or by drawings or observation of parts or equipment. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine or of others who were under confidentiality obligations as
to the item or items involved.
(b) FORMER EMPLOYER INFORMATION. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) THIRD PARTY INFORMATION. I recognize that the Company has received
and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. I have attached hereto, as Exhibit
A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products
or research and development, and which are not assigned to the Company
hereunder; or, if no such list is attached, I represent that there are no such
Prior Inventions. If in the course of my employment with the Company, I
incorporate into a Company product, process or machine a Prior Invention owned
by me or in which I have an interest, the Company is hereby granted and shall
have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to
make, have made, modify, use and sell such Prior Invention as part of or in
connection with such product, process or machine.
(b) ASSIGNMENT OF INVENTIONS. I agree that I will promptly make full
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to (i) any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
whether or not patentable or registrable under copyright or similar laws, that
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I
am in the employ of the Company, and (ii) do hereby so assign any and all
proprietary information, trade secrets that underlie, are summarized, embodied
or described in, the Company's business plans prepared prior to or on the date
hereof, and all copyrights, whether or not registered, therefor, all trade
secrets and/or proprietary information and all other intellectual property
rights, no matter how described or denominated, described, contained or
reflected therein or related thereto that I have conceived, invented, created
or reduced to practice (either prior to the date hereof or at anytime during
the term of my employment) in furtherance thereof (collectively referred to as
"INVENTIONS"), except as provided in Section 3(f) below. I further acknowledge
that all original works of authorship that are made by me (solely or jointly
with others) within the scope of and during the period of my employment with
the Company and which are protectible by copyright are "works made for hire,"
as that term is defined in the United States Copyright Act.
(c) INVENTIONS ASSIGNED TO THE UNITED STATES. I agree to assign to the
United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) MAINTENANCE OF RECORDS. I agree to keep and maintain adequate and
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) PATENT AND COPYRIGHT REGISTRATIONS. I agree to assist the Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work
rights or other intellectual property rights relating thereto in any and all
countries, including the disclosure to the Company of all pertinent information
and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns, and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and
any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable to
secure my signature to apply for or to pursue any application for any United
States or foreign patents or copyright registrations covering Inventions or
original works of authorship assigned to the Company as above because of my
mental or physical incapacity or because the Company is unable to reach me
after using its good faith reasonable efforts, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney in fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.
4. CONFLICTING EMPLOYMENT. I agree that, during the term of my employment
with the Company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the Company is now involved or becomes involved during the term of my
employment, nor will I engage in any other activities that conflict with my
obligations to the Company.
5. RETURNING COMPANY DOCUMENTS. I agree that, at the time of leaving the
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I
agree to sign and deliver the "Termination Certification" attached hereto as
Exhibit B.
6. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. NON-COMPETITION; SOLICITATION OF EMPLOYEES. I acknowledge and agree that
the Confidential Information is the exclusive and valuable property of the
Company and may not be used by me for any purpose of any kind, directly or
indirectly, except during the term of this Agreement for the sole and exclusive
benefit of the Company in my capacity as an employee of the Company and that
the success of the Company depends on my observance of his covenants in this
Section 7.
7.1 In consideration of the rights and benefits to be provided to me by
the Company, I agree that so long as I am an employee or consultant of the
Company and in addition for the Restrictive Period (as hereinafter defined) I
shall not directly or indirectly:
7.1.1 Engage or participate in any business or line of business that
competes with the business conducted by the Company or under consideration by
the Company while I was employed by the Company (the "Business"); or perform
any research or development or distribution or marketing services of products
that compete with the Business within the restricted Geographic Area.
7.1.2 Solicit any employee or consultant of the Company or persuade
or entice any such employee or consultant to terminate or lessen the extent of
his or its relationship with the Company.
7.1.3 Engage in any activity to interfere with, disrupt or damage
the Business of the Company or its relationships with any of its clients,
customers, distributors, suppliers, investors or other financial co-venturer or
other business relationship.
7.1.4 Engage in business with, or provide advice or services to, any
person or entity which directly or indirectly competes with the Business (or
any line of business) of the Company.
7.1.5 For the purposes of this Agreement, the term "Restrictive
Period" shall mean the term of this Agreement and an additional period of
twelve months.
7.1.6 These restrictions are limited to the geographic locations in
which the Company is doing Business at the time of my termination by the
Company, and the geographic locations in which the Company is actively planning
to do business at the time of my termination by the Company.
7.1.7 For the purposes of this Agreement, the term "Restricted
Geographic Area" shall mean any metropolitan area wherein the Company is
engaged in or actively planning to be engaged in Business as of the date of the
termination of this Agreement.
7.2 Following termination of my employment by the Company for any
reason, I shall continue to observe and be bound by his covenants under Section
7.1 for the Restrictive Period.
7.3 For purposes of this Section 7, the term "Company" shall include the
Company and its affiliates, including any entity that directly or indirectly
controls the business and affairs of the Company.
8. CONFLICT OF INTEREST GUIDELINES. I agree to diligently adhere to the
Conflict of Interest Guidelines attached as Exhibit C hereto.
9. REPRESENTATIONS. I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement. I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict
herewith.
10. ARBITRATION AND EQUITABLE RELIEF.
(a) ARBITRATION. Except as provided in Section 10(b) below, I agree that
any dispute or controversy arising out of or relating to any interpretation,
construction, performance or breach of this Agreement, shall be settled by
arbitration to be held in _____________, New York, in accordance with the rules
then in effect of the American Arbitration Association. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The decision
of the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction. The Company and I shall each pay one-half of the costs and
expenses of such arbitration, and each of us shall separately pay our counsel
fees and expenses.
(b) EQUITABLE REMEDIES. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of
the covenants set forth in Sections 2, 3, 5 and 7 herein. Accordingly, I agree
that if I breach any of such Sections, the Company will have available, in
addition to any other right or remedy available, the right to obtain an
injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement. I further agree that no bond or other security shall be required in
obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance.
11. GENERAL PROVISIONS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will
be governed by the laws of the State of New York, without reference to choice
of laws or conflict of laws principles. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in New York for
any lawsuit filed there against me by the Company arising from or relating to
this Agreement.
(b) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and merges all prior discussions between us. No modification of or amendment to
this Agreement, nor any waiver of any rights under this agreement, will be
effective unless in writing signed by the party to be charged. Any subsequent
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.
(c) SEVERABILITY. If any provision of this Agreement or any part hereof
or the application hereof to any person or circumstance shall be finally
determined by a court of competent jurisdiction or by any arbitration panel to
be invalid or unenforceable to any extent, the remainder of this Agreement, or
the remainder of such provision or the application of such provision to persons
or circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby and each provision of this
Agreement shall remain in full force and effect to the fullest extent permitted
by law. The parties also agree that if any portion of this Agreement, or any
part hereof or application hereof, to any person or circumstance shall be
finally determined by a court of competent jurisdiction or arbitration panel to
be invalid or unenforceable to any extent, then such objectionable provision
shall be deemed modified to the extent necessary so as to make it valid,
reasonable and enforceable including, without limitation, modification of the
restrictive covenants of Section 7 with respect to geography, time or scope of
business.
(d) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be
for the benefit of the Company, its successors, and its assigns.
<PAGE>
IN WITNESS WHEREOF, I hereby execute this Agreement as of the date first
written above.
-----------------------------------
- ------------------------
Witness
<PAGE>
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date or Brief Description
____ No inventions or improvements
____ Additional Sheets Attached
Signature of Employee: __________________________
Print Name of Employee:
Date:
<PAGE>
EXHIBIT C
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to ONSITE ACCESS INC., its subsidiaries, affiliates, successors
or assigns (together, the "Company").
I further certify that I have complied with all the terms of the Company's
Employment Confidential Information and Invention Assignment Agreement signed
by me, including the reporting of any inventions and original works of
authorship (as defined therein), conceived or made by me (solely or jointly
with others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary
information relating to products, processes, know-how, designs, formulas,
developmental or experimental work, computer programs, data bases, other
original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company
or any of its employees, clients, consultants or licensees.
I further agree that for twelve months from this date, I will not take
undertake any actions in violation of Section 7 of the Employment, Confidential
Information and Invention Assignment Agreement.
Date: ___________, ______
<PAGE>
EXHIBIT C
CONFLICT OF INTEREST GUIDELINES
It is the policy of OnSite Access, Inc. to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give
the appearance of being in conflict, with these principles and with the
interests of the Company. The following are potentially compromising situations
which must be avoided. Any exceptions must be reported to the Chief Executive
Officer and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing confidential
information. Unauthorized divulging of information is a violation of this
policy whether or not for personal gain and whether or not harm to the Company
is intended. (The Employment, Confidential Information and Invention Assignment
Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment, favors
or payments which may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
3. Participating in civic or professional organizations that might involve
divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or punishment
of employees or applicants where there is a family relationship or is or
appears to be a personal or social involvement (other than as officers of the
Company appointed by the Board of Directors).
5. Initiating or approving any form of personal or social harassment of
employees.
6. Investing or holding outside directorship in suppliers, customers, or
competing companies, including financial speculations, where such investment or
directorship might influence in any manner a decision or course of action of
the Company.
7. Borrowing from or lending to employees, customers or suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
11. Making any unlawful agreement with distributors with respect to prices.
12. Improperly using or authorizing the use of any inventions which are the
subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge.
<PAGE>
EXHIBIT F
Form of Opinion of Herrick, Feinstein LLP, Counsel for the Successor
<PAGE>
EXHIBIT G
Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson,
Counsel for the Successor
<PAGE>
EXHIBIT H
Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Special Counsel for the Successor
<PAGE>
EXHIBIT I
Board of Directors
Scott H. Rechler*
Jeff Neumann
Matt Mochary
Rich Shapero
Monty Cerf
Scott Jarus
* So long as Mr. Rechler holds the office of President of RSI-OSA Holdings,
Inc. on the First Closing Date.
<PAGE>
EXHIBIT J
Form of Amendment to Intercompany Agreement between the Company
and OnSite Commerce and Content LLC
<PAGE>
TABLE OF CONTENTS
PAGE SECTION 1. THE MERGER; AUTHORIZATION AND SALE OF SERIES B, SERIES C
AND SERIES D PREFERRED STOCK. 1
1.1. The Merger. 1
1.2. Authorization. 1
1.3. Sale of Series B Preferred, Series C Preferred and Series D
Preferred. 1
SECTION 2. THE CLOSINGS. 2
2.1. The First Closing. 2
2.2. Subsequent Closings. 2
2.3. Conditions to Obligations. 3
2.4. Failure to Purchase. 3
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 4
3.1. Organization and Standing; Certificate and Bylaws;
Subsidiaries. 4
3.2. Corporate Power. 5
3.3. Capitalization. 5
3.4. Authorization. 6
3.5. Financial Statements. 7
3.6. Changes. 7
3.7. Patents and Other Intangible Assets. 9
3.8. Compliance with Other Instruments, None Burdensome, Etc. 9
3.9. Litigation, Etc. 10
3.10. Employees. 10
3.11. Consent, Etc. 11
3.12. Offering. 11
3.13. Brokers or Finders. 11
3.14. Disclosure. 12
3.15. No Conflict of Interest. 12
3.16. Agreements. 12
3.17. Permits. 14
3.18. Registration Rights, Preemptive Rights and Voting Rights. 15
3.19. Title to Property and Assets. 15
3.20. Insurance. 15
3.21. Minute Books. 15
3.22. Taxes. 15
3.23. Labor Agreements and Actions. 16
3.24. Projections. 16
3.25. Environmental. 16
3.26. Confidentiality Agreements. 17
3.27. Compliance with Law. 17
3.28. Business. 17
3.29. Absence of Certain Commercial Practices. 17
3.30. Small Business Investment Act. 18
3.31. Year 2000. 18
Section 4. Representations, Warranties and Covenants of the Purchasers. 19
4.1. Representations and Warranties of the Purchasers. 19
4.2. Legends. 20
Section 5. Conditions to Closing of the Purchasers. 21
5.1. Representations and Warranties. 21
5.2. Covenants. 21
5.3. Qualifications and Consents. 21
5.4. Compliance Certificate. 21
5.5. Certificate of Designation; Corporate Proceedings. 22
5.6. Rights Agreement. 22
5.7. Opinions of Company Counsel. 22
5.8. Voting Agreement. 22
5.9. Secretary's Certificate. 22
5.10. Board of Directors. 22
5.11 February 10, 1999 Letter Agreement. 23
Section 6. Conditions to Closing of the Successor. 23
6.1. Representations. 23
6.2. Covenants. 23
6.3. Rights Agreement. 23
Section 7. Covenants of the Company and the Successor. 23
7.1. Consummation of Merger. 23
7.2. Information Rights. 23
7.3. Certain Affirmative and Negative Covenants. 24
7.4. Protective Rights. 26
7.5. Other Actions. 27
7.6. Consents. 27
7.7. Use of Proceeds. 27
7.8. Reimbursement of Directors'Expenses. 27
7.9. Confidentiality Agreements. 27
7.10. Small Business Investment Act. 27
7.11. Videoconferencing Equipment. 28
7.12. Transactions in Securities. 28
7.13. OnSite Commerce and Content LLC. 28
Section 8. Miscellaneous. 28
8.1. Governing Law. 28
8.2. Survival; Termination. 28
8.3. Successors and Assigns. 29
8.4. Entire Agreement, Amendment. 29
8.5. Notices, Etc. 29
8.6. Delays or Omissions. 30
8.7. California Corporate Securities Law. 30
8.8. Expenses. 30
8.9. Counterparts. 30
8.10. Severability. 30
8.11. Titles and Subtitles. 31
8.12. Further Assurances. 31
8.13. Specific Performance. 31
8.14. Defined Terms. 31
<PAGE>
ATTACHMENT 1 Schedule of Purchasers
EXHIBIT A Certificate of Designation of Series A, Series B and
Series C Preferred Stock
EXHIBIT B Disclosure Schedule
EXHIBIT C Rights Agreement
EXHIBIT D Voting Agreement
EXHIBIT E Form of Confidentiality Agreement
EXHIBIT F Form of Opinion of Herrick, Feinstein LLP, Counsel for
the Successor
EXHIBIT G Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson,
Counsel for the Successor
EXHIBIT H Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Special Counsel for the Successor
EXHIBIT I Board of Directors
EXHIBIT J Form of Amendment to Intercompany Agreement between the Company
and OnSite Commerce and Content LLC
