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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
:[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission File Number 0-30162
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FRONTLINE CAPITAL GROUP
(Exact name of registrant as specified in its charter)
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DELAWARE 11-3383642
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1350 AVENUE OF THE AMERICAS 10019
NEW YORK, NY
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (212) 931-8000
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Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value NASDAQ
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ ]
The aggregate market value of the shares of common stock held by
non-affiliates was approximately $1.0 billion based on the closing price on the
NASDAQ for such shares on March 20, 2000.
The number of the Registrant's shares of common stock outstanding was
32,025,230 as of March 20, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held in June 2000 are incorporated by reference into Part III.
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TABLE OF CONTENTS
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ITEM FORM 10-K
NO. REPORT PAGE
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PART I
1. Business .................................................................... I-1
2. Properties .................................................................. I-11
3. Legal Proceedings ........................................................... I-11
4. Submission of Matters to a Vote of Security Holders ......................... I-11
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters ....... II-1
6. Selected Financial Data ..................................................... II-2
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations .................................................................. II-3
7a. Quantitative and Qualitative Disclosures about Market Risk .................. II-10
8. Financial Statements and Supplementary Data ................................. II-11
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure .................................................................. II-11
PART III
10. Directors and Executive Officers of the Registrant .......................... III-1
11. Executive Compensation ...................................................... III-1
12. Security Ownership of Certain Beneficial Owners and Management .............. III-1
13. Certain Relationships and Related Transactions .............................. III-1
PART IV
14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K ........ IV-1
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PART I
ITEM 1. BUSINESS
THE COMPANY
FrontLine Capital Group, formerly Reckson Service Industries, Inc.,
("FrontLine" or the "Company"), was formed on July 15, 1997. FrontLine is a
publicly traded operating company that acquires interests in and develops a
network of business-to-business ("B2B") e-commerce and e-services Internet
companies (the "Partner Companies") focused on serving small and medium-sized
enterprises ("SMEs"), including independent professionals, entrepreneurs, and
the mobile workforces of larger companies.
SMEs account for approximately 51% of the U.S. gross domestic product.
Internet-based solutions can provide SME owners with the ability to operate
their businesses more efficiently and affordably, allowing them to
realistically compete with larger corporations. As of March 24, 2000, the
Company has invested approximately $316.8 million in 13 Partner Companies,
including the organic development of one Partner Company.
The Company acquires significant, long-term ownership stakes in targeted
Partner Companies and integrates them into a collaborative network of
companies, seeking to accelerate their growth and increase their likelihood of
long-term success. FrontLine has developed an extensive e-Cooperative platform
that allows its Partner Companies to gain access to the growing customer base
of its existing and future Partner Companies and to benefit from its
operational and management resources. The e-Cooperative consists of the
following elements:
o enterprise Development Group or eDG -- eDG offers strategic planning,
project management and functional expertise in the areas of
organizational design, recruiting, finance and technology strategy.
o Advisory Board -- a group of recognized business and academic leaders
provides strategic insight, expertise, relationships and access to new
opportunities and potential alliances for the Company and its Partner
Companies.
o Network of Partner Companies -- facilitates learning and collaboration
among all Partner Companies and provides access to the customer base,
resources and relationships of the entire network. It also facilitates
business partnerships among Partner Companies, including cross-selling
and cross-marketing opportunities.
o Click and Mortar -- Global workplace solutions provider which offers the
Partner Companies the ability to access the virtual and physical global
infrastructure as well as a distribution network to a customer base of
SMEs.
FrontLine endeavors to understand the needs of SMEs and build a network of
companies that deliver a suite of Internet applications, services and
infrastructure to help SMEs streamline operations, outsource key business
processes and focus on their core competencies.
INDUSTRY OVERVIEW
The growth in the B2B e-commerce and e-services sector is attributable to
several favorable trends, including the growth of the Internet due to the
increased access to broadband connectivity, the proliferation of effective
Internet-based applications and outsourced solutions and the growth of small
and medium-sized enterprises, or SMEs.
GROWTH OF THE INTERNET
Forrester Research estimates that the B2B e-commerce market will grow from
$43 billion in 1998 to more than $1.3 trillion by 2003 and that the B2B
e-services market will grow from $2.8 billion in 1998 to approximately $220
billion in 2003. Further, Forrester Research estimates that by 2003 B2B
e-commerce will account for approximately 93% of all Internet commerce.
Although still in early phases, a number of factors are converging that are
contributing to the rapid acceleration of B2B e-commerce and e-services.
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The first factor is increasing Internet access, particularly access to
broadband connectivity. According to Forrester Research, over 2.5 million U.S.
businesses, or 35% of all enterprises, have access to the Internet today. In
addition, the proliferation of broadband solutions is enabling functionality
and service levels previously unavailable, particularly to SMEs. According to
Forrester Research, the percentage of enterprises with broadband access will
grow from 7% in 1998 to 30% in 2003. FrontLine believes that as network
reliability and performance improve, businesses will increasingly rely and
depend upon Internet-based solutions.
The second factor is the adoption of standardized platforms, applications
and protocols that allows for a more cost-effective deployment of applications
and services to a wide and diverse group of users. Historically, B2B e-commerce
has occurred through electronic data interchange over proprietary networks,
which are costly and available only to a limited number of participants. Today,
a number of standardized component applications have been developed which
dramatically reduce the cost and time of building e-commerce systems.
The third and most compelling reason for the rapid acceleration of B2B
e-commerce solutions is the return on investment ("ROI") for adopters.
Businesses use the Internet as a means to enhance the operating performance of
their businesses. With the increase in global competition and the increasing
speed of business adaptation, companies are becoming increasingly reliant on
the Internet to obtain a competitive advantage.
GROWTH OF SMES
SMEs represent approximately 51% of the U.S. gross domestic product.
Internet-based solutions can provide SME owners with the ability to operate
their businesses more efficiently and affordably, allowing them to effectively
compete with larger corporations.
Today, the Internet enables SMEs to communicate with their suppliers and
customers as well as to purchase and sell products/services in geographically
diverse markets. It also allows them to reduce transaction costs, improve
service and react more quickly to changing market conditions. According to
International Data Corporation, Internet penetration will steadily increase
among SMEs through the year 2002. Nearly 70% of SMEs will have Internet access
in 2002. Today, over 31% of SMEs in the United States use the Internet to
conduct commerce. International Data Corporation also estimates that SMEs will
generate 30% of worldwide Internet commerce revenue by 2003, an increase from
17% in 1997.
As SMEs have become more competitive, many larger companies have responded
to this threat by moving their workforces closer to their customers, suppliers
and markets. As a result, the workforce of these larger companies has become
more mobile. According to Dataquest, there will be an estimated 36 million
mobile workers by 2003. When operating in a mobile environment, these workers
need access to the resources typically available at the corporate office.
Internet-based and outsourced solutions are likely to provide many of these
services.
INVESTMENT CRITERIA AND APPROACH
The Company has developed an investment strategy targeted at acquiring
interests in B2B companies that serve the SME market, including independent
professionals, entrepreneurs and the mobile workforces of larger companies.
FrontLine's investment philosophy focuses on actively researching emerging
industry sectors, seeking opportunities in the customer base of its Partner
Companies, and examining market segments that are complimentary to the existing
partner network. FrontLine seeks to take significant long-term ownership
interests in its Partner Companies. In order to take an active role in the
affairs of a new Partner Company, FrontLine generally requires board of
director and board committee representation. In this manner, the Company can
better integrate the new Partner Company into its e-Cooperative network.
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FrontLine primarily targets three types of B2B e-commerce and e-services
companies:
o Internet-based outsourcing: companies that utilize the Internet to enable
the outsourcing of non-core business functions;
o e-Commerce and infrastructure: companies that deliver or enable the
delivery of goods and services over the Internet; and
o Virtual brick and mortar: companies that combine a physical
infrastructure with an Internet-enabled model to enhance the delivery of
their services.
The Company applies a disciplined analysis when it evaluates whether to
acquire an interest in an e-commerce or e-services company. In this review
process, the following factors are considered:
Industry Related Criteria:
o Market Size and Growth. FrontLine seeks to invest in markets that can
sustain significant growth rates for at least five years or large markets
that have the potential for consolidation or evolution.
o Inefficiency. FrontLine considers whether the industry is information
intensive and suffers from inefficiencies in information distribution
that may be alleviated by improving the delivery mechanism through
e-commerce and e-services.
o Barriers and Margins. FrontLine considers the ability to maintain margins
within an industry by recognizing barriers to entry created by physical
assets, customer relationships and switching costs, and the relative
value proposition of new models.
o Competition. FrontLine evaluates the amount of competition that a
potential Partner Company faces from e-commerce, e-services and
traditional businesses.
Company Related Criteria:
o Industry Leader Potential. FrontLine considers the ability of a company
to become a leader in its market based on the business model, management
team and competitive landscape.
o Compelling value/service proposition. FrontLine evaluates the ability of
a new or evolving business model to have a significant impact on its
industry by offering a compelling value proposition to the user or
increasing the level of service provided. The new model must present a
clearly demonstrable ROI to the user.
o Customer Targets. FrontLine is focused on companies that service SMEs,
the mobile workforce, as well as professional individuals and
organizations.
FrontLine Related Criteria:
o Significant Ownership. The Company considers whether it will be able to
acquire a significant ownership interest in the potential Partner
Company, influence the strategic direction of the company, and actively
develop a long-term partnership with the company.
o e-Cooperative Value Added. The Company considers the extent to which it
can add value to the Partner Company through the eDG, Advisory Board,
e-Cooperative network and customer base.
o Network Synergy Gained. The Company considers the degree to which a
potential Partner Company will add value to its Partner Company network.
This is based on the ability of the Partner Company to offer product and
service synergies and to expand the customer base.
Based on the Company's strategy of acquiring significant ownership
interests in and adding value to its Partner Companies, it generally targets
early stage B2B e-commerce companies. These early stage companies benefit from
FrontLine's operating and strategic support and provide it with the opportunity
to share significantly from the potential value creation FrontLine provides.
The Company also considers investments in later stage companies if they provide
significant network synergies.
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OPERATING STRATEGY
FrontLine's operating strategy is focused on securing small to medium
sized companies, including professionals, entrepreneurs and mobile workforces
of large corporations, through its network of B2B e-commerce and e-services
Internet companies. FrontLine seeks to accelerate growth opportunities and
increase the likelihood of success of its Partner Companies by utilizing the
resources of the e-Cooperative. These collective resources enable Partner
Companies to reduce their time to market without sacrificing the development of
infrastructure that is required for long-term success.
The e-Cooperative consists of the eDG and Advisory Board as well as the
collaborative network of Partner Companies. Through eDG, which currently
consists of 12 experienced professionals, FrontLine offers Partner Companies
access to substantial management resources in areas such as strategic planning,
project management and functional expertise in the areas of organizational
design, sales and marketing, human resources and organizational design,
recruiting, finance and technology. To augment internal resources, FrontLine
has developed, and will continue to enhance, an Advisory Board with expertise
in such areas as strategic management, marketing and technology. Currently, the
Advisory Board is comprised of seven members and active discussions are
continuing with others. The Advisory Board offers management guidance to
Partner Companies and provides the Company with new business and acquisition
opportunities.
In addition to assisting individual Partner Companies, FrontLine
facilitates collaboration among its Partner Companies to foster strategic
relationships, cross selling, and knowledge sharing across the entire network.
As a Partner Company is added to the network, the Partner Company has the
ability to accelerate its growth by accessing the collective customer base.
This customer base is especially valuable because its members have similar
needs and the propensity to use Internet-based solutions.
In addition to assisting Partner Companies, the Company may use the
resources of the eDG and the Advisory Board to organically develop new Partner
Companies. If FrontLine is unable to identify a potential Partner Company that
satisfies its acquisition criteria in industry sectors that FrontLine views as
attractive, the Company may seek to organically develop a Partner Company. In
order to internally develop a Partner Company, FrontLine will formulate a
business plan, act as interim management, identify a dedicated management team,
and actively support the development of the Partner Company through the
resources of the eDG.
EDG AND THE ADVISORY BOARD
Based on the rapid pace of development of B2B e-commerce, the value of
"first mover" advantage, and the incremental value realized by market leaders,
FrontLine seeks to accelerate the time to market of its Partner Companies and
increase their likelihood of success. To do so, FrontLine provides strategic
guidance to its Partner Companies regarding market positioning, business model
development and market trends. In addition, the Company advises Partner Company
management on day-to-day matters. The Company also provides significant support
through active involvement in ongoing operational issues and, where necessary,
act as interim management for its Partner Companies.
FrontLine assists its Partner Companies by providing access to the skilled
managers within the eDG who guide its Partner Companies in the following areas:
o Strategic Guidance. FrontLine's management team works with the senior
management of Partner Companies to enhance their business strategies,
refine their business models and develop effective execution plans.
o Business Development. B2B e-commerce and e-services companies may be
involved in evaluating, structuring and negotiating joint ventures,
strategic alliances, joint marketing agreements, acquisitions or other
transactions. The Company's management team, Advisory Board, strategic
investors and other Partner Companies will provide assistance in these
areas.
o Sales and Marketing. The Company's management team provides guidance to
Partner Companies in their sales, marketing, product positioning and
advertising efforts.
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o Executive Recruiting and Human Resources. FrontLine's management team
assists Partner Companies in recruiting key executive talent. In
providing this assistance, the Company leverages the contacts developed
by its network of Partner Companies, eDG and Advisory Board.
o Technology. FrontLine's management team provides Partner Companies with
guidance in technology strategy and assists in the resolution of
technology development issues. In addition, FrontLine is a Global Client
Partner of iXL Enterprises, which enables it to provide its Partner
Companies with preferential access to world-class service offered by iXL.
This relationship provides its Partner Companies with access and a
service level typically available only to Fortune 500 companies.
o Finance. The Company is dedicated to providing financial guidance to
Partner Companies in areas such as corporate finance, financial
reporting, accounting and treasury operations. In providing these
services, the Company leverages the skills and experience of its internal
finance and accounting group, as well as the Partner Company network.
o Customer Research and Knowledge. FrontLine continues to build substantial
knowledge of the collective customer base of its Partner Companies
through customer surveys, focus groups and other research. Through this
knowledge and close customer relationships, FrontLine can anticipate new
investment opportunities and assist Partner Companies in developing and
launching new products and services.
COLLABORATIVE NETWORK OF PARTNER COMPANIES -- SELF-REINFORCING MODEL
One of the Company's principal goals is to form a Partner Company network
that can rapidly increase the value of each individual Partner Company. This is
achieved by encouraging each company in the network to leverage the strengths
and resources of the other Partner Companies. As individual Partner Companies
grow into leadership positions, the network will become stronger. As the value
of the network grows, the Company will seek to attract an increasing number of
quality Partner Companies. The Company refers to this as the self-reinforcing
model.
To accomplish this self-reinforcing model, FrontLine facilitates
collaboration among its Partner Companies by assisting them in forming
strategic alliances and in the sharing of knowledge relating to the common
customer base. These strategic alliances offer the Partner Companies access to
a large customer base with similar needs and the ability to deliver enhanced
product and service offerings. FrontLine encourages these relationships through
its networking events and Partner Company forums. FrontLine also provides
resources to encourage the sharing of knowledge and best practices between
Partner Companies. This information sharing occurs both through the interaction
of its management as well as through its Knowledge On-Line system ("KOL") and
its Customer Knowledge Program. KOL is an intranet and extranet available to
each Partner Company. The system is intended to contain best practices and
lessons learned by the Partner Companies as well as general industry
information and tools (e.g., standard legal agreements, employee handbooks,
legal and accounting guides).
The Company also utilizes the collective resources of the network to
provide its Partner Companies with access to a comprehensive set of
professional and business resources. A primary mission of its business
development group is to form significant business relationships with
organizations that provide critical resources to Partner Companies and assure a
level of service they could not achieve on their own. These relationships
include services such as legal, accounting, public relations, banking, real
estate and technology. A particular problem for early stage e-commerce
companies is accessing the resources of the leading web development and
technology firms. To provide FrontLine's Partner Companies with preferential
access to such service, FrontLine has become a Global Client Partner of iXL
Enterprises which enables it to provide its Partner Companies with access to
world-class service typically available only to Fortune 1000 companies.
FrontLine will continue to establish such relationships with other value added
service and product providers.
REPORTABLE SEGMENTS OVERVIEW
FrontLine's financial statements include the effect of consolidating
VANTAS Incorporated ("VANTAS") and OneXstream.com, Inc. ("OneXstream") in 1999.
The reportable segments are Executive Office Suites and Virtual Office
Services, e-Businesses and Other Operations. Executive Office
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Suites and Virtual Office Services includes the effect of consolidating VANTAS
for the year ended December 31, 1999 and the effect of the equity method of
accounting for InterOffice SuperHoldings Corporation and Reckson Executive
Centers, LLC for the year ended December 31, 1998. e-Businesses includes the
effect of transactions and other events incidental to the ownership interests
in FrontLine's Partner Companies, excluding VANTAS. Other Operations represents
the expenses of providing strategic and operational support to the Partner
Companies, the administrative costs related to these expenses and FrontLine's
operations in general.
Financial information about the Company's industry segments may be found
in Note 13 to the Company's consolidated financial statements presented in Item
8 of this Annual Report on Form 10-K.
CURRENT PARTNER COMPANIES
As of March 24, 2000, FrontLine owns stakes in the following Partner
Companies:
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FUTURE
INVESTED % COMMITTED RESULTING RESULTING
CAPITAL OWNED CAPITAL % OWNED % OWNED
PARTNER COMPANY (MM) (BASIC) (MM) (BASIC) (DILUTED)
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OnSite Access, Inc. ...... $ 46.0 (1) 37% -- 37% 22%
VANTAS Incorporated....... 211.5 (2) 84% $ 1.3 84% 76%
UpShot.com ............... 16.0 20% -- 20% 18%
EmployeeMatters, Inc...... 10.0 53% 5.0 53% 45%
LiveCapital.com .......... 7.5 4% -- 4% 4%
RealtyIQ.com ............. 13.7 (3) 68% 4.6 68% 54%
CommerceInc 4.9 31% 7.1 31% 26%
Corporation .............
AdOutlet.com ............. 2.0 12% -- 12% 10%
DigitalWork, Inc. ........ 2.0 <1% -- <1% <1%
NeoCarta Ventures ........ 2.0 4% 8.0 4% 4%
Opus360 Corporation ...... 1.0 <1% -- <1% <1%
GiftCertificates.com ..... 0.2 <1% -- <1% <1%
OneXstream, Inc. ......... -- 93% -- 93% 80%
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PARTNER COMPANY DESCRIPTION
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OnSite Access, Inc. ...... A building-centric, integrated communications services provider
VANTAS Incorporated....... A virtual and physical office solutions provider
UpShot.com ............... Web-based sales management solutions for SMEs
EmployeeMatters, Inc...... A fully-integrated Internet-based employee benefits and human resource
administration outsourcing company
LiveCapital.com .......... Marketplace through which SMEs may acquire financing
RealtyIQ.com ............. Web-based provider of comprehensive commercial real estate information
CommerceInc
Corporation ............. Web-based infomediary focused on B2B e-commerce
AdOutlet.com ............. Marketplace for advertising space and time across all media
DigitalWork, Inc. ........ A B2B portal for SMEs providing a platform to complete a range of
business tasks
NeoCarta Ventures ........ Strategic investment into venture capital fund
Opus360 Corporation ...... Marketplace for knowledge workers and project opportunities
GiftCertificates.com ..... A leading e-commerce provider of gift certificates
OneXstream, Inc. ......... Business portal that will offer e-services of FrontLine Partner Companies
to SMEs
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(1) Includes $23.6 million in FrontLine common stock.
(2) Includes $58.0 million in FrontLine common stock.
(3) Includes $2.1 million in FrontLine common stock.
VANTAS Incorporated ("VANTAS"). The Company entered into a merger
agreement in January 2000 pursuant to which VANTAS Incorporated, a company in
which it owns an approximate 84% interest, will be merged with HQ Global
Workplaces, Inc. ("HQ"). The merger will create the world's largest virtual
workplace solutions provider and comprehensive e-fulfillment enterprise. The
new company, HQ Global Workplaces, will serve approximately 43,000 customers
through 463 owned, managed or franchised centers in 17 countries. The merger is
scheduled to close by April 30, 2000 and will be financed through the issuance
of new equity of HQ Global Workplaces and approximately $350 million of HQ
Global Workplaces debt. VANTAS has posted a letter of credit in the amount of
$35 million to secure the obligations under the merger agreement. The Company
has pledged approximately 15 million shares of VANTAS stock to secure its
nonrecourse guarantee of the letter of credit. In the event the letter of
credit is drawn upon and the lender forecloses upon the Company's shares of
VANTAS, VANTAS is obligated to reimburse the Company in the form of additional
shares of VANTAS for any loss of the Company's shares of VANTAS provided that
such loss was not a result of the Company's gross negligence. FrontLine has
obtained commitments for the debt financing and is in negotiations to obtain
the equity financing. However, no assurance can be given that the Company will
be successful in obtaining the equity financing required under the merger
agreement such that the merger will be consummated on its current terms or that
the merger will not be consummated for any other reason.
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HQ Global Workplaces will provide a unique component of FrontLine's
e-Cooperative. FrontLine believes the formation of HQ Global Workplaces creates
the potential to add significant value to its Partner Company network by:
o Enabling Partner Companies. By utilizing the centers, its Partner
Companies will gain access to local points of presence for service
delivery, sales, and customer support. Obtaining fully operational office
space typically involves a lengthy and burdensome process including
finding suitable space, negotiating lease terms, building out of the
space, selecting staff, and developing technology and operating
infrastructure. FrontLine is and will continue to utilize the over 463
VANTAS/HQ Global Workplace centers to provide its Partner Companies with
a rapid deployment platform and turnkey infrastructure including
technology, operations, and staffing. As an example, EmployeeMatters,
Inc. plans to locate sales people in VANTAS centers to provide a local
point of contact with its customers. Additionally, it is contemplated
that Opus360 will enter into a national agreement with VANTAS to provide
the independent contractors served by Opus360 with executive and virtual
office services. The Company will continue to form such beneficial
relationships with Partner Companies.
o Broadband Connected Community. By providing the Partner Companies with
access to a broadband connected community throughout the HQ Global
Workplaces centers, FrontLine will enable them to effectively design,
test and launch new Internet-based business services. Optimizing the
functionality of many emerging B2B e-commerce services will require
access to high bandwidth connectivity. Through the HQ Global Workplace
centers, the Company will provide broadband access to approximately
43,000 customers.
o Incubators. HQ Global Workplaces will provide an in-place facility to
foster the development of seed stage and early stage B2B e-commerce
companies. A portion of certain HQ Global Workplaces centers will be
dedicated exclusively to seed stage and early stage B2B e-commerce
companies. The Company will offer these companies physical office space,
the business support services currently provided by HQ Global Workplaces,
plus a host of other services to support their growth and development.
The Company believes that its ability to offer these services
distinguishes it from other providers of incubators. These services will
be provided by the eDG, an operational team dedicated to the incubator
centers, and by third parties. The eDG and incubator team will provide
services similar to those provided to the Partner Companies. In addition,
FrontLine is developing programs with a number of third parties to
provide assistance in the areas of technology, finance and accounting,
and legal, among others. The Company also intends to provide seed and
follow on capital to the companies it incubates. FrontLine plans to
pursue the development of numerous new e-commerce and e-services Partner
Companies through these centers.
o Providing Proprietary Deal Flow. Today approximately 40% of VANTAS' and
HQ's customers are technology and telecommunications companies. FrontLine
intends to develop systems and marketing programs to actively source
acquisition opportunities from this base of members.
Executive suites are a cost-effective alternative to traditional office
space offering flexible, fully furnished and staffed offices, which are
immediately available for varying lengths of time. Thus, executive suites are
able to accommodate the needs of businesses ranging from individual
entrepreneurs to branches of Fortune 500 firms. Although cost is one motivation
of utilizing an executive suite, the ability to access a full service turnkey
solution has become increasingly important. VANTAS also leverages its
infrastructure to provide virtual office services to over 4,000 customers who
do not maintain an office in a VANTAS center.
The Executive Suite Association estimates there are 80 million square feet
of available serviced workspace in the United States, representing 3% of the
total office market. The U.S. executive suite industry generates an estimated
$3 billion in sales per year.
VANTAS' Management team includes David Rupert, Chief Operating Officer and
interim Chief Executive Officer, who previously was President of the Business
Services division of Pitney Bowes. Scott
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Rechler, FrontLines' Chief Executive Officer, serves as the chairman of the
Board of Directors of VANTAS and will serve as the Chairman of HQ Global
Workplaces upon the consummation of the merger. Certain other senior members of
the Company's management team serve on the Board of Directors of VANTAS.
In connection with the merger, the Company has agreed to enter into a
stockholders agreement with certain of the holders of HQ who will continue to
hold a $120 million common stock investment in HQ Global Workplaces which will
provide the holders with a right to put their shares of HQ Global Workplaces to
FrontLine at various times during the two years subsequent to the merger if an
initial public offering of the common stock of HQ Global Workplaces satisfying
certain criteria has not occurred. The put right provides that up to $20
million of the holders' shares may be put to FrontLine in November 2000, up to
50% of the holders' shares may be put to FrontLine in December 2001 and any
remaining shares of the holders may be put to FrontLine in July 2002. The put
is payable in cash or the Company's common stock (valued at the time of closing
under the put) at its option.
The Stockholders Agreement also provides for participation rights,
tag-along rights, board representation and a limited right of first offer to
the HQ Holders and contains certain tax-related provisions. The Stockholders
Agreement also grants FrontLine a right of first offer with respect to the HQ
Holders' Surviving Corporation Shares. The Company has filed additional
information regarding this transaction with the SEC in Current Reports on Form
8-K which are incorporated into this document by reference.
OnSite Access, Inc. ("OnSite"). OnSite is an integrated communications
provider offering SMEs a range of voice and data services, including high speed
Internet access and enhanced services. OnSite's "building centric" model is
based on partnering with owners of multi-tenant office buildings throughout the
United States. By aggregating the usage of several small and medium sized
tenants, OnSite is able to provide cost-effective access to high-bandwidth,
high-availability digital telecommunications, high-speed Internet access and
data network services through the use of fiber-optic and DSL technology, which
would otherwise be cost prohibitive to most SMEs.
FrontLine initially invested in OnSite in February 1998, and subsequently
orchestrated a second round financing with a private equity investor group that
included Spectrum Equity Investors, Crosspoint Venture Partners, J.P. Morgan
Capital, AT&T Ventures and Veritech Ventures. The Board of Directors of OnSite
consists of seven members, two of which are elected by FrontLine. The Company
also has the right to representation on committees of the Board.
On December 15, 1999, OnSite filed a registration statement on Form S-1
with the Securities and Exchange Commission covering the initial public
offering of its common stock. On February 16, 2000, Winstar Communications
filed a lawsuit in New York state court against an OnSite executive, Howard
Taylor, alleging breach of Mr. Taylor's non-compete agreement with Winstar and
the alleged use of Winstar's confidential information. No assurance can be
given as to the impact, if any, on OnSite of the Winstar litigation. In
addition, there can be no assurance that the OnSite initial public offering
will be consummated or, if consummated, the timing of such offering.
EmployeeMatters, Inc.("EmployeeMatters"). EmployeeMatters is an
Internet-based employee benefits and human resources administration outsourcing
company.
EmployeeMatters' objective is to be the dominant provider of
Internet-based, fully integrated employee administration and human resources
outsourcing services to SMEs in white collar sectors. EmployeeMatters seeks to
provide products and services in the areas of payroll processing, 401(k) plan
administration, insurance, financial services, group purchasing and other
services. EmployeeMatters' initial target market includes two million companies
and 10 million employees nationally. EmployeeMatters' strategy is to enable
these companies to increase their profitability by reducing time and resources
spent on non-revenue producing activities, assisting clients in attracting and
retaining high-quality employees, and reducing the costs and risks of human
resource and employee administration.
EmployeeMatters' management includes co-founders Elliot Cooperstone, Chief
Executive Officer, and H. Thach Pham, Chief Financial Officer. Mr. Cooperstone
was previously Executive Vice President of Payroll Transfers, Inc., one of the
nation's largest professional employer organizations and Executive
I-8
<PAGE>
Vice President and Chief Administrative Officer of Alexander & Alexander
Services, Inc., a $1.3 billion global insurance brokerage and human resources
consulting firm. Mr. Pham was, until recently, a Vice President in the Mergers
and Acquisitions Department of Morgan Stanley Dean Witter. Previously, he was a
founding partner of Grauer & Wheat, Inc., a private merchant bank, and the
Chief Financial Officer of Pinnacle Brands, Inc., a Grauer & Wheat Portfolio
Company.
The Board of Directors of EmployeeMatters consists of five members, two of
which are elected by FrontLine and one of which is an independent director. The
Company also has the right to representation on committees of the Board.
OneXstream. The Company is actively developing a portal that will bring
together a suite of services and applications to create a virtual workplace.
The portal will integrate the products and services of its Partner Companies
plus a number or proprietary services, as well as products and services
provided through strategic alliances with third parties. The Company
anticipates that the portal will provide customers with a host of business
resources in the areas of office support (i.e., virtual administrative
assistants, human resource and bookkeeping, call center outsourcing, etc.),
workflow support (i.e., tools tailored for specific users including sales force
automation and project management), technology support (i.e., hosted e-commerce
web sites, data back-up, conferences call services, etc.) and purchasing
support (i.e., purchasing of office supplies and equipment, communications
products and services, marketing services, etc.).
Through OneXstream, FrontLine is creating an integrated resource for SMEs
to purchase a wide variety of business services. In addition, through strategic
alliances and co-branding, FrontLine anticipates that the portal will enhance
the value of its Partner Companies by increasing their exposure and potential
customer base.
RealtyIQ.com ("RealtyIQ"). RealtyIQ develops, owns and manages a
proprietary database of comprehensive commercial real estate information
targeted at real estate professionals. Through its service, RealtyIQ provides
commercial real estate brokers, owners, and asset managers easy, affordable
access to comprehensive data on office, industrial, flex, research and
development and retail buildings.
RealtyIQ was founded in October 1991 by two former real estate
professionals and a software engineer to develop a comprehensive, up-to-date
database for commercial properties in Manhattan. Today, its service has become
an industry standard for commercial real estate information. RealtyIQ maintains
a national database of property data that it intends to use as the foundation
for a comprehensive commercial real estate portal.
CommerceInc Corporation ("CommerceInc"). CommerceInc is an "infomediary"
on the world wide web specifically focused on enabling the B2B e-commerce
marketplace. CommerceInc maintains an 11 million record database of detailed
information on SMEs which it compiles by integrating and enhancing a number of
databases.
CommerceInc compiles and presents data on SMEs via the Internet to allow
buyers to make informed supplier choices and allows suppliers to better target
potential customers. CommerceInc has agreements with Dunn & Bradstreet ("D&B"),
American Express and others providing it access to its initial base of business
profiles ("Supplier Cards"). CommerceInc combines this data with data from
other databases to produce an enhanced data set. CommerceInc's end product is a
detailed Supplier Card that includes a complete overview of each company
including: products and services, supplier description, location, contact
information, customers, credit information and other relevant information.
CommerceInc primarily distributes its products through its own web site
and through distribution agreements with other web sites, particularly portals.
The distribution agreements allow CommerceInc to maintain the new and refreshed
data, and also reach many more suppliers and customers. Today, CommerceInc has
distribution agreements with Excite's small business web site and Business
Week's small business web site (and other McGraw Hill companies). CommerceInc
is currently negotiating significant content and distribution agreements with
potential partners.
UpShot.com. UpShot.com based in Mountain View, California, was launched in
January 1997 to build, sell, and support a family of Web-based sales solutions
that allows companies to track leads, close
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business faster, and forecast sales more accurately in an affordable,
web-based, hassle-free, and secure environment. Today, UpShot has more than
35,000 subscribers and has won numerous industry awards, including awards from
Microsoft and others.
LiveCapital.com. LiveCapital.com is a leading on-line business financing
center for SMEs. Businesses visiting LiveCapital.com can comparison shop for,
apply for, and secure loans, lines of credit, credit cards, equipment leases,
and more from reputable financial institutions. Loan offerings include
SBA-backed loans of up to $2.5 million. In less than five minutes, visitors can
complete one short application, have it screened against the lending criteria
of multiple leading financial institutions, and instantly secure multiple
financing options. LiveCapital.com's proprietary technology provides a unique
functionality where applicants are offered decisions from multiple lenders
within seconds of submitting an application.
LiveCapital.com now receives more than 500 daily applications, and, since
launching in June 1999, has offered SMEs more than $500 million in financing to
become one of the country's top 20 originators of small business financing. In
the last two months alone, LiveCapital.com has tripled its lender base,
developing a network of 25 leading financial institutions that businesses
seeking financing can access. LiveCapital.com's lending partners include
American Express, Union Bank of California and Heller Financial.
AdOutlet.com. AdOutlet.com is an on-line marketplace for the buying and
selling of advertising providing a B2B e-commerce solution to meet the growing
demands of media buyers and media suppliers. AdOutlet.com is headquartered in
New York, New York and has offices in Columbus, Ohio, Chicago, Illinois, Los
Angeles, California and will soon establish an office in San Francisco,
California.
NeoCarta Ventures. NeoCarta Ventures is a limited partnership fund that
invests in e-commerce companies. The Fund was sponsored by principals of Kelso
& Company, a private equity firm, Bert Ellis, the Chairman and Chief Executive
Officer of iXL Enterprises and a member of FrontLine's Advisory Board and
others. This investment provides FrontLine with an expanded network of
relationships and access to additional deal flow.
Other Ownership Stakes. Opus360 Corporation ("Opus360") provides a suite
of services across the spectrum of a project-based workforce. These web-based
services enable organizations to manage their internal resources, their
vendors' resources, as well as the largest virtual workforce and most diverse
group of independent consultants and freelancers through FreeAgent.com. Opus360
is a private company backed by a consortium of investors including Safeguard
Scientifics, Crosspoint Ventures and MSD Capital. Opus360 and VANTAS are
negotiating a national service agreement to provide office suite and virtual
office services to Opus360's free agents. Based on the anticipated value of
this relationship FrontLine was able to make an investment into this highly
sought after company after the financing round had been closed.
The Company also has interests in Digitalwork.com and
Giftcertificates.com. Digitalwork.com is an on-line "do-it-yourself" business
agency that provides entrepreneurs with a suite of easy to use on-line services
organized into workshops, enabling them to complete routine business tasks,
including marketing, human resources and financial services, easily and
effectively. Giftcertificates.com is a destination site that offers branded
gift certificates for the nation's leading retailers, restaurants and hotels.
In addition to FrontLine's Partner Company Network, it is also a managing
member of a $300 million venture capital vehicle ("Reckson Strategic") which
invests in real estate operating companies and offers these companies capital
and strategic guidance to aid in their development. Reckson Strategic targets
companies that are well positioned to capitalize upon positive demographic and
socio-economic trends. Reckson Strategic is funded with a $200 million
commitment from Paine Webber Real Estate Securities, Inc. and a $100 million
commitment from the Company.
Potential Partner Company Acquisitions. Having established a solid
foundation of Partner Companies, the Company has grown its Partner Company
network and has significantly increased its pipeline of acquisition
opportunities. Within the next quarter, it is anticipated that FrontLine will
commit
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<PAGE>
to acquire interests in several additional Partner Companies. Over the next
year, FrontLine anticipates making a significant investment into new Partner
Companies. FrontLine anticipates that these acquisitions will consist mainly of
significant stakes in Partner Companies that will benefit from the full
resources of its e-Cooperative. In addition, FrontLine may selectively acquire
smaller stakes in a number of companies to solidify strategic relationships.
The Company's future acquisitions are dependent upon its continued access to
capital as well as its ability to identify attractive Partner Company
acquisition opportunities.
The Company's executive offices are located at 1350 Avenue of the
Americas, New York, New York 10019, and its telephone number at that location
is (212) 931-8000. At December 31, 1999, the Company had approximately 26
employees.
ITEM 2. PROPERTIES
The Company's principal office is located at 1350 Avenue of the Americas,
New York, New York, 10019.
VANTAS Incorporated, a consolidated subsidiary, leases its principal
offices at 90 Park Avenue, New York, New York, 10016. In addition, VANTAS
leases space for 201 business centers that are primarily located in the United
States. See Note 10 to the financial statements for a summary of the associated
commitments.
Management believes that such properties are sufficient to meet their
present needs and does not anticipate any difficulty in securing additional
space, as needed, on terms acceptable to the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently subject to any material litigation nor, to
the Company's knowledge, is any litigation threatened against the Company,
other than routine actions for negligence or other claims and administrative
proceedings arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively are
not expected to have a significant adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of the year ended December 31, 1999.
I-11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock began trading over-the-counter ("OTC") on June
29, 1998 under the symbol "RSII"and is traded on the NASDAQ National Market
("NASDAQ") under the symbol "RSII". The following table sets forth the
quarterly high and low closing bid prices per share of the common stock
reported for each respective quarter. These OTC and NASDAQ market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions. Since inception, the
Company has not paid any dividends to its shareholders. Under the terms of the
Company's credit facilities, as long as there are outstanding advances under
such facilities, the Company is prohibited from paying dividends on any shares
of its capital stock.
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
June 29, 1998 ............... $ 4.063 $ 3.625
June 30, 1998 ............... $ 3.750 $ 3.125
September 30, 1998 .......... $ 4.500 $ 2.000
December 31, 1998 ........... $ 4.625 $ 1.688
March 31, 1999 .............. $ 5.718 $ 3.500
June 30, 1999 ............... $ 17.125 $ 4.062
September 30, 1999 .......... $ 19.625 $ 12.500
December 31, 1999 ........... $ 68.312 $ 15.250
</TABLE>
The approximate number of shareholders of the Company's common stock as of
March 3, 2000 was 437.
From January 26, 2000, and February 28, 2000, the Company completed
convertible preferred stock offerings to Warburg Dillon Read, LLC of 26,000
shares of 8.875% Cumulative Convertible Preferred Stock, with net proceeds of
$24.6 million. These shares are convertible into the Company's common stock at
prices ranging from $66.30 to $75.08.
On March 7, 2000, Gotham Partners Management Co., LLC ("Gotham"), an
investment partnership that invests in public and private companies in a wide
range of industries and stages of development, invested $30 million to purchase
1.5 million warrants for FrontLine's common stick for $20 per warrant. The
warrant's have an exercise price of $70 per share and a term of 3.25 years. The
Company utilized approximately half of these proceeds to reduce the Credit
Facility and the remaining portion will be utilized for acquisitions of
interests in Partner Companies and working capital purposes.
UNREGISTERED SALES OF SECURITIES
In connection with its acquisitions of ownership interests in VANTAS from
November 1999 through February 2000, the Company issued 3,122,202 shares of its
common stock in transactions exempt from registration under Section 4(2) of the
Securities Act of 1933 ("Section 4(2)").
In connection with its acquisitions of ownership interests in OnSite in
October 1999, the Company issued 1,731,597 shares of its common stock in
transactions exempt from registration under Section 4 (2).
In connection with its amendments of the FrontLine and Reckson Strategic
Facilities in November 1999, the Company issued 176,186 shares of its common
stock in a transaction exempt from registration under Section 4 (2).
In connection with its acquisitions of ownership interests in RealtyIQ.com,
in December 1999 the Company issued 52,578 shares of its common stock in a
transaction exempt from registration under Section 4 (2).
In connection with its acquisitions of ownership interests in
EmployeeMatters, Inc., in December 1999, the Company issued warrants to purchase
200,000 shares of its common stock in transactions exempt from registration
under Section 4 (2).
II-1
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED JULY 15, 1997 TO
DECEMBER 31, 1999(2) DECEMBER 31, 1998 DECEMBER 31, 1997
---------------------- ------------------- ------------------
<S> <C> <C> <C>
OPERATIONS SUMMARY:
Operating revenues .......................... $215,376 $ 336 $ --
Partner Company operating income ............ 27,927 336 --
Corporate general and administrative ........ (9,509) (2,613) (479)
Equity in earnings (loss) of Partner
Companies and other ownership interest..... (10,599) (3,966) 223
Net loss .................................... $(39,847) $(8,147) $ (258)
PER SHARE DATA: (1)
Basic and diluted net loss .................. $ (1.56) $ (0.56) $ --
BALANCE SHEET DATA (PERIOD END):
Cash and cash equivalents ................... $ 32,740 $ 2,026 $ 130
Working capital ............................. 11,559 132 11
Ownership interests in and advances to
Partner Companies ......................... 61,207 30,277 325
Other ownership interest .................... 36,626 15,561 5,520
Intangible assets ........................... 239,412 -- --
Total assets ................................ 541,983 58,843 7,519
Credit facilities ........................... 166,255 40,981 --
Notes payable ............................... 108,125 -- --
Total shareholders' equity .................. $114,109 $15,968 $4,222
</TABLE>
- ----------
(1) Based on 25,600,985 and 14,522,513 weighted average shares of common stock
outstanding for the years ended December 31, 1999 and 1998, respectively.
(2) Reflects the Company's acquisition and consolidation of a majority
ownership interest in VANTAS Incorporated in 1999.
No dividends were paid in any of the periods presented.
II-2
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying Financial Statements of FrontLine Capital Group, formerly Reckson
Service Industries, Inc., ("FrontLine" or the "Company") and related notes
thereto.
The Company considers certain statements set forth to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, with respect
to the Company's expectations for future periods. Certain forward-looking
statements, including, without limitation, statements relating to the ability
to identify and acquire interests in commercial service companies, the
financing of the Company's and Partner Companies' operations, the timing and
success of such acquisitions and the ability to integrate and manage
effectively its various acquisitions, involve certain risks and uncertainties.
Although the Company believes that the expectation reflected in such
forward-looking statements is based on reasonable assumptions, the actual
results may differ materially from those set forth in the forward-looking
statements and the Company and Partner Companies can give no assurance that its
expectations will be achieved. Certain factors that might cause the results of
the Company and Partner Companies to differ materially from those indicated by
such forward-looking statements include, among other factors, general economic
conditions, a lack of attractive business opportunities or suitable
acquisitions, the Company's dependence upon financing from Reckson Operating
Partnership, L.P. ("Reckson"), conflicts of interest of management, competition
for targeted acquisitions and the ability to otherwise finance business
opportunities. Consequently, such forward-looking statements should be regarded
solely as reflections of the Company's and Partner Companies' current operating
and development plans and estimates. These plans and estimates are subject to
revision from time to time as additional information becomes available, and the
Company undertakes no obligation to update these plans and estimates.
OVERVIEW AND BACKGROUND
FrontLine was formed on July 15, 1997 and is a publicly-traded operating
company that identifies, acquires interests in, and develops a network of
business-to-business ("B2B") e-commerce and e-service companies (the "Partner
Companies") that service small and medium sized enterprises ("SMEs"),
independent professionals and the mobile workforce of larger companies.
The Company's goal is to acquire significant, long-term stakes in targeted
Partner Companies, which will be incorporated into a collaborative network of
e-commerce and e-services companies, in an effort to accelerate their growth
and increase their likelihood of success. FrontLine has developed an extensive
e-Cooperative platform that allows its Partner Companies to benefit from its
operational and management resources and experience and the Company's extensive
customer base as well as gain significant synergies from other existing and
future Partner Companies. The e-Cooperative consists of the:
o enterprise Development Group or eDG -- eDG offers strategic planning,
project management and functional expertise in the areas of
organizational design, recruiting, finance and technology strategy.
o Advisory Board -- a group of recognized business and academic leaders
provides strategic insight, expertise, relationships and access to new
opportunities and potential alliances for the Company and its Partner
Companies.
o Network of Partner Companies -- facilitates learning and collaboration
among all Partner Companies and provides access to the customer base,
resources and relationships of the entire network. It also facilitates
business partnerships among Partner Companies, including cross-selling
and cross-marketing opportunities.
o Click and Mortar -- Global workplace solutions provider which offers the
Partner Companies the ability to access the virtual and physical global
infrastructure as well as a distribution network to a customer base of
SMEs.
II-3
<PAGE>
The Company's strategy is to continue to expand its network of Partner
Companies and its e-Cooperative platform by pursuing additional acquisitions
that complement and enhance the overall network. FrontLine seeks to add
significant value to its Partner Companies with the goal of creating industry
leaders that have the potential to become public companies, act as industry
consolidators or merge with the proper strategic partners. FrontLine targets
early stage companies that can benefit from FrontLine's entire franchise and
therefore have the potential to create significant value for FrontLine.
FrontLine seeks to focus its future acquisitions in the Internet sector by
targeting three types of B2B e-commerce and e-services companies:
o e-Commerce and infrastructure: companies that deliver or enable the
delivery of goods and services over the Internet;
o Virtual brick and mortar: companies that combine a physical
infrastructure with an Internet-enabled model to enhance the delivery of
their services; and
o Internet-based outsourcing: companies that utilize the Internet to enable
the outsourcing of non-core business functions.
Although the Company refers to the companies in which it has acquired an
equity and cost ownership interest as its "Partner Companies" and that it has a
"partnership" with these companies, it does not act as an agent or legal
representative for any of these companies, it does not have the power or
authority to legally bind any of its Partner Companies and it does not have the
types of liabilities in relation to its Partner Companies that a general
partner of a partnership would have.
Because FrontLine acquires significant interests in B2B e-commerce
companies, many of which generate net losses, FrontLine has experienced, and
expects to continue to experience, significant volatility in the quarterly
results. Management does not know if the Company will report net income in any
period, and expects to report net losses for the foreseeable future. While most
Partner Companies have consistently reported losses, the Company may experience
significant volatility from period to period due to one-time transactions and
other events incidental to the ownership interests in and advances to Partner
Companies. On a continuous basis, but no less frequently than at the end of
each quarterly reporting period, management evaluates the carrying value of the
ownership interests in and advances to each of the Partner Companies for
possible impairment based on achievement of business plan objectives and
milestones, the fair value of each ownership interest and advance in the
Partner Company relative to carrying value, the financial condition and
prospects of the Partner Company, and other relevant factors. The business plan
objectives and milestones that are taken into consideration include, among
others, those related to financial performance such as achievement of planned
financial results or completion of capital raising activities, and those that
are more operational in nature such as the launching of a web site or the
hiring of key employees. The fair value of the ownership interests in and
advances to privately held Partner Companies is generally determined based on
the value at which independent third parties have invested or have committed to
invest in Partner Companies.
The presentation and content of the Company's financial statements is
largely a function of the presentation and content of the financial statements
of the Partner Companies. As a result, to the extent Partner Companies change
the presentation or content of their financial statements, as may be required
by the Securities and Exchange Commission or changes in accounting literature,
the presentation and content of the Company's financial statements may also
change.
EFFECT OF VARIOUS ACCOUNTING METHODS ON RESULTS OF OPERATIONS
The various interests that FrontLine acquires in Partner Companies are
accounted for under one of three methods: consolidation, equity method and cost
method. The applicable accounting method is generally determined based on the
Company's voting interest in a Partner Company.
Consolidation. Partner Companies in which the Company directly or
indirectly owns more than 50% of the outstanding voting securities and controls
the board of directors are generally accounted for under the consolidation
method of accounting. Under this method, a Partner Company's results of
operations are reflected within the Company's Consolidated Statements of
Operations. In the fourth quarter 1999,
II-4
<PAGE>
the Company acquired control of VANTAS Incorporated ("VANTAS") (See Note 3 to
the Consolidated Financial Statements). Additionally, the Company consolidates
OneXstream.com, Inc. with FrontLine's financial statements. Participation of
other Partner Company shareholders in the earnings or losses of a consolidated
Partner Company is reflected in a caption "Minority interest" in the
Consolidated Statements of Operations. Minority interest adjusts the
consolidated net results of operations to reflect only FrontLine's share of the
earnings or losses of the consolidated Partner Company.
The effect of a Partner Company's results of operations on FrontLine's
results of operations is generally the same under either the consolidation
method of accounting and the equity method of accounting, because under each of
these methods only FrontLine's share of the earnings or losses of a Partner
Company is reflected in the results of operations in the Consolidated
Statements of Operations.
Equity Method. Partner Companies whose results are not consolidated, but
over whom the Company exercises significant influence, are generally accounted
for under the equity method of accounting. Whether or not the Company exercises
significant influence with respect to a Partner Company depends on an
evaluation of several factors; including, among others, representation on the
Partner Company's board of directors and ownership level, which is generally a
20% to 50% interest in the voting securities of the Partner Company, including
voting rights associated with the Company's holdings in common, preferred and
other convertible instruments in the Partner Company. Under the equity method
of accounting, a Partner Company's accounts are not reflected within the
Company's Consolidated Statements of Operations; however, FrontLine's share of
the earnings or losses of the Partner Company is reflected in the caption
"Equity in earnings (loss) of Partner Companies and other ownership interest"
in the Consolidated Statements of Operations.
Partner Companies accounted for under the equity method of accounting
included:
<TABLE>
<CAPTION>
PARTNER VOTING OWNERSHIP ON BASIC BASIS VOTING OWNERSHIP ON DILUTED BASIS
COMPANY --------------------------------------- ---------------------------------------
SINCE DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998
-------- ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
CommerceInc. Corporation ......... 1999 31% N/A 26% N/A
EmployeeMatters, Inc. ............ 1999 53% N/A 45% N/A
OnSite Access, Inc. .............. 1997 37% 1% 22% 1%
RealtyIQ.com ..................... 1999 68% N/A 54% N/A
UpShot.com ....................... 2000 *20% N/A *18% N/A
VANTAS Incorporated .............. 1998 N/A 21% N/A 21%
</TABLE>
- ----------
* Ownership interest acquired in February 2000.
FrontLine has representation on the board of directors of all of the above
Partner Companies, and as of December 31, 1999, generally owned voting
convertible preferred stock in all of them. Most of FrontLine's equity method
Partner Companies are in a very early stage of development and have not
generated significant revenues. In addition, equity method Partner Companies
have incurred substantial losses since their inception and are expected to
continue to incur substantial losses in 2000.
Cost Method. Partner Companies not accounted for under either the
consolidation or the equity method of accounting are accounted for under the
cost method of accounting. Under this method, the Company's share of the
earnings or losses of these companies is not included in the Consolidated
Statements of Operations.
II-5
<PAGE>
Partner Companies accounted for under the cost method of accounting
included:
<TABLE>
<CAPTION>
VOTING OWNERSHIP VOTING OWNERSHIP
PARTNER ON BASIC BASIS ON DILUTED BASIS
COMPANY ------------------- ------------------
SINCE DECEMBER 31, 1999 DECEMBER 31, 1999
-------- ------------------- ------------------
<S> <C> <C> <C>
AdOutlet.com ................. 1999 12% 10%
DigitalWork.com .............. 1999 <1% <1%
Giftcertificates.com ......... 1999 <1% <1%
LiveCapital.com .............. 2000 *4% *4%
NeoCarta Ventures ............ 1999 4% 4%
Opus 360 Corporation ......... 1999 <1% <1%
</TABLE>
- ----------
* Ownership interest acquired in February 2000.
The cost method Partner Companies are in a very early stage of development
and have not generated significant revenues. In addition, FrontLine's cost
method Partner Companies incurred substantial losses since their inception and
are expected to continue to incur substantial losses in 2000.
EFFECT OF CONSOLIDATION ON THE PRESENTATION OF FRONTLINE'S FINANCIAL STATEMENTS
The presentation of FrontLine's financial statements may differ from
period to period primarily due to whether or not the consolidation method of
accounting or the equity method of accounting is applied. For example, previous
to the fourth quarter of 1999, VANTAS was accounted for under the equity method
of accounting; however, due to the acquisition of additional interests
resulting in voting control VANTAS was subsequently consolidated during the
fourth quarter of 1999.
To understand the Company's results of operations and financial position
without the effect of the consolidation of VANTAS, Note 4 to the consolidated
financial statements summarizes the Company's Statements of Operations and
Balance Sheets treating the ownership interest in VANTAS as if it were
accounted for under the equity method of accounting for all periods presented.
FrontLine's share of VANTAS' losses is included in "Equity in earnings (loss)
of Partner Companies and other ownership interest."
RESULTS OF OPERATIONS
The Company commenced operations on July 15, 1997 and primarily incurred
startup costs through December 31, 1998. Therefore, the following periods, the
years ended December 31, 1999 and 1998, respectively, are not comparable.
FrontLine's financial statements include the effect of consolidating
VANTAS and OneXstream.com, Inc. in 1999. The reportable segments are Executive
Office Suites and Virtual Office Services, e-Businesses and Other Operations.
Executive Office Suites and Virtual Office Services includes the effect of
consolidating the operations of VANTAS for the year ended December 31, 1999 and
the effect of the equity method of accounting for Interoffice SuperHoldings
Corporation ("InterOffice") and Reckson Executive Centers, LLC for the year
ended December 31, 1998. e-Businesses includes the effect of transactions and
other events incidental to the ownership interest in FrontLine's Partner
Companies, excluding VANTAS. Other Operations represents the expenses of
providing strategic and operational support to the Partner Companies, the
administrative costs related to these expenses and FrontLine's operations in
general.
EXECUTIVE OFFICE SUITES AND VIRTUAL OFFICE SERVICES
VANTAS was formed in January 1999 as a result of a merger of Interoffice,
Reckson Executive Centers, LLC and Alliance National Incorporated.
A significant portion of FrontLine's operating revenues and all of its
operating expenses for the year ended December 31, 1999 were attributable to
VANTAS. The following is a discussion of VANTAS' results of operations for the
year ended December 31, 1999.
II-6
<PAGE>
VANTAS' executive office suite income for the year ended December 31, 1999
was approximately $124.6 million. Executive office suite income was primarily
derived from rental income for newly acquired and existing executive office
suites in 1999. Support service and other revenues of approximately $90.8
million for the year ended December 31, 1999 was primarily attributable to
broadband Internet access, information technology support services and
administrative support services.
VANTAS' operating expenses were approximately $187.4 million, representing
87% of operating revenues. Approximately $175.5 million of operating expenses
consisted of the costs of operating the executive office suite centers.
Approximately $82.7 million of the costs represented rent expense for the
office suites, approximately $31.1 million was related to the cost of providing
support services to tenants and approximately $61.7 million was related to
center general and administrative costs. Operating expenses of approximately
$12.0 million of general and administrative expense was primarily related to
the increase of the corporate staff and related office space associated with
the Company's growth during the year ended December 31, 1999.
VANTAS incurred merger and integration costs of approximately $26.7
million for the year ended December 31, 1999 in connection with mergers and
one-time costs related to agreements with shareholders of VANTAS to purchase a
portion of the shareholders' securities in VANTAS.
For the year ended December 31, 1999, VANTAS incurred interest expense of
approximately $10.3 million. Interest expense was primarily related to
borrowings under VANTAS' credit facility for funding acquisitions during 1999
and prior periods.
At December 31, 1999, VANTAS recognized an income tax benefit of
approximately $2.8 million, net of an applicable valuation allowance on
deferred tax assets.
For the year ended December 31, 1998, the Company's share of Interoffice's
income was less than $.1 million under the equity method of accounting. The
Company's share of losses for Reckson Executive Centers, LLC was approximately
$.1 million.
E-BUSINESSES
A significant portion of FrontLine's net loss is derived from corporations
in which it holds a significant minority ownership interest accounted for under
the equity method of accounting. Equity income (loss) fluctuates with the
number of Partner Companies accounted for under the equity method, FrontLine's
voting ownership percentage in these companies, the amortization of goodwill
related to newly acquired equity method Partner Companies, and the results of
operations of these companies. As of December 31, 1999, FrontLine accounted for
four of its Partner Companies under this method as compared to two Partner
Companies during the year ended December 31, 1998. All four of these companies
incurred losses for the year ended December 31, 1999. Under this method, the
results of operations of these entities are not consolidated within the
Consolidated Statements of Operations; however, FrontLine's share of these
companies' losses is reflected in the caption "Equity in earnings (loss) of
Partner Companies and other ownership interest" in the Consolidated Statements
of Operations.
OTHER OPERATIONS
FrontLine's Other Operations consist primarily of general and
administrative cost for compensation office costs, and outside services such as
legal, accounting and travel related costs. As the number of FrontLine's
employees grow to support its operations and those of its Partner Companies,
its general and administrative costs will increase. As a result of the increase
in the number of employees and the increase in the acquisition of interests in
Partner Companies, general and administrative costs for the year ended December
31, 1999 was approximately $9.5 million compared to approximately $2.6 million
for the year ended December 31, 1998 and approximately $.5 million for the 1997
period. FrontLine plans to continue to increase the number of new employees and
build its overall infrastructure. These costs are expected to continue to be
higher compared to historical periods. During the year ended December 31, 1999,
the Company recorded compensation costs of approximately $8.5 million in
connection with incentive stock awards to management.
II-7
<PAGE>
FrontLine's interest expense, before the consolidation of VANTAS, for the
year ended December 31, 1999 was approximately $8.1 million compared to
approximately $0.6 million for the year ended December 31, 1998 and less than
$0.1 million for the 1997 period. The increase is due to an increase in the
amounts advanced under the Company's existing credit facilities and the secured
credit facility.
Included in Other Operations is FrontLine's ownership interest in RSVP
Holdings, LLC. For the year ended December 31, 1999, FrontLine's share of RSVP
Holdings, LLC's income was approximately $0.3 million.
LIQUIDITY AND CAPITAL RESOURCES
FrontLine has funded operations and investing activities through a
combination of borrowings under various credit facilities and issuances of the
Company's common stock.
FrontLine funded approximately $132.6 million in cash and issued $59.1
million of the Company's common stock to acquire interests in or make advances
to new and existing Partner Companies during the year ended December 31, 1999.
These companies include: AdOutlet.com, CommerceInc. Corporation,
DigitalWork.com, EmployeeMatters, Inc. Giftcertificates.com, NeoCarta Ventures,
OnSite Access, Inc., Opus360 Corporation, RealtyIQ.com and VANTAS Incorporated.
Prior to 1999, the Company established a credit facility with Reckson in
the amount of $100 million ("FrontLine Facility"). Additionally, Reckson
Strategic Venture Partners, LLC ("Reckson Strategic") has established a $100
million facility with Reckson to fund Reckson Strategic investments. Note 8 to
the consolidated financial statements summarizes the outstanding amounts and
terms of the FrontLine and Reckson Strategic Facilities. The Company had
approximately $79.5 million outstanding under the FrontLine Facility at
December 31, 1999. Borrowings were primarily used to fund acquisitions of
ownership interests in Partner Companies and general operations. Approximately
$42.3 million was outstanding under the Reckson Strategic Facility at December
31, 1999. These borrowings were utilized to fund Reckson Strategic investments
and general operations. At December 31, 1999, $39.0 million was available on
these Facilities.
In November 1999, the Board of Directors of FrontLine approved amendments
to the credit facilities with Reckson necessary in order for FrontLine to
proceed with certain proposed acquisition financings. As consideration for such
approvals, FrontLine paid a fee to Reckson in the form of 176,186 shares of
FrontLine's common stock which were valued at $20.31 per share.
On November 30, 1999, the Company entered into a $60 million credit
facility ("Credit Facility") with a significant financial institution to fund
transactions to acquire additional ownership interests in Partner Companies.
The Credit Facility prohibits the Company from borrowing from third parties
without consent of the lender. Note 5 to the consolidated financial statements
summarizes the terms of the Credit Facility. As of December 31, 1999, the total
available on the Credit Facility was approximately $15.6 million. In March
2000, the Credit Facility was amended to permit the Company to use proceeds
from certain equity offerings for general corporate purposes in lieu of
repayment to the Credit Facility.
VANTAS has a credit agreement with various lending institutions for $157.9
million. The credit agreement provides for a $5 million acquisition loan
commitment, $127.9 million term loans and a $25 million revolving loan
commitment, including letters of credit. As of December 31, 1999, $21.5 million
of the term loan was funded into a cash collateral account that VANTAS will be
permitted to utilize in connection with permitted acquisitions. There were no
borrowings outstanding under the acquisition and revolving loan commitment.
VANTAS had outstanding letters of credit of approximately $10.1 million for
landlord security deposits which reduced the borrowing available under the
revolving loan commitment. Note 6 to the consolidated financial statements
summarizes the terms of VANTAS' credit agreement and outstanding balances
thereunder.
II-8
<PAGE>
On February 22, 2000, VANTAS and the lenders entered into an amendment to
the credit facility whereby certain of the financial covenants contained in the
credit facility were amended. VANTAS has obtained a commitment letter for the
provision of a new credit facility, subject to satisfaction of various
conditions, which would replace the credit facility upon consummation of the HQ
Global Workplaces Merger. There can be no assurance that the HQ Global
Workplaces Merger will occur or that, if the HQ Global Workplace Merger does not
occur, VANTAS will be able to meet certain of the financial covenants contained
in the credit facility for fiscal quarters subsequent to December 31, 1999.
FrontLine also funded investments of ownership interests in Partner
Companies through the issuance of FrontLine's common stock. During the year
ended December 31, 1999, the Company issued approximately $59.1 million of
FrontLine's common stock to acquire interests in Partner Companies.
On December 16, 1999, the Company issued 1,437,500 shares of its common
stock in a public offering at $47.25 per share for an aggregate consideration
of approximately $63.9 million. Proceeds of the public offering were primarily
used for purchases of additional ownership interests in Partner Companies.
Subsequent to December 31, 1999, the Company funded approximately $78.6
million in cash and issued $24.6 million of common stock to acquire interests
in or make advances to new and existing Partner Companies. New Partner
Companies include LiveCapital.com and UpShot.com.
On January 21, 2000, the Company entered into a merger agreement pursuant
to which VANTAS will be merged with HQ Global Workplaces, Inc. The merger is
scheduled to close by April 30, 2000 and requires FrontLine to obtain and will
be financed through the issuance of new equity of HQ Global Workplaces and
approximately $350 million of HQ Global Workplaces debt. VANTAS has posted a
letter of credit in the amount of $35 million to secure the obligations under
the merger agreement. The Company has pledged approximately 15 million shares
of VANTAS stock to secure its nonrecourse guarantee of the letter of credit. In
the event the letter of credit is drawn upon and the lender forecloses upon the
Company's shares of VANTAS, VANTAS is obligated to reimburse the Company in the
form of additional shares of VANTAS for any loss of the Company's shares of
VANTAS provided that such loss was not a result of the Company's gross
negligence. FrontLine has obtained commitments for the debt financing which are
subject to certain conditions and is in negotiations to obtain the equity
financing. However, no assurance can be given that the Company will be
successful in obtaining the equity financing required under the merger
agreement such that the merger will be consummated on its current terms or that
the merger will not be consummated for any other reason.
The Company also funded investing activities subsequent to December 31,
1999 with net proceeds of approximately $24.6 million from the completion of
26,000 shares of privately placed Convertible Preferred Stock.
On March 7, 2000, Gotham Partners ("Gotham"), an investment partnership
that invests in public and private companies in a wide range of industries and
stages of development, and certain affiliates of Gotham, invested $30 million
to purchase 1.5 million warrants to acquire FrontLine's common stock at an
exercise price of $70 per share for $20 per warrant. The warrants have a term
of 3.25 years. The Company utilized approximately half of these proceeds to
reduce the Credit Facility and the remaining portion will be utilized for
acquisitions of interest in Partner Companies and working capital purposes.
Currently, the Company has two short-term letters of credit totaling $7.7
million, which have been utilized as deposits for future acquisitions of
ownership interests in Partner Companies.
FrontLine's operations do not require intensive capital expenditures.
There were no significant capital expenditure commitments as of December 31,
1999.
FrontLine will continue to evaluate acquisition opportunities and expects
to acquire additional ownership interests in new and existing Partner Companies
in the next 12 months, all of which will make it necessary for the Company to
raise additional funds. The existing secured credit facility matures in May
2000; although it contains a three-month potential extension, the Company may
not be able to renew this facility or obtain additional bank or other financing
beyond this period, and may be required to repay the amounts borrowed under the
Credit Facility at times when it does not have sufficient internal funds, or
may only be able to do so on terms not favorable or acceptable to the Company.
If additional funds are
II-9
<PAGE>
raised through the issuance of equity securities, existing shareholders may
experience significant dilution. Although management believes that it will
continue to have access to the public markets, the availability and amount of
funds from these markets is subject to numerous factors including some that are
beyond the Company's control, and therefore is not assured.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature of the progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation of testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
The Company expensed approximately $.1 million during 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal
systems, or the products and services of third parties. The Company will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
INFLATION
The Credit Facilities generally bear interest at variable rates. These
rates will be influenced by changes in the prime rate and is sensitive to
inflation and other economic factors. A significant increase in interest rates
may have a negative impact on the earnings of the Company due to the variable
interest rate under the Credit Facilities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk facing the Company is interest rate risk on its
Credit Facilities. The Company does not hedge interest rate risk using
financial instruments. The Credit Facilities bear interest at the greater of
the prime rate plus 2% or 12% (with interest on balances outstanding more than
one year increasing by 4% of the previous years rate). The rate of interest on
the Credit Facilities will be influenced by changes in the prime rate and is
sensitive to inflation and other economic factors. A significant increase in
interest rates may have a negative impact on the earnings of the Company due to
the variable interest rate under the Credit Facilities.
The following table sets forth the Company's Credit Facilities
obligations, principal cash flows by scheduled maturity, weighted average
interest rates and estimated fair market value ("FMV") at December 31, 1999 (in
thousands).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL FMV
------------ ------ -------- ------------- ------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate ......... $ 44,407 $ -- $ --- $ 121,848 $ -- $ -- $ 166,255 $166,255
Average interest
rate ................. 8.56% -- -- 12.01% -- -- 11.09% --
</TABLE>
The primary market risk facing VANTAS is interest rate risk on its credit
agreement. The credit agreement bears interest ranging from LIBOR plus 3.0% to
LIBOR plus 3.75% for a one, three or six month period at the election of
VANTAS. The rate of interest on the credit agreement will be influenced by
changes in short term rates and is sensitive to inflation and other economic
factors. As significant increase in interest rates may have a negative impact
on the earnings of VANTAS due to the variable interest under the credit
agreement.
Based on variable rate debt levels, a 10% increase in market interest
rates throughout 1999 (approximately 50 basis points on a weighted average
basis) would have an approximate 5.3% impact on VANTAS' interest expense, net
for the year ended December 31, 1999.
II-10
<PAGE>
VANTAS has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of December 31, 1999,
VANTAS had no other material exposure to market risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included in Item 14 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II-11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the section captioned "Proposal I: Election
of Directors" of the Company's definitive proxy statement for the 2000 annual
meeting of shareholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the section captioned "Executive
Compensation" of the Company's definitive proxy statement for the 2000 annual
meeting of shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the section captioned "Principal and
Management Stockholders" of the Company's definitive proxy statement for the
2000 annual meeting of shareholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the section captioned "Certain Relationships
and Related Transactions" of the Company's definitive proxy statement for the
2000 annual meeting of the shareholders is incorporated herein by reference.
III-1
<PAGE>
PART IV
ITEM 14. FINANCIAL STATEMENTS AND SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
(a) (1 and 2) Financial Statements and Schedules
The following consolidated financial information is included as a separate
section of this annual report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Auditors .............................................. IV-6
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ... IV-7
Consolidated Statements of Operations for the years ended December 31, 1999,
December 31, 1998 and the period July 15, 1997 (commencement of operations)
to December 31, 1997 ...................................................... IV-8
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1999, December 31, 1998 and the period July 15, 1997 (commencement of
operations) to December 31, 1997 .......................................... IV-9
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
December 31, 1998 and the period July 15, 1997 (commencement of operations)
to December 31, 1997. ..................................................... IV-10
Notes to Consolidated Financial Statements .................................. IV-11
</TABLE>
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements and notes
thereto.
IV-1
<PAGE>
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
3.1(1) Certificate of Incorporation
3.2 Amended and Restated By-Laws of Registrant
3.3(6) Amended and Restated Certificate of Incorporation
4.1(1) Specimen Share Certificate of Common Stock
4.2 Specimen Warrant W-1, dated December 7, 1999, in the name Elliot S. Cooperstone to purchase 100,000 shares of common
stock
4.3 Specimen Warrant W-2, dated December 7, 1999, in the name H. Thach Pham to purchase 100,000 shares of common stock
4.4 Specimen Option O-1, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
shares of common stock of
eSourceOne, Inc. owned by Elliot S. Cooperstone
4.5 Specimen Option O-2, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
shares of common stock of
eSourceOne, Inc. owned by H. Thach Pham
4.9(14) Certificate of Designations Establishing and Fixing the Rights of Series A-1 Cumulative Preferred Stock
4.10(14) Certificate of Designations Establishing and Fixing the Rights of Series A-2 Cumulative Preferred Stock
4.11(14) Certificate of Designations Establishing and Fixing the Rights of Series A-3 Cumulative Preferred Stock
4.12(14) Certificate of Designations Establishing and Fixing the Rights of Series A-4 Cumulative Preferred Stock
4.13(14) Certificate of Designations Establishing and Fixing the Rights of Series A-5 Cumulative Preferred Stock
4.14(14) Certificate of Designations Establishing and Fixing the Rights of Series A-6 Cumulative Preferred Stock
4.16(14) Specimen Warrant W-1, dated March 7, 2000, in the name Gorham Partners, L.P. to purchase 1,000,000 shares of common stock
4.17(14) Specimen Warrant W-2, dated March 7, 2000, in the name Gorham Partners III, L.P. to purchase 30,000 shares of common
stock
4.18(14) Specimen Warrant W-3, dated March 7, 2000, in the name Gorham Partners International, Inc. to purchase 50,000 shares
of common stock
10.0 Subscription Agreement as of February 7, 2000, by and between Reckson Service Industries, Inc. and VANTAS
Incorporated
10.1(6) Intercompany Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc. dated May
13, 1998
10.2A Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
Inc. relating to the operations of
Reckson Strategic Venture Partners, LLC dated August 4, 1999
10.2B Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
Inc. relating to the operations of
Reckson Service Industries, Inc. dated August 4, 1999
10.2C(12) Amendment to Amended and Restated Credit Agreements between Reckson Operating Partnership, L.P. and Reckson Service
Industries dated November
30, 1999
10.3(1) Limited Liability Company Agreement of OnSite Ventures, LLC
10.4(1) Limited Liability Company of RSVP Holdings, LLC
10.5A(1) Operating Agreement of Reckson Strategic Venture Partners, LLC
10.5B(1) Supplemental Agreement to Operating Agreement of Reckson Strategic Venture Partners, LLC
10.6(1) Registration Rights Agreement between Reckson Service Industries, Inc. and certain affiliates thereof dated May 13,
1998
10.7(6) Loan Agreement regarding On-Site Convertible Loans
10.8A(1) Stock Option Plan
10.8B(6) 1998 Employee Stock Option Plan
10.8C(7) 1999 Stock Option Plan
10.8D 2000 Employee Stock Option Plan
10.9(1) Employment Agreement of Steven H. Shepsman
10.10(1) Employment Agreement of Seth B. Lipsay
10.11(1) Limited Liability Company Agreement of Interoffice Superholdings, LLC by and among Interoffice Superholdings, LLC,
RSI I/O Holdings, Inc., JAH I/O,
LLC and Rieger I/O LLC
10.12 Fifth Amended and Restated Stockholders' Agreement, dated by and among VANTAS Incorporated and certain
securityholders identified therein
10.13(2) Letter Agreement dated November 9, 1998 by and between JAH I/O LLC and Reckson Management Group, Inc., Reckson
Service Industries, Inc., RSI I/O
Holdings, Inc., and Reckson Office Centers, LLC
10.14(2) Letter Agreement by and between Reckson Service Industries, Inc., and RFIA, LLC
10.15(3) Amended and Restated Operating Agreement of Assisted Living Investments LLC
10.16(4) Operating Agreement of Dominion Venture Group LLC
10.17(5) Agreement and Plan of Merger by and among Alliance National Incorporated, Alliance Holding Inc., Interoffice
Superholdings Corporation and Interoffice
Superholdings, LLC
10.18(5) Agreement and Plan of Merger by and among Alliance National Incorporated, ANI Holdings, Inc., Reckson Executive
Centers, Inc., and Reckson Office
Centers, LLC
10.19(6) $44 million Senior Secured Promissory Note of On-Site Ventures, LLC
10.20(8) Investor Rights Agreement, by and among OnSite Access, Inc. and certain investors and individuals within management
10.21(8) Voting Agreement, by and among OnSite Access, Inc. and certain investors
10.22(8) Purchase Agreement regarding Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.23(9) Series D Convertible Preferred Stock Securities Purchase Agreement, dated as of July 29, 1999 by and among VANTAS
Incorporated and several
Purchasers
10.24(10) Stock Purchase Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service Industries,
Inc. and RSI ESO, Inc.
10.25(10) Registration Rights Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service
Industries, Inc., RSI ESO, Inc., Elliott S.
Cooperstone and H. Thach Pham
10.26(10) Stockholders' Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc. and certain stockholders
10.27(11) Stock Purchase Agreement, dated as of August 19, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings,
Inc., Cahill, Warnock Strategic Partners
Fund L.P., Strategic Associates, L.P. and David L. Warnock
10.28(11) Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings, Inc.,
RSI-OnSite Holdings LLC, RSI-OSA
Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.29(11) Letter of Amendment to Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI
I/O Holdings, Inc., RSI-OnSite
Holdings LLC, RSI-OSA Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
</TABLE>
IV-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -------------------------------------------------------------------------------------------------------------------
<S> <C>
10.30(12) Credit Agreement, dated November 30, 1999, by and among Reckson Service Industries, Inc. and Warburg Dillon Read,
LLC and UBS AG, Stamford
Branch
10.31(12) Equity Interest Pledge and Security Agreement, dated November 30, 1999, by and among the parties therein and UBS
AG, Stamford Branch
10.32(12) Interest Rate Cap Agreement, Pledge and Security Agreement, dated November 30, 1999, among Reckson Service
Industries, Inc. and Warburg Dillon
Read, LLC and UBS AG, Stamford Branch
10.33(12) November 30, 1999 Promissory Note for $60,000,000 to the order of UBS AG, Stamford Branch
10.34(13) Agreement and Plan of Merger by and among HQ Global Workplaces, Inc. and CarrAmerica Realty Corporation and VANTAS
Incorporated and Reckson
Service Industries, Inc., dated as of January 20, 2000
10.35(13) Stock Purchase Agreement between CarrAmerica Realty Corporation and Reckson Service Industries, Inc., dated as of
January 20, 2000
10.36(13) Stock Purchase Agreement among CarrAmerica Realty Corporation, OmniOffices (UK) Limited and OmniOffices (Lux) 1929
Holding Company S.A. and
VANTAS Incorporated and Reckson Service Industries, Inc., dated as of January 20, 2000
10.37(8) Certificate of Designation of Series A, Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.38(13) Form of Stockholders Agreement by and among HQ Global Workplaces, Inc., Reckson Service Industries, Inc.,
CarrAmerica Realty Corporation and
certain other stockholders of HQ Global Workplaces, Inc.
10.39 Amended and Restated Credit Agreement among VANTAS, Various Banks, and Paribas, as agent, dated as of January 16,
1997, as amended and restated
as of November 6, 1998 and August 3, 1999
10.40 Exchange Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc., Elliot S. Cooperstone
and H. Thach Pham
10.41 Warrant Registration Rights Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc.,
Elliot S. Cooperstone and H. Thach
Pham
10.42(14) Warrant Registration Rights Agreement, dated as of March 7, 2000 between Reckson Service Industries, Inc., and
Gotham Partners, L.P., Gotham Partners,
III, L.P. and Gotham Partners International, Ltd.
12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries of Reckson Service Industries, Inc.
23.0 Consent of Independent Accountants
24.1 Powers of Attorney (included in Part IV of this Form 10-K)
27.0 Financial Data Schedule
</TABLE>
- ----------
(1) Previously filed as an exhibit to Registration Statement on Form S-1 (No.
333-44419) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on January 25, 1999 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on September 8, 1998 and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on September 11, 1998 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on December 1, 1998 and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Form 10-K filed with the
SEC on March 31, 1999 and incorporated herein by reference.
(7) Previously filed as an exhibit to Registration Statement on Form S-8 filed
with the SEC on July 29, 1999 and incorporated herein by reference.
(8) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on July 16, 1999 and incorporated herein by reference.
(9) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on August 31, 1999 and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on September 1, 1999 and incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on October 12, 1999 and incorporated herein by reference.
(12) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on December 13, 1999 and incorporated herein by reference.
(13) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on January 25, 2000 and incorporated herein by reference.
(14) Previously filed as an exhibit to the Company's Form 8-K filed with the
SEC on March 28, 2000 and incorporated herein by reference.
IV-3
<PAGE>
(3) Exhibits
(b) Reports on Form 8-K
On October 12, 1999, the Company filed a report on Form 8-K with respect to a
stock purchase agreement with Cahill, Warnock Strategic Partners Fund, L.P.,
Strategic Associates, L.P., and David L. Warnock to purchase VANTAS
Incorporated stock.
On October 14, 1999, the Company filed a report on Form 8-K announcing the
lapse of a right of first refusal of certain VANTAS shareholders pursuant to
the terms of a stockholder's agreement.
On October 28, 1999, the Company filed a report on Form 8-K with respect to the
purchase of an entity which indirectly owns shares of OnSite Access, Inc., from
a certain affiliate.
On December 13, 1999, the Company filed a report on Form 8-K announcing a
secured credit facility with Warburg Dillon Read, LLC, as Arranger and UBS AG,
Stamford Branch as Administrative Agent.
On December 13, 1999, the Company filed a report on Form 8-K relating to the
filing of proforma financial statements with respect to the purchase of shares
to increase the Company's ownership interest in VANTAS Incorporated.
On December 29, 1999, the Company filed a report on Form 8-K relating to the
underwritten public offering on December 16, 1999.
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 29, 2000.
FRONTLINE CAPITAL GROUP
By: /s/ Scott Rechler
-------------------------------------
(Scott Rechler)
President, Chief Executive Officer
and Director
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors
of FrontLine Capital Group, hereby severally constitute Scott H. Rechler,
Mitchell D. Rechler and Michael Maturo, and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Form 10-K filed
herewith and any and all amendments to said Form 10-K, and generally to do all
such things in our names and in our capacities as officers and directors to
enable FrontLine Capital Group to comply with the provisions of the Securities
Exchange Act of 1934, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys, or any of them, to said Form 10-K and any and all
amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------- ------------------------------------------------------- ---------------
<S> <C> <C>
/s/ Scott H. Rechler President, Chief Executive Officer and Director March 29, 2000
- ---------------------
(Scott H. Rechler)
/s/ Michael Maturo Executive Vice President, Chief Financial Officer and March 29, 2000
- ---------------------
Director (Principal Financial Officer and Accounting
(Michael Maturo)
Officer)
/s/ Donald J. Rechler Chairman of the Board and Director March 29, 2000
- ---------------------
(Donald J. Rechler)
/s/ Roger M. Rechler Member of Management Advisory Committee and March 29, 2000
- ---------------------
Director
(Roger M. Rechler)
/s/ Mitchell d.. Rechler Secretary, Member of Management Advisory March 29, 2000
- ---------------------
Committee and Director
(Mitchell D. Rechler)
/s/ Gregg M.. Rechler Member of Management Advisory Committee and March 29, 2000
- ---------------------
Director
(Gregg M. Rechler)
/s/ Paul Amoruso Independent Director March 29, 2000
- ---------------------
(Paul Amoruso)
/s/ Ronald Cooper Independent Director March 29, 2000
- ---------------------
(Ronald Cooper)
</TABLE>
IV-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Reckson Service Industries, Inc.
We have audited the accompanying consolidated balance sheets of Reckson
Service Industries, Inc. and Subsidiaries (d/b/a FrontLine Capital Group) as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years ended December
31, 1999 and 1998 and for the period for July 15, 1997 (commencement of
operations) to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Reckson
Service Industries, Inc. and Subsidiaries (d/b/a FrontLine Capital Group) as of
December 31, 1999 and 1998, and the consolidated results of their operations
and their cash flows for the years ended December 31, 1999 and 1998 and for the
period from July 15, 1997 (commencement of operations) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
New York, New York
February 22, 2000
IV-6
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
------------- ------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents ...................................... $ 32,740 $ 2,026
Restricted cash (Notes 2 and 6) ................................ 21,572 --
Accounts receivable, net of allowance for doubtful accounts of
$861 in 1999................................................... 8,426 --
Other current assets ........................................... 16,008 --
--------- --------
Total Current Assets ........................................ 78,746 2,026
Ownership interests in and advances to Partner Companies
(Note 3) ...................................................... 61,207 30,277
Other ownership interest (Note 9) .............................. 36,626 15,561
Intangible assets (net) (Note 2) ............................... 239,412 --
Property and equipment (net) (Note 2) .......................... 80,425 100
Other assets (net) (Notes 2 and 8) ............................. 45,567 10,879
--------- --------
TOTAL ASSETS ................................................ $ 541,983 $ 58,843
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued expenses .......................... $ 51,383 $ 1,894
Current portion of notes payable (Note 6) ...................... 12,500 --
Deferred rent payable (Note 10) ................................ 2,165 --
Other current liabilities ...................................... 1,139 --
--------- --------
Total Current Liabilities ................................... 67,187 1,894
Credit facilities with related parties (Note 8) ................ 121,848 40,981
Secured credit facility (Note 5) ............................... 44,407 --
Notes payable (Note 6) ......................................... 108,125 --
Deferred rent payable (Note 10) ................................ 22,794 --
Other liabilities .............................................. 28,175 --
--------- --------
TOTAL LIABILITIES ........................................... 392,536 42,875
--------- --------
MINORITY INTEREST .............................................. 35,338 --
COMMITMENTS AND CONTINGENCIES (NOTES 8 AND 10) ................. -- --
SHAREHOLDERS' EQUITY: (NOTES 1 AND 7)
Preferred stock, $.01 par value 25,000,000 shares authorized,
none issued ................................................... -- --
Common stock, $.01 par value, 100,000,000 shares authorized,
30,672,794 and 24,685,514 shares issued and outstanding, at
December 31, 1999 and December 31, 1998, respectively ......... 307 247
Additional paid in capital ..................................... 162,054 24,126
Accumulated deficit ............................................ (48,252) (8,405)
--------- --------
TOTAL SHAREHOLDERS' EQUITY 114,109 15,968
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................. $ 541,983 $ 58,843
========= ========
</TABLE>
(See accompanying notes to consolidated financial statements)
IV-7
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1997
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Executive office suite income ......................... $ 124,564 $ -- $ --
Support services and other (Note 8) ................... 90,812 336 --
----------- ----------- ------
TOTAL OPERATING REVENUES ............................. 215,376 336 --
----------- ----------- ------
OPERATING EXPENSES:
Cost of revenue ....................................... 175,454 -- --
Partner Company general and administrative expenses. 11,995 -- --
----------- ----------- ------
TOTAL OPERATING EXPENSES ............................. 187,449 -- --
----------- ----------- ------
PARTNER COMPANY OPERATING INCOME ..................... 27,927 336 --
----------- ----------- ------
OTHER INCOME ( EXPENSES):
Merger and integration costs (Note 2) ................. (26,730) -- --
Corporate general and administrative expenses ......... (9,509) (2,613) (479)
Depreciation and amortization ......................... (15,680) (1,260) (8)
Amortization of deferred charges (Note 7) ............. (8,455) -- --
Interest (expense) income (Note 8) .................... (18,432) (644) 6
----------- ----------- --------
LOSS BEFORE BENEFIT FOR INCOME TAXES, MINORITY INTEREST
AND EQUITY IN EARNINGS (LOSS) OF PARTNER COMPANIES
AND OTHER OWNERSHIP INTEREST ......................... (50,879) (4,181) (481)
Benefit for income taxes .............................. 2,841 -- --
----------- ----------- --------
LOSS BEFORE MINORITY INTEREST AND EQUITY IN EARNINGS
(LOSS) OF PARTNER COMPANIES AND OTHER OWNERSHIP
INTEREST ............................................. (48,038) (4,181) (481)
Minority interest ..................................... 18,790 -- --
Equity in earnings (loss) of Partner Companies and
other ownership interest (Note 3) .................... (10,599) (3,966) 223
----------- ----------- --------
NET LOSS .............................................. $ (39,847) $ (8,147) $ (258)
=========== =========== ========
Basic and diluted net loss per weighted average
common share ......................................... $ (1.56) $ (.56) $ --
=========== =========== ========
Basic and diluted weighted average common shares
outstanding .......................................... 25,600,985 14,522,513 --
=========== =========== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
IV-8
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL PAID IN ACCUMULATIVE SHAREHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
-------- -------------------- -------------- --------------
<S> <C> <C> <C> <C>
Initial capitalization, July 15, 1997 .............. $ -- $ 4,480 $ -- $ 4,480
Net Loss ........................................... -- -- (258) (258)
---- -------- --------- ---------
Shareholders' equity, December 31,1997 ............. -- 4,480 (258) 4,222
Distribution of shares ............................. 41 -- -- 41
Proceeds from rights offering, net of costs of
$1,296............................................. 206 19,646 -- 19,852
Net loss ........................................... -- -- (8,147) (8,147)
---- -------- --------- ---------
Shareholders' equity, December 31, 1998 ............ 247 24,126 (8,405) 15,968
Issuance of common stock ........................... 44 71,923 -- 71,967
Proceeds from the exercise of employee options. 2 274 -- 276
Issuance of Warrants (Note 3) ...................... -- 2,172 -- 2,172
Proceeds from public offering, net of costs of
$4,348............................................. 14 63,559 -- 63,573
Net loss ........................................... -- -- (39,847) (39,847)
---- -------- --------- ---------
Shareholders' equity, December 31, 1999 ............ $307 $162,054 $ (48,252) $ 114,109
==== ======== ========= =========
</TABLE>
(See accompanying notes to consolidated financial statements)
IV-9
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1997
FOR THE YEAR FOR THE YEAR (COMMENCEMENT OF
ENDED ENDED OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .................................................... $ (39,847) $ (8,147) $ (258)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Amortization and depreciation .............................. 15,680 39 8
Equity in (earnings) loss of Partner Companies and
other ownership interest ................................. 10,599 3,966 (223)
Minority interest .......................................... (18,790) -- --
Benefit for income taxes ................................... (2,841) -- --
Non-cash compensation ...................................... 18,000 -- --
Changes in operating assets and liabilities:
Accounts receivable, net ................................... (1,329) -- --
Other assets ............................................... (6,532) (1,453) (30)
Equipment .................................................. (341) (115) --
Deferred rent .............................................. 4,889 -- --
Organization and pre-acquisition costs ..................... -- 658 (690)
Accounts payable and accrued expenses ...................... 32,762 1,774 119
Other liabilities .......................................... 88 -- --
Affiliates receivables ..................................... 7,427 (11,741) 2,345
---------- --------- --------
Net cash provided by (used in) operating activities ......... 19,765 (15,019) 1,271
---------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of Executive Office Suite Centers ............. (88,870) -- --
Restricted cash ............................................ (10,318) -- --
Acquisition of ownership interests and advances to
Partner Companies ........................................ (111,572) (30,077) (325)
Other ownership interest ................................... (20,760) (13,882) (1,674)
---------- --------- --------
Net cash used in investing activities ....................... (231,520) (43,959) (1,999)
---------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net .............................. 69,911 -- --
Capital contributions ...................................... -- -- 857
Deferred financing costs ................................... (4,398) -- --
Costs of capital ........................................... (457) -- --
Net proceeds from credit facilities with related
parties .................................................. 128,492 40,982 --
Capital leases ............................................. (2,226) -- --
Exercise of options ........................................ 3,125 -- --
Net proceeds from secured credit facility .................. 44,407 -- --
Net proceeds from rights offering .......................... -- 19,893 --
---------- --------- --------
Net cash provided by financing activities .................. 238,854 60,875 857
---------- --------- --------
CASH AND CASH EQUIVALENTS:
Net increase ............................................... 27,099 1,897 129
Beginning of year .......................................... 5,641 129 --
---------- --------- --------
End of year ................................................ $ 32,740 $ 2,026 $ 129
========== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest ..................... $ 14,253 $ 816 $ --
========== ========= ========
Cash paid during the year for income taxes ................. $ 2,009 $ -- $ --
========== ========= ========
</TABLE>
(See accompanying notes to consolidated financial statements)
IV-10
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF THE COMPANY
Reckson Service Industries, Inc. and Subsidiaries d/b/a FrontLine Capital
Group ("FrontLine" or the "Company"), was formed on July 15, 1997. FrontLine is
a publicly-traded operating company that identifies, acquires interests in, and
develops a network of business-to-business ("B2B") e-commerce and e-service
companies (the "Partner Companies") that service small and medium sized
enterprises, independent professionals and the mobile workforce of larger
companies.
The Company acquires significant, long-term stakes in targeted Partner
Companies, which it incorporates into a collaborative network of e-commerce and
e-services companies, seeking to accelerate their growth and increasing their
likelihood of success. FrontLine has developed an extensive e-Cooperative
platform that allows its Partner Companies to benefit from its operational and
management resources and experience, the Company's extensive customer base as
well as gain significant synergies from other existing and future Partner
Companies. The e-Cooperative consists of the:
o enterprise Development Group ("eDG") -- eDG offers strategic guidance,
organizational design, human resources, recruiting and technology
assistance to its Partner Companies,
o Collaborative network of Partner Companies -- Enables Partner Companies
to share collective knowledge and benefit from cross-selling and
cross-marketing business development opportunities,
o Advisory Board -- The Advisory Board of independent industry
professionals will supplement FrontLine's eDG by providing management
guidance to Partner Companies and sourcing new business opportunities.
The Company's strategy is to continue to expand its network of Partner
Companies and its e-Cooperative platform by pursuing additional acquisitions
that complement and enhance the overall network. FrontLine seeks to add
significant value to its Partner Companies with the goal of creating industry
leaders that have the potential to become public companies, act as industry
consolidators or merge with the proper strategic partners. FrontLine targets
early stage companies that can benefit from FrontLine's entire franchise and
therefore have the potential to create significant value for FrontLine.
FrontLine seeks to focus its future acquisitions in the Internet sector by
targeting three types of B2B e-commerce and e-services companies:
o Internet-based outsourcing (i.e. companies that utilize the Internet to
enable the outsourcing of non-core business functions),
o e-commerce and infrastructure (i.e. companies that primarily deliver or
enable the delivery of goods and services over the Internet),
o Virtual office solutions (i.e. companies that combine a physical
infrastructure with an Internet enabled model to enhance the delivery of
their services).
Although the Company refers to the companies in which it has acquired an equity
and cost ownership interest as its "Partner Companies" and that it has a
"partnership" with these companies, it does not act as an agent or legal
representative for any of these companies, it does not have the power or
authority to legally bind any of its Partner Companies and it does not have the
types of liabilities in relation to its Partner Companies that a general
partner of a partnership would have.
IV-11
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED )
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements present the
consolidated financial position of the Company and its majority owned
subsidiaries, VANTAS Incorporated ("VANTAS") and OneXstream.com, Inc. at
December 31, 1999 and 1998 and the results of their operations and their cash
flows for the years ended December 31, 1999 and 1998 and for the period July
15, 1997 to December 31, 1997. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
CHANGE IN ACCOUNTING PRINCIPLE
In 1999, the Company changed its balance sheet presentation to a
classified balance sheet. The balance sheet in prior years, beginning in 1998,
was presented as unclassified. The new method was adopted in conjunction with
the consolidation of VANTAS, a service company, and has been applied to the
prior year's balance sheet to conform to the 1999 presentation. The change has
no effect on the consolidated statement of operations.
ACCOUNTING FOR OWNERSHIP INTERESTS IN PARTNER COMPANIES AND OTHER OWNERSHIP
INTEREST
The interests that FrontLine acquires in its Partner Companies and other
ownership interest are accounted for under one of three methods: consolidation,
equity method and cost method. The applicable accounting method is generally
determined based on the Company's voting interest and rights in a Partner
Company.
Consolidation. Partner Companies in which the Company directly or
indirectly owns more than 50% of the outstanding voting securities are
generally accounted for under the consolidation method of accounting. Under
this method, a Partner Company's results of operations are reflected within the
Company's Consolidated Statements of Operations. All significant inter-company
accounts and transactions have been eliminated. Participation of other Partner
Company shareholders in the earnings or losses of a consolidated Partner
Company are reflected in the caption "Minority interest" in the Company's
Consolidated Statements of Operations. Minority interest adjusts the Company's
consolidated results of operations to reflect only the Company's share of the
earnings or losses of the consolidated Partner Company.
Equity Method. Partner Companies and other ownership interests whose
results are not consolidated, but over whom the Company exercises significant
influence, are accounted for under the equity method of accounting. Whether or
not the Company exercises significant influence with respect to a Partner
Company or other ownership interest depends on an evaluation of several factors
including, among others, representation on the Partner Company's or other
ownership interest's Board of Directors and ownership level, which is generally
a 20% to 50% interest in the voting securities of the Partner Company and other
ownership interests, including voting rights associated with the Company's
holdings in common, preferred and any other convertible instruments in the
Partner Company and other ownership interests. Under the equity method of
accounting, a Partner Company's or other ownership interest's accounts are not
reflected within the Company's Consolidated Statements of Operations; however,
FrontLine's share of the earnings or losses of the Partner Company or other
ownership interest is reflected in the caption "Equity in earnings (loss) of
Partner Companies and other ownership interests" in the Consolidated Statements
of Operations.
The amount by which the Company's carrying value exceeds its share of the
underlying net assets of Partner Companies or other ownership interests
accounted for under the consolidation or equity method of accounting is
amortized on a straight-line basis over 30 years which adjusts the Company's
share of the Partner Company's or other ownership interest's earnings or
losses.
IV-12
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Cost Method. Partner Companies not accounted for under the consolidation
or the equity method of accounting are accounted for under the cost method of
accounting. Under this method, the Company's share of the earnings or losses of
such companies is not included in the Consolidated Statements of Operations.
The Company also recognizes income from dividends on distributed earnings of
its Partner Companies. However, cost method impairment charges are recognized
in the Consolidated Statement of Operations with the new cost basis not
written-up if circumstances suggest that the value of the Partner Company has
subsequently recovered.
The Company records its ownership interest in debt securities of Partner
Companies accounted for under the cost method at cost as it has the ability and
intent to hold these securities until maturity. The Company records its
ownership interests in equity securities of Partner Companies accounted for
under the cost method at cost, unless these securities have readily
determinable fair values based on quoted market prices, in which case these
interests would be classified as available-for-sale securities or some other
classification in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". In addition to the Company's investments in voting and non-voting
equity and debt securities, it also periodically makes advances to its Partner
Companies in the form of promissory notes which are accounted for in accordance
with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan".
The Company continually evaluates the carrying value of its ownership
interests in and advances to each of its Partner Companies for possible
impairment based on achievement of business plan objectives and milestones, the
value of each ownership interest in the Partner Company relative to carrying
value, the financial condition and prospects of the Partner Company, and other
relevant factors. The business plan objectives and milestones the Company
considers include, among others, those related to financial performance such as
achievement of planned financial results or completion of capital raising
activities, and those that are not primarily financial in nature such as the
launching of a web site, business development activities, or the hiring of key
employees. The fair value of the Company's ownership interests in and advances
to privately held Partner Companies is generally determined based on the value
at which independent third parties have invested or have committed to invest in
the Partner Companies.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
RESTRICTED CASH
VANTAS has restricted cash of approximately $21.6 million that was held at
December 31, 1999 for future acquisitions of executive office suite centers.
REVENUE RECOGNITION
The Company's operating revenues for the year ended December 31, 1999 were
primarily attributable to VANTAS. VANTAS' revenue is derived primarily from the
operation of their executive office suites and the range of telecommunication
and business support services provided to clients, and are recognized as the
related services are provided.
RECEIVABLES AND CONCENTRATION OF CREDIT RISK
VANTAS performs credit evaluations of its clients and generally requires
at least two months' rent as a security deposit. VANTAS facilities are located
primarily throughout the United States, which limits VANTAS' exposure to
certain economic risks, based upon local economic conditions.
IV-13
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
VANTAS' cash balances are held primarily at one financial institution and
may, at times, exceed insurable amounts. VANTAS believes it mitigates its risk
by investing in or through a major financial institution. Recoverability would
be dependent upon the performance of the institution.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets which
range from five to seven years. Leasehold improvements are amortized over the
lesser of the term of the related lease or the estimated useful lives of the
assets. As of December 31, 1999, accumulated depreciation was approximately
$14.0 million.
If there is an event or a change in circumstance that indicates that the
basis of the Company's long-lived assets may not be recoverable, the Company's
policy is to assess any impairment in value by making a comparison of the
current and projected operating cash flows of the asset over its remaining
useful life, on an undiscounted basis, to the carrying amount of the asset.
Such carrying amount would be adjusted, if necessary, to reflect an impairment
in the value of the assets.
DEFERRED FINANCING COSTS
The Company has amortized deferred financing costs over the term of the
related debt. As of December 31, 1999, accumulated amortization was
approximately $2.0 million.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill which is the excess of the
purchase price over the net assets of acquired companies by FrontLine and is
being amortized on the straight-line method primarily over 30 years. As of
December 31, 1999 accumulated amortization was approximately $9.0 million.
If there is an event or change in circumstances that indicates that the
basis of FrontLine's long-lived intangibles may not be recoverable, FrontLine's
policy is to assess any impairment in value by making a comparison of the
current and projected operating cash flows of the business center for which the
intangible relates over its remaining useful life, on an undiscounted basis, to
the carrying amount of the intangible. Such carrying amount would be adjusted,
if necessary, to reflect an impairment in the value of the intangible assets.
RENT EXPENSE
Generally accepted accounting principles require that rent expense be
recognized on a straight-line basis over the term of the related lease. The
difference between the rent expense recognized for financial reporting purposes
and the actual payments made in accordance with the lease agreement is
recognized as a deferred rent liability.
MERGER AND INTEGRATION COSTS
VANTAS incurred merger and integration costs during the year ended
December 31, 1999 in connection with its merger with FrontLine. Such charges
consisted primarily of compensation expense, professional fees, business
process re-engineering and other integration costs.
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options and grants because
the alternative fair value accounting provided for under Financial Accounting
Standard Board ("FASB") Statement No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123") requires the use of option valuation models that
were not developed for use in valuing employee stock options.
IV-14
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INCOME TAXES
At inception, the Company adopted SFAS No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which prescribes an asset and liability method of
accounting for income taxes. Under SFAS 109, deferred tax assets are recognized
for temporary differences that will result in deductible amounts in future
years. A valuation allowance is recognized if it is more likely than not that
some portion of the deferred asset will not be recognized. The Company has
recognized a deferred tax asset of $9.9 million attributable to VANTAS at
December 31, 1999. The remaining deferred tax assets at December 31, 1999 and
1998 have been reserved for 100% due to the uncertainty as to whether these
assets will have benefit in future periods.
VANTAS accounts for income taxes under the liability method which requires
recognition of deferred tax assets and liabilities based upon the expected
future tax consequences of events included in VANTAS' financial statements and
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. At December 31, 1999, VANTAS
recognized a current income tax benefit of approximately $2.8 million.
EARNINGS PER SHARE
In 1997, the FASB issued Statement No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings
per share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented to conform to the SFAS 128
requirements.
COMPREHENSIVE INCOME
In 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income
("SFAS 130") which is effective for fiscal years beginning after December 15,
1997. SFAS 130 established standards for reporting comprehensive income and its
components in a full set of general-purpose financial statements. SFAS 130
requires that all components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The adoption of this standard had no impact on the Company's
financial position or results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments"
requires FrontLine to disclose the estimated fair values of its financial
instrument assets and liabilities. The carrying amounts approximate fair value
for cash and cash equivalents because of the short maturity of those
instruments. For the loans payable to affiliates and others, the estimated fair
value approximates the recorded balance.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In 1997, the FASB issued Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131") which is effective for
fiscal years beginning after December 15, 1997. SFAS 131 establishes standards
for reporting information about operating segments in annual financial
statements and in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The adoption of this standard had no impact on the Company's
financial position or results of operations, but did effect the disclosure of
segment information, see Note 13.
IV-15
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1999, the FASB issued Statement No.137, amending Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
extended the required date of adoption in the years beginning after June 15,
2000. The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt the new Statement
effective January 1, 2001. The Company does not anticipate that the adoption of
this Statement will have any effect on its results of operations or financial
position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
3. OWNERSHIP INTERESTS IN PARTNER COMPANIES
Partner Companies at December 31, 1999 and December 31, 1998 included:
<TABLE>
<CAPTION>
VOTING OWNERSHIP ON A BASIC VOTING OWNERSHIP ON A DILUTED
BASIS BASIS
----------------------------- ----------------------------
PARTNER APPLICABLE
COMPANY ACCOUNTING DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
SINCE METHOD 1999 1998 1999 1998
--------- --------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
AdOutlet.com .................... 1999 Cost 12% N/A 10% N/A
CommerceInc. Corporation ........ 1999 Equity 31% N/A 26% N/A
DitigalWork.com ................. 1999 Cost <1% N/A <1% N/A
EmployeeMatters, Inc. ........... 1999 Equity 53% N/A 45% N/A
Giftcertificates.com ............ 1999 Cost <1% N/A <1% N/A
LiveCapital.com ................. 2000 Cost **4% N/A **4% N/A
Neo Carta Ventures .............. 1999 Cost 4% N/A 4% N/A
OneXstream.com, Inc. ............ 1998 Consolidation 93% 59% 80% 59%
OnSite Access, Inc. ............. 1997 Equity 37% 1% 22% 1%
Opus360 Corporation ............. 1999 Cost <1% N/A <1% N/A
RealtyIQ.com .................... 1999 Equity 68% N/A 54% N/A
UpShot.com ...................... 2000 Equity **20% N/A **18% N/A
VANTAS Incorporated ............. 1998 Consolidation *84% 21% *76% 21%
</TABLE>
- ----------
* Included additional ownership interest acquired in January 2000.
** Ownership interest acquired in February 2000.
The Company's ownership interests in Partner Companies are classified
according to the applicable accounting method utilized at December 31, 1999 and
1998. The carrying value represents the Company's acquisition cost less any
impairment charges, plus or minus the Company's share of such Partner
Companies' income or loss. The cost basis represents the Company's acquisition
costs less any impairment charges in such Partner Companies. The Company's
ownership interests in and advances to Partner Companies accounted for under
the equity method or cost method of accounting are as follows (in thousands):
IV-16
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------- ------------------------------
CARRYING VALUE COST BASIS CARRYING VALUE COST BASIS
---------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C>
Equity Method ......... $54,807 $65,741 $30,277 $30,402
Cost Method ........... 6,400 6,400 -- --
------- -------
$61,207 $30,277
======= =======
</TABLE>
The following are the Company's summarized earnings/(losses) on ownership
interests in Partner Companies (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1997
(COMMENCEMENT OF
FOR THE YEAR ENDED FOR THE YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -------------------- ------------------
<S> <C> <C> <C>
VANTAS and predecessor entities ......... $ -- $ (95) $ --
OnSite Access, Inc. and predecessor
entity ................................. (8,137) (30) --
EmployeeMatters,Inc. .................... (2,230) -- --
CommerceInc. Corporation ................ (526) -- --
RealtyIQ.com ............................ (11) -- --
Other ownership interests ............... -- 119 223
--------- ----- -----
Net income (loss) on ownership interests
in Partner Companies ................... $ (10,904) $ (6) $ 223
========= ===== =====
</TABLE>
The Company's ownership interests in Partner Companies are summarized as
follows:
EXECUTIVE OFFICE SUITES AND VIRTUAL OFFICE SERVICES
- ---------------------------------------------------
VANTAS AND PREDECESSOR ENTITIES
On January 8, 1999, InterOffice Superholdings Corporation ("InterOffice")
(36 executive office suite centers) and Reckson Executive Centers, Inc.
("Reckson Executive") (8 executive office suite centers) merged with Alliance
National Incorporated, a holding company which owned and operated approximately
90 nationally located executive office suite centers (the "Merger"). To
effectuate the merger, the Company contributed approximately $21.4 million of
assets. The merged entity changed its name to VANTAS Incorporated ("VANTAS").
The stockholders of InterOffice and Reckson Executive received convertible
Series C Preferred Stock of VANTAS representing approximately 40% of the equity
interest in VANTAS of which approximately 23% of VANTAS was owned by the
Company as of the merger.
As of December 31, 1999, VANTAS operates 201 business centers in 27
states, the District of Columbia, France and Mexico and manages 5 others for
unrelated property owners. VANTAS provides fully furnished individual offices
and suites and a full range of telecommunication and business support services
to its clients that generally require 2,000 square feet or less of traditional
office space. VANTAS does not own the real estate in which the business centers
are located.
During the third quarter of 1999, the Company increased its ownership in
VANTAS to approximately 35% on a basic basis and 29% on a diluted basis through
an additional $23.0 million equity ownership interest as a part of a $30.0
million financing by VANTAS.
IV-17
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)
Subsequently, the Company entered into a number of stock purchase
agreements with other VANTAS stockholders to increase its ownership to
approximately 84% on a basic basis and 76% on a diluted basis. The terms to
acquire these VANTAS shares were generally to pay 70% of the purchase price in
cash and the remaining 30% in FrontLine stock, which at the time had a value of
$19.00 per share. The closings for these transaction have been taking place
periodically since November 30, 1999 and are anticipated to be completed by
March 31, 2000. As of December 31, 1999, the Company had expended approximately
$59.8 million in cash and issued 1,828,099 shares of its common stock. In
closings subsequent to December 31, 1999, the Company has paid approximately
$42.0 million in cash and issued 1,294,103 shares of its common stock. One
final closing remains, at which time the Company will pay a balance of
approximately $1.3 million in cash.
As a result of this stepped acquisition during 1999 of a controlling
interest in VANTAS, the Company changed the accounting method for its
investment in VANTAS from the equity method to consolidation during the fourth
quarter of 1999.
E-BUSINESSES
- ------------
ONSITE ACCESS
In 1998, the Company had owned a 1% interest on a basic and diluted basis
in On-Site Ventures, LLC, ("On-Site"), a company that provides advanced
telecommunications systems and services within commercial buildings and/or
building complexes. The Company had also advanced On-Site $6.5 million through
December 31, 1998 to fund operating costs under the terms of a 12% subordinated
convertible note.
On April 16, 1999, the Company contributed approximately $5.25 million to
On-Site as part of a $60.0 million private equity financing agreement (the
"Financing Transaction") which included FrontLine and several strategic third
party private equity investors. The equity agreement required the Company to
fund up to $15 million. On July 1, 1999, On-Site merged into OnSite Access,
Inc. ("OnSite Access"), a Delaware corporation whereby, closings were completed
for approximately $20.5 million of additional equity in connection with the
Financing Transaction. The investors, including FrontLine, in the Financing
Transaction were committed to invest the remaining $39.5 million, subject only
to satisfaction of the conditions of the Financing Transaction and the
corporation's call for funds. In addition, in connection with the merger, the
principal and accrued interest outstanding under the $6.5 million subordinated
FrontLine loan was converted into 5,869,000 shares of Preferred Stock issued to
FrontLine. On October 15, 1999, the Company increased its ownership in OnSite
Access by 7% to 36% on a basic basis by issuing 1,731,597 shares of common
stock valued at $13.63 per share to another OnSite Access shareholder. At
December 31, 1999, FrontLine had funded its entire capital commitment and owns
approximately 37% and 22% of OnSite Access on a basic and diluted basis,
respectively.
IV-18
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)
Summarized financial information and a summary of the Company's investment in
and advances to OnSite Access and FrontLine's share of its loss is as follows
(in thousands):
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------
<S> <C>
Current assets ........................................................ $ 25,535
Property and equipment (net) .......................................... 20,052
Intangibles (net) ..................................................... 25,055
Other assets .......................................................... 4,132
---------
Total Assets .......................................................... $ 74,774
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities ................................................... $ 13,702
Other Liabilities ..................................................... 1,913
---------
Total Liabilities .................................................. 15,615
---------
REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT):
Non FrontLine preferred and common stock .............................. 104,274
Stockholders' loans for restricted stock .............................. (2,471)
Deferred equity compensation .......................................... (24,878)
Accumulated deficit ................................................... (40,732)
---------
FrontLines' net investment in OnSite Access ........................... 39,017
Add: Net loss allocation .............................................. 8,137
Less: Payment to OnSite shareholder ................................... (23,593)
Less: Excess acquisition costs ........................................ (595)
---------
FrontLine preferred and common stock in OnSite Access ................. 22,966
---------
Total Redeemable Preferred Stock and Stockholders' Equity (deficit) 59,159
---------
Total Liabilities and Stockholders' Equity (deficit) ............... $ 74,774
=========
</TABLE>
IV-19
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
3. OWNERSHIP INTERESTS IN PARTNER COMPANIES - (CONTINUED)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Revenues ..................................... $ 3,646
---------
Expenses:
Direct costs of revenue ..................... 3,090
Selling, general and administrative ......... 29,361
Depreciation and amortization ............... 2,838
Interest expense (net) ...................... 899
---------
Total operating expenses ..................... 36,188
Net loss ..................................... (32,542)
---------
Other interests, share of net loss ........... (24,405)
---------
FrontLines' share of net loss ................ $ (8,137)
=========
</TABLE>
OTHER E-BUSINESSES
On August 11, 1999, FrontLine acquired a 53% on a basic basis and 45%
noncontrolling interest on a fully diluted basis in EmployeeMatters, Inc.
("EmployeeMatters") for a purchase price of $15.0 million. At the time, $5
million was paid in cash and $10 million was in the form of a note.
EmployeeMatters is an Internet-based employee benefits and human administration
outsourcing company targeting small and medium-size businesses.
FrontLine acquired Series A Preferred Stock of EmployeeMatters which is
convertible into shares of common stock of EmployeeMatters. The Preferred Stock
will convert automatically in the event EmployeeMatters completes an initial
public offering within certain parameters. FrontLine is also committed to
invest an additional $7.5 million in connection with a future equity funding.
FrontLine also entered into a Stockholders' Agreement and a Registration Rights
Agreement in respect of certain governance, voting and stockholder rights,
including rights with respect to board representation, rights of first offer
with respect to their EmployeeMatters stock, pre-emptive rights, registration
rights and other matters.
In December 1999, the Company issued warrants to purchase 200,000 shares
of the Company's common stock to the executive officers of EmployeeMatters in
exchange for options to purchase 789,474 shares of EmployeeMatters. The fair
market value of these warrants is approximately $2.2 million, as determined by
the Black-Scholes valuation pricing model. This value is included in the
Company's investment in EmployeeMatters at December 31, 1999.
In 1999, the Company has invested approximately $15.5 million and issued
approximately 53,000 shares of its common stock for non-controlling interests
in seven other e-business Partner Companies.
Subsequent to December 31, 1999, the Company has invested approximately
$23.5 million to purchase ownership interests in two other e-business
companies.
IV-20
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED )
4. PARENT COMPANY FINANCIAL INFORMATION
The Company's consolidated financial statements reflect VANTAS accounted
for under the consolidation method of accounting for the year ended December
31, 1999 and VANTAS under the equity method of accounting for the year ended
December 31, 1998.
Parent company financial information is provided to present the financial
position and results of operations of the Company as if VANTAS was accounted
for under the equity method of accounting for all years presented. The
Company's share of VANTAS losses is included in "Equity in earnings (loss)
Partner Companies and other ownership interests" in the Parent Company
Statements of Operations for all years presented based on the Company's
ownership percentage of in each period.
PARENT COMPANY BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
ASSETS
Current assets ....................................... $ 28,933 $ 2,026
Ownership interests in and advances to Partner
Companies .......................................... 197,859 30,277
Other assets ......................................... 67,089 26,540
--------- --------
TOTAL ASSETS ....................................... $ 293,881 $ 58,843
========= ========
Liabilities and Shareholders' Equity
Current liabilities .................................. $ 13,372 $ 1,894
Non-current liabilities .............................. 166,255 40,982
Shareholders' equity ................................. 114,254 15,967
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... $ 293,881 $ 58,843
========= ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1997
FOR THE YEAR FOR THE YEAR (COMMENCEMENT OF
ENDED ENDED OPERATIONS) TO
PARENT COMPANY STATEMENTS OF OPERATIONS DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
(IN THOUSANDS) ------------------- ------------------- ------------------
<S> <C> <C> <C>
Revenues ................................ $ 333 $ 336 $ --
---------- --------- ------
Operating expenses ...................... (9,509) (2,613) (479)
Other expenses .......................... (9,130) (1,260) (8)
Interest (expense) income ............... (8,167) (644) 6
---------- --------- --------
Total expenses .......................... 26,806 4,517 (481)
---------- --------- --------
Loss before equity in earnings income
(loss) of Partner Companies ............ (26,473) (4,181) (481)
Equity in earnings (loss) of Partner
Companies and other ownership
interests .............................. (13,228) (3,966) 223
---------- --------- --------
Net loss ................................ $ (39,701) $ (8,147) $ (258)
========== ========= ========
</TABLE>
IV-21
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED )
5. SECURED CREDIT FACILITY
On November 30, 1999, the Company entered into a $60 million credit
facility (the "Credit Facility") with a significant financial institution. The
Credit Facility matures on May 30, 2000, and provides for a three month
extension provision. FrontLine's ability to borrow under the Credit Facility is
subject to the satisfaction of certain financial covenants. Borrowings under
the Credit Facility are secured directly or indirectly by 17,452,876 shares of
VANTAS and 21,837,184 shares of OnSite Access. As of December 31, 1999, the
total outstanding on the Credit Facility was approximately $44.4 million. The
balance of the facility was drawn subsequent to year end.
6. NOTES PAYABLE
VANTAS currently has a credit agreement with various lending institutions
for $157.9 million. The credit agreement provides for a $5 million acquisition
loan commitment, $127.9 million term loans, and a $25 million revolving loan
commitment, including letters of credit. The credit agreements contain certain
covenants dealing with debt to equity ratios.
During 1999, interest on each commitment ranged from LIBOR plus 3.00%
(9.5% at December 31, 1999) to LIBOR plus 3.75% (10.25% at December 31, 1999)
for a one, three or six month period, at the election of VANTAS. During 1998,
interest on each commitment ranged from LIBOR plus 3.00% (8.56% at December 31,
1998) to LIBOR plus 3.5% (9.06% at December 31, 1998) for a one, three or six
month period, at the election of VANTAS.
Pursuant to the credit agreement, the lending institutions have an
assignment of leases and rents associated with VANTAS' business centers to
collateralize the notes payable.
ACQUISITION LOAN COMMITMENT
The credit agreement provides VANTAS with an acquisition loan commitment
which allows VANTAS to make acquisitions subject to certain terms and
conditions. As of December 31, 1999, VANTAS had no borrowings outstanding under
the acquisition loan commitment. In accordance with the credit agreement,
VANTAS cannot borrow under the acquisition loan commitment after November 6,
2000. Principal repayments under the acquisition loan commitment shall commence
on December 31, 2001 and are based upon percentages of the amount borrowed as
follows:
<TABLE>
<CAPTION>
PERIOD REPAYMENT PERCENTAGE
- ------------------------------------- ---------------------
<S> <C>
December 2001-September 2002 2.5% quarterly
December 2002-September 2003 10% quarterly
November 2003 50%
</TABLE>
TERM LOANS
The $38 million Term Loan A had $31 million outstanding at December 31,
1999 which requires quarterly principal payments. The final principal payment
is due on June 30, 2002.
The $89.9 million Term Loan B had $89.6 million outstanding at December
31, 1999 which requires quarterly principal payments. The final principal
payment is due on November 6, 2005.
At December 31, 1999, $21.5 million of the Term Loan was funded into a
cash collateral account that VANTAS will be permitted to utilize in connection
with permitted acquisitions.
IV-22
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
6. NOTES PAYABLE - (CONTINUED)
The total future principal repayments as of December 31, 1999 for the Term
Loans of VANTAS for each of the next five fiscal years are (in thousands):
<TABLE>
<CAPTION>
TERM A TERM B TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
2000 ..................... $12,000 $ 500 $ 12,500
2001 ..................... 14,300 500 14,800
2002 ..................... 4,700 15,250 19,950
2003 ..................... -- 19,500 19,500
2004 ..................... -- 23,751 23,751
Thereafter ............... -- 30,124 30,124
------- ------- --------
$31,000 $89,625 $120,625
======= ======= ========
</TABLE>
REVOLVING LOAN COMMITMENT
The $25 million revolving loan commitment, which expires on November 6,
2003, had no outstanding balance at December 31, 1999.
At December 31, 1999, VANTAS had outstanding letters of credit of
approximately $10.1 million for landlord security deposits which reduced the
borrowings available under the revolving loan commitment.
The carrying value of the notes payable approximates its fair value as of
December 31, 1999.
7. SHAREHOLDERS EQUITY
The Company has established the 1998 stock option plan, 1998 "broad based"
stock option plan and 1999 stock option plan (the "Plans") for the purpose of
attracting and retaining directors, executive officers, other key employees and
advisory board members. As of December 31, 1999, 3,700,376, 100,000 and
1,750,000 of the Company's authorized shares have been reserved for issuance
under the 1998 stock option plan, 1998 "broad based" stock option plan and 1999
stock option plan, respectively.
The following table sets forth the outstanding options and their
corresponding exercise price per share:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE RANGE
----------- ---------------------
GRANTED FROM TO
----------- --------------------- -----------
<S> <C> <C> <C>
1998 Stock Option Plan ..................... 3,700,376 $ 1.04 $ 2.00
1998 Broad Based Stock Option Plan ......... 100,000 $ 2.00 $ 2.00
1999 Stock Option Plan ..................... 1,643,500 $ 4.63 $ 55.00
Other Options .............................. 171,165 $ 2.00 $ 28.69
---------
Total ...................................... 5,615,041
=========
</TABLE>
Options granted to officers under the 1998 stock option plan were fully
vested on January 1, 1999. Options granted to new employees vest in three equal
installments on the first, second and third anniversaries of the date of the
grant.
Pursuant to the 1999 stock option plan, 550,000 shares of the 1,750,000
shares reserved were issued in August 1999. At December 31, 1999, the Company
has recorded deferred compensation of approximately $3.9 million, net of
amortization.
IV-23
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
7. SHAREHOLDERS EQUITY - (CONTINUED)
ADVISORY BOARD
In December 1999, the Company formed an advisory board to provide its
Partner Companies with strategic guidance and be actively involved in their
development. As of December 31, 1999, the advisory board consists of six
members. These members were granted a total of 120,000 options under the 1999
stock option plan with exercise prices ranging from $26.72 to $28.69. These
options vest in three equal installments on the first, second and third
anniversaries of the date of the grant. In accordance with FAS 123, the Company
is amortizing into compensation expense over three years the fair values of
these options determined by the Black-Scholes option valuation model.
STOCK OPTION PLANS
Options granted under the Plans are exercisable at the market price on the
date of the grant and, subject to termination of employment, expire ten years
from date of the grant, are not transferable other than on death.
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of FAS 123. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999 and 1998, risk-free interest rate of 5%, no expected
dividend yield, a volatility factor of the expected market price of the
Company's common stock of 1.367 and 1.723, respectively, and a weighted-average
expected life of the option of 7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. For the years
ended December 31, 1999 and 1998 the Company's pro forma information follows:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Pro forma net loss (in thousands) $ (43,474) $ (11,495)
--------- ---------
Basic and diluted net loss per share $ (1.70) $ (.79)
--------- ---------
</TABLE>
A summary of the Company's stock option activity, and related information is as
follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE FAIR VALUE
------------ ------------------ -----------------
<S> <C> <C> <C>
Outstanding -- December 31, 1997 ......... -- $ -- $ --
Granted ................................. 3,731,541 1.16 1.15
Exercised ............................... -- -- --
Forfeited ............................... -- -- --
--------- ------- -------
Outstanding -- December 31, 1998 ......... 3,731,541 $ 1.16 $ 1.15
Granted ................................. 1,883,500 14.59 13.23
Exercised ............................... (210,000) 1.31 1.24
Forfeited ............................... -- -- --
--------- -------- --------
Outstanding -- December 31, 1999 ......... 5,405,041 $ 15.78 $ 14.35
========= ======== ========
</TABLE>
IV-24
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
7. SHAREHOLDERS EQUITY - (CONTINUED)
As part of the Company's ongoing investment in organizational
infrastructure and the retention of high quality senior management, certain
incentive stock option awards were granted on March 24, 1999 when the closing
stock price was $4.625. These incentive compensation awards were subject to
stockholder approval of the 1999 Stock Option Plan which occurred on June 24,
1999, when the closing stock price was $14.9375. Pursuant to financial
accounting guidelines the date for measuring compensation costs would be June
24, 1999. These awards vest over various periods ranging from six months to
three years and include tax loans which will be forgiven one year thereafter.
During the year ended December 31, 1999, results include approximately $8.5
million or $0.33 per basic and diluted share, associated with these awards, the
majority, of which is non-cash in nature.
On December 16, 1999, the Company issued 1,437,500 shares of it's common
stock in a public offering at $47.25 per share for an aggregate consideration
of approximately $63.9 million.
Subsequent to December 31, 1999, the Company completed preferred stock
offerings of 23,000 shares of 8.875% Cumulative Convertible Preferred Stock, at
a price of $1,000 per share with net proceeds of $21.7 million. These shares
are convertible into the Company's common stock at prices ranging from $66.30
to $75.08.
In January 2000, the Board of Directors for the Company approved the 2000
stock option plan and reserved 2,500,000 shares of common stock for issuance.
8. TRANSACTIONS WITH RELATED PARTIES
On June 15, 1998, the Company established a credit facility with Reckson
Operating Partnership, L.P. ("Reckson") in the amount of $100 million
("FrontLine Facility") for their service sector operations and other general
corporate purposes. Reckson has advanced the Company approximately $79.5
million at December 31, 1999. These advances bear interest at 12% per annum.
Additionally, FrontLine established a $100 million RSVP Facility with Reckson
for funding the Reckson Strategic investments. As of December 31, 1999, Reckson
has advanced FrontLine approximately $42.3 million under the RSVP Facility and
has invested approximately $24.8 million under the facility in joint ventures
with Reckson Strategic. The total outstanding at December 31, 1999, owed by
FrontLine under both credit facilities was approximately $121.8 million.
Interest accrued on these facilities at December 31, 1999, was approximately
$5.5 million. Both of the FrontLine and RSVP facilities expire in June 2003.
Currently, the Company has two short term open letters of credit totaling $7.7
million, which have been utilized as consideration for future FrontLine
investment acquisitions. These letters of credit decrease the availability
under the FrontLine Facility.
In November 1999, the Board of Directors of both FrontLine and Reckson
approved amendments to the credit facilities necessary in order for FrontLine
to proceed with certain short-term financings for proposed acquisitions. As
consideration for such approvals, FrontLine paid a fee to Reckson in the form
of 176,186 shares of FrontLine common stock which have been valued at $20.31
per share. The fee of approximately $3.6 million has been included in deferred
financing costs and is generally being amortized over the estimated nine month
benefit period.
The Company is entitled to a cumulative annual management fee of $2
million with respect to Reckson Strategic, of which $1.5 million is subordinate
to Paine Webber receiving an annual minimum rate of return of 16% and a return
of its capital. The unsubordinated amounts for the years ended December 31,
1999 and 1998 were approximately $.5 million and $.4 million, respectively.
The Company reimburses Reckson with respect to general and administrative
expenses (including payroll expenses) incurred by Reckson for the benefit of
the Company. These services include payroll, human resources and accounting
services. During 1999 and 1998, the Company reimbursed approximately $.5
million and $.4 million, respectively, for such activities.
IV-25
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED )
9. OTHER OWNERSHIP INTEREST
Reckson Strategic Venture Partners, LLC ("Reckson Strategic") was formed
on March 5, 1998 to invest in operating companies with experienced management
teams in real estate and real estate related market sectors which are in the
early stages of their growth cycle or offer unique circumstances for attractive
investments, as well as platforms for future growth. Through RSVP Holdings, LLC
("Holdings"), the Company is a managing member and 100% owner of the common
equity of Reckson Strategic. New World Realty, LLC, an entity owned by two
individuals retained by Holdings, (the "RSVP Managing Directors"), acts as a
managing member of Holdings, and have a carried interest which provides for the
RSVP Managing Directors to receive a share in the profits of Reckson Strategic
after the Company and Paine Webber Real Estate Securities, Inc., ("Paine
Webber") have received certain minimum returns and a return of capital. Paine
Webber is a non-managing member and preferred equity owner who has committed
$200 million in capital (the "Preferred Equity Facility") and shares in profits
and losses of Reckson Strategic with the Company, subject to a maximum internal
rate of return of 16% of invested capital. On April 24, 1998, Paine Webber
assigned 25% of its preferred equity interest in Reckson Strategic,
representing an unfunded capital commitment of $50 million to Stratum Realty
Fund, L.P. ("Stratum"). The assignment provided Stratum with similar rights and
priorities. On March 17, 1999, Paine Webber transferred all of its rights,
title and interest in its initial invested capital to Stratum. This transfer
included the right to distributions based upon the amount of funded capital
contributions. As a result of this transfer, Stratum has funded its entire $50
million commitment as of December 31, 1999.
Summarized financial information and a summary of the Company's investment
in, advances to Holdings and FrontLine's share of loss at December 31, 1998 is
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------
<S> <C>
BALANCE SHEET
ASSETS:
Investment in Dominion Venture Group, LLC ........................ $ 29,289
Other equity investments ......................................... 5,971
Other assets ..................................................... 9,491
--------
TOTAL ASSETS ..................................................... $ 44,751
========
LIABILITIES AND MEMBERS' EQUITY
Total Liabilities ................................................ $ 2,988
--------
Minority interest ................................................ 31,202
Preferred capital offering costs ................................. (5,000)
FrontLine ownership interest in and advances to Holdings ......... 15,561
--------
TOTAL LIABILITIES AND MEMBERS' EQUITY ............................ $ 44,751
========
</TABLE>
IV-26
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
9. OTHER OWNERSHIP INTEREST - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 26, 1998 TO
DECEMBER 31, 1998
---------------------
<S> <C>
STATEMENT OF OPERATIONS
Revenues .......................................... $ 646
Net loss on equity investments .................... (3,747)
Expenses .......................................... 7,122
---------
Net loss .......................................... (10,223)
Minority interest share of loss ................... (6,264)
---------
FrontLine's share of net loss of Holdings ......... $ (3,959)
=========
</TABLE>
In 1998, the Company made a non-cash contribution of approximately $1.9 million
to Reckson Strategic.
In 1999, the operating results for Reckson Strategic were not significant.
10. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
VANTAS and its subsidiaries lease certain business center facilities and
their corporate offices under noncancellable operating leases expiring at
various dates through 2014. Certain of these noncancellable operating leases
provide for renewal options.
Minimum future rental payments under these noncancellable operating leases
as of December 31, 1999 for each of the next five years and in the aggregate
are approximately, (in thousands):
<TABLE>
<S> <C>
2000 .................... $ 87,933
2001 .................... 86,677
2002 .................... 79,617
2003 .................... 75,162
2004 .................... 67,324
Thereafter .............. 215,484
--------
$612,197
========
</TABLE>
VANTAS is also generally obligated to reimburse the lessor for its
proportionate share of operating expenses, which are not included in the above
amounts.
OTHER
From time-to-time, legal actions are brought against the Company and its
Partner Companies in the ordinary course of business. Management believes such
matters will not have a significant adverse effect on the Company's financial
position.
11. SUPPLEMENTAL DISCLOSURES OF VANTAS NON-CASH ACTIVITIES
During the year ended December 31, 1999, VANTAS, through a merger,
obtained 45 business centers and received cash of $8.4 million in exchange for
the issuance of 13,325,424 shares of Series C Convertible Preferred Stock,
approximately $1.6 million in cash and the assumption of approximately $4.6
million in transaction related liabilities, approximately $2.1 million of
capital lease obligations, approximately $5.5 million in tenants' security
deposits, approximately $3.8 million in other long term
IV-27
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
11. SUPPLEMENTAL DISCLOSURES OF VANTAS NON-CASH ACTIVITIES- (CONTINUED)
liabilities. Net assets acquired included net accounts receivable of
approximately $2.3 million prepaid expenses and other assets of approximately
$.5 million, security deposits of approximately $.5 million, deferred income
taxes of approximately $.9 million and restricted cash of $1.3 million.
During the year ended December 31, 1999, VANTAS acquired 42 business
centers for approximately $44.9 million in cash and the assumption of
approximately $2.5 million in transaction related liabilities, approximately
$.5 million of capital lease obligations, approximately $3.6 million in
tenants' security deposits and approximately $.4 million in other long term
liabilities. Net assets acquired included net accounts receivable of
approximately $.9 million, prepaid expenses and other assets of approximately
$.8 million and security deposits and other assets of approximately $1.2
million.
During the year ended December 31, 1999, VANTAS recorded compensation
expense of approximately $12.5 million related to an agreement with certain
shareholders of VANTAS and a principal shareholder, relating to the purchase of
a portion of such shareholders' securities in VANTAS. In connection with this
agreement, certain shareholders exercised vested stock options for which VANTAS
received notes receivable of approximately $.9 million, in respect of the
aggregate exercise price for such options.
During the year ended December 31, 1999, VANTAS recorded deferred credits
of approximately $11.8 million related to tenant improvements, which are
reimbursed by landlords and amortized against rent expense over the lives of
the leases.
12. SUBSEQUENT EVENTS
On January 21, 2000, the Company executed an agreement and plan of merger
of two executive suites companies (the "Merger"), HQ Global Workplaces, and
VANTAS. The merged company will retain the name HQ Global Workplaces ("HQ
Global") and will become the world's largest virtual and physical workplace
solutions provider.
In connection with the Merger, (i) each share of the common stock of
VANTAS will be converted into the right to receive $8.00 per share in cash and
(ii) each share of the convertible preferred stock of VANTAS that is
outstanding will be converted into the right to receive that number of shares
of the surviving corporation that equal to the product of the number of shares
of the common stock of VANTAS that such stockholder would have been entitled to
receive had it converted its shares immediately prior to the Merger and the
Conversion Ratio (as defined in the Merger Agreement), subject, in each case,
to adjustment as provided in the Merger Agreement. In connection with the
Merger, VANTAS established a $35 million letter of credit as a deposit. In the
event the Merger is not consummated under certain circumstances; this letter of
credit is collateralized by 15,057,487 shares of VANTAS that are owned by
FrontLine and guaranteed by FrontLine on a nonrecourse basis.
As part of the transaction, the owners of HQ Global Workplaces will
receive $380 million in cash (inclusive of the repayment of indebtedness of
HQ's credit facility) and approximately 19 percent of the equity in HQ Global.
It is anticipated that FrontLine will own approximately 50 percent of HQ
Global. This transaction is expected to be funded with bank debt of HQ Global
and equity. The transaction is anticipated to close in April 2000. As a result
of the Merger, it is anticipated that HQ Global will be consolidated into
FrontLine.
13. SEGMENT DISCLOSURE (UNAUDITED)
Each of the segments has a managing director who reports directly to the
Board of Directors/Executive Committees, who have been identified as the Chief
Operating Decision Makers ("CODM") because of their final authority over
resource allocation decisions and performance assessment.
IV-28
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED)
13. SEGMENT DISCLOSURE (UNAUDITED) - (CONTINUED)
The CODM evaluates the operating performance of these segments based on
sectors.
FrontLine's governance and control rights are generally exercised through
Board of Directors seats and through representation on the executive committees
of the various segment entities.
The following table sets forth the Company's segments and their revenues
and expenses and other related disclosures as required by SFAS 131 for the
years ended December 31,1999 and 1998 (in thousands).
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------------------------------
EXECUTIVE OFFICE SUITES
AND OTHER
VIRTUAL OFFICE SERVICES E-BUSINESSES OPERATIONS TOTAL
------------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
TOTAL ASSETS ................ $ 332,457 $ 61,207 $ 148,319 $ 541,983
--------- ---------- ---------- ----------
TOTAL OPERATING
REVENUES ................... 215,043 -- 333 215,376
--------- ---------- ---------- ----------
TOTAL OPERATING
EXPENSES ................... 187,449 -- -- 187,449
--------- ---------- ---------- ----------
OTHER INCOME
(EXPENSES), BENEFIT FOR
INCOME TAXES, AND
MINORITY INTEREST .......... (30,223) -- (26,952) (57,175)
--------- ---------- ---------- ----------
EQUITY IN EARNINGS
(LOSS) OF PARTNER
COMPANIES AND OTHER
OWNERSHIP INTEREST ......... -- (10,904) 305 (10,599)
--------- ---------- ---------- ----------
NET INCOME (LOSS) ........... $ (2,629) $ (10,904) $ (26,314) $ (39,847)
--------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------------
EXECUTIVE OFFICE SUITES
AND OTHER
VIRTUAL OFFICE SERVICES E-BUSINESSES OPERATIONS TOTAL
------------------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
TOTAL ASSETS ................ $ 23,176 $ 7,101 $ 28,566 $ 58,843
-------- ------- --------- ---------
TOTAL OPERATING
REVENUES ................... -- -- 336 336
-------- ------- --------- ---------
TOTAL OPERATING
EXPENSES ................... -- -- -- --
-------- ------- --------- ---------
OTHER INCOME
(EXPENSES), BENEFIT FOR
INCOME TAXES, AND
MINORITY INTEREST .......... -- -- (4,517) (4,517)
-------- ------- --------- ---------
EQUITY IN EARNINGS
(LOSS) OF PARTNER
COMPANIES AND OTHER
OWNERSHIP INTEREST ......... (95) (30) (3,841) (3,966)
-------- ------- --------- ---------
NET INCOME (LOSS) ........... $ (95) $ (30) $ (8,022) $ (8,147)
-------- ------- --------- ---------
</TABLE>
IV-29
<PAGE>
RECKSON SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
(D/B/A FRONTLINE CAPITAL GROUP)
DECEMBER 31, 1999 AND 1998 - (CONTINUED )
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the Company's results of operations for
each quarter during 1999 and 1998 (in thousands, except share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues reported by the Company .................. $ 83 $ 83 $ 83 $ 83
Revenues reported by VANTAS ....................... 46,775 52,588 58,081 57,600
----------- ----------- ----------- -----------
Total revenues .................................... 46,858 52,671 58,164 57,683
Expenses reported by the Company .................. 1,667 8,755 6,846 9,684
Expenses reported by VANTAS ....................... 46,049 52,038 58,545 79,830
----------- ----------- ----------- -----------
Total expenses .................................... 47,716 60,793 65,391 89,514
Minority interest ................................. (466) (322) 398 19,180
Loss on ownership interests ....................... (631) (1,392) (4,911) (3,665)
----------- ----------- ----------- -----------
Net loss .......................................... $ (1,955) $ (9,836) $ (11,740) $ (16,316)
=========== =========== =========== ===========
Basic and diluted net loss per weighted average
common share ..................................... $ (0.08) $ (0.40) $ (0.47) $ (0.59)
=========== =========== =========== ===========
Basic and diluted weighted average common
shares outstanding ............................... 24,686,042 24,712,383 25,163,301 27,812,667
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1998 QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total revenues ................................ $ 47 $ 205 $ 495 $ 595
---------- ---------- ---------- ----------
Total expenses ................................ 400 595 1,004 3,525
---------- ---------- ---------- ----------
Loss on ownership interests ................... (424) (26) (735) (2,780)
---------- ---------- ---------- ----------
Net loss ...................................... $ (777) $ (416) $ (1,244) $ (5,710)
========== ========== ========== ==========
Basic and diluted net loss per weighted average
common share ................................. $ (0.20) $ (0.09) $ (0.05) $ (0.23)
========== ========== ========== ==========
Basic and diluted weighted average common
shares outstanding ........................... 3,864,573 4,513,975 24,685,514 24,685,514
========== ========== ========== ==========
</TABLE>
The above quarterly information for 1998 has been restated to reflect the
Company's early adoption of SOP 98-5.
IV-30
<PAGE>
Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
3.1(1) Certificate of Incorporation
3.2 Amended and Restated By-Laws of Registrant
3.3(6) Amended and Restated Certificate of Incorporation
4.1(1) Specimen Share Certificate of Common Stock
4.2 Specimen Warrant W-1, dated December 7, 1999, in the name Elliot S. Cooperstone to purchase 100,000 shares of common
stock
4.3 Specimen Warrant W-2, dated December 7, 1999, in the name H. Thach Pham to purchase 100,000 shares of common stock
4.4 Specimen Option O-1, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
shares of common stock of eSourceOne,
Inc. owned by Elliot S. Cooperstone
4.5 Specimen Option O-2, dated December 7, 1999, in the name of Reckson Service Industries, Inc. to purchase 394,737
shares of common stock of eSourceOne,
Inc. owned by H. Thach Pham
4.9(14) Certificate of Designations Establishing and Fixing the Rights of Series A-1 Cumulative Preferred Stock
4.10(14) Certificate of Designations Establishing and Fixing the Rights of Series A-2 Cumulative Preferred Stock
4.11(14) Certificate of Designations Establishing and Fixing the Rights of Series A-3 Cumulative Preferred Stock
4.12(14) Certificate of Designations Establishing and Fixing the Rights of Series A-4 Cumulative Preferred Stock
4.13(14) Certificate of Designations Establishing and Fixing the Rights of Series A-5 Cumulative Preferred Stock
4.14(14) Certificate of Designations Establishing and Fixing the Rights of Series A-6 Cumulative Preferred Stock
4.16(14) Specimen Warrant W-1, dated March 7, 2000, in the name Gorham Partners, L.P. to purchase 1,000,000 shares of common stock
4.17(14) Specimen Warrant W-2, dated March 7, 2000, in the name Gorham Partners III, L.P. to purchase 30,000 shares of common
stock
4.18(14) Specimen Warrant W-3, dated March 7, 2000, in the name Gorham Partners International, Inc. to purchase 50,000 shares
of common stock
10.0 Subscription Agreement as of February 7, 2000, by and between Reckson Service Industries, Inc. and VANTAS
Incorporated
10.1(6) Intercompany Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc. dated May
13, 1998
10.2A Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
Inc. relating to the operations of
Reckson Strategic Venture Partners, LLC dated August 4, 1999
10.2B Amended and Restated Credit Agreement between Reckson Operating Partnership, L.P. and Reckson Service Industries,
Inc. relating to the operations of
Reckson Service Industries, Inc. dated August 4, 1999
10.2C(12) Amendment to Amended and Restated Credit Agreements between Reckson Operating Partnership, L.P. and Reckson Service
Industries dated November 30,
1999
10.3(1) Limited Liability Company Agreement of OnSite Ventures, LLC
10.4(1) Limited Liability Company of RSVP Holdings, LLC
10.5A(1) Operating Agreement of Reckson Strategic Venture Partners, LLC
10.5B(1) Supplemental Agreement to Operating Agreement of Reckson Strategic Venture Partners, LLC
10.6(1) Registration Rights Agreement between Reckson Service Industries, Inc. and certain affiliates thereof dated May 13,
1998
10.7(6) Loan Agreement regarding On-Site Convertible Loans
10.8A(1) Stock Option Plan
10.8B(6) 1998 Employee Stock Option Plan
10.8C(7) 1999 Stock Option Plan
10.8D 2000 Employee Stock Option Plan
10.9(1) Employment Agreement of Steven H. Shepsman
10.10(1) Employment Agreement of Seth B. Lipsay
10.11(1) Limited Liability Company Agreement of Interoffice Superholdings, LLC by and among Interoffice Superholdings, LLC,
RSI I/O Holdings, Inc., JAH I/O, LLC
and Rieger I/O LLC
10.12 Fifth Amended and Restated Stockholders' Agreement, dated by and among VANTAS Incorporated and certain
securityholders indentified therein
10.13(2) Letter Agreement dated November 9, 1998 by and between JAH I/O LLC and Reckson Management Group, Inc., Reckson
Service Industries, Inc., RSI I/O
Holdings, Inc., and Reckson Office Centers, LLC
10.14(2) Letter Agreement by and between Reckson Service Industries, Inc., and RFIA, LLC
10.15(3) Amended and Restated Operating Agreement of Assisted Living Investments LLC
10.16(4) Operating Agreement of Dominion Venture Group LLC
10.17(5) Agreement and Plan of Merger by and among Alliance National Incorporated, Alliance Holding Inc., Interoffice
Superholdings Corporation and Interoffice
Superholdings, LLC
10.18(5) Agreement and Plan of Merger by and among Alliance National Incorporated, ANI Holdings, Inc., Reckson Executive
Centers, Inc., and Reckson Office Centers,
LLC
10.19(6) $44 million Senior Secured Promissory Note of On-Site Ventures, LLC
10.20(8) Investor Rights Agreement, by and among OnSite Access, Inc. and certain investors and individuals within management
10.21(8) Voting Agreement, by and among OnSite Access, Inc. and certain investors
10.22(8) Purchase Agreement regarding Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.23(9) Series D Convertible Preferred Stock Securities Purchase Agreement, dated as of July 29, 1999 by and among VANTAS
Incorporated and several Purchasers
10.24(10) Stock Purchase Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service Industries,
Inc. and RSI ESO, Inc.
10.25(10) Registration Rights Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc., Reckson Service
Industries, Inc., RSI ESO, Inc., Elliott S.
Cooperstone and H. Thach Pham
10.26(10) Stockholders' Agreement, dated as of August 10, 1999, by and among eSourceOne, Inc. and certain stockholders
10.27(11) Stock Purchase Agreement, dated as of August 19, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings,
Inc., Cahill, Warnock Strategic Partners Fund
L.P., Strategic Associates, L.P. and David L. Warnock
10.28(11) Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI I/O Holdings, Inc.,
RSI-OnSite Holdings LLC, RSI-OSA
Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.29(11) Letter of Amendment to Letter Agreement, dated as of September 23, 1999, among Reckson Service Industries, Inc., RSI
I/O Holdings, Inc., RSI-OnSite
Holdings LLC, RSI-OSA Holdings, Inc., JAH Realties, L.P., Veritech Ventures LLC and JAH I/O LLC
10.30(12) Credit Agreement, dated November 30, 1999, by and among Reckson Service Industries, Inc. and Warburg Dillon Read,
LLC and UBS AG, Stamford Branch
</TABLE>
IV-31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------------------------
<S> <C>
10.31(12) Equity Interest Pledge and Security Agreement, dated November 30, 1999, by and among the parties therein and UBS
AG, Stamford Branch
10.32(12) Interest Rate Cap Agreement, Pledge and Security Agreement, dated November 30, 1999, among Reckson Service
Industries, Inc. and Warburg Dillon Read,
LLC and UBS AG, Stamford Branch
10.33(12) November 30, 1999 Promissory Note for $60,000,000 to the order of UBS AG, Stamford Branch
10.34(13) Agreement and Plan of Merger by and among HQ Global Workplaces, Inc. and CarrAmerica Realty Corporation and VANTAS
Incorporated and Reckson
Service Industries, Inc., dated as of January 20, 2000
10.35(13) Stock Purchase Agreement between CarrAmerica Realty Corporation and Reckson Service Industries, Inc., dated as of
January 20, 2000
10.36(13) Stock Purchase Agreement among CarrAmerica Realty Corporation, OmniOffices (UK) Limited and OmniOffices (Lux) 1929
Holding Company S.A. and
VANTAS Incorporated and Reckson Service Industries, Inc., dated as of January 20, 2000
10.37(8) Certificate of Designation of Series A, Series B, Series C and Series D Preferred Stock of OnSite Access, Inc.
10.38(13) Form of Stockholders Agreement by and among HQ Global Workplaces, Inc., Reckson Service Industries, Inc.,
CarrAmerica Realty Corporation and certain
other stockholders of HQ Global Workplaces, Inc.
10.39 Amended and Restated Credit Agreement among VANTAS, Various Banks, and Paribas, as agent, dated as of January 16,
1997, as amended and restated as
of November 6, 1998 and August 3, 1999
10.40 Exchange Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc., Elliot S. Cooperstone
and H. Thach Pham
10.41 Warrant Registration Rights Agreement, dated December 7, 1999, by and among Reckson Service Industries, Inc.,
Elliot S. Cooperstone and H. Thach Pham
10.42(14) Warrant Registration Rights Agreement, dated as of March 7, 2000 between Reckson Service Industries, Inc., and
Gotham Partners, L.P., Gotham Partners III, L.P. and Gotham Partners International, Ltd.
12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries of Reckson Service Industries, Inc.
23.0 Consent of Independent Accountants
24.1 Powers of Attorney (included in Part IV of this Form 10-K)
27.0 Financial Data Schedule
</TABLE>
1 Previously filed as an exhibit to Registration Statement on Form S-1 (No.
333-44419) and incorporated herein by reference.
2 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on January 25, 1999 and incorporated herein by reference.
3 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on September 8, 1998 and incorporated herein by reference.
4 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on September 11, 1998 and incorporated herein by reference.
5 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on December 1, 1998 and incorporated herein by reference.
6 Previously filed as an exhibit to the Company's Form 10-K filed with the SEC
on March 31, 1999 and incorporated herein by reference.
7 Previously filed as an exhibit to Registration Statement on Form S-8 filed
with the SEC on July 29, 1999 and incorporated herein by reference.
8 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on July 16, 1999 and incorporated herein by reference.
9 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on August 31, 1999 and incorporated herein by reference.
10 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on September 1, 1999 and incorporated herein by reference.
11 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on October 12, 1999 and incorporated herein by reference.
12 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on December 13, 1999 and incorporated herein by reference.
13 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on January 25, 2000 and incorporated herein by reference.
14 Previously filed as an exhibit to the Company's Form 8-K filed with the SEC
on March 28, 2000 and incorporated herein by reference.
IV-32
Exhibit 3.2
RECKSON SERVICE INDUSTRIES, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I.
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting. Any action required or
permitted to be taken at any meeting of the stockholders must be effected at a
duly called annual or special meeting of such stockholders and may not be
effected by any consent in writing by such stockholders.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year or such other month as may be
fixed by resolution of the Board of Directors.
Section 3. SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights of holders of any class or series of preferred stock of
the Corporation to elect additional directors under specified circumstances
("Preferred Holders' Rights"), the chairman or vice chairman, president or Board
of Directors only may call special meetings of the stockholders pursuant to a
resolution stating the purpose(s) thereof, approved by a majority of the total
number of directors which the corporation would have if there were no vacancies
(the "Whole Board"). Any power of the stockholders is otherwise specifically
denied.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual
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place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his post
office address as it appears on the records of the Corporation, with postage
thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the Chairman
of the Board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the Chairman of the Board, one of the following
officers present shall conduct the meeting in the order stated: the Vice
Chairman of the Board, if there be one, the President, the Vice Presidents in
their order of rank and seniority, or a Chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as Chairman, and the
Secretary, or, in his absence, an assistant secretary, or in the absence of both
the Secretary and assistant secretaries, a person appointed by the Chairman
shall act as Secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting of the stockholders, the
stockholders entitled to vote at such meeting, present in person or by proxy,
shall have the power to adjourn the meeting from time to time to a date not more
than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. Subject to the Preferred Holders' Rights and
applicable law, each stockholder having the right to vote shall be entitled at
every meeting of stockholders to one (1) vote for every share owned in his or
her name on the record date fixed by the Board of Directors pursuant to these
Bylaws. Except as otherwise provided by law, the charter of the Corporation,
these Bylaws, any resolution adopted by the Board of Directors authorizing a
class or series of preferred stock, or any resolution adopted by a majority of
the Whole Board, all matters submitted to the stockholders at any meeting (other
than the election of directors) shall be decided by a majority of the votes cast
with respect thereto. A plurality of all votes cast at a meeting of stockholders
duly called and at which a quorum is present shall be sufficient to elect a
director.
Section 9. PROXIES. A stockholder may vote the stock owned of record by
him, either in person or by proxy executed in writing by the stockholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
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Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 11. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders (except for stockholder proposals included in the proxy
materials pursuant to Rule 14a-8 under the
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Securities Exchange Act of 1934, as amended (the "Exchange Act")) may be made at
an annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 12(a) and who is entitled to vote
at the meeting and who complied with the notice procedures set forth in this
Section 12(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph(a)(1) of
this Section 12, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 75 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than seven
calendar days or delayed by more than 60 days from such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier than the 90th
day prior to such annual meeting and not later than the close of business on the
later of the 75th day prior to such annual meeting or the twentieth day
following the earlier of the day on which public announcement of the date of
such meeting is first made or notice of the meeting is mailed to stockholders.
Such stockholder's notice shall set forth: (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange Act (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (y) the number of shares of each class or series of
stock of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2)
of this Section 12 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 85 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Section 12(a) shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors
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may be made at a special meeting of stockholders at which directors are to be
elected (i) pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) provided that the Board of
Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in this Section 12(b), who is entitled
to vote at the meeting and who complied with the notice procedures set forth in
this Section 12(b). In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be) for election to such position as specified in the Corporation's notice
of meeting, if the stockholder's notice containing the information required by
paragraph (a)(2) of this Section 12 shall be delivered to the secretary at the
principal executive offices of the Corporation not earlier than the 180th day
prior to such special meeting and not later than the close of business on the
later of the 75th day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting.
(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 12. Nothing in this Section 12 shall be deemed
to affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
to create any additional rights with respect to any such inclusion.
Section 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
ARTICLE III.
DIRECTORS
Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs of
the Corporation shall be managed under the direction of its Board of Directors.
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Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or
at any special meeting called for that purpose, a majority of the Whole Board of
Directors may establish, increase or decrease the number of directors, provided
that the number thereof shall never be less than the minimum number required by
applicable law, nor be more than 25, and further provided that the tenure of
office of a director shall not be affected by any decrease in the number of
directors. Except for the initial directors of the Corporation who were
appointed by the Incorporator of the Corporation and those directors who may be
elected pursuant to Preferred Holders' Rights, the Board of Directors shall be
classified with respect to the time for which they severally hold office into
three classes, as nearly equal in number as possible, one class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
1999, another class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 2000, and another class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
2001, with directors of each class to hold office until their successor is duly
elected and qualified. At each succeeding annual meeting of stockholders,
directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until such
person's successor shall have been duly elected and qualified. Directors need
not be stockholders.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Delaware, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board (or any
co-chairman of the board if more than one), president or by a majority of the
directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Delaware, as the place for holding any special meeting of the Board
of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such notice in a telephone call to which he is a party.
Facsimile transmission notice shall be deemed to be given upon completion of the
transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a
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majority of such directors are present at said meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice, and provided further that if, pursuant to the charter of the Corporation
or these Bylaws, the vote of a majority of a particular group of directors is
required for action, a quorum must also include a majority of such group.
The Board of Directors present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. RESIGNATION AND REMOVAL; VACANCIES. Any director may resign
at any time upon written notice to the Corporation. Subject to any Preferred
Holders' Rights, any director may be removed only for cause by the affirmative
vote of holders of at least 80% of the entire voting power of all the
then-outstanding shares of stock entitled to vote at an election of directors,
voting together as a single class.
If for any reason any or all the directors cease to be directors, such
event shall not terminate the Corporation or affect these Bylaws or the powers
of the remaining directors hereunder (even if fewer than three directors
remain). Subject to any Preferred Holders' Rights, and unless the Board of
Directors otherwise determines, any vacancy on the Board of Directors for any
cause other than an increase in the number of directors shall be filled by a
majority of the remaining directors, although such majority is less than a
quorum, or by the sole remaining director. Any vacancy in the number of
directors created by an increase in the number of directors may be filled by a
majority vote of the Whole Board. Any individual so elected as director shall
hold office for the unexpired term of the director he is replacing.
Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
may receive fixed sums per year and/or per meeting and/or per visit to real
property owned or to be acquired by the Corporation and for any service or
activity they performed or engaged in as directors. Directors may be reimbursed
for expenses of attendance, if any, at each annual, regular or special meeting
of the Board of Directors or of any committee thereof and for their expenses, if
any, in connection with each property visit and any other service or activity
they performed or engaged
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in as directors; but nothing herein contained shall be construed to preclude any
directors from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV.
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of two or more directors,
to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or any
two members of any committee may fix the time and place of its meeting unless
the Board shall otherwise provide. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another director to act in the place of such
absent member. Each committee shall keep minutes of its proceedings.
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Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V.
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board (or one or more co-chairmen of the board), a
vice chairman of the board, one or more executive vice presidents, one or more
senior vice presidents, one or more vice presidents, a chief operating officer,
a chief financial officer, a treasurer, one or more assistant secretaries and
one or more assistant treasurers, as well as a management advisory committee. In
addition, the Board of Directors may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The officers of the Corporation shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of stockholders, except that the chief executive officer may appoint one
or more vice presidents, assistant secretaries and assistant treasurers. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices except
president and vice president may be held by the same person. In its discretion,
the Board of Directors may leave unfilled any office except that of president,
treasurer and secretary. Election of an officer or agent shall not of itself
create contract rights between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer, member of any
management advisory committee or agent of the Corporation may be removed by the
Board of Directors if in its judgment the best interests of the Corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer, member of any
management advisory committee or agent of the Corporation may resign at any time
by giving written notice of his resignation to the Board of Directors, the
chairman of the board (or any co-chairman of the board if more than one), the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time
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when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation. Such resignation shall be
without prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office or management advisory
committee may be filled by the Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board (or, if more than one, the co-chairmen of the board in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall be the chief executive
officer of the Corporation. The chief executive officer shall have general
responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business and
affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board (or one or more co-chairmen of the board). The
chairman of the board shall preside over the meetings of the Board of Directors
and of the stockholders at which he shall be present. If there be more than one,
the co-chairmen designated by the Board of Directors will perform such duties.
The chairman of the board shall perform such other duties as may be assigned to
him or them by the Board of Directors.
Section 8. CHAIRMAN OF THE BOARD EMERITUS. The directors may elect by a
majority vote, from time to time, a chairman of the board emeritus (or one or
more co-chairmen of the board emeritus). The chairman of the board emeritus
shall be an honorary position and shall have no vote on any matter considered by
the directors. The chairman of the board emeritus shall serve for such term as
determined by the Board of Directors and may be removed by a majority role of
directors with or without cause.
Section 9. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall be the chief operating
officer. He may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
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Section 10. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the executive vice president, senior vice
president or vice president (or in the event there be more than one such vice
president, such vice presidents in the order designated at the time of their
election or, in the absence of any designation, then in the order of their
election) shall perform the duties of the president and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
have general charge of the share transfer books of the Corporation; and (f) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.
Section 12. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.
11
<PAGE>
Section 14. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer,
member of any management advisory committee or agent to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
Corporation and such authority may be general or confined to specific instances.
Any agreement, deed, mortgage, lease or other document executed by one or more
of the directors or by an authorized person shall be valid and binding upon the
Board of Directors and upon the Corporation when authorized or ratified by
action of the Board of Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by any officer, member of any management
advisory committee or agent of the Corporation in such manner as shall from time
to time be determined by the Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII.
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the
12
<PAGE>
relative rights and preferences between the shares of each series to the extent
they have been set and the authority of the Board of Directors to set the
relative rights and preferences of subsequent series. In lieu of such statement
or summary, the certificate may state that the Corporation will furnish a full
statement of such information to any stockholder upon request and without
charge. If any class of stock is restricted by the Corporation as to
transferability, the certificate shall contain a full statement of the
restriction or state that the Corporation will furnish information about the
restrictions to the stockholder on request and without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the charter of the Corporation and all
of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board
of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to
13
<PAGE>
vote at a meeting of stockholders, such books shall be closed for at least ten
days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate stock ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII.
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX.
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.
14
<PAGE>
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X.
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
ARTICLE XI.
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Corporate Seal, Delaware". The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE XII.
INDEMNIFICATION AND ADVANCES FOR EXPENSES
To the maximum extent permitted by Delaware law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director, officer or member of any
management advisory committee of the Corporation and who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of the Corporation and at the request of the Corporation,
serves or has served another corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise and who is made a party to the proceeding by reason of
his service in that capacity. The Corporation may, with the approval of its
Board of Directors, provide such indemnification and advance for expenses to a
person who served a predecessor of
15
<PAGE>
the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII.
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE XIV.
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter
or repeal any provision of these Bylaws and to make new Bylaws. These Bylaws may
also be amended by the affirmative vote of holders of at least 80% of the entire
voting power of all the then outstanding shares of stock entitled to vote at an
election of directors, voting together as a single class.
16
Exhibit 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER 7, 2001 AND (B) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
WARRANT TO PURCHASE UP TO 100,000 SHARES
OF COMMON STOCK OF
RECKSON SERVICE INDUSTRIES, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
W-1
This certifies that ELLIOT S. COOPERSTONE or its permitted assigns (the
"Holder"), for value received, is entitled to purchase from Reckson Service
Industries, Inc., a Delaware corporation (the "Company"), having a place of
business at 10 East 50th Street - 27th Floor, New York, New York, a maximum of
100,000 fully paid and nonassessable shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock") for cash at a price of $15.00 per
share (as may be adjusted from time to time in accordance with Section 3, the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (New York time), on the first to occur of (i) a Change-in-Control
Transaction (as defined below), and (ii) December 7, 2009 (the first of such
dates in clauses (i) and (ii) being referred to herein as the "Expiration
Date"). Holder may purchase the shares hereunder upon surrender to the Company
at its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Warrant is exercisable at any time prior to the
Expiration Date with respect to all or any part of the shares of Common Stock
set forth in the first paragraph of this Warrant. Any unexercised portion of
this Warrant shall terminate on the Expiration Date. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Common Stock as may be requested by the Holder hereof and shall be registered in
the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
<PAGE>
For purposes of the above calculation, fair market value of one share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the Common Stock is not then quoted on any
automated quotation system or exchange, the price determined by the Company's
Board of Directors in good faith.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights evidenced by this Warrant may be
exercised, the Company will at all times during such period have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights evidenced by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the securities of the Company may be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities laws with respect to such exercise except as
otherwise provided by that certain Warrant Registration Rights Agreement, of
even date herewith, by and among the Company, Elliot S. Cooperstone and H. Thach
Pham.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment in accordance with this Section 3 and
from time to time upon the occurrence of certain events described in this
Section 3. Upon each adjustment of the Stock Purchase Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor,
<PAGE>
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action, (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Warrant, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had the Holder
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then, as a condition of
such Organic Change, lawful and adequate provisions shall be made by the Company
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby. In the event of any Organic Change, the Company
shall make appropriate provision with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holders
of a majority of the warrants to purchase Common Stock then outstanding,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase. The Company shall notify the Holder of this Warrant of any proposed
Organic Change or Change-in-Control Transaction reasonably prior to the
consummation of such Organic Change or Change-in-Control Transaction so as to
provide such Holder with a reasonable opportunity prior to such consummation to
exercise this Warrant in accordance with the terms and conditions hereof;
provided, however, that in the case of a transaction which requires notice be
given to the holders
<PAGE>
of Common Stock of the Company, the Holder of this Warrant shall be provided the
same notice given to the holders of Common Stock of the Company.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant and of the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 10
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at least 30
business days prior to the date on which an Organic Change shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon
the exercise of any portion of this Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of any portion of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof the
right to vote or to consent or to receive notice as a stockholder of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall
<PAGE>
give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Warrant, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Warrant, shall be transferable, in whole or in part,
except to the Holder's estate, heirs, administrators or executors and, whether
by gift or otherwise, from the Holder to the Holder's spouse, siblings, lineal
descendants or ancestors (or to a trustee of a trust which upon such transfer
and at all times thereafter is maintained solely for the benefit of such
persons). Commencing at the end of the Restricted Period and thereafter, subject
to compliance with applicable federal and state securities laws, this Warrant
and all rights hereunder shall be transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed.
For purposes of this Warrant, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter.
For purposes of this Warrant, the "Restricted Period" shall mean the period
commencing on the date of this Warrant and ending on the first to occur of (a)
two (2) years from the date of this Warrant and (b) a Change-in-Control
Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and
<PAGE>
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of New York, without regard to
its rules concerning conflicts of law.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officer thereunto duly authorized.
Dated: As of December 7, 1999 Reckson Service Industries, Inc.,
a Delaware corporation
By___________________________________
Name: Jeffrey D. Neumann
Title: Executive Vice President
<PAGE>
9
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
|_| The undersigned hereby elects to exercise the warrant issued to it by
Reckson Service Industries, Inc. (the "Company") and dated December 7, 1999
Warrant No. W-1 (the "Warrant") and to purchase thereunder ___________
shares of the Common Stock, par value $.01 per share, of the Company (the
"Shares") at a purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the "Purchase
Price").
|_| The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1.1 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
By:
Title:
9
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO RECKSON SERVICE
INDUSTRIES, INC., ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANT DATED DECEMBER 7, 1999, WILL BE ISSUED.
- ------------, ----
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock") of
Reckson Service Industries, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
<PAGE>
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
By:
Title:
11
Exhibit 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER __, 2001 AND (B) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
WARRANT TO PURCHASE UP TO 100,000 SHARES
OF COMMON STOCK OF
RECKSON SERVICE INDUSTRIES, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
W-2
This certifies that H. THACH PHAM or its permitted assigns (the "Holder"),
for value received, is entitled to purchase from Reckson Service Industries,
Inc., a Delaware corporation (the "Company"), having a place of business at 10
East 50th Street - 27th Floor, New York, New York, a maximum of 100,000 fully
paid and nonassessable shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock") for cash at a price of $15.00 per share (as may be
adjusted from time to time in accordance with Section 3, the "Stock Purchase
Price") at any time or from time to time up to and including 5:00 p.m. (New York
time), on the first to occur of (i) a Change-in-Control Transaction (as defined
below), and (ii) December __, 2009 (the first of such dates in clauses (i) and
(ii) being referred to herein as the "Expiration Date"). Holder may purchase the
shares hereunder upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and, if applicable, upon payment in cash or by check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Warrant is exercisable at any time prior to the
Expiration Date with respect to all or any part of the shares of Common Stock
set forth in the first paragraph of this Warrant. Any unexercised portion of
this Warrant shall terminate on the Expiration Date. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Common Stock as may be requested by the Holder hereof and shall be registered in
the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being exercised (at the date of such
calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
<PAGE>
For purposes of the above calculation, fair market value of one share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the Common Stock is not then quoted on any
automated quotation system or exchange, the price determined by the Company's
Board of Directors in good faith.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights evidenced by this Warrant may be
exercised, the Company will at all times during such period have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights evidenced by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the securities of the Company may be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities laws with respect to such exercise except as
otherwise provided by that certain Warrant Registration Rights Agreement, of
even date herewith, by and among the Company, Elliot S. Cooperstone and H. Thach
Pham.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment in accordance with this Section 3 and
from time to time upon the occurrence of certain events described in this
Section 3. Upon each adjustment of the Stock Purchase Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor,
<PAGE>
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action, (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Warrant, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had the Holder
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then, as a condition of
such Organic Change, lawful and adequate provisions shall be made by the Company
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby. In the event of any Organic Change, the Company
shall make appropriate provision with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holders
of a majority of the warrants to purchase Common Stock then outstanding,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase. The Company shall notify the Holder of this Warrant of any proposed
Organic Change or Change-in-Control Transaction reasonably prior to the
consummation of such Organic Change or Change-in-Control Transaction so as to
provide such Holder with a reasonable opportunity prior to such consummation to
exercise this Warrant in accordance with the terms and conditions hereof;
provided, however, that in the case of a transaction which requires notice be
given to the holders
<PAGE>
of Common Stock of the Company, the Holder of this Warrant shall be provided the
same notice given to the holders of Common Stock of the Company.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant and of the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 10
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at least 30
business days prior to the date on which an Organic Change shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon
the exercise of any portion of this Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of any portion of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof the
right to vote or to consent or to receive notice as a stockholder of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall
<PAGE>
give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Warrant, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Warrant, shall be transferable, in whole or in part,
except to the Holder's estate, heirs, administrators or executors and, whether
by gift or otherwise, from the Holder to the Holder's spouse, siblings, lineal
descendants or ancestors (or to a trustee of a trust which upon such transfer
and at all times thereafter is maintained solely for the benefit of such
persons). Commencing at the end of the Restricted Period and thereafter, subject
to compliance with applicable federal and state securities laws, this Warrant
and all rights hereunder shall be transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed.
For purposes of this Warrant, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter.
For purposes of this Warrant, the "Restricted Period" shall mean the period
commencing on the date of this Warrant and ending on the first to occur of (a)
two (2) years from the date of this Warrant and (b) a Change-in-Control
Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and
<PAGE>
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of New York, without regard to
its rules concerning conflicts of law.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officer thereunto duly authorized.
Dated: As of December 7, 1999 Reckson Service Industries, Inc.,
a Delaware corporation
By __________________________________
Name: Jeffrey D. Neumann
Title: Executive Vice President
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued
to it by Reckson Service Industries, Inc. (the "Company") and
dated December __, 1999 Warrant No. W-1 (the "Warrant") and to
purchase thereunder ___________ shares of the Common Stock,
par value $.01 per share, of the Company (the "Shares") at a
purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the
"Purchase Price").
/ / The undersigned hereby elects to convert
_______________________ percent (____%) of the value of the
Warrant pursuant to the provisions of Section 1.1 of the
Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
By:
Title:
9
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO RECKSON SERVICE
INDUSTRIES, INC., ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANT DATED DECEMBER __, 1999, WILL BE ISSUED.
- ------------, ----
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock") of
Reckson Service Industries, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
<PAGE>
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
By:
Title:
11
Exhibit 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER 7, 2001, (B) A QUALIFIED IPO (AS DEFINED IN THAT CERTAIN EXCHANGE
AGREEMENT DATED DECEMBER 7, 1999 BY AND AMONG RECKSON SERVICE INDUSTRIES, INC.,
ELLIOT S. COOPERSTONE AND H. THACH PHAM) AND (C) A CHANGE-IN-CONTROL TRANSACTION
(AS DEFINED HEREIN).
OPTION TO PURCHASE UP TO 394,737 SHARES
OF COMMON STOCK OF
ESOURCEONE, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
O-1
This certifies that RECKSON SERVICE INDUSTRIES, INC., a Delaware
corporation, or its permitted assigns (the "Holder"), for value received, is
entitled to purchase from ELLIOT S. COOPERSTONE (the "Optionor"), an individual
residing at 36 New England Drive Stamford, Connecticut, a maximum of 394,737
fully paid and nonassessable shares of the Common Stock, $.01 par value per
share (the "Common Stock"), of eSourceOne, Inc., a Delaware corporation (the
"Company") for cash at a price of $3.80 per share (as may be adjusted from time
to time in accordance with Section 3, the "Stock Purchase Price") at any time or
from time to time up to and including 5:00 p.m. (New York time), on the first to
occur of (i) a Change-in-Control Transaction (as defined below), and (ii)
December 7, 2009 (the first of such dates in clauses (i) and (ii) being referred
to herein as the "Expiration Date"). The shares purchasable hereunder are
referred to as the "Purchasable Shares". Holder may purchase all or any part of
the Purchasable Shares upon surrender to the Optionor at the address of Optionor
set forth above (or at such other location as the Optionor may advise the Holder
in writing) of this Option properly endorsed with the Form of Exercise Notice
attached hereto duly completed and signed and against payment in cash or by
check of the aggregate Stock Purchase Price for the number of Purchasable Shares
for which this Option is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of Purchasable Shares
are subject to adjustment as provided in Section 3 of this Option.
<PAGE>
This Option is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Option is exercisable at any time prior to the
Expiration Date with respect to all or any part of the Purchasable Shares. Any
unexercised portion of this Option shall terminate on the Expiration Date.
Certificates for all or any portion of the Purchasable Shares for which this
Option is exercised, properly endorsed, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Optionor at the Optionor's expense within
a reasonable time after this Option has been so exercised and payment of the
purchase price for such Purchasable Shares has been received by the Optionor. In
the case of an election to purchase less than all of the Purchasable Shares, the
Optionor shall cancel this Option and execute and deliver a new Option or
Options of like tenor for the unexercised portion of the Purchasable Shares
within a reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof, and the
Optionor shall execute any such documents as may be requested by the Company to
register on the Company's stock ledger the ownership of the Purchasable Shares
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value per share of the Common Stock is greater than
the Stock Purchase Price (at the date of calculation as set forth below), in
lieu of exercising this Option for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Option (or the portion thereof
being canceled) by surrender of this Option at the address of the Holder
together with the properly endorsed Form of Exercise Notice and notice of such
election in which event the Optionor shall transfer to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of Purchasable Shares or, if only a portion of
this Option is being exercised, the portion of this Option
being exercised (at the date of such calculation)
A = the fair market value per share of Common Stock (at the date
of such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value per share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the
<PAGE>
Common Stock is not then quoted on any automated quotation system or exchange,
the price determined by the Company's Board of Directors in good faith.
2. SHARES TO BE UNENCUMBERED. The Optionor covenants and agrees that
all of the Purchasable Shares have been duly authorized, validly issued, fully
paid and nonassessable and are free from all preemptive rights of any
stockholder and free of all taxes, encumbrances, liens, charges and the like
(each an "Encumbrance") with respect to the issue thereof, including, without
limitation, any Encumbrance under that certain Stockholders' Agreement, dated
August 11, 1999, by and among certain stockholders of the Company, including,
among others, the Optionor and the Holder. The Optionor further covenants and
agrees that, during the period within which the rights evidenced by this Option
may be exercised, the Optionor will maintain ownership of the Purchasable Shares
and any additional stock or other securities or property (including cash) by way
of spin-off, split-up, reclassification, or combination thereof or similar
corporate action free and clear of any Encumbrances. The Optionor will not take
any action in his individual capacity which would cause, or omit to take any
action within the reasonable control of Optionor which would prevent, the
purchase of any of the Purchasable Shares by the Holder as provided herein to
be, or from being, as the case may be, a violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the securities of the Company may be listed; provided, however, that the
foregoing sentence shall not apply in any case where it requires the Optionor to
act or omit to act in a manner that is contrary to any fiduciary duty that the
Optionor has to the Company in the Optionor's capacity as an officer or director
of the Company.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Option shall be subject to adjustment in accordance with this Section 3 and from
time to time upon the occurrence of certain events described in this Section 3.
Upon each adjustment of the Stock Purchase Price, the Holder of this Option
shall thereafter be entitled to purchase, at the Stock Purchase Price resulting
from such adjustment, the number of shares obtained by multiplying the Stock
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Option) shall
have received or become entitled to receive, without payment therefor,
(a) Common Stock or any shares of stock or other securities which are
at any time directly or indirectly convertible into or exchangeable for any
other shares of stock or
<PAGE>
other securities, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Option, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had he been the
holder of record of such Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected, in each case in such a way that does not
constitute a Change-in-Control Transaction (an "Organic Change"), then the
Holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares of stock, securities or other assets or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Purchasable Shares of immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby. In the event of any Organic Change, the Optionor shall make
appropriate provision with respect to the rights and interests of the Holder of
this Option to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Option)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Optionor shall
notify the Holder of any proposed Organic Change or Change-in-Control
Transaction reasonably prior to the consummation of such Organic Change or
Change-in-Control Transaction so as to provide Holder with a reasonable
opportunity prior to such consummation to exercise this Option in accordance
with the terms and conditions hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or
any other event occurs as to which the other provisions of this Section 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder in accordance with such provisions, then the
Optionor shall make an adjustment in the number and class of shares available
under the Option, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of this Option upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as the
Holder would have owned had this Option been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.
<PAGE>
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Option and of the Stock Purchase Price, the Optionor shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Optionor shall give written notice to the Holder at least ten
(10) business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or distributions.
(c) The Optionor shall also give written notice to the Holder at least
thirty (30) business days prior to the date on which an Organic Change shall
take place.
4. TRANSFER AND ISSUE TAXES. The transfer of and issuance of
certificates for shares of Common Stock upon the exercise of any portion of this
Option shall be made without charge to the Holder of this Option for any
transfer or issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that neither Optionor nor the Company shall be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of this Option being exercised.
5. CLOSING OF BOOKS. The Optionor shall not cause the Company to close
at any time the Company's transfer books against the transfer of any shares of
Common Stock transferable upon the exercise of this Option in any manner which
interferes with the timely exercise of any portion of this Option; provided,
however, that the foregoing sentence shall not apply in any case where it
requires the Optionor to act or omit to act in a manner that is contrary to any
fiduciary duty that the Optionor has to the Company in the Optionor's capacity
as an officer or director of the Company.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Option shall be construed as conferring upon the Holder hereof
the right to vote or to consent or to receive notice as a stockholder of the
Company or any other matters or any rights whatsoever as a stockholder of the
Company. No dividends or interest shall be payable or accrued in respect of this
Option or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, this Option shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of such Holder for
the Stock Purchase Price or as a stockholder of the Company, whether such
liability is asserted by the Optionor, the Company or by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Option, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Option, shall be transferable, in whole or in part, except
to Affiliates or employees of the Holder. Commencing at the end of the
Restricted Period and thereafter, subject to compliance with applicable federal
and state securities laws, this Option and all rights hereunder shall be
<PAGE>
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of the Option properly enclosed.
For purposes of this Option, the term "Affiliate" shall mean shall mean
any corporation or other entity in which the subject person (A)(1) owns or
controls the voting rights of 50% or more of the capital stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or entity
or (2) has the right to nominate and/or elect at least one-half of the members
of the board of directors of such corporation or entity or (3) at least one-half
of the then current members of the board of directors of such corporation or
entity were nominated or designated for election as directors of such
corporation by the subject person and (B) for financial reporting purposes, the
financial statements of the subject person includes on a consolidated basis the
financial statements of such corporation or other entity.
For purposes of this Option, a "Change-in-Control Transaction" shall
mean any merger or consolidation of the Company into or with another
corporation, sale, transfer or other disposition of all or substantially all of
the assets or capital stock of the Company, or any reorganization,
recapitalization or like transaction or series of transactions having
substantially equivalent effect and purpose, at the conclusion of which such
merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
the Company immediately prior to such transaction or series of transactions own
less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter; provided, however, that Change-in-Control Transaction
shall not include any acquisition or series of related acquisitions of more than
50% of the outstanding capital stock of the Company by Reckson Service
Industries, Inc. or its Affiliates.
For purposes of this Option, a "Qualified IPO" shall mean a firm
underwritten public offering of common stock of eSourceOne by a nationally
recognized underwriter which offering results in the receipt of aggregate gross
proceeds by eSourceOne of at least $30,000,000 and reflects a market value of
eSourceOne of at least $150,000,000 immediately prior to such public offering.
For purposes of this Option, the "Restricted Period" shall mean the
period commencing on the date of this Option and ending on the first to occur of
(a) two (2) years from the date of this Option, (b) a Qualified IPO and (c) a
Change-in-Control Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF OPTION. The rights and
obligations of the Company, of the Holder of this Option and of the holder of
shares of Common Stock issued upon exercise of this Option referred to in
Section 7 shall survive the exercise of this Option.
9. MODIFICATION AND WAIVER. This Option and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
<PAGE>
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Optionor shall be
delivered or shall be sent by certified mail, postage prepaid, to the Holder at
the Holder's address as set forth in the first paragraph of this Option, to the
Optionor at the Optionor's address as set forth in the first paragraph of this
Option, or, in each case, such other address as either may from time to time be
provided by one party to the other.
11. BINDING EFFECT ON SUCCESSORS. This Option shall be binding upon any
successor in interest to the Optionor. All of the obligations of the Optionor
relating to the transfer of the Common Stock upon the exercise of this Option
shall survive the exercise and termination of this Option. All of the covenants
and agreements of the Optionor shall inure to the benefit of the successors and
assigns of the Holder.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Option are inserted for convenience
only and do not constitute a part of this Option. This Option shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the internal laws of the State of New York, without regard to its rules
concerning conflicts of law.
13. LOST OPTION. The Optionor represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Optionor of
the loss, theft, destruction, or mutilation of this Option and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Optionor, or in the case of any such mutilation upon
surrender and cancellation of this Option, the Company, at its expense, will
make and deliver a new Option, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Option.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Option. The Company shall pay to the Holder, in lieu of issuing
any fractional share, a sum in cash equal to such fraction multiplied by the
then effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Option has caused this Option to be duly
executed by its officer thereunto duly authorized.
Dated: As of December 7 , 1999 ELLIOT S. COOPERSTONE
By____________________________
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Elliot S. Cooperstone
36 New England Drive
Stamford, CT 06903
Tel: 203-968-1113
Dear __________:
/ / The undersigned hereby elects to exercise the option issued to
it by Elliot S. Cooperstone (the "Optionor"), dated December
7, 1999 (the "Option"), and to purchase thereunder ___________
shares (the "Shares") of the Common Stock, par value $.01 per
share, of eSourceOne, Inc., a Delaware corporation, at a
purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the
"Purchase Price").
/ / The undersigned hereby elects to convert
_______________________ percent (____%) of the value of the
Option pursuant to the provisions of Section 1.1 of the
Option.
Pursuant to the terms of the Option the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Option.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: ____________________________
Name:
Title:
9
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO THE OPTIONOR, ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
OPTION, DATED DECEMBER 7, 1999, WILL BE ISSUED.
------------, ----
Elliot S. Cooperstone
36 New England Drive
Stamford, CT 06903
Tel: 203-968-1113
Dear ____________:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock"), of
eSourceOne, Inc. (the "Company") from you ("Optionor") pursuant to the exercise
of that certain Option, dated December 7, 1999, granted by Optionor to
Purchaser. The Common Stock will be sold to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by Optionor and the Company,
Purchaser represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by Optionor and the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
<PAGE>
Purchaser agrees that the shares of Common Stock to be purchased by Purchaser
upon exercise of the Option shall in the hands of Purchaser continue to be
subject to the terms and conditions of that certain Stockholders Agreement by
and among the Company and certain stockholders of the Company, including, among
others, Optionor and Purchaser, or any replacement stockholders agreement (the
"Stockholders Agreement"), and to execute a counterpart of the Stockholders
Agreement upon request by Optionor or the Company for the purpose of evidencing
such agreement by Purchaser.
Purchaser also understands and agrees that, in addition to any legends required
by the Stockholders Agreement, there will be placed on the certificate(s) for
the Common Stock or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: ______________________________
Name:
Title:
11
Exhibit 4.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER 7, 2001, (B) A QUALIFIED IPO (AS DEFINED IN THAT CERTAIN EXCHANGE
AGREEMENT DATED DECEMBER 7, 1999 BY AND AMONG RECKSON SERVICE INDUSTRIES, INC.,
ELLIOT S. COOPERSTONE AND H. THACH PHAM) AND (C) A CHANGE-IN-CONTROL TRANSACTION
(AS DEFINED HEREIN).
OPTION TO PURCHASE UP TO 394,737 SHARES
OF COMMON STOCK OF
ESOURCEONE, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
O-2
This certifies that RECKSON SERVICE INDUSTRIES, INC., a Delaware
corporation, or its permitted assigns (the "Holder"), for value received, is
entitled to purchase from H. THACH PHAM (the "Optionor"), an individual residing
at 53 Fayette Road, Scarsdale, New York, a maximum of 394,737 fully paid and
nonassessable shares of the Common Stock, $.01 par value per share (the "Common
Stock"), of eSourceOne, Inc., a Delaware corporation (the "Company") for cash at
a price of $3.80 per share (as may be adjusted from time to time in accordance
with Section 3, the "Stock Purchase Price") at any time or from time to time up
to and including 5:00 p.m. (New York time), on the first to occur of (i) a
Change-in-Control Transaction (as defined below), and (ii) December 7, 2009 (the
first of such dates in clauses (i) and (ii) being referred to herein as the
"Expiration Date"). The shares purchasable hereunder are referred to as the
"Purchasable Shares". Holder may purchase all or any part of the Purchasable
Shares upon surrender to the Optionor at the address of Optionor set forth above
(or at such other location as the Optionor may advise the Holder in writing) of
this Option properly endorsed with the Form of Exercise Notice attached hereto
duly completed and signed and against payment in cash or by check of the
aggregate Stock Purchase Price for the number of Purchasable Shares for which
this Option is being exercised determined in accordance with the provisions
hereof. The Stock Purchase Price and the number of Purchasable Shares are
subject to adjustment as provided in Section 3 of this Option.
<PAGE>
This Option is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Option is exercisable at any time prior to the
Expiration Date with respect to all or any part of the Purchasable Shares. Any
unexercised portion of this Option shall terminate on the Expiration Date.
Certificates for all or any portion of the Purchasable Shares for which this
Option is exercised, properly endorsed, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Optionor at the Optionor's expense within
a reasonable time after this Option has been so exercised and payment of the
purchase price for such Purchasable Shares has been received by the Optionor. In
the case of an election to purchase less than all of the Purchasable Shares, the
Optionor shall cancel this Option and execute and deliver a new Option or
Options of like tenor for the unexercised portion of the Purchasable Shares
within a reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof, and the
Optionor shall execute any such documents as may be requested by the Company to
register on the Company's stock ledger the ownership of the Purchasable Shares
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value per share of the Common Stock is greater than
the Stock Purchase Price (at the date of calculation as set forth below), in
lieu of exercising this Option for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Option (or the portion thereof
being canceled) by surrender of this Option at the address of the Holder
together with the properly endorsed Form of Exercise Notice and notice of such
election in which event the Optionor shall transfer to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of Purchasable Shares or, if only a
portion of this Option is being exercised, the
portion of this Option being exercised (at the date
of such calculation)
A = the fair market value per share of Common Stock
(at the date of such calculation)
B = the Stock Purchase Price (as adjusted to the date
of such calculation)
For purposes of the above calculation, fair market value per share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the
<PAGE>
Common Stock is not then quoted on any automated quotation system or exchange,
the price determined by the Company's Board of Directors in good faith.
2. SHARES TO BE UNENCUMBERED. The Optionor covenants and agrees that
all of the Purchasable Shares have been duly authorized, validly issued, fully
paid and nonassessable and are free from all preemptive rights of any
stockholder and free of all taxes, encumbrances, liens, charges and the like
(each an "Encumbrance") with respect to the issue thereof, including, without
limitation, any Encumbrance under that certain Stockholders' Agreement, dated
August 11, 1999, by and among certain stockholders of the Company, including,
among others, the Optionor and the Holder. The Optionor further covenants and
agrees that, during the period within which the rights evidenced by this Option
may be exercised, the Optionor will maintain ownership of the Purchasable Shares
and any additional stock or other securities or property (including cash) by way
of spin-off, split-up, reclassification, or combination thereof or similar
corporate action free and clear of any Encumbrances. The Optionor will not take
any action in his individual capacity which would cause, or omit to take any
action within the reasonable control of Optionor which would prevent, the
purchase of any of the Purchasable Shares by the Holder as provided herein to
be, or from being, as the case may be, a violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the securities of the Company may be listed; provided, however, that the
foregoing sentence shall not apply in any case where it requires the Optionor to
act or omit to act in a manner that is contrary to any fiduciary duty that the
Optionor has to the Company in the Optionor's capacity as an officer or director
of the Company.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Option shall be subject to adjustment in accordance with this Section 3 and from
time to time upon the occurrence of certain events described in this Section 3.
Upon each adjustment of the Stock Purchase Price, the Holder of this Option
shall thereafter be entitled to purchase, at the Stock Purchase Price resulting
from such adjustment, the number of shares obtained by multiplying the Stock
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.
3.1 Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 Dividends in Preferred Stock, Property, Reclassification. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Option) shall
have received or become entitled to receive, without payment therefor,
(a) Common Stock or any shares of stock or other securities which are
at any time directly or indirectly convertible into or exchangeable for any
other shares of stock or
<PAGE>
other securities, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Option, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had he been the
holder of record of such Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected, in each case in such a way that does not
constitute a Change-in-Control Transaction (an "Organic Change"), then the
Holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares of stock, securities or other assets or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Purchasable Shares of immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby. In the event of any Organic Change, the Optionor shall make
appropriate provision with respect to the rights and interests of the Holder of
this Option to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Option)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Optionor shall
notify the Holder of any proposed Organic Change or Change-in-Control
Transaction reasonably prior to the consummation of such Organic Change or
Change-in-Control Transaction so as to provide Holder with a reasonable
opportunity prior to such consummation to exercise this Option in accordance
with the terms and conditions hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or
any other event occurs as to which the other provisions of this Section 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder in accordance with such provisions, then the
Optionor shall make an adjustment in the number and class of shares available
under the Option, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of this Option upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as the
Holder would have owned had this Option been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.
<PAGE>
3.5 Notices of Change.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Option and of the Stock Purchase Price, the Optionor shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Optionor shall give written notice to the Holder at least ten
(10) business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or distributions.
(c) The Optionor shall also give written notice to the Holder at least
thirty (30) business days prior to the date on which an Organic Change shall
take place.
4. TRANSFER AND ISSUE TAXES. The transfer of and issuance of
certificates for shares of Common Stock upon the exercise of any portion of this
Option shall be made without charge to the Holder of this Option for any
transfer or issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that neither Optionor nor the Company shall be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of this Option being exercised.
5. CLOSING OF BOOKS. The Optionor shall not cause the Company to close
at any time the Company's transfer books against the transfer of any shares of
Common Stock transferable upon the exercise of this Option in any manner which
interferes with the timely exercise of any portion of this Option; provided,
however, that the foregoing sentence shall not apply in any case where it
requires the Optionor to act or omit to act in a manner that is contrary to any
fiduciary duty that the Optionor has to the Company in the Optionor's capacity
as an officer or director of the Company.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Option shall be construed as conferring upon the Holder hereof
the right to vote or to consent or to receive notice as a stockholder of the
Company or any other matters or any rights whatsoever as a stockholder of the
Company. No dividends or interest shall be payable or accrued in respect of this
Option or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, this Option shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of such Holder for
the Stock Purchase Price or as a stockholder of the Company, whether such
liability is asserted by the Optionor, the Company or by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Option, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Option, shall be transferable, in whole or in part, except
to Affiliates or employees of the Holder. Commencing at the end of the
Restricted Period and thereafter, subject to compliance with applicable federal
and state securities laws, this Option and all rights hereunder shall be
<PAGE>
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of the Option properly enclosed.
For purposes of this Option, the term "Affiliate" shall mean shall mean
any corporation or other entity in which the subject person (A)(1) owns or
controls the voting rights of 50% or more of the capital stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or entity
or (2) has the right to nominate and/or elect at least one-half of the members
of the board of directors of such corporation or entity or (3) at least one-half
of the then current members of the board of directors of such corporation or
entity were nominated or designated for election as directors of such
corporation by the subject person and (B) for financial reporting purposes, the
financial statements of the subject person includes on a consolidated basis the
financial statements of such corporation or other entity.
For purposes of this Option, a "Change-in-Control Transaction" shall
mean any merger or consolidation of the Company into or with another
corporation, sale, transfer or other disposition of all or substantially all of
the assets or capital stock of the Company, or any reorganization,
recapitalization or like transaction or series of transactions having
substantially equivalent effect and purpose, at the conclusion of which such
merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
the Company immediately prior to such transaction or series of transactions own
less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter; provided, however, that Change-in-Control Transaction
shall not include any acquisition or series of related acquisitions of more than
50% of the outstanding capital stock of the Company by Reckson Service
Industries, Inc. or its Affiliates.
For purposes of this Option, a "Qualified IPO" shall mean a firm
underwritten public offering of common stock of eSourceOne by a nationally
recognized underwriter which offering results in the receipt of aggregate gross
proceeds by eSourceOne of at least $30,000,000 and reflects a market value of
eSourceOne of at least $150,000,000 immediately prior to such public offering.
For purposes of this Option, the "Restricted Period" shall mean the
period commencing on the date of this Option and ending on the first to occur of
(a) two (2) years from the date of this Option, (b) a Qualified IPO and (c) a
Change-in-Control Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF OPTION. The rights and
obligations of the Company, of the Holder of this Option and of the holder of
shares of Common Stock issued upon exercise of this Option referred to in
Section 7 shall survive the exercise of this Option.
9. MODIFICATION AND WAIVER. This Option and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
<PAGE>
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Optionor shall be
delivered or shall be sent by certified mail, postage prepaid, to the Holder at
the Holder's address as set forth in the first paragraph of this Option, to the
Optionor at the Optionor's address as set forth in the first paragraph of this
Option, or, in each case, such other address as either may from time to time be
provided by one party to the other.
11. BINDING EFFECT ON SUCCESSORS. This Option shall be binding upon any
successor in interest to the Optionor. All of the obligations of the Optionor
relating to the transfer of the Common Stock upon the exercise of this Option
shall survive the exercise and termination of this Option. All of the covenants
and agreements of the Optionor shall inure to the benefit of the successors and
assigns of the Holder.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Option are inserted for convenience
only and do not constitute a part of this Option. This Option shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the internal laws of the State of New York, without regard to its rules
concerning conflicts of law.
13. LOST OPTION. The Optionor represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Optionor of
the loss, theft, destruction, or mutilation of this Option and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Optionor, or in the case of any such mutilation upon
surrender and cancellation of this Option, the Company, at its expense, will
make and deliver a new Option, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Option.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Option. The Company shall pay to the Holder, in lieu of issuing
any fractional share, a sum in cash equal to such fraction multiplied by the
then effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Option has caused this Option to be duly
executed by its officer thereunto duly authorized.
Dated: As of December 7 , 1999 H. THACH PHAM
By ___________________________________
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
H. Thach Pham
53 Fayette Road
Scarsdale, NY 10583
Tel: 914-725-8693
Fax: 914-722-1419
Dear __________:
/ / The undersigned hereby elects to exercise the option issued to
it by H. Thach Pham (the "Optionor"), dated December 7, 1999
(the "Option"), and to purchase thereunder ___________ shares
(the "Shares") of the Common Stock, par value $.01 per share,
of eSourceOne, Inc., a Delaware corporation, at a purchase
price of $___ per Share or an aggregate purchase price of
______________________ Dollars ($__________) (the "Purchase
Price").
/ / The undersigned hereby elects to convert
_______________________ percent (____%) of the value of the
Option pursuant to the provisions of Section 1.1 of the
Option.
Pursuant to the terms of the Option the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Option.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: _________________________
Name:
Title:
9
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO THE OPTIONOR, ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
OPTION, DATED DECEMBER 7, 1999, WILL BE ISSUED.
------------, ----
H. Thach Pham
53 Fayette Road
Scarsdale, NY 10583
Tel: 914-725-8693
Fax: 914-722-1419
Dear ____________:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock"), of
eSourceOne, Inc. (the "Company") from you ("Optionor") pursuant to the exercise
of that certain Option, dated December 7, 1999, granted by Optionor to
Purchaser. The Common Stock will be sold to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by Optionor and the Company,
Purchaser represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by Optionor and the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion
10
<PAGE>
of counsel reasonably satisfactory to counsel for the Company, to the effect
that such registration is not required.
Purchaser agrees that the shares of Common Stock to be purchased by Purchaser
upon exercise of the Option shall in the hands of Purchaser continue to be
subject to the terms and conditions of that certain Stockholders Agreement by
and among the Company and certain stockholders of the Company, including, among
others, Optionor and Purchaser, or any replacement stockholders agreement (the
"Stockholders Agreement"), and to execute a counterpart of the Stockholders
Agreement upon request by Optionor or the Company for the purpose of evidencing
such agreement by Purchaser.
Purchaser also understands and agrees that, in addition to any legends required
by the Stockholders Agreement, there will be placed on the certificate(s) for
the Common Stock or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: ___________________________
Name:
Title:
11
EXHIBIT 10
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
February 7, 2000 by and between Reckson Service Industries, Inc., a Delaware
corporation ("RSI"), and VANTAS Incorporated, a Nevada corporation ("VANTAS").
WHEREAS, RSI and VANTAS have entered into that certain Agreement and
Plan of Merger, dated January 20, 2000, with HQ Global Workplaces, Inc., a
Delaware corporation ("HQ"), and CarrAmerica Realty Corporation, a Maryland
corporation, (the "Merger Agreement") pursuant to which VANTAS is to be merged
(the "Merger") with and into HQ, with HQ being the surviving corporation;
WHEREAS, in accordance with the terms of the Merger Agreement, VANTAS
obtained an irrevocable letter of credit from Bankers Trust Company ("Bankers
Trust") in favor of HQ and guaranteed by RSI in the amount of $35 million (the
"Letter of Credit");
WHEREAS, pursuant to the Equity Interest Pledge and Security Agreement,
dated February 7, 2000, by and between RSI and Bankers Trust (the "Security
Agreement"), RSI has pledged 11,299,072 shares of the capital stock in VANTAS,
as more fully set forth on Schedule A to this Agreement, as collateral (the
"Collateral") securing the Letter of Credit;
WHEREAS, if there is a foreclosure on the Collateral, VANTAS has agreed
to issue to RSI, at RSI's election, shares of the capital stock of VANTAS (the
"Securities") to reimburse RSI for the loss of the Collateral; and
WHEREAS, the parties hereto acknowledge that, notwithstanding anything
contained in this agreement, if there is a foreclosure on the Collateral, RSI
shall maintain its subrogation rights with respect to the Letter of Credit. To
the extent that RSI does not exercise its rights pursuant to this agreement, RSI
may pursue such subrogation rights.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amount and Consideration. In consideration of RSI securing VANTAS'
obligations under the Letter of Credit, VANTAS agrees that, if, and only to the
extent, Bankers Trust forecloses on the Collateral (other than a foreclosure
resulting from RSI's gross negligence), it shall be obligated to issue to RSI,
at RSI's election, the Securities. Such Securities shall have the same terms and
conditions as the securities comprising the Collateral which was foreclosed upon
and not otherwise returned to RSI by Bankers Trust pursuant to the terms of the
Security Agreement with the value of such Securities equal to the value ascribed
to VANTAS common and preferred stock in such foreclosure sale;
2. Restrictions on Transferability of Securities. RSI realizes that the
Securities are not, and will not be, registered under the Securities Act of
1933, as amended (the "Securities
<PAGE>
Act"), or the securities laws of any state. RSI agrees that the Securities will
not be sold, offered for sale, transferred, pledged, hypothecated, or otherwise
disposed of except in compliance with the Securities Act and applicable state
securities laws. RSI understands that any sale, transfer, pledge, hypothecation,
or other disposition of the Securities may require in some states specific
approval by the appropriate governmental agency or commission in such states.
RSI has been advised that the Company has no obligation, and does not intend, to
cause the Securities to be registered under the Securities Act or to comply with
the requirements for any exemption under the Securities Act, including but not
limited to those provided by Rule 144 and Rule 144A promulgated under the
Securities Act, which would permit the Securities to be sold by RSI. RSI
understands that it is not anticipated that there will be any market for resale
of the Securities and that the transfer of the Securities is specifically
restricted under this Subscription Agreement and the Securities Act, and may be
restricted by applicable state securities laws. RSI understands the legal
consequences of the foregoing to mean that RSI must bear the economic risk of
its investment in VANTAS for an indefinite period of time. RSI understands that
instruments, if any, representing the Securities may bear legends restricting
the transfer thereof.
3. Acceptance of Subscription. VANTAS understands and agrees that RSI,
in its sole discretion, reserves the right to accept or reject this and any
other subscription for the Securities in whole or in part at any time prior to
the acceptance of such Securities, notwithstanding prior receipt by VANTAS of
notice of acceptance. In the event that this subscription is rejected in whole
or in part or, if the offering of the Securities to RSI is not consummated for
any reason, this subscription shall be deemed to be rejected and this
Subscription Agreement shall thereafter have no force or effect to that extent.
4. Representations and Warranties of VANTAS. In connection with the
transactions contemplated herein, VANTAS warrants and represents to RSI that (a)
VANTAS is a duly organized corporation, validly existing and in good standing
under the laws of the State of Nevada, (b) the execution and delivery of this
Subscription Agreement and the performance of all acts contemplated hereunder
been duly authorized by all necessary actions and, to VANTAS' knowledge, will
not constitute a breach or violation of, or a default under, any agreement by
which VANTAS or any of its properties is bound, nor constitute a violation of
any law, administrative regulation or court decree applicable VANTAS and (c) the
Securities have been duly authorized and shall be validly issued.
5. Notices. Any consent, request, waiver, notice or other communication
or document required or permitted to be given pursuant to any provision of this
Subscription Agreement ("Notice") shall be deemed duly given only when in
writing, signed by or on behalf of RSI giving such Notice, and (i) personally
delivered (with receipt acknowledged by the recipient or its agent), (ii)
deposited in a designated U.S. mail depositary, registered or certified mail,
return receipt requested, postage prepaid, or (iii) sent by overnight courier
(with receipt acknowledged by the recipient or its agent), addressed to VANTAS
to its principal office at 90 Park Avenue, New York, NY 10016. Any such Notice
shall be deemed received (x) upon personal delivery, (y) five (5) days after
mailing as provided above, or (z) one (1) day after sending by overnight
courier.
6. Counterparts. This Subscription Agreement may be executed through
the use of separate signature pages or in any number of counterparts, and each
such counterpart shall, for
2
<PAGE>
all purposes, constitute one agreement binding on all parties, notwithstanding
that all parties are not signatories to the same counterpart.
7. Entire Agreement. This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein.
8. Severability. Each provision of this Subscription Agreement is
intended to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality of
the remainder hereof.
9. Assignability. This Subscription Agreement is not transferable or
assignable by either party hereto.
10. Headings and Captions. The headings and captions for the various
sections of this Subscription Agreement are for convenience of reference only
and shall in no way modify or affect the meaning or construction of any of the
terms or provisions hereof.
11. Applicable Law. This Subscription Agreement shall be governed by
and construed in accordance with the law of the State of New York without giving
effect to the conflicts of laws principles thereof.
12. Choice of Jurisdiction. The parties agree that any action or
proceeding arising, directly, indirectly or otherwise, in connection with, out
of or from this Subscription Agreement, any breach hereof or any transaction
covered hereby shall be resolved within the State of New York. Accordingly, the
parties consent and submit to the jurisdiction of the United States federal and
state courts located within the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
VANTAS INCORPORATED
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
RECKSON SERVICE INDUSTRIES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
4
EXHIBIT 10.2(a)
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
August 4, 1999
between
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
and
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
relating to the operations of
RECKSON STRATEGIC VENTURE PARTNERS, LLC
<PAGE>
Table of Contents
Page
----
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions................................................1
(a) Terms Generally...................................1
(b) Other Terms.......................................1
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans.......................................7
Section 2.2 Borrowing Procedure........................................7
Section 2.3 Termination and Reduction of Commitment....................7
Section 2.4 Repayment..................................................8
Section 2.5 Optional Prepayment........................................8
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate..............................................8
Section 3.2 Interest on Overdue Amounts................................8
Section 3.3 Maximum Interest Rate......................................9
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments................................9
Section 4.2 Compensation for Losses....................................0
Section 4.3 Withholding and Additional Costs...........................0
(a) Withholding.......................................0
(b) Additional Costs..................................0
(c) Certificate, Etc..................................1
Section 4.4 Expenses; Indemnity........................................1
Section 4.5 Survival...................................................2
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties.............................2
(a) Good Standing and Power...........................2
(b) Authority.........................................2
(c) Authorizations....................................2
(d) Binding Obligation................................2
(e) Litigation........................................3
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(f) No Conflicts......................................3
(g) Taxes.............................................3
(h) Properties........................................3
(i) Compliance with Laws and Charter Documents........3
(j) No Material Adverse Effect........................3
(k) Disclosure........................................4
Section 5.2 Survival...................................................4
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment and Letters
of Credit................................................14
(a) This Agreement....................................14
(b) Certificate of Incorporation and By-Laws..........14
(c) Representations and Warranties....................14
(d) Other Documents...................................15
Section 6.2 Conditions to All Loans and Letters of Credit..............15
(a) Borrowing Request.................................15
(b) No Default........................................15
(c) Debt-to-Equity Ratio..............................15
(d) Representations and Warranties; Covenants.........15
(e) REIT Status of Reckson............................15
(f) Certain Loans Subject to Reckson's Approval.......15
Section 6.3 Satisfaction of Conditions Precedent.......................15
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants......................................16
(a) Financial Statements; Compliance Certificates.....16
(b) Existence.........................................16
(c) Compliance with Law and Agreements................16
(d) Authorizations....................................17
(e) Inspection........................................17
(f) Maintenance of Records............................17
(g) Notice of Defaults and Adverse Developments.......17
Section 7.2 Negative Covenants.........................................17
(a) Mergers, Consolidations and Sales of Assets.......17
(b) Liens.............................................17
(c) Indebtedness......................................18
(d) Dividends.........................................18
(e) Certain Amendments................................18
ARTICLE VIII.
EVENTS OF DEFAULT
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Section 8.1 Events of Default..........................................18
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans and Letters of Credit....................20
ARTICLE X.
LETTERS OF CREDIT
Section 10.1 Letters of Credit..........................................20
(a) Types and Amounts.................................20
(b) Conditions........................................21
(c) Issuance of Letters of Credit.....................21
(d) Reimbursement Obligations; Duties of the Lender...22
(e) Payment of Reimbursement Obligations..............22
(f) Letter of Credit Fee Charges......................22
(g) Letter of Credit Reporting Requirements...........23
(h) Indemnification; Exoneration......................23
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Applicable Law.............................................24
Section 11.2 Waiver of Jury.............................................24
Section 11.3 Jurisdiction and Venue; Service of Process.................24
Section 11.4 Confidentiality............................................24
Section 11.5 Amendments and Waivers.....................................25
Section 11.6 Cumulative Rights; No Waiver...............................25
Section 11.7 Notices....................................................25
Section 11.8 Certain Acknowledgments....................................26
Section 11.9 Separability...............................................26
Section 11.10 Parties in Interest........................................26
Section 11.11 Execution in Counterparts..................................26
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AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 4,
1999, between Reckson Service Industries, Inc., a Delaware corporation, and
Reckson Operating Partnership, L.P., a Delaware limited partnership, relating to
the operations of Reckson Strategic Venture Partners, LLC ("RSVP").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to commit to
lend to the Borrower up to $100 million on a revolving basis for investment in
RSVP;
WHEREAS, the Lender is willing to make revolving credit loans
on the terms and conditions provided herein; and
WHEREAS, the parties hereto desire to amend and restate their
credit agreement dated June 15, 1998 to allow for the issuance of one or more
Letters of Credit in favor of the Lender for the benefit of the Borrower;
NOW, THEREFORE, the parties agree as follows:
DEFINITIONS
Section 1.1 Definitions.
(a) Terms Genezrally. The definitions ascribed to terms in this
Agreement apply equally to both the singular and plural forms of such terms.
Whenever the context may require, any pronoun shall be deemed to include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be interpreted as if followed by the phrase
"without limitation". The phrase "individually or in the aggregate" shall be
deemed general in scope and not to refer to any specific Section or clause of
this Agreement. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require. The
table of contents, headings and captions herein shall not be given effect in
interpreting or construing the provisions of this Agreement. Except as otherwise
expressly provided herein, all references to "dollars" or "$" shall be deemed
references to the lawful money of the United States of America.
(b) Other Terms. The following terms have the meanings ascribed to
them below or in the Sections of this Agreement
indicated below:
"Adjusted Indebtedness" means, with respect to the Borrower,
the Borrower's Indebtedness determined without regard for any amounts
described in clause (viii) of the definition of "Indebtedness."
<PAGE>
"Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control
with, such Person.
"Agreement" means this credit agreement, as it may be amended,
modified or supplemented from time to time.
"Available Commitment" means, on any day, an amount equal to
(i) the Commitment on such day minus (ii) the aggregate outstanding
principal amount of Loans on such day.
"Borrower" means Reckson Service Industries, Inc., a Delaware
corporation.
"Borrowing Date" means, with respect to any Loan or Letter of
Credit, the Business Day set forth in the relevant Borrowing Request as
the date upon which the Borrower desires to borrow such Loan or Letter
of Credit;
"Borrowing Request" means a request by the Borrower for a Loan
or a Letter of Credit, which shall specify (i) the requested Borrowing
Date and (ii) the aggregate amount of such Loan or Letter of Credit.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized by law to close.
"Capital Lease Obligations" means, with respect to any Person,
the obligation of such Person to pay rent or other amounts under any
lease with respect to any property (whether real, personal or mixed)
acquired or leased by such Person that is required to be accounted for
as a liability on a consolidated balance sheet of such Person.
"Commercial Letter of Credit" means any documentary letter of
credit issued by an Issuing Bank pursuant to Section 10.1 for the
account of the Lender on behalf of the Borrower.
"Commitment" means $100 million, less (i) the amount of loans
made by the Lender to the Borrower for the funding of investments made
by RSVP prior to the spin-off distribution of shares of common stock of
the Borrower by Reckson and (ii) the amount of any investments made by
the Lender in joint venture investments made with RSVP, and as such
amount may be reduced from time to time pursuant to Section 2.3.
"Commitment Termination Date" means the earlier to occur of
(i) June 15, 2003 and (ii) the date, if any, on which the Commitment is
terminated.
"Confidential Information" means information delivered to the
Lender by or on behalf of the Borrower in connection with the
transactions contemplated by or otherwise pursuant to this Agreement
that is confidential or proprietary in nature at the time it is so
delivered or information obtained by the Lender in the course of its
review of the books or records of the Borrower contemplated herein;
provided that such term shall not include information W that was
publicly known or otherwise known to the Lender prior
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to the time of such disclosure, (ii) that subsequently becomes
publicly known through no act or omission by the Lender or any Person
acting on the Lender's behalf, (iii) that otherwise becomes known to
the Lender other than through disclosure by the Borrower or (iv) that
constitutes financial information delivered to the Lender that is
otherwise publicly available.
"Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Loans at such time, plus
(ii) the Letter of Credit Obligations at such time.
"Default" means any event or circumstance which, with the
giving of notice or the passage of time, or both, would be an Event of
Default.
"EBITDA" means for any fiscal period, the Consolidated Net
Income or Consolidated Net Loss, as the case may be, for such fiscal
period, after restoring thereto amounts deducted for (a) extraordinary
losses (or deducting therefrom any amounts included therein on account
of extraordinary gains) and special charges, (b) depreciation and
amortization (including write-offs or write-downs) and special charges,
(c) the amount of interest expense of the Borrower and its
Subsidiaries, if any, determined on a consolidated basis in accordance
with GAAP, for such period on the aggregate principal amount of their
consolidated indebtedness, (d) the amount of tax expense of the
Borrower and its Subsidiaries, if any, determined on a consolidated
basis in accordance with GAAP, for such period and (e) the aggregate
amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries, if any, determined on a consolidated basis in accordance
with GAAP, for such period with respect to leases of real and personal
property.
"Effective Date" has the meaning assigned to such term in
Section 6.1.
"Event of Default" has the meaning assigned to such term in
Section 8.1.
"GAAP" means generally accepted accounting principles, as set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entities as may be
approved by a significant segment of the accounting profession of the
United States of America.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
and including any obligation of such Person (i) to purchase or pay
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(or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii)
to purchase property, securities or services for the purpose of
assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or
the financial condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness. The term
"Guaranteed" shall have the corresponding meaning.
"Indebtedness" means, with respect to any Person, (i) all
obligations of such Person for borrowed money or for the deferred
purchase price of property or services (including all obligations,
contingent or otherwise, of such Person in connection with letters of
credit, bankers' acceptances, interest rate swap agreements, interest
rate cap agreements or other similar instruments, including currency
swaps) other than indebtedness to trade creditors and service providers
incurred in the ordinary course of business and payable on usual and
customary terms, (ii) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even though the remedies available to the seller or lender
under such agreement are limited to repossession or sale of such
property), (iv) all Capital Lease Obligations of such Person, (v) all
obligations of the types described in clauses (i), (ii), (iii) or (iv)
above secured by (or for which the obligee has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in any
property (including accounts, contract rights and other intangibles)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vi) all preferred stock
issued by such Person which is redeemable, prior to full satisfaction
of the Borrower's obligations under this Agreement (including repayment
in full of the Loans and all interest accrued thereon), other than at
the option of such Person, valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends,
(vii) all Indebtedness of others Guaranteed by such Person and (viii)
all Indebtedness of any partnership of which such Person is a general
partner.
"Indemnitee" has the meaning assigned to such term in Section
4.4(b).
"Intercompany Agreement" means the intercompany agreement,
dated as of the date hereof, by and between the Borrower and the
Lender.
"Interest Period" means, with respect to any Loan, each
three-month period commencing on the date such Loan is made or at the
end of the preceding Interest Period, as the case may be; provided,
however, that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall be extended to the next Business Day,
unless such Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Business Day;
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(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) below, end on the last Business
Day of a calendar month; and
(iii) any Interest Period that would otherwise end after the
Commitment Termination Date then in effect shall end on such Commitment
Termination Date.
"Issuing Bank" means The Chase Manhattan Bank or such other
banking institution selected by the parties hereto to issue a Letter of
Credit pursuant to Section 10.1(c)(ii) hereof.
"Lender" means Reckson Operating Partnership, L.P., a Delaware
limited partnership.
"Letter of Credit" means any Commercial Letter of Credit or
Standby Letter of Credit.
"Letter of Credit Fee" has the meaning set forth in Section
10.1(f).
"Letter of Credit Obligations" means, at any particular time,
the sum of (i) all outstanding Reimbursement Obligations, (ii) the
aggregate undrawn face amount of all outstanding Letters of Credit, and
(iii) the aggregate face amount of all Letters of Credit requested by
the Lender but not yet issued.
"Letter of Credit Reimbursement Agreement" means, with respect
to a Letter of Credit, such form of application therefor and form of
reimbursement agreement therefor (whether in a single or several
documents, taken together) as an Issuing Bank may employ in the
ordinary course of business for its own account, with such
modifications thereto as may be agreed upon by such Issuing Bank and
the Lender and as are not materially adverse (in the judgment of such
Issuing Bank) to the interests of the Lender; provided, however, in the
event of any conflict between the terms of any Letter of Credit
Reimbursement Agreement and this Agreement, the terms of this Agreement
shall control.
"Lien" means, with respect to any asset of a Person, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (ii) the interest of a vendor or lessor
under any conditional sale agreement, capital lease or title retention
agreement relating to such asset, and (iii) in the case of securities,
any purchase option, call or similar right of any other Person with
respect to such securities.
"Loans" has the meaning assigned to such term in Section 2.1.
"Material Adverse Effect" means any material and adverse
effect on (i) the consolidated business, properties, condition
(financial or otherwise) or operations, present or prospective, of the
Borrower and its Subsidiaries, (ii) the ability of the Borrower timely
to perform any of its material obligations, or of the Lender to
exercise
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any remedy, under this Agreement or (iii) the legality, validity,
binding nature or enforceability of this Agreement.
"Net Assets" means, with respect to the Borrower, the greater
of (i) the sum of the Borrower's paid-in capital and retained earnings
or (ii) the excess of the Value of all of the Borrower's assets of any
kind over the Borrower's Adjusted Indebtedness.
"Permitted Liens" means, collectively, the following: (i)
Liens expressly approved by the Lender, which approval shall not be
unreasonably withheld; (ii) Liens imposed by any Governmental Authority
for taxes, assessments or charges not yet due or that are being
contested in good faith by appropriate proceedings and for which
adequate reserves are being maintained (in accordance with GAAP); and
(iii) Liens existing on the date hereof.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether Federal, state, county, city, municipal
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"Prime Rate" means the prime rate (or if a range is given, the
highest prime rate) listed under "Money Rates" in The Wall Street
Journal for such date or, if The Wall Street Journal is not published
on such date, then in The Wall Street Journal most recently published.
"Reckson" means Reckson Associates Realty Corp., a Maryland
corporation.
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to
amounts drawn under Letters of Credit.
"Responsible Officer" means the chief executive officer,
president, chief financial officer, chief accounting officer, treasurer
or any vice president, senior vice president or executive vice
president of the General Partner.
"RSI Facility Agreement" means the credit agreement dated the
date hereof between Borrower and Lender in respect of the operations of
Reckson Service Industries, Inc.
"RSVP Platform" means a particular real estate market sector
in which RSVP invests.
"SEC" means the Securities and Exchange Commission (or any
successor Governmental Authority).
"Standby Letter of Credit" means any Letter of Credit issued
by the Issuing Bank pursuant to Section 10.1 for the account of the
Lender, which is not a Commercial Letter of Credit.
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"Subsidiary" means, at any time and with respect to any
Person, any other Person the shares of stock or other ownership
interests of which having ordinary voting power to elect a majority of
the board of directors or with respect to other matters of such Person
are at the time owned, or the management or policies of which is
otherwise at the time controlled, directly or indirectly through one or
more intermediaries (including other Subsidiaries) or both, by such
first Person. Unless otherwise qualified or the context indicates
clearly to the contrary, all references to a "Subsidiary" or
"Subsidiaries" in this Agreement refer to a Subsidiary or Subsidiaries
of the Borrower.
"Taxes" has the meaning assigned to such term in Section
4.3(a).
"Value" means, with respect to any asset owned by the
Borrower, the present value of the net cash flow reasonably projected
by the Borrower to be received with respect to its ownership of such
assets, discounted at an interest rate that the Borrower reasonably
determines appropriate given the risks associated with such asset and
such projected net cash flow, but in no event at an interest rate lower
than 2% above the Prime Rate in effect at the time that the
determination of Value is made.
ARTICLE II
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans. Until the Commitment Termination Date,
subject to the terms and conditions of this Agreement, the Lender agrees to make
revolving credit loans (collectively, "Loans") in dollars to the Borrower in an
aggregate principal amount at any one time outstanding, and taking into account
any Letters of Credit issued pursuant to the terms of Article X, not to exceed
the Commitment.
Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower
shall give a Borrowing Request to the Lender, by telephone, telex or telecopy or
in writing, not later than 10:30 A.M., New York time, on the third Business Day
before the Borrowing Date (or such later time or date as the Lender may in its
sole discretion permit). (If any Borrowing Request is made otherwise than in
writing, Borrower shall promptly confirm such Borrowing Request in writing.)
Subject to satisfaction, or waiver by the Lender, of each of the applicable
conditions precedent contained in Article VI, on the Borrowing Date the Lender
shall make available, in immediately available funds, to the Borrower the amount
of the requested Loan.
Section 2.3 Termination and Reduction of Commitment. The Borrower may
terminate the Commitment, or reduce the amount thereof, by giving written notice
to the Lender, not later than 5:00 P.M., New York time, on the fifth Business
Day prior to the date of termination or reduction (or such later time or date as
the Lender may in its sole discretion permit).
Section 2.4 Repayment. Loans shall be repaid, together with all accrued and
unpaid interest thereon, on the Commitment Termination Date.
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Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving
notice (specifying the Loans to be prepaid in whole or in part, the principal
amount thereof to be prepaid and the date of prepayment) to the Lender, by
telephone, telex, telecopy or in writing not later than 12:00 noon, New York
time, on the fourth Business Day preceding the proposed date of prepayment (or
such later time or date as the Lender may in its sole discretion permit). (If
any such prepayment notice is made otherwise than in writing, Borrower shall
promptly confirm such notice in writing.) Each such prepayment shall be at the
aggregate principal amount of the principal being prepaid, together with accrued
interest on the principal being prepaid to the date of prepayment and the
amounts required by Section 4.3. Subject to the terms and conditions of this
Agreement, prepaid Loans may be reborrowed.
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate. Each Loan shall bear interest from the date made
until the date repaid, payable in arrears, with respect to Interest Periods of
three months or less, on the last day of such Interest Period, and with respect
to Interest Periods longer than three months, on the day which is three months
after the commencement of such Interest Period and on the last day of such
Interest Period, at a rate per annum equal to the greater of (i) the sum of (x)
2% and (y) the Prime Rate for the applicable Interest Period and (ii) 12%. With
respect to each Loan outstanding for one year or longer, such 12% rate shall
increase to 12.48%, 12.98%, 13.50% and 14.04% as of the anniversary of the
making of such Loan, for the second, third, fourth and fifth years that such
Loan is outstanding, respectively. Notwithstanding the foregoing, if the amount
of interest to be paid by the Borrower to the Lender exceeds the amount of
EBITDA of the Borrower for the immediately preceding calendar quarter (ending
the last day of September, December, March, or June), the Borrower shall not be
obligated to repay the amount of interest in excess of EBITDA of the Borrower
for such period. Any such amount of unpaid interest shall be added to principal
and shall accrue interests thereon. Payments under the Notes shall be applied
first to any fees, costs or expenses due under the Notes or hereunder, then to
interest, and then to principal. Notwithstanding any other provision of this
Agreement, all outstanding principal and interest of the Loan and all other
amounts payable hereunder, if not sooner paid, shall be due and payable on the
Commitment Termination Date.
Section 3.2 Interest on Overdue Amounts. All overdue amounts (including
principal, interest and fees) hereunder, and, during the continuance of any
Event of Default that shall have occurred, each Loan, shall bear interest,
payable on demand, at a rate per annum equal to the greater of (i) the sum of
(x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With
respect to each Loan outstanding for one year or longer, such 13% rate shall
increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the
making of such Loan for the second, third, fourth and fifth years that such Loan
is outstanding, respectively.
Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall
require the Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 11.1 is intended
to limit the rate of interest payable for the
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account of the Lender to the maximum rate permitted by the laws of the State of
New York (or any other applicable law) if a higher rate is permitted with
respect to the Lender by supervening provisions of U.S. Federal law.
(b) If the amount of interest payable for the account of the Lender
on any interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to this Article III, would exceed the
maximum amount permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of the Lender
in respect of any interest computation period is reduced pursuant to Section
3.3(b) and the amount of interest payable for its account in respect of any
subsequent interest computation period would be less than the maximum amount
permitted by law to be charged by the Lender, then the amount of interest
payable for its account in respect of such subsequent interest computation
period shall be automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of the Lender has been increased pursuant to this Section 3.3(c)
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to Section 3.3(b).
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments.
(a) All payments by the Borrower hereunder shall be made without
setoff or counterclaim to the Lender, for its account, in dollars and in
immediately available funds to the account of the Lender theretofore designated
in writing to the Borrower not later than 12:00 noon, New York time, on the date
when due or, in the case of payments pursuant to Sections 4.3 and 4. 4 or
payments otherwise specified as payable upon demand, forthwith upon written
demand therefor.
(b) Whenever any payment from the Borrower shall be due on a day
that is not a Business Day, the date of payment thereof shall be extended to the
next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
Section 4.2 Compensation for Losses. 1. If (i) the Borrower prepays
Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans (or
portions thereof) shall become or be declared to be due prior to the scheduled
maturity thereof, then the Borrower shall pay to the Lender an amount that will
compensate the Lender for any loss (other than lost profit) or premium or
penalty incurred by the Lender as a result of such prepayment, declaration or
revocation in respect of funds obtained for the purpose of making or maintaining
the Lender's Loans, or any portion thereof. Such compensation shall include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so paid or prepaid, or
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not borrowed, for the period from the date of such payment or prepayment or
failure to borrow to the last day of such Interest Period (or, in the case of a
failure to borrow, the Interest Period that would have commenced on the expected
Borrowing Date) in each case at the applicable rate of interest for such Loan
over (ii) the amount of interest (as reasonably determined by the Lender) that
would have accrued on such amount were it on deposit for a comparable period
with leading banks in the London interbank market.
(b) If requested by the Borrower, in connection with a payment due
pursuant to this Section 4.2, the Lender shall provide to the Borrower a
certificate setting forth in reasonable detail the amount required to be paid by
the Borrower to the Lender and the computations made by the Lender to determine
such amount. In the absence of manifest error, such certificate shall be
conclusive as to the amount required to be paid.
Section 4.3 Withholding and Additional Costs.
(a) Withholding. All payments under this Agreement (including
payments of principal and interest) shall be payable to the Lender free and
clear of any and all present and future taxes, levies, imposts, duties,
deductions, withholdings, fees, liabilities and similar charges (collectively,
"Taxes"). If any Taxes are required to be withheld or deducted from any amount
payable under this Agreement, then the amount payable under this Agreement shall
be increased to the amount which, after deduction from such increased amount of
all Taxes required to be withheld or deducted therefrom, will yield to the
Lender the amount stated to be payable under this Agreement. The Borrower shall
also hold the Lender harmless and indemnify it for any stamp or other taxes with
respect to the preparation, execution, delivery, recording, performance or
enforcement of this Agreement (all of which shall be included within "Taxes").
If any of the Taxes specified in this Section 4.3(a) are paid by the Lender, the
Borrower shall, upon demand of the Lender, promptly reimburse the Lender for
such payments, together with any interest, penalties and expenses incurred in
connection therewith. The Borrower shall deliver to the Lender certificates or
other valid vouchers for all Taxes or other charges deducted from or paid with
respect to payments made by the Borrower hereunder.
(b) Additional Costs. Subject to Section 4.3(c), and without
duplication of any amounts payable described in Section 4.2 or 4.3(a), if after
the date hereof any change in any law or regulation or in the interpretation
thereof by any court or administrative or Governmental Authority charged with
the administration thereof or the enactment of any law or regulation shall
either (1) impose, modify or deem applicable any reserve, special deposit or
similar requirement against the Lender's Commitment or Loans or (2) impose on
the Lender any other condition regarding this Agreement, its Commitment or the
Loans and the result of any event referred to in clause (1) or (2) shall be to
increase the cost to the Lender of maintaining its Commitment or any Loans made
by the Lender (which increase in cost shall be calculated in accordance with the
Lender's reasonable averaging and attribution methods) by an amount which the
Lender deems to be material, then, upon demand by the Lender, the Borrower shall
pay to the Lender an amount equal to such increase in cost.
(c) Certificate, Etc. If requested by the Borrower, in connection
with any demand for payment pursuant to this Section 4.3, the Lender shall
provide to the Borrower a certificate
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setting forth in reasonable detail the basis for such demand, the amount
required to be paid by the Borrower to the Lender, the computations made by the
Lender to determine such amount and satisfaction of the conditions set forth in
the next sentence. Anything to the contrary herein notwithstanding, the Lender
shall not have the right to demand any payment or compensation under this
Section 4.3 (i) with respect to any period more than 180 days prior to the date
it has made a demand pursuant to this Section 4.3, and (ii) to the extent that
the Lender determines in good faith that the interest rate on the relevant Loans
appropriately accounts for any increased cost or reduced rate of return. In the
absence of manifest error, the certificate referred to above shall be conclusive
as to the amount required to be paid.
Section 4.4 Expenses; Indemnity. 1. The Borrower agrees: (i) to pay
or reimburse the Lender for all reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any amendment,
supplement or modification to, this Agreement and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of Brown & Wood LLP, counsel to the Lender; and (ii) to
pay or reimburse the Lender for all reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Lender. The Borrower also
agrees to indemnify the Lender against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Agreement.
(b) The Borrower agrees to indemnify the Lender and its directors,
officers, partners, employees, agents and Affiliates (for purposes of this
paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all claims, liabilities, damages, losses, costs, charges and
expenses (including fees and expenses of counsel) incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated by this Agreement, the performance by the parties
thereto of their respective obligations under this Agreement or the consummation
of the transactions and the other transactions contemplated by this Agreement,
(ii) the use of the proceeds of the Loans or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) All amounts due under this Section 4.4 shall be payable in
immediately available funds upon written demand therefor.
Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4
shall remain operative and in full force and effect regardless of the expiration
of the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the reduction or termination of the
Commitment, the invalidity or unenforceability of any term or provision of this
Agreement, or any investigation made by or on behalf of the Lender.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties. In order to induce the
Lender to enter into this Agreement and to make Loans and the other financial
accommodations to the Borrower and to induce the Lender to obtain Letters of
Credit on its behalf as described herein, the Borrower represents and warrants
to the Lender as follows:
(a) Good Standing and Power. The Borrower and each Subsidiary is a
limited partnership or corporation, duly organized and validly existing
in good standing under the laws of the jurisdiction of its
organization; each has the power to own its property and to carry on
its business as now being conducted; and each is duly qualified to do
business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary,
except where the failure to be so qualified, or to be in good standing,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(b) Authority. The Borrower has full power and authority to execute
and deliver, and to incur and perform its obligations under, this
Agreement, which has been duly authorized by all proper and necessary
action. No consent or approval of limited partners is required as a
condition to the validity or performance of, or the exercise by the
Lender of any of its rights or remedies under, this Agreement.
(c) Authorizations. All authorizations, consents, approvals,
registrations, notices, exemptions and licenses with or from any
Governmental Authority or other Person necessary for the execution,
delivery and performance by the Borrower of, and the incurrence and
performance of each of its obligations under, this Agreement, and the
exercise by the Lender of its remedies under this Agreement have been
effected or obtained and are in full force and effect.
(d) Binding Obligation. This Agreement constitutes the valid and
legally binding obligation of the Borrower enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(e) Litigation. There are no proceedings or investigations now
pending or, to the knowledge of the Borrower, threatened before any
court or arbitrator or before or by any Governmental Authority which,
individually or in the aggregate, if determined adversely to the
interests of the Borrower or any Subsidiary, could reasonably be
expected to have a Material Adverse Effect.
(f) No Conflicts. There is no statute, regulation, rule, order or
judgment, and no provision of any agreement or instrument binding upon
the Borrower or any
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Subsidiary, or affecting their properties, and no provision of the
certificate of limited partnership, certificate of incorporation,
agreement of limited partnership or by-laws (or similar constitutive
instruments) of the Borrower or any Subsidiary, that would prohibit,
conflict with or in any way impair the execution or delivery of, or
the incurrence or performance of any obligations of the Borrower
under, this Agreement, or result in or require the creation or
imposition of any Lien on property of the Borrower or any Subsidiary
as a consequence of the execution, delivery and performance of this
Agreement.
(g) Taxes. The Borrower and the Subsidiaries each has filed or
caused to be filed all tax returns that are required to be filed and
paid all taxes that are required to be shown to be due and payable on
said returns or on any assessment made against it or any of its
property and all other taxes, assessments, fees, liabilities, penalties
or other charges imposed on it or any of its property by any
Governmental Authority, except for any taxes, assessments, fees,
liabilities, penalties or other charges which are being contested in
good faith and (unless the amount thereof is not material to the
Borrower's consolidated financial condition) for which adequate
reserves have been established in accordance with GAAP.
(h) Properties. The Borrower and the Subsidiaries each has good and
marketable title to, or valid leasehold interests in, all of its
respective properties and assets. All such assets and properties are so
owned or held free and clear of all Liens, except Permitted Liens.
(i) Compliance with Laws and Charter Documents. Neither the
Borrower nor any Subsidiary is, or as a result of performing any of its
obligations under this Agreement will be, in violation of (a) any law,
statute, rule, regulation or order of any Governmental Authority
applicable to it or its properties or assets or (b) its certificate of
limited partnership, certificate of incorporation, agreement of limited
partnership, by-laws or any similar document.
(j) No Material Adverse Effect. Since May 15, 1997, there has not
occurred or arisen any event, condition or circumstance that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(k) Disclosure. All information relating to the Borrower or its
Subsidiaries delivered in writing to the Lender in connection with the
negotiation, execution and delivery of this Agreement is true and
complete in all material respects. There is no material fact of which
the Borrower is aware which, individually or in the aggregate, would
reasonably be expected adversely to influence the Lender's credit
analysis relating to the Borrower and its Subsidiaries which has not
been disclosed to the Lender in writing.
Section 5.2 Survival. All representations and warranties made by the
Borrower in this Agreement, and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement, shall be
considered to have been relied upon by the Lender,
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(ii) survive the making of Loans and the issuance of or payment under any Letter
of Credit regardless of any investigation made by, or on behalf of, the Lender
and (iii) continue in full force and effect as long as the Commitment has not
been terminated and, thereafter, so long as any Loan, Letter of Credit fee or
other amount payable under this Agreement remains unpaid.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment and Letters of
Credit. The obligations of the Lender (including its obligators in respect of
Letters of Credit) hereunder are subject to, and the Lender's Commitment shall
not become available until the earliest date (the "Effective Date") on which
each of the following conditions precedent shall have been satisfied or waived
in writing by the Lender:
(a) This Agreement. The Lender shall have received this Agreement
duly executed and delivered by the Borrower.
(b) Certificate of Incorporation and By-Laws. The Lender shall have
received the following:
(i) a copy of the Certificate of Incorporation of the Borrower, as
in effect on the Effective Date, certified by the Secretary of State of
Delaware, and a certificate from such Secretary of State as to the good
standing of the Borrower, in each case as of a date reasonably close to
the Effective Date; and
(ii) a certificate of a Responsible Officer of the Borrower, dated
the Effective Date, and stating that attached thereto is a true and
complete copy of the By-Laws of the Borrower as in effect on such date.
(c) Representations and Warranties. The representations and
warranties contained in Section 5.1 shall be true and correct on the
Effective Date, and the Lender shall have received a certificate,
signed by a Responsible Officer of the Borrower, to that effect.
(d) Other Documents. The Lender shall have received such other
certificates, opinions and other documents as the Lender reasonably may
require.
Section 6.2 Conditions to All Loans and Letters of Credit. The obligations
of the Lender to make each Loan and to obtain Letters of Credit are subject to
the conditions precedent that, on the date of each Loan or Letter of Credit and
after giving effect thereto, each of the following conditions precedent shall
have been satisfied, or waived in writing by the Lender:
(a) Borrowing Request. The Lender shall have received a Borrowing
Request in accordance with the terms of this Agreement.
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(b) No Default. No Default or Event of Default shall have occurred
and be continuing, nor shall any Default or Event of Default occur as a
result of the making of such Loan or obtaining such Letter of Credit.
(c) Debt-to-Equity Ratio. The Lender shall have received from the
Borrower a certificate demonstrating that the ratio of the Borrower's
Adjusted Indebtedness to the Borrower's Net Assets, taking into account
the requested Loan or Letter of Credit and the assets, if any, to be
acquired by the Borrower with the proceeds of such Loan or Letter of
Credit, shall not exceed 4-to-1.
(d) Representations and Warranties; Covenants. The representations
and warranties contained in Section 5. 1 shall have been true and
correct when made and (except to the extent that any representation or
warranty speaks as of a date certain) shall be true and correct on the
Borrowing Date with the same effect as though such representations and
warranties were made on such Borrowing Date; and the Borrower shall
have complied with all of its covenants and agreements under this
Agreement.
(e) REIT Status of Reckson. The borrowing shall not, in the sole
judgment of the Lender, endanger Reckson's status as a REIT.
(f) Certain Loans Subject to Reckson's Approval. In respect of any
Loan or Letter of Credit or Loans or Letters of Credit aggregating $25
million in a single RSVP Platform, Reckson shall have approved the
Lender's making such Loan or obtaining such Letter of Credit in its
sole discretion.
Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the delivery
by the Borrower of a Borrowing Request (unless the Borrower notifies the Lender
in writing to the contrary prior to the Borrowing Date) and (ii) the acceptance
of the proceeds of a Loan or the delivery of the Letter of Credit shall be
deemed to constitute a certification by the Borrower that, as of the Borrowing
Date, each of the conditions precedent contained in Section 6. 2 has been
satisfied with respect to the Loan then being made or the Letter of Credit then
being issued.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will:
(a) Financial Statements; Compliance Certificates. Furnish to the
Lender:
(i) as soon as available, but in no event more than 60 days
following the end of each of the first three quarters of each fiscal
year, copies of the Borrower's Quarterly Report on Form 10-Q being
filed with the SEC, which shall include a consolidated
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balance sheet and consolidated income statement of the Borrower and
the Subsidiaries for such quarter;
(ii) as soon as available, but in no event more than 120 days
following the end of each fiscal year, a copy of the Borrower's Annual
Report on Form 10-K being filed with the SEC, which shall include the
consolidated financial statements of the Borrower and the
Subsidiaries, together with a report thereon by Ernst & Young LLP (or
another firm of independent certified public accountants reasonably
satisfactory to the Lender), for such year;
(iii) within five Business Days of any Responsible Officer of the
Borrower obtaining knowledge of any Default or Event of Default, if
such Default or Event of Default is then continuing, a certificate of
a Responsible Officer of the Borrower stating that such certificate is
a "Notice of Default" and setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto; and
(iv) such additional information, reports or statements,
regarding the business, financial condition or results of operations
of the Borrower and its Subsidiaries, as the Lender from time to time
may reasonably request.
(b) Existence. Except as permitted by Section 7. 2(a), maintain its
existence in good standing and qualify and remain qualified to do business
in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(c) Compliance with Law and Agreements. Comply, and cause each
Subsidiary to comply, with all applicable laws, ordinances, orders, rules,
regulations and requirements of all Governmental Authorities and with all
agreements except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or where the failure to comply
therewith, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(d) Authorizations. Obtain, make and keep in full force and effect all
authorizations from and registrations with Governmental Authorities
required for the validity or enforceability of this Agreement.
(e) Inspection. Permit, and cause each Subsidiary to permit, the
Lender to have one or more of its officers and employees, or any other
Person designated by the Lender, to visit and inspect any of the properties
of the Borrower and the Subsidiaries and to examine the minute books, books
of account and other records of the Borrower and the Subsidiaries, and to
photocopy extracts from such minute books, books of account and other
records, and to discuss its affairs, finances and accounts with its
officers and with the Borrower's independent accountants, during normal
business hours and at such other reasonable times, for the purpose of
monitoring the Borrower's compliance with its obligations under this
Agreement.
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(f) Maintenance of Records. Keep, and cause each Subsidiary to keep, proper
books of record and account in which full, true and correct entries will be made
of all dealings or transactions of or in relation to its business and affairs.
(g) Notice of Defaults and Adverse Developments. Promptly notify the Lender
upon the discovery by any Responsible officer of the occurrence of (i) any
Default or Event of Default; (ii) any event, development or circumstance whereby
the financial statements most recently furnished to the Lender fail in any
material respect to present fairly, in accordance with GAAP, the financial
condition and operating results of the Borrower and the Subsidiaries as of the
date of such financial statements; (iii) any material litigation or proceedings
that are instituted or threatened (to the knowledge of the Borrower) against the
Borrower or any Subsidiary or any of their respective assets; (iv) any event,
development or circumstance which, individually or in the aggregate, could
reasonably be expected to result in an event of default (or, with the giving of
notice or lapse of time or both, an event of default) under any Indebtedness and
the amount thereof; and (v) any other development in the business or affairs of
the Borrower or any Subsidiary if the effect thereof would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
in each case describing the nature thereof and the action the Borrower proposes
to take with respect thereto.
Section 7.2 Negative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will not:
(a) Mergers, Consolidations and Sales of Assets. Wind up, liquidate
or dissolve its affairs or enter into any merger, consolidation or
share exchange, or convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time), whether in one or
a series of transactions, all or any substantial part of its assets, or
permit any Subsidiary so to do, unless such transaction or series of
transactions are expressly approved by the Lender, which approval shall
not be unreasonably withheld.
(b) Liens. Create, incur, assume or suffer to exist any Lien upon
or with respect to any of its property or assets, whether now owned or
hereafter acquired, or assign or otherwise convey any right to receive
income, except Permitted Liens.
(c) Indebtedness. Create, incur, issue, assume, guarantee or suffer
to exist any Indebtedness, except:
(i) Indebtedness to the Lender under this Agreement or under
the RSI Facility Agreement,
(ii) Non-recourse Indebtedness of the Borrower and any
Subsidiary secured by mortgages, encumbrances or liens specifically
permitted by Section 7. 2(b), and
(iii) Indebtedness expressly approved by the Lender in writing,
which approval may be withheld in the Lender's sole discretion.
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(d) Dividends. Declare any dividends on any of its shares of capital stock
unless such dividend or distribution is expressly approved in writing by the
Lender.
(e) Certain Amendments. Amend, modify or waive, or permit to be amended,
modified or waived, any provision of its Certificate of Incorporation unless,
within not less than 5 days prior to such amendment, modification or waiver (or
such later time as the Lender may in its sole discretion permit), the Borrower
shall have given the Lender notice thereof, including all relevant terms and
conditions thereof, and the Lender shall have consented in writing thereto.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default. If one or more of the following events
(each, an "Event of Default") shall occur:
(a) The Borrower shall fail duly to pay any principal of any Loan or Letter
of Credit when due, whether at maturity, by notice of intention to prepay or
otherwise; or
(b) The Borrower shall fail duly to pay any interest, fee or any other
amount payable under this Agreement within two days after the same shall be due;
or
(c) Borrower shall fail duly to observe or perform any term, covenant, or
agreement contained in Section 7. 2; or
(d) The Borrower shall fail duly to observe or perform any other term,
covenant or agreement contained in this Agreement, and such failure shall have
continued unremedied for a period of 30 days; or
(e) Any representation or warranty made or deemed made by the Borrower in
this Agreement, or any statement or representation made in any certificate,
report or opinion delivered by or on behalf of the Borrower in connection with
this Agreement, shall prove to have been false or misleading in any material
respect when so made or deemed made; or
(f) The Borrower shall fail to pay any Indebtedness (other than obligations
here under) in an amount of $100,000 or more when due; or any such Indebtedness
having an aggregate principal amount outstanding of $100,000 or more shall
become or be declared to be due prior to the expressed maturity thereof; or
(g) An involuntary case or other proceeding shall be commenced against the
Borrower seeking liquidation, reorganization or other relief with respect to it
or its debts under any applicable bankruptcy, insolvency, reorganization or
similar law or seeking the appointment of a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of more than 60 days; or an order or
decree approving or ordering any of the foregoing shall be entered and continued
unstayed and in effect; or
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(h) The Borrower shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or similar law or any other
case or proceeding to be adjudicated a bankrupt or insolvent, or any of them
shall consent to the entry of a decree or order for relief in respect of the
Borrower in an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against any of them, or any of them
shall file a petition or answer or consent seeking reorganization or relief
under any applicable law, or any of them shall consent to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Borrower
or any substantial part of its property, or the Borrower shall make an
assignment for the benefit of creditors, or the Borrower shall admit in writing
its inability to pay its debts generally as they become due, or the Borrower
shall take corporate action in furtherance of any such action;
(i) One or more judgments against the Borrower or attachments against its
property, which in the aggregate exceed $100,000, or the operation or result of
which could be to interfere materially and adversely with the conduct of the
business of the Borrower remain unpaid, unstayed on appeal, undischarged,
unbonded, or undismissed for a period of more than 30 days; or
(j) Any court or governmental or regulatory authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which prohibits, enjoins or otherwise
restricts, in a manner that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, any of the transactions
contemplated under this Agreement; or
(k) Any Event of Default shall occur and be continuing under the RSI
Facility Agreement.
then, and at any time during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitment, Credit Obligations and any obligations of the Lender to obtain
Letters of Credit pursuant to this Agreement and (ii) declare any Credit
Obligations then outstanding to be due, whereupon the principal of the Credit
Obligations so declared to be due, together with accrued interest thereon and
any unpaid amounts accrued under this Agreement, shall become forthwith due,
without presentment, demand, protest or any other notice of any kind (all of
which are hereby expressly waived by the Borrower); provided that, in the case
of any Event of Default described in Section 8. 1(g) or (h) occurring with
respect to the Borrower, the Commitment and any obligations of the Lender to
obtain Letters of Credit pursuant to this Agreement shall automatically and
immediately terminate and the principal of all Loans then outstanding, together
with accrued interest thereon and any unpaid amounts accrued under this
Agreement, shall automatically and immediately become due without presentment,
demand, protest or any other notice of any kind (all of which are hereby
expressly waived by the Borrower).
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ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans and Letters of Credit. 1. The Lender shall
maintain accounts evidencing the indebtedness of the Borrower to the Lender
resulting from each Loan made by the Lender and each Letter of Credit issued for
the benefit of the Borrower from time to time, including the amounts of
principal and interest payable and paid to the Lender in respect of Loans or
Letters of Credit.
(b) The Lender's written records described above shall be available for
inspection during ordinary business hours by the Borrower from time to time upon
reasonable prior notice to the Lender.
(c) The entries made in the Lender's written or electronic records and the
foregoing accounts shall be prima facie evidence of the existence and amounts of
the indebtedness of the Borrower therein recorded; provided, however, that the
failure of the Lender to maintain any such account or such records, as
applicable, or any error therein, shall not in any manner affect the validity or
enforceability of any obligation of the Borrower to repay any Loan actually made
by the Lender in accordance with the terms of this Agreement.
ARTICLE X
LETTERS OF CREDIT
Section 10.1 Letters of Credit. Until the Commitment Termination Date and
subject to the terms and conditions set forth in this Agreement, the Lender
hereby agrees to obtain from an Issuing Bank for the account of the Borrower one
or more Letters of Credit, subject to the following provisions:
(a) Types and Amounts. The Lender shall not have any obligation to obtain,
or cause the amendment or extension of any Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to the
Issuing Bank, after giving effect to the issuance, amendment or extension
of the Letter of Credit requested hereunder, shall exceed any limit
imposed by law or regulation upon the Issuing Bank;
(ii) if, immediately after giving effect to the issuance, amendment or
extension of such Letter of Credit, (1) the Letter of Credit Obligations
at such time would exceed [$10,000,000] or (2) the Credit Obligations at
such time would exceed the Commitment at such time, or (3) one or more of
the conditions precedent contained in Sections 6.1 or 6.2, as applicable,
would not on such date be satisfied, unless such conditions are thereafter
satisfied and written notice of such satisfaction is given to the Lender
(and the Lender shall not otherwise be required to determine that, or take
notice
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whether, the conditions precedent set forth in Sections 6.1 or 6.2, as
applicable, have been satisfied);
(iii) which has an expiration date later than the earlier of
(A) the date one (1) year after the date of issuance (without regard to
any automatic renewal provisions thereof) or (B) the Business Day next
preceding the scheduled Commitment Termination Date; or
(iv) which is in a currency other than dollars.
(b) Conditions. In addition to being subject to the satisfaction of
the conditions precedent contained in Sections 6.1 and 6.2, as
applicable, the obligation of the Lender to obtain from an Issuing
Bank, or to cause the amendment or extension of any Letter of Credit is
subject to the satisfaction in full of the following conditions:
(i) if the Lender so requests, the Borrower shall have executed
and delivered to the Lender a Letter of Credit Reimbursement Agreement
and such other documents and materials as may be required pursuant to
the terms thereof; and
(ii) the terms of the proposed Letter of Credit shall be
satisfactory to the Lender in its sole discretion.
(c) Issuance of Letters of Credit. 1. The Borrower shall give the
Lender written notice that it requires the issuance of a Letter of Credit
not later than 11:00 a.m. (New York time) on the third (3rd) Business Day
preceding the requested date for issuance thereof under this Agreement.
Such notice shall be irrevocable unless and until such request is denied by
the Lender and shall specify (A) that the requested Letter of Credit is
either a Commercial Letter of Credit or a Standby Letter of Credit, (B) the
stated amount of the Letter of Credit requested, (C) the effective date
(which shall be a Business Day) of issuance of such Letter of Credit, (D)
the date on which such Letter of Credit is to expire (which shall be a
Business Day and no later than the Business Day immediately preceding the
scheduled Commitment Termination Date), (E) that such Letter of Credit is
to be issued for the benefit of the Borrower, (F) other relevant terms of
such Letter of Credit, (G) the Available Commitment at such time and (H)
the amount of the then outstanding Letter of Credit Obligations.
(ii) The Lender shall give the Borrower written notice, or
telephonic notice confirmed promptly thereafter in writing, of the
issuance, amendment or extension of a Letter of Credit.
(d) Reimbursement Obligations; Duties of the Lender.
(i) Notwithstanding any provisions to the contrary in any
Letter of Credit Reimbursement Agreement:
(A) the Borrower shall reimburse the Lender for amounts
drawn under its Letter of Credit, in dollars, no later than the
date (the "Reimbursement Date") which is the earlier of (I) the
time specified in the applicable Letter of Credit
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Reimbursement Agreement and (II) three (3) Business Days after
the Borrower receives written notice from the Lender that payment
has been made under such Letter of Credit by the Issuing Bank;
and
(B) all Reimbursement Obligations with respect to any
Letter of Credit shall bear interest at the Prime Rate in
accordance with Section 3.1 from the date of the relevant drawing
under such Letter of Credit until the Reimbursement Date.
(ii) The Lender shall give the Borrower written notice, or
telephonic notice confirmed promptly thereafter in writing, of all
drawings under a Letter of Credit and the payment (or the failure to
pay when due) by the Borrower, as the case may be, on account of a
Reimbursement Obligation.
(iii) In determining whether to pay under any Letter of Credit,
it is understood that the Issuing Bank shall have no obligation other
than to confirm that any documents required to be delivered under a
respective Letter of Credit appear to have been delivered and that they
appear on their face to comply with the requirements of such Letter of
Credit.
(e) Payment of Reimbursement Obligations. (i) The Borrower unconditionally
agrees to pay to the Lender, in dollars, the amount of all Reimbursement
Obligations, interest and other amounts payable to the Lender under or in
connection with the Letters of Credit when such amounts are due and payable,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against the Lender or any other Person.
(f) Letter of Credit Fee Charges. In connection with each Letter of Credit,
the Borrower hereby covenants to pay to the Lender the following Letter of
Credit Fee payable quarterly in arrears (on the first Banking Day of each
calendar quarter following the issuance of each Letter of Credit): a fee, for
the Lender's own account, computed daily on the amount of the Letter of Credit
issued and outstanding at a rate per annum equal to the Lender's cost in
obtaining the Letter of Credit plus a spread equal to the difference between the
interest rate payable on Loans hereunder less the Lender's cost of borrowing
under the Lender's credit facility (or, in the absence of a credit facility, the
Prime Rate as announced by Citibank N.A.). Notwithstanding the foregoing, if
amounts payable pursuant to this Section 10.1(f) together with any interest
payable pursuant to Section 3.1, exceed the amount of EBITDA of the Borrower for
the immediately preceding calendar quarter (ending the last day of September,
December, March or June), the Borrower shall not be obligated to repay the
amounts payable under this Section 10.1(f) which when added to the interest
payable pursuant to Section 3.1 exceeds EBITDA of the Borrower for such period.
Any such amount in excess of EBITDA shall be added to principal hereunder and
shall accrue interest thereon in accordance with Section 3.1.
(g) Letter of Credit Reporting Requirements. The Lender shall, upon the
request of the Borrower, provide to the Borrower separate schedules for
Commercial Letters of Credit and Standby Letters of Credit issued as Letters of
Credit, in form and substance reasonably satisfactory to the Borrower, setting
forth the aggregate Letter of Credit Obligations outstanding
22
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to it at the end of each month and any information requested by the Borrower
relating to the date of issue, account party, amount, expiration date and
reference number of each Letter of Credit issued as contemplated hereunder.
(h) Indemnification; Exoneration. 1. In addition to all other amounts
payable to the Lender, the Borrower hereby agrees to defend, indemnify, and save
the Lender harmless from and against any and all claims, demands, liabilities,
penalties, damages, losses (other than loss of profits), reasonable costs,
reasonable charges and reasonable expenses (including reasonable attorneys fees
but excluding taxes) which the Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit
other than as a result of the gross negligence or willful misconduct of the
Lender, as determined by a court of competent jurisdiction, or (B) the failure
of the Issuing Bank to honor a drawing under such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority.
(ii) As between the Borrower on the one hand and the Lender on the
other hand, the Borrower assumes all risks of the acts and omissions of, or
misuse of Letters of Credit by, the respective beneficiary of the Letters
of Credit. In furtherance and not in limitation of the foregoing, subject
to the provisions of the Letter of Credit Reimbursement Agreements, the
Lender shall not be responsible for: (A) the form, validity, legality,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance
of the Letters of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (B)
the validity, legality or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; (C) failure of
the Borrower to duly comply with conditions required in order to draw upon
such Letter of Credit; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex
or otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the Borrower of the proceeds of any drawing Letter of
Credit; and (H) any consequences arising from causes beyond the control of
the Lender, other than of the foregoing resulting from the gross negligence
or willful misconduct of the Lender.
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
23
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Section 11.2 Waiver of Jury. THE BORROWER AND THE LENDER EACH HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE RELATIONSHIPS
ESTABLISHED HEREUNDER.
Section 11.3 Jurisdiction and Venue; Service of Process. 1. The Borrower
and the Lender each hereby irrevocably submits to the non-exclusive jurisdiction
of any state or federal court in the Borough of Manhattan, The City of New York
for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Agreement and to the laying of venue in the Borough of
Manhattan The City of New York. The Borrower and the Lender each hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
(b) Borrower agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 11.7 or at such other address of
which the Lender shall have been notified pursuant thereto. The Borrower further
agrees that nothing herein shall affect the right to effect service of process
in any other manner permitted by law or shall limit the right to sue in any
other jurisdiction; and
(c) The Borrower waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential damages.
Section 11.4 Confidentiality. The Lender agrees (on behalf of itself and
each of its Affiliates, partners, officers, employees and representatives) to
use its best efforts to keep confidential, in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with commercially reasonable business practices, any Confidential
Information; provided that nothing herein shall limit the disclosure of any such
information (i) to the extent required by statute, rule, regulation or judicial
process, (ii) to counsel for the Lender, (iii) to auditors or accountants, (iv)
by the Lender to an Affiliate thereof, or (v) in connection with any litigation
relating to enforcement of this Agreement; provided further, that, unless
specifically prohibited by applicable law or court order, the Lender shall,
prior to disclosure thereof, notify the Borrower of any request for disclosure
of any Confidential Information (x) by any Governmental Authority or
representative thereof or (y) pursuant to legal process.
Section 11.5 Amendments and Waivers. 1. Any provision of this Agreement may
be amended, modified, supplemented or waived, but only by a written amendment or
supplement, or written waiver, signed by the Borrower and the Lender.
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(b) Except to the extent expressly set forth therein, any waiver shall be
effective only in the specific instance and for the specific purpose for which
such waiver is given.
Section 11.6 Cumulative Rights; No Waiver. Each and every right granted to
the Lender hereunder or under any other document delivered in connection
herewith, or allowed it by law or equity, shall be cumulative and not exclusive
and may be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by the Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right.
Section 11.7 Notices. Any communication, demand or notice to be given
hereunder will be duly given when delivered in writing or by telecopy to a party
at its address as indicated below or such other address as such party may
specify in a notice to the other party hereto. A communication, demand or notice
given pursuant to this Agreement shall be addressed:
If to the Borrower, to:
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 719-7400
Attention: Chief Financial Officer
If to the Lender, to:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 694-6900
Attention: Chief Financial Officer
This Section 11.7 shall not apply to notices referred to in Article II of
this Agreement, except to the extent set forth therein.
Section 11.8 Certain Acknowledgments. The Borrower hereby confirms and
acknowledges that (a) the Lender does not have any fiduciary or similar
relationship to the Borrower by virtue of this Agreement and the transactions
contemplated herein and that the relationship established by this Agreement
between the Lender and the Borrower is solely that of creditor and debtor and
(b) no joint venture exists between the Borrower and the Lender by virtue of
this Agreement and the transactions contemplated herein.
Section 11.9 Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity,
26
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legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
Section 11.10 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower may not assign any of its
rights hereunder without the prior written consent of the Lender, and any
purported assignment by the Borrower without such consent shall be void.
Section 1l.11 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all the counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
By: ________________________________
Name:
Title:
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
By: Reckson Associates Realty Corp.,
its general partner
By: ________________________________
Name:
Title:
27
Exhibit 10.2(b)
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
August 4, 1999
between
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
and
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
relating to the operations of
RECKSON SERVICE INDUSTRIES, INC.
<PAGE>
Table of Contents
Page
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.....................................................1
(a) Terms Generally.........................................1
(b) Other Terms.............................................1
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans............................................7
Section 2.2 Borrowing Procedure.............................................7
Section 2.3 Termination and Reduction of Commitment.........................7
Section 2.4 Repayment.......................................................8
Section 2.5 Optional Prepayment.............................................8
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate...................................................8
Section 3.2 Interest on Overdue Amounts.....................................8
Section 3.3 Maximum Interest Rate...........................................9
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments.....................................9
Section 4.2 Compensation for Losses.........................................9
Section 4.3 Withholding and Additional Costs...............................10
(a) Withholding............................................10
(b) Additional Costs.......................................10
(c) Certificate, Etc.......................................11
Section 4.4 Expenses; Indemnity............................................11
Section 4.5 Survival.......................................................11
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties.................................12
(a) Good Standing and Power................................12
(b) Authority..............................................12
(c) Authorizations.........................................12
(d) Binding Obligation.....................................12
(e) Litigation.............................................12
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(f) No Conflicts...........................................13
(g) Taxes..................................................13
(h) Properties.............................................13
(i) Compliance with Laws and Charter Documents.............13
(j) No Material Adverse Effect.............................13
(k) Disclosure.............................................13
Section 5.2 Survival.......................................................14
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment and
Letters of Credit..............................................14
(a) This Agreement.........................................14
(b) Certificate of Incorporation and By-Laws...............14
(c) Representations and Warranties.........................14
(d) Other Documents........................................14
Section 6.2 Conditions to All Loans and Letters of Credit..................14
(a) Borrowing Request......................................15
(b) No Default.............................................15
(c) Debt-to-Equity Ratio...................................15
(d) Representations and Warranties; Covenants..............15
(e) REIT Status of Reckson.................................15
(f) Certain Loans Subject to Reckson's Approval............15
Section 6.3 Satisfaction of Conditions Precedent...........................15
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants..........................................15
(a) Financial Statements; Compliance Certificates..........16
(b) Existence..............................................16
(c) Compliance with Law and Agreements.....................16
(d) Authorizations.........................................16
(e) Inspection.............................................16
(f) Maintenance of Records.................................17
(g) Notice of Defaults and Adverse Developments............17
Section 7.2 Negative Covenants.............................................17
(a) Mergers, Consolidations and Sales of Assets............17
(b) Liens..................................................17
(c) Indebtedness...........................................17
(d) Dividends..............................................18
(e) Certain Amendments.....................................18
ii
<PAGE>
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default..............................................18
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans and Letters of Credit........................20
ARTICLE X.
LETTERS OF CREDIT
Section 10.1 Letters of Credit..............................................20
(a) Types and Amounts......................................20
(b) Conditions.............................................21
(c) Issuance of Letters of Credit..........................21
(d) Reimbursement Obligations; Duties of the Lender........21
(e) Payment of Reimbursement Obligations...................22
(f) Letter of Credit Fee Charges...........................22
(g) Letter of Credit Reporting Requirements................23
(h) Indemnification; Exoneration...........................23
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Applicable Law.................................................24
Section 11.2 Waiver of Jury.................................................24
Section 11.3 Jurisdiction and Venue; Service of Process.....................24
Section 11.4 Confidentiality................................................24
Section 11.5 Amendments and Waivers.........................................25
Section 11.6 Cumulative Rights; No Waiver...................................25
Section 11.7 Notices........................................................25
Section 11.8 Certain Acknowledgments........................................26
Section 11.9 Separability...................................................26
Section 11.10 Parties in Interest............................................26
Section 11.11 Execution in Counterparts......................................26
iii
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 4, 1999,
between Reckson Service Industries, Inc., a Delaware corporation, and Reckson
Operating Partnership, L.P., a Delaware limited partnership, relating to the
operations of Reckson Service Industries, Inc.
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to commit to lend to
the Borrower up to $100 million on a revolving basis for acquisitions of assets
and general corporate purposes;
WHEREAS, the Lender is willing to make revolving credit loans on the
terms and conditions provided herein; and
WHEREAS, the parties hereto desire to amend and restate their credit
agreement dated June 15, 1998 to allow for the issuance of one or more Letters
of Credit in favor of the Lender for the benefit of the Borrower;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.
(a) Terms Generally. The definitions ascribed to terms in this Agreement
apply equally to both the singular and plural forms of such terms. Whenever the
context may require, any pronoun shall be deemed to include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be interpreted as if followed by the phrase "without
limitation". The phrase "individually or in the aggregate" shall be deemed
general in scope and not to refer to any specific Section or clause of this
Agreement. All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. The
table of contents, headings and captions herein shall not be given effect in
interpreting or construing the provisions of this Agreement. Except as otherwise
expressly provided herein, all references to "dollars" or "$" shall be deemed
references to the lawful money of the United States of America.
(b) Other Terms. The following terms have the meanings ascribed to them
below or in the Sections of this Agreement indicated below:
"Adjusted Indebtedness" means, with respect to the Borrower, the
Borrower's Indebtedness determined without regard for any amounts described
in clause (viii) of the definition of "Indebtedness."
<PAGE>
"Affiliate" means, with respect to any Person, any other Person that
controls, is controlled by, or is under common control with, such Person.
"Agreement" means this credit agreement, as it may be amended,
modified or supplemented from time to time.
"Available Commitment" means, on any day, an amount equal to (i) the
Commitment on such day minus (ii) the aggregate outstanding principal
amount of Loans on such day.
"Borrower" means Reckson Service Industries, Inc., a Delaware
corporation.
"Borrowing Date" means, with respect to any Loan or Letter of Credit,
the Business Day set forth in the relevant Borrowing Request as the date
upon which the Borrower desires to borrow such Loan or Letter of Credit;
"Borrowing Request" means a request by the Borrower for a Loan or a
Letter of Credit, which shall specify (i) the requested Borrowing Date and
(ii) the aggregate amount of such Loan or Letter of Credit.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized by law
to close.
"Capital Lease Obligations" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under any lease with
respect to any property (whether real, personal or mixed) acquired or
leased by such Person that is required to be accounted for as a liability
on a consolidated balance sheet of such Person.
"Commercial Letter of Credit" means any documentary letter of credit
issued by an Issuing Bank pursuant to Section 10.1 for the account of the
Lender on behalf of the Borrower.
"Commercial Services" means businesses that provide services for
occupants of office, industrial and other property types that Reckson may
not be permitted to provide under Federal tax laws applicable to a real
estate investment trust or that have not traditionally been provided by
Reckson.
"Commitment" means $100 million, as such amount may be reduced from
time to time pursuant to Section 2.3.
"Commitment Termination Date" means the earlier to occur of (i) June
15, 2003 and (ii) the date, if any, on which the Commitment is terminated.
"Confidential Information" means information delivered to the Lender
by or on behalf of the Borrower in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is
confidential or proprietary in nature at the time it is so delivered or
information obtained by the Lender in the course of its review of the books
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<PAGE>
or records of the Borrower contemplated herein; provided that such term
shall not include information W that was publicly known or otherwise known
to the Lender prior to the time of such disclosure, (ii) that subsequently
becomes publicly known through no act or omission by the Lender or any
Person acting on the Lender's behalf, (iii) that otherwise becomes known to
the Lender other than through disclosure by the Borrower or (iv) that
constitutes financial information delivered to the Lender that is otherwise
publicly available.
"Credit Obligations" means, at any particular time, the sum of (i) the
outstanding principal amount of the Loans at such time, plus (ii) the
Letter of Credit Obligations at such time.
"Default" means any event or circumstance which, with the giving of
notice or the passage of time, or both, would be an Event of Default.
"EBITDA" means for any fiscal period, the Consolidated Net Income or
Consolidated Net Loss, as the case may be, for such fiscal period, after
restoring thereto amounts deducted for (a) extraordinary losses (or
deducting therefrom any amounts included therein on account of
extraordinary gains) and special charges, (b) depreciation and amortization
(including write-offs or write-downs) and special charges, (c) the amount
of interest expense of the Borrower and its Subsidiaries, if any,
determined on a consolidated basis in accordance with GAAP, for such period
on the aggregate principal amount of their consolidated indebtedness, (d)
the amount of tax expense of the Borrower and its Subsidiaries, if any,
determined on a consolidated basis in accordance with GAAP, for such period
and (e) the aggregate amount of fixed and contingent rentals payable by the
Borrower and its Subsidiaries, if any, determined on a consolidated basis
in accordance with GAAP, for such period with respect to leases of real and
personal property.
"Effective Date" has the meaning assigned to such term in Section 6.1.
"Event of Default" has the meaning assigned to such term in Section
8.1.
"GAAP" means generally accepted accounting principles, as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entities as may be approved by a significant
segment of the accounting profession of the United States of America.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing
3
<PAGE>
any Indebtedness of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to purchase (or to advance or supply funds
for the purchase of) any security for the payment of such Indebtedness,
(ii) to purchase property, securities or services for the purpose of
assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or the
financial condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness. The term "Guaranteed" shall have
the corresponding meaning.
"Indebtedness" means, with respect to any Person, (i) all obligations
of such Person for borrowed money or for the deferred purchase price of
property or services (including all obligations, contingent or otherwise,
of such Person in connection with letters of credit, bankers' acceptances,
interest rate swap agreements, interest rate cap agreements or other
similar instruments, including currency swaps) other than indebtedness to
trade creditors and service providers incurred in the ordinary course of
business and payable on usual and customary terms, (ii) all obligations of
such Person evidenced by bonds, notes, debentures or other similar
instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the remedies available to the
seller or lender under such agreement are limited to repossession or sale
of such property), (iv) all Capital Lease Obligations of such Person, (v)
all obligations of the types described in clauses (i), (ii), (iii) or (iv)
above secured by (or for which the obligee has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in any property
(including accounts, contract rights and other intangibles) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vi) all preferred stock issued by such
Person which is redeemable, prior to full satisfaction of the Borrower's
obligations under this Agreement (including repayment in full of the Loans
and all interest accrued thereon), other than at the option of such Person,
valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (vii) all Indebtedness of
others Guaranteed by such Person and (viii) all Indebtedness of any
partnership of which such Person is a general partner.
"Indemnitee" has the meaning assigned to such term in Section 4.4(b).
"Intercompany Agreement" means the intercompany agreement, dated as of
the date hereof, by and between the Borrower and the Lender.
"Interest Period" means, with respect to any Loan, each three-month
period commencing on the date such Loan is made or at the end of the
preceding Interest Period, as the case may be; provided, however, that:
(i) any Interest Period that would otherwise end on a day that is not
a Business Day shall be extended to the next Business Day, unless such
Business Day falls
4
<PAGE>
in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last Business Day of a calendar
month; and
(iii) any Interest Period that would otherwise end after the
Commitment Termination Date then in effect shall end on such Commitment
Termination Date.
"Issuing Bank" means The Chase Manhattan Bank or such other banking
institution selected by the parties hereto to issue a Letter of Credit
pursuant to Section 10.1(c)(ii) hereof.
"Lender" means Reckson Operating Partnership, L.P., a Delaware limited
partnership.
"Letter of Credit" means any Commercial Letter of Credit or Standby
Letter of Credit.
"Letter of Credit Fee" has the meaning set forth in Section 10.1(f).
"Letter of Credit Obligations" means, at any particular time, the sum
of (i) all outstanding Reimbursement Obligations, (ii) the aggregate
undrawn face amount of all outstanding Letters of Credit, and (iii) the
aggregate face amount of all Letters of Credit requested by the Lender but
not yet issued.
"Letter of Credit Reimbursement Agreement" means, with respect to a
Letter of Credit, such form of application therefor and form of
reimbursement agreement therefor (whether in a single or several documents,
taken together) as an Issuing Bank may employ in the ordinary course of
business for its own account, with such modifications thereto as may be
agreed upon by such Issuing Bank and the Lender and as are not materially
adverse (in the judgment of such Issuing Bank) to the interests of the
Lender; provided, however, in the event of any conflict between the terms
of any Letter of Credit Reimbursement Agreement and this Agreement, the
terms of this Agreement shall control.
"Lien" means, with respect to any asset of a Person, (i) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or
on such asset, (ii) the interest of a vendor or lessor under any
conditional sale agreement, capital lease or title retention agreement
relating to such asset, and (iii) in the case of securities, any purchase
option, call or similar right of any other Person with respect to such
securities.
"Loans" has the meaning assigned to such term in Section 2.1.
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"Material Adverse Effect" means any material and adverse effect on (i)
the consolidated business, properties, condition (financial or otherwise)
or operations, present or prospective, of the Borrower and its
Subsidiaries, (ii) the ability of the Borrower timely to perform any of its
material obligations, or of the Lender to exercise any remedy, under this
Agreement or (iii) the legality, validity, binding nature or enforceability
of this Agreement.
"Net Assets" means, with respect to the Borrower, the greater of (i)
the sum of the Borrower's paid-in capital and retained earnings or (ii) the
excess of the Value of all of the Borrower's assets of any kind over the
Borrower's Adjusted Indebtedness.
"Permitted Liens" means, collectively, the following: (i) Liens
expressly approved by the Lender, which approval shall not be unreasonably
withheld; (ii) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due or that are being contested in good
faith by appropriate proceedings and for which adequate reserves are being
maintained (in accordance with GAAP); and (iii) Liens existing on the date
hereof.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether
Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Prime Rate" means the prime rate (or if a range is given, the highest
prime rate) listed under "Money Rates" in The Wall Street Journal for such
date or, if The Wall Street Journal is not published on such date, then in
The Wall Street Journal most recently published.
"Reckson" means Reckson Associates Realty Corp., a Maryland
corporation.
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to
amounts drawn under Letters of Credit.
"Responsible Officer" means the chief executive officer, president,
chief financial officer, chief accounting officer, treasurer or any vice
president, senior vice president or executive vice president of the General
Partner.
"RSVP-ROP Facility Agreement" means the credit agreement dated the
date hereof between Borrower and Lender in respect of the operations of
Reckson Strategic Venture Partners, LLC.
"SEC" means the Securities and Exchange Commission (or any successor
Governmental Authority).
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"Standby Letter of Credit" means any Letter of Credit issued by the
Issuing Bank pursuant to Section 10.1 for the account of the Lender, which
is not a Commercial Letter of Credit.
"Subsidiary" means, at any time and with respect to any Person, any
other Person the shares of stock or other ownership interests of which
having ordinary voting power to elect a majority of the board of directors
or with respect to other matters of such Person are at the time owned, or
the management or policies of which is otherwise at the time controlled,
directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by such first Person. Unless otherwise qualified or
the context indicates clearly to the contrary, all references to a
"Subsidiary" or "Subsidiaries" in this Agreement refer to a Subsidiary or
Subsidiaries of the Borrower.
"Taxes" has the meaning assigned to such term in Section 4.3(a).
"Value" means, with respect to any asset owned by the Borrower, the
present value of the net cash flow reasonably projected by the Borrower to
be received with respect to its ownership of such assets, discounted at an
interest rate that the Borrower reasonably determines appropriate given the
risks associated with such asset and such projected net cash flow, but in
no event at an interest rate lower than 2% above the Prime Rate in effect
at the time that the determination of Value is made.
ARTICLE II.
THE REVOLVING CREDIT FACILITY
Section 2.1 Commitment and Loans. Until the Commitment Termination Date,
subject to the terms and conditions of this Agreement, the Lender agrees to make
revolving credit loans (collectively, "Loans") in dollars to the Borrower in an
aggregate principal amount at any one time outstanding, and taking into account
any Letters of Credit issued pursuant to the terms of Article X, not to exceed
the Commitment.
Section 2.2 Borrowing Procedure. In order to borrow a Loan, the Borrower
shall give a Borrowing Request to the Lender, by telephone, telex or telecopy or
in writing, not later than 10:30 A.M., New York time, on the third Business Day
before the Borrowing Date (or such later time or date as the Lender may in its
sole discretion permit). (If any Borrowing Request is made otherwise than in
writing, Borrower shall promptly confirm such Borrowing Request in writing.)
Subject to satisfaction, or waiver by the Lender, of each of the applicable
conditions precedent contained in Article VI, on the Borrowing Date the Lender
shall make available, in immediately available funds, to the Borrower the amount
of the requested Loan.
Section 2.3 Termination and Reduction of Commitment. The Borrower may
terminate the Commitment, or reduce the amount thereof, by giving written notice
to the Lender, not later than 5:00 P.M., New York time, on the fifth Business
Day prior to the date of termination or reduction (or such later time or date as
the Lender may in its sole discretion permit).
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Section 2.4 Repayment. Loans shall be repaid, together with all accrued and
unpaid interest thereon, on the Commitment Termination Date.
Section 2.5 Optional Prepayment. The Borrower may prepay Loans by giving
notice (specifying the Loans to be prepaid in whole or in part, the principal
amount thereof to be prepaid and the date of prepayment) to the Lender, by
telephone, telex, telecopy or in writing not later than 12:00 noon, New York
time, on the fourth Business Day preceding the proposed date of prepayment (or
such later time or date as the Lender may in its sole discretion permit). (If
any such prepayment notice is made otherwise than in writing, Borrower shall
promptly confirm such notice in writing.) Each such prepayment shall be at the
aggregate principal amount of the principal being prepaid, together with accrued
interest on the principal being prepaid to the date of prepayment and the
amounts required by Section 4.3. Subject to the terms and conditions of this
Agreement, prepaid Loans may be reborrowed.
ARTICLE III.
INTEREST AND FEES
Section 3.1 Interest Rate. Each Loan shall bear interest from the date made
until the date repaid, payable in arrears, with respect to Interest Periods of
three months or less, on the last day of such Interest Period, and with respect
to Interest Periods longer than three months, on the day which is three months
after the commencement of such Interest Period and on the last day of such
Interest Period, at a rate per annum equal to the greater of (i) the sum of (x)
2% and (y) the Prime Rate for the applicable Interest Period and (ii) 12%. With
respect to each Loan outstanding for one year or longer, such 12% rate shall
increase to 12.48%, 12.98%, 13.50% and 14.04% as of the anniversary of the
making of such Loan, for the second, third, fourth and fifth years that such
Loan is outstanding, respectively. Notwithstanding the foregoing, if the amount
of interest to be paid by the Borrower to the Lender exceeds the amount of
EBITDA of the Borrower for the immediately preceding calendar quarter (ending
the last day of September, December, March, or June), the Borrower shall not be
obligated to repay the amount of interest in excess of EBITDA of the Borrower
for such period. Any such amount of unpaid interest shall be added to principal
and shall accrue interests thereon. Payments under the Notes shall be applied
first to any fees, costs or expenses due under the Notes or hereunder, then to
interest, and then to principal. Notwithstanding any other provision of this
Agreement, all outstanding principal and interest of the Loan and all other
amounts payable hereunder, if not sooner paid, shall be due and payable on the
Commitment Termination Date.
Section 3.2 Interest on Overdue Amounts. All overdue amounts (including
principal, interest and fees) hereunder, and, during the continuance of any
Event of Default that shall have occurred, each Loan, shall bear interest,
payable on demand, at a rate per annum equal to the greater of (i) the sum of
(x) 3% and (y) Prime Rate for the applicable Interest Period and (ii) 13%. With
respect to each Loan outstanding for one year or longer, such 13% rate shall
increase to 13.48%, 13.98%, 14.50% and 15.04% as of the anniversary of the
making of such Loan for the second, third, fourth and fifth years that such Loan
is outstanding, respectively.
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Section 3.3 Maximum Interest Rate. (a) Nothing in this Agreement shall
require the Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 11.1 is intended
to limit the rate of interest payable for the account of the Lender to the
maximum rate permitted by the laws of the State of New York (or any other
applicable law) if a higher rate is permitted with respect to the Lender by
supervening provisions of U.S. Federal law.
(b) If the amount of interest payable for the account of the Lender on any
interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to this Article III, would exceed the
maximum amount permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of the Lender in
respect of any interest computation period is reduced pursuant to Section 3.3(b)
and the amount of interest payable for its account in respect of any subsequent
interest computation period would be less than the maximum amount permitted by
law to be charged by the Lender, then the amount of interest payable for its
account in respect of such subsequent interest computation period shall be
automatically increased to such maximum permissible amount; provided that at no
time shall the aggregate amount by which interest paid for the account of the
Lender has been increased pursuant to this Section 3.3(c) exceed the aggregate
amount by which interest paid for its account has theretofore been reduced
pursuant to Section 3.3(b).
ARTICLE IV.
DISBURSEMENT AND PAYMENT
Section 4.1 Method and Time of Payments.
(a) All payments by the Borrower hereunder shall be made without setoff or
counterclaim to the Lender, for its account, in dollars and in immediately
available funds to the account of the Lender theretofore designated in writing
to the Borrower not later than 12:00 noon, New York time, on the date when due
or, in the case of payments pursuant to Sections 4.3 and 4. 4 or payments
otherwise specified as payable upon demand, forthwith upon written demand
therefor.
(b) Whenever any payment from the Borrower shall be due on a day that is
not a Business Day, the date of payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
Section 4.2 Compensation for Losses. (a) If (i) the Borrower prepays Loans,
(ii) the Borrower revokes any Borrowing Request or (iii) Loans (or portions
thereof) shall become or be declared to be due prior to the scheduled maturity
thereof, then the Borrower shall pay to the Lender an amount that will
compensate the Lender for any loss (other than lost profit) or premium or
penalty incurred by the Lender as a result of such prepayment, declaration or
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revocation in respect of funds obtained for the purpose of making or maintaining
the Lender's Loans, or any portion thereof. Such compensation shall include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so paid or prepaid, or not borrowed, for the period
from the date of such payment or prepayment or failure to borrow to the last day
of such Interest Period (or, in the case of a failure to borrow, the Interest
Period that would have commenced on the expected Borrowing Date) in each case at
the applicable rate of interest for such Loan over (ii) the amount of interest
(as reasonably determined by the Lender) that would have accrued on such amount
were it on deposit for a comparable period with leading banks in the London
interbank market.
(b) If requested by the Borrower, in connection with a payment due pursuant
to this Section 4.2, the Lender shall provide to the Borrower a certificate
setting forth in reasonable detail the amount required to be paid by the
Borrower to the Lender and the computations made by the Lender to determine such
amount. In the absence of manifest error, such certificate shall be conclusive
as to the amount required to be paid.
Section 4.3 Withholding and Additional Costs.
(a) Withholding. All payments under this Agreement (including payments of
principal and interest) shall be payable to the Lender free and clear of any and
all present and future taxes, levies, imposts, duties, deductions, withholdings,
fees, liabilities and similar charges (collectively, "Taxes"). If any Taxes are
required to be withheld or deducted from any amount payable under this
Agreement, then the amount payable under this Agreement shall be increased to
the amount which, after deduction from such increased amount of all Taxes
required to be withheld or deducted therefrom, will yield to the Lender the
amount stated to be payable under this Agreement. The Borrower shall also hold
the Lender harmless and indemnify it for any stamp or other taxes with respect
to the preparation, execution, delivery, recording, performance or enforcement
of this Agreement (all of which shall be included within "Taxes"). If any of the
Taxes specified in this Section 4.3(a) are paid by the Lender, the Borrower
shall, upon demand of the Lender, promptly reimburse the Lender for such
payments, together with any interest, penalties and expenses incurred in
connection therewith. The Borrower shall deliver to the Lender certificates or
other valid vouchers for all Taxes or other charges deducted from or paid with
respect to payments made by the Borrower hereunder.
(b) Additional Costs. Subject to Section 4.3(c), and without duplication of
any amounts payable described in Section 4.2 or 4.3(a), if after the date hereof
any change in any law or regulation or in the interpretation thereof by any
court or administrative or Governmental Authority charged with the
administration thereof or the enactment of any law or regulation shall either
(1) impose, modify or deem applicable any reserve, special deposit or similar
requirement against the Lender's Commitment or Loans or (2) impose on the Lender
any other condition regarding this Agreement, its Commitment or the Loans and
the result of any event referred to in clause (1) or (2) shall be to increase
the cost to the Lender of maintaining its Commitment or any Loans made by the
Lender (which increase in cost shall be calculated in accordance with the
Lender's reasonable averaging and attribution methods) by an amount which the
Lender deems to be material, then, upon demand by the Lender, the Borrower shall
pay to the Lender an amount equal to such increase in cost.
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(c) Certificate, Etc. If requested by the Borrower, in connection with any
demand for payment pursuant to this Section 4.3, the Lender shall provide to the
Borrower a certificate setting forth in reasonable detail the basis for such
demand, the amount required to be paid by the Borrower to the Lender, the
computations made by the Lender to determine such amount and satisfaction of the
conditions set forth in the next sentence. Anything to the contrary herein
notwithstanding, the Lender shall not have the right to demand any payment or
compensation under this Section 4.3 (i) with respect to any period more than 180
days prior to the date it has made a demand pursuant to this Section 4.3, and
(ii) to the extent that the Lender determines in good faith that the interest
rate on the relevant Loans appropriately accounts for any increased cost or
reduced rate of return. In the absence of manifest error, the certificate
referred to above shall be conclusive as to the amount required to be paid.
Section 4.4 Expenses; Indemnity. (a) The Borrower agrees: (i) to pay or
reimburse the Lender for all reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any amendment,
supplement or modification to, this Agreement and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of Brown & Wood LLP, counsel to the Lender; and (ii) to
pay or reimburse the Lender for all reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Lender. The Borrower also
agrees to indemnify the Lender against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Agreement.
(b) The Borrower agrees to indemnify the Lender and its directors,
officers, partners, employees, agents and Affiliates (for purposes of this
paragraph, each, an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all claims, liabilities, damages, losses, costs, charges and
expenses (including fees and expenses of counsel) incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated by this Agreement, the performance by the parties
thereto of their respective obligations under this Agreement or the consummation
of the transactions and the other transactions contemplated by this Agreement,
(ii) the use of the proceeds of the Loans or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) All amounts due under this Section 4.4 shall be payable in immediately
available funds upon written demand therefor.
Section 4.5 Survival. The provisions of Sections 4.2, 4.3 and 4.4 shall
remain operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans,
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the reduction or termination of the Commitment, the invalidity or
unenforceability of any term or provision of this Agreement, or any
investigation made by or on behalf of the Lender.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties. In order to induce the Lender
to enter into this Agreement and to make Loans and the other financial
accommodations to the Borrower and to induce the Lender to obtain Letters of
Credit on its behalf as described herein, the Borrower represents and warrants
to the Lender as follows:
(a) Good Standing and Power. The Borrower and each Subsidiary is a
limited partnership or corporation, duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization; each
has the power to own its property and to carry on its business as now being
conducted; and each is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties
owned or leased by it therein or in which the transaction of its business
makes such qualification necessary, except where the failure to be so
qualified, or to be in good standing, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) Authority. The Borrower has full power and authority to execute
and deliver, and to incur and perform its obligations under, this
Agreement, which has been duly authorized by all proper and necessary
action. No consent or approval of limited partners is required as a
condition to the validity or performance of, or the exercise by the Lender
of any of its rights or remedies under, this Agreement.
(c) Authorizations. All authorizations, consents, approvals,
registrations, notices, exemptions and licenses with or from any
Governmental Authority or other Person necessary for the execution,
delivery and performance by the Borrower of, and the incurrence and
performance of each of its obligations under, this Agreement, and the
exercise by the Lender of its remedies under this Agreement have been
effected or obtained and are in full force and effect.
(d) Binding Obligation. This Agreement constitutes the valid and
legally binding obligation of the Borrower enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(e) Litigation. There are no proceedings or investigations now pending
or, to the knowledge of the Borrower, threatened before any court or
arbitrator or before or by any Governmental Authority which, individually
or in the aggregate, if determined adversely to the interests of the
Borrower or any Subsidiary, could reasonably be expected to have a Material
Adverse Effect.
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(f) No Conflicts. There is no statute, regulation, rule, order or
judgment, and no provision of any agreement or instrument binding upon the
Borrower or any Subsidiary, or affecting their properties, and no provision
of the certificate of limited partnership, certificate of incorporation,
agreement of limited partnership or by-laws (or similar constitutive
instruments) of the Borrower or any Subsidiary, that would prohibit,
conflict with or in any way impair the execution or delivery of, or the
incurrence or performance of any obligations of the Borrower under, this
Agreement, or result in or require the creation or imposition of any Lien
on property of the Borrower or any Subsidiary as a consequence of the
execution, delivery and performance of this Agreement.
(g) Taxes. The Borrower and the Subsidiaries each has filed or caused
to be filed all tax returns that are required to be filed and paid all
taxes that are required to be shown to be due and payable on said returns
or on any assessment made against it or any of its property and all other
taxes, assessments, fees, liabilities, penalties or other charges imposed
on it or any of its property by any Governmental Authority, except for any
taxes, assessments, fees, liabilities, penalties or other charges which are
being contested in good faith and (unless the amount thereof is not
material to the Borrower's consolidated financial condition) for which
adequate reserves have been established in accordance with GAAP.
(h) Properties. The Borrower and the Subsidiaries each has good and
marketable title to, or valid leasehold interests in, all of its respective
properties and assets. All such assets and properties are so owned or held
free and clear of all Liens, except Permitted Liens.
(i) Compliance with Laws and Charter Documents. Neither the Borrower
nor any Subsidiary is, or as a result of performing any of its obligations
under this Agreement will be, in violation of (a) any law, statute, rule,
regulation or order of any Governmental Authority applicable to it or its
properties or assets or (b) its certificate of limited partnership,
certificate of incorporation, agreement of limited partnership, by-laws or
any similar document.
(j) No Material Adverse Effect. Since May 15, 1997, there has not
occurred or arisen any event, condition or circumstance that, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(k) Disclosure. All information relating to the Borrower or its
Subsidiaries delivered in writing to the Lender in connection with the
negotiation, execution and delivery of this Agreement is true and complete
in all material respects. There is no material fact of which the Borrower
is aware which, individually or in the aggregate, would reasonably be
expected adversely to influence the Lender's credit analysis relating to
the Borrower and its Subsidiaries which has not been disclosed to the
Lender in writing.
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Section 5.2 Survival. All representations and warranties made by the
Borrower in this Agreement, and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement, shall be
considered to have been relied upon by the Lender, (ii) survive the making of
Loans and the issuance of or payment under any Letter of Credit regardless of
any investigation made by, or on behalf of, the Lender and (iii) continue in
full force and effect as long as the Commitment has not been terminated and,
thereafter, so long as any Loan, Letter of Credit fee or other amount payable
under this Agreement remains unpaid.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to the Availability of the Commitment and Letters of
Credit. The obligations of the Lender (including its obligators in respect of
Letters of Credit) hereunder are subject to, and the Lender's Commitment shall
not become available until the earliest date (the "Effective Date") on which
each of the following conditions precedent shall have been satisfied or waived
in writing by the Lender:
(a) This Agreement. The Lender shall have received this Agreement duly
executed and delivered by the Borrower.
(b) Certificate of Incorporation and By-Laws. The Lender shall have
received the following:
(i) a copy of the Certificate of Incorporation of the Borrower, as in
effect on the Effective Date, certified by the Secretary of State of
Delaware, and a certificate from such Secretary of State as to the good
standing of the Borrower, in each case as of a date reasonably close to the
Effective Date; and
(ii) a certificate of a Responsible Officer of the Borrower, dated the
Effective Date, and stating that attached thereto is a true and complete
copy of the By-Laws of the Borrower as in effect on such date.
(c) Representations and Warranties. The representations and warranties
contained in Section 5.1 shall be true and correct on the Effective Date,
and the Lender shall have received a certificate, signed by a Responsible
Officer of the Borrower, to that effect.
(d) Other Documents. The Lender shall have received such other
certificates, opinions and other documents as the Lender reasonably may
require.
Section 6.2 Conditions to All Loans and Letters of Credit. The obligations
of the Lender to make each Loan and to obtain Letters of Credit are subject to
the conditions precedent that, on the date of each Loan or Letter of Credit and
after giving effect thereto, each of the following conditions precedent shall
have been satisfied, or waived in writing by the Lender:
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(a) Borrowing Request. The Lender shall have received a Borrowing
Request in accordance with the terms of this Agreement.
(b) No Default. No Default or Event of Default shall have occurred and
be continuing, nor shall any Default or Event of Default occur as a result
of the making of such Loan or obtaining such Letter of Credit.
(c) Debt-to-Equity Ratio. The Lender shall have received from the
Borrower a certificate demonstrating that the ratio of the Borrower's
Adjusted Indebtedness to the Borrower's Net Assets, taking into account the
requested Loan or Letter of Credit and the assets, if any, to be acquired
by the Borrower with the proceeds of such Loan or Letter of Credit, shall
not exceed 4-to-1.
(d) Representations and Warranties; Covenants. The representations and
warranties contained in Section 5. 1 shall have been true and correct when
made and (except to the extent that any representation or warranty speaks
as of a date certain) shall be true and correct on the Borrowing Date with
the same effect as though such representations and warranties were made on
such Borrowing Date; and the Borrower shall have complied with all of its
covenants and agreements under this Agreement.
(e) REIT Status of Reckson. The borrowing shall not, in the sole
judgment of the Lender, endanger Reckson's status as a REIT.
(f) Certain Loans Subject to Reckson's Approval. In respect of any
Loan or Letter of Credit or Loans or Letters of Credit aggregating in
excess of $10 million, any single Commercial Service, as well as any Loan
or Letter of Credit relating to an investment by Borrower in any area other
than Commercial Services, Reckson shall have approved the Lender's making
such Loan or obtaining such Letter of Credit in its sole discretion.
Section 6.3 Satisfaction of Conditions Precedent. Each of (i) the delivery
by the Borrower of a Borrowing Request (unless the Borrower notifies the Lender
in writing to the contrary prior to the Borrowing Date) and (ii) the acceptance
of the proceeds of a Loan or the delivery of the Letter of Credit shall be
deemed to constitute a certification by the Borrower that, as of the Borrowing
Date, each of the conditions precedent contained in Section 6. 2 has been
satisfied with respect to the Loan then being made or the Letter of Credit then
being issued.
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will:
(a) Financial Statements; Compliance Certificates. Furnish to the Lender:
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(i) as soon as available, but in no event more than 60 days following
the end of each of the first three quarters of each fiscal year, copies of
the Borrower's Quarterly Report on Form 10-Q being filed with the SEC,
which shall include a consolidated balance sheet and consolidated income
statement of the Borrower and the Subsidiaries for such quarter;
(ii) as soon as available, but in no event more than 120 days
following the end of each fiscal year, a copy of the Borrower's Annual
Report on Form 10-K being filed with the SEC, which shall include the
consolidated financial statements of the Borrower and the Subsidiaries,
together with a report thereon by Ernst & Young LLP (or another firm of
independent certified public accountants reasonably satisfactory to the
Lender), for such year;
(iii) within five Business Days of any Responsible Officer of the
Borrower obtaining knowledge of any Default or Event of Default, if such
Default or Event of Default is then continuing, a certificate of a
Responsible Officer of the Borrower stating that such certificate is a
"Notice of Default" and setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto; and
(iv) such additional information, reports or statements, regarding the
business, financial condition or results of operations of the Borrower and
its Subsidiaries, as the Lender from time to time may reasonably request.
(b) Existence. Except as permitted by Section 7. 2(a), maintain its
existence in good standing and qualify and remain qualified to do business in
each jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business is such that the failure to
qualify, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(c) Compliance with Law and Agreements. Comply, and cause each Subsidiary
to comply, with all applicable laws, ordinances, orders, rules, regulations and
requirements of all Governmental Authorities and with all agreements except
where the necessity of compliance therewith is contested in good faith by
appropriate proceedings or where the failure to comply therewith, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(d) Authorizations. Obtain, make and keep in full force and effect all
authorizations from and registrations with Governmental Authorities required for
the validity or enforceability of this Agreement.
(e) Inspection. Permit, and cause each Subsidiary to permit, the Lender to
have one or more of its officers and employees, or any other Person designated
by the Lender, to visit and inspect any of the properties of the Borrower and
the Subsidiaries and to examine the minute books, books of account and other
records of the Borrower and the Subsidiaries, and to photocopy extracts from
such minute books, books of account and other records, and to discuss its
affairs, finances and accounts with its officers and with the Borrower's
independent
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accountants, during normal business hours and at such other reasonable times,
for the purpose of monitoring the Borrower's compliance with its obligations
under this Agreement.
(f) Maintenance of Records. Keep, and cause each Subsidiary to keep, proper
books of record and account in which full, true and correct entries will be made
of all dealings or transactions of or in relation to its business and affairs.
(g) Notice of Defaults and Adverse Developments. Promptly notify the Lender
upon the discovery by any Responsible officer of the occurrence of (i) any
Default or Event of Default; (ii) any event, development or circumstance whereby
the financial statements most recently furnished to the Lender fail in any
material respect to present fairly, in accordance with GAAP, the financial
condition and operating results of the Borrower and the Subsidiaries as of the
date of such financial statements; (iii) any material litigation or proceedings
that are instituted or threatened (to the knowledge of the Borrower) against the
Borrower or any Subsidiary or any of their respective assets; (iv) any event,
development or circumstance which, individually or in the aggregate, could
reasonably be expected to result in an event of default (or, with the giving of
notice or lapse of time or both, an event of default) under any Indebtedness and
the amount thereof; and (v) any other development in the business or affairs of
the Borrower or any Subsidiary if the effect thereof would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
in each case describing the nature thereof and the action the Borrower proposes
to take with respect thereto.
Section 7.2 Negative Covenants. Until satisfaction in full of all the
obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will not:
(a) Mergers, Consolidations and Sales of Assets. Wind up, liquidate or
dissolve its affairs or enter into any merger, consolidation or share exchange,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time), whether in one or a series of transactions, all
or any substantial part of its assets, or permit any Subsidiary so to do, unless
such transaction or series of transactions are expressly approved by the Lender,
which approval shall not be unreasonably withheld.
(b) Liens. Create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except
Permitted Liens.
(c) Indebtedness. Create, incur, issue, assume, guarantee or suffer to
exist any Indebtedness, except:
(i) Indebtedness to the Lender under this Agreement or under the
RSVP-ROP Facility Agreement,
(ii) Non-recourse Indebtedness of the Borrower and any Subsidiary
secured by mortgages, encumbrances or liens specifically permitted by
Section 7. 2(b), and
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(iii) Indebtedness expressly approved by the Lender in writing, which
approval may be withheld in the Lender's sole discretion.
(d) Dividends. Declare any dividends on any of its shares of capital stock
unless such dividend or distribution is expressly approved in writing by the
Lender.
(e) Certain Amendments. Amend, modify or waive, or permit to be amended,
modified or waived, any provision of its Certificate of Incorporation unless,
within not less than 5 days prior to such amendment, modification or waiver (or
such later time as the Lender may in its sole discretion permit), the Borrower
shall have given the Lender notice thereof, including all relevant terms and
conditions thereof, and the Lender shall have consented in writing thereto.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Events of Default. If one or more of the following events
(each, an "Event of Default") shall occur:
(a) The Borrower shall fail duly to pay any principal of any Loan or Letter
of Credit when due, whether at maturity, by notice of intention to prepay or
otherwise; or
(b) The Borrower shall fail duly to pay any interest, fee or any other
amount payable under this Agreement within two days after the same shall be due;
or
(c) Borrower shall fail duly to observe or perform any term, covenant, or
agreement contained in Section 7. 2; or
(d) The Borrower shall fail duly to observe or perform any other term,
covenant or agreement contained in this Agreement, and such failure shall have
continued unremedied for a period of 30 days; or
(e) Any representation or warranty made or deemed made by the Borrower in
this Agreement, or any statement or representation made in any certificate,
report or opinion delivered by or on behalf of the Borrower in connection with
this Agreement, shall prove to have been false or misleading in any material
respect when so made or deemed made; or
(f) The Borrower shall fail to pay any Indebtedness (other than obligations
here under) in an amount of $100,000 or more when due; or any such Indebtedness
having an aggregate principal amount outstanding of $100,000 or more shall
become or be declared to be due prior to the expressed maturity thereof; or
(g) An involuntary case or other proceeding shall be commenced against the
Borrower seeking liquidation, reorganization or other relief with respect to it
or its debts under any applicable bankruptcy, insolvency, reorganization or
similar law or seeking the appointment of a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall remain
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undismissed and unstayed for a period of more than 60 days; or an order or
decree approving or ordering any of the foregoing shall be entered and continued
unstayed and in effect; or
(h) The Borrower shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or similar law or any other
case or proceeding to be adjudicated a bankrupt or insolvent, or any of them
shall consent to the entry of a decree or order for relief in respect of the
Borrower in an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against any of them, or any of them
shall file a petition or answer or consent seeking reorganization or relief
under any applicable law, or any of them shall consent to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Borrower
or any substantial part of its property, or the Borrower shall make an
assignment for the benefit of creditors, or the Borrower shall admit in writing
its inability to pay its debts generally as they become due, or the Borrower
shall take corporate action in furtherance of any such action;
(i) One or more judgments against the Borrower or attachments against its
property, which in the aggregate exceed $100,000, or the operation or result of
which could be to interfere materially and adversely with the conduct of the
business of the Borrower remain unpaid, unstayed on appeal, undischarged,
unbonded, or undismissed for a period of more than 30 days; or
(j) Any court or governmental or regulatory authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which prohibits, enjoins or otherwise
restricts, in a manner that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, any of the transactions
contemplated under this Agreement; or
(k) Any Event of Default shall occur and be continuing under the RSVP-ROP
Facility Agreement.
then, and at any time during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitment, Credit Obligations and any obligations of the Lender to obtain
Letters of Credit pursuant to this Agreement and (ii) declare any Credit
Obligations then outstanding to be due, whereupon the principal of the Credit
Obligations so declared to be due, together with accrued interest thereon and
any unpaid amounts accrued under this Agreement, shall become forthwith due,
without presentment, demand, protest or any other notice of any kind (all of
which are hereby expressly waived by the Borrower); provided that, in the case
of any Event of Default described in Section 8. 1(g) or (h) occurring with
respect to the Borrower, the Commitment and any obligations of the Lender to
obtain Letters of Credit pursuant to this Agreement shall automatically and
immediately terminate and the principal of all Loans then outstanding, together
with accrued interest thereon and any unpaid amounts accrued under this
Agreement, shall automatically and immediately become due
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without presentment, demand, protest or any other notice of any kind (all of
which are hereby expressly waived by the Borrower).
ARTICLE IX.
EVIDENCE OF LOANS; TRANSFERS
Section 9.1 Evidence of Loans and Letters of Credit. (a) The Lender shall
maintain accounts evidencing the indebtedness of the Borrower to the Lender
resulting from each Loan made by the Lender and each Letter of Credit issued for
the benefit of the Borrower from time to time, including the amounts of
principal and interest payable and paid to the Lender in respect of Loans or
Letters of Credit.
(b) The Lender's written records described above shall be available for
inspection during ordinary business hours by the Borrower from time to time upon
reasonable prior notice to the Lender.
(c) The entries made in the Lender's written or electronic records and the
foregoing accounts shall be prima facie evidence of the existence and amounts of
the indebtedness of the Borrower therein recorded; provided, however, that the
failure of the Lender to maintain any such account or such records, as
applicable, or any error therein, shall not in any manner affect the validity or
enforceability of any obligation of the Borrower to repay any Loan actually made
by the Lender in accordance with the terms of this Agreement.
ARTICLE X.
LETTERS OF CREDIT
Section 10.1 Letters of Credit. Until the Commitment Termination Date and
subject to the terms and conditions set forth in this Agreement, the Lender
hereby agrees to obtain from an Issuing Bank for the account of the Borrower one
or more Letters of Credit, subject to the following provisions:
(a) Types and Amounts. The Lender shall not have any obligation to obtain,
or cause the amendment or extension of any Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to the
Issuing Bank, after giving effect to the issuance, amendment or extension
of the Letter of Credit requested hereunder, shall exceed any limit imposed
by law or regulation upon the Issuing Bank;
(ii) if, immediately after giving effect to the issuance, amendment or
extension of such Letter of Credit, (1) the Letter of Credit Obligations at
such time would exceed [$10,000,000] or (2) the Credit Obligations at such
time would exceed the Commitment at such time, or (3) one or more of the
conditions precedent contained in Sections 6.1 or 6.2, as applicable, would
not on such date be satisfied, unless such
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conditions are thereafter satisfied and written notice of such satisfaction
is given to the Lender (and the Lender shall not otherwise be required to
determine that, or take notice whether, the conditions precedent set forth
in Sections 6.1 or 6.2, as applicable, have been satisfied);
(iii) which has an expiration date later than the earlier of (A) the
date one (1) year after the date of issuance (without regard to any
automatic renewal provisions thereof) or (B) the Business Day next
preceding the scheduled Commitment Termination Date; or
(iv) which is in a currency other than dollars.
(b) Conditions. In addition to being subject to the satisfaction of the
conditions precedent contained in Sections 6.1 and 6.2, as applicable, the
obligation of the Lender to obtain from an Issuing Bank, or to cause the
amendment or extension of any Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i) if the Lender so requests, the Borrower shall have executed and
delivered to the Lender a Letter of Credit Reimbursement Agreement and such
other documents and materials as may be required pursuant to the terms
thereof; and
(ii) the terms of the proposed Letter of Credit shall be satisfactory
to the Lender in its sole discretion.
(c) Issuance of Letters of Credit. (i) The Borrower shall give the Lender
written notice that it requires the issuance of a Letter of Credit not later
than 11:00 a.m. (New York time) on the third (3rd) Business Day preceding the
requested date for issuance thereof under this Agreement. Such notice shall be
irrevocable unless and until such request is denied by the Lender and shall
specify (A) that the requested Letter of Credit is either a Commercial Letter of
Credit or a Standby Letter of Credit, (B) the stated amount of the Letter of
Credit requested, (C) the effective date (which shall be a Business Day) of
issuance of such Letter of Credit, (D) the date on which such Letter of Credit
is to expire (which shall be a Business Day and no later than the Business Day
immediately preceding the scheduled Commitment Termination Date), (E) that such
Letter of Credit is to be issued for the benefit of the Borrower, (F) other
relevant terms of such Letter of Credit, (G) the Available Commitment at such
time and (H) the amount of the then outstanding Letter of Credit Obligations.
(ii) The Lender shall give the Borrower written notice, or telephonic
notice confirmed promptly thereafter in writing, of the issuance, amendment
or extension of a Letter of Credit.
(d) Reimbursement Obligations; Duties of the Lender.
(i) Notwithstanding any provisions to the contrary in any Letter of
Credit Reimbursement Agreement:
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(A) the Borrower shall reimburse the Lender for amounts drawn
under its Letter of Credit, in dollars, no later than the date (the
"Reimbursement Date") which is the earlier of (I) the time specified
in the applicable Letter of Credit Reimbursement Agreement and (II)
three (3) Business Days after the Borrower receives written notice
from the Lender that payment has been made under such Letter of Credit
by the Issuing Bank; and
(B) all Reimbursement Obligations with respect to any Letter of
Credit shall bear interest at the Prime Rate in accordance with
Section 3.1 from the date of the relevant drawing under such Letter of
Credit until the Reimbursement Date.
(ii) The Lender shall give the Borrower written notice, or telephonic
notice confirmed promptly thereafter in writing, of all drawings under a
Letter of Credit and the payment (or the failure to pay when due) by the
Borrower, as the case may be, on account of a Reimbursement Obligation.
(iii) In determining whether to pay under any Letter of Credit, it is
understood that the Issuing Bank shall have no obligation other than to
confirm that any documents required to be delivered under a respective
Letter of Credit appear to have been delivered and that they appear on
their face to comply with the requirements of such Letter of Credit.
(e) Payment of Reimbursement Obligations. (i) The Borrower unconditionally
agrees to pay to the Lender, in dollars, the amount of all Reimbursement
Obligations, interest and other amounts payable to the Lender under or in
connection with the Letters of Credit when such amounts are due and payable,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against the Lender or any other Person.
(f) Letter of Credit Fee Charges. In connection with each Letter of Credit,
the Borrower hereby covenants to pay to the Lender the following Letter of
Credit Fee payable quarterly in arrears (on the first Banking Day of each
calendar quarter following the issuance of each Letter of Credit): a fee, for
the Lender's own account, computed daily on the amount of the Letter of Credit
issued and outstanding at a rate per annum equal to the Lender's cost in
obtaining the Letter of Credit plus a spread equal to the difference between the
interest rate payable on Loans hereunder and the Lender's cost of borrowing
under its credit facility (or, in the absence of a credit facility, the Prime
Rate as announced by Citibank NA). Notwithstanding the foregoing, if amounts
payable pursuant to this Section 10.1(f), together with any interest payable
pursuant to Section 3.1, exceed the amount of EBITDA of the Borrower for the
immediately preceding calendar quarter (ending the last day of September,
December, March or June), the Borrower shall not be obligated to repay the
amounts payable under this Section 10.1(f) which, when added to the interest
payable pursuant to Section 3.1 exceeds EBITDA of the Borrower for such period.
Any such amount in excess of EBITDA shall be added to principal hereunder and
shall accrue interest thereon in accordance with Section 3.1.
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(g) Letter of Credit Reporting Requirements. The Lender shall, upon the
request of the Borrower, provide to the Borrower separate schedules for
Commercial Letters of Credit and Standby Letters of Credit issued as Letters of
Credit, in form and substance reasonably satisfactory to the Borrower, setting
forth the aggregate Letter of Credit Obligations outstanding to it at the end of
each month and any information requested by the Borrower relating to the date of
issue, account party, amount, expiration date and reference number of each
Letter of Credit issued as contemplated hereunder.
(h) Indemnification; Exoneration. 1. In addition to all other amounts
payable to the Lender, the Borrower hereby agrees to defend, indemnify, and save
the Lender harmless from and against any and all claims, demands, liabilities,
penalties, damages, losses (other than loss of profits), reasonable costs,
reasonable charges and reasonable expenses (including reasonable attorneys fees
but excluding taxes) which the Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit
other than as a result of the gross negligence or willful misconduct of the
Lender, as determined by a court of competent jurisdiction, or (B) the failure
of the Issuing Bank to honor a drawing under such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority.
(ii) As between the Borrower on the one hand and the Lender on the
other hand, the Borrower assumes all risks of the acts and omissions of, or
misuse of Letters of Credit by, the respective beneficiary of the Letters
of Credit. In furtherance and not in limitation of the foregoing, subject
to the provisions of the Letter of Credit Reimbursement Agreements, the
Lender shall not be responsible for: (A) the form, validity, legality,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance
of the Letters of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (B)
the validity, legality or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; (C) failure of
the Borrower to duly comply with conditions required in order to draw upon
such Letter of Credit; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex
or otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the Borrower of the proceeds of any drawing Letter of
Credit; and (H) any consequences arising from causes beyond the control of
the Lender, other than of the foregoing resulting from the gross negligence
or willful misconduct of the Lender.
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ARTICLE XI.
MISCELLANEOUS
Section 11.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 11.2 Waiver of Jury. THE BORROWER AND THE LENDER EACH HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, OR THE RELATIONSHIPS
ESTABLISHED HEREUNDER.
Section 11.3 Jurisdiction and Venue; Service of Process. (a) The Borrower
and the Lender each hereby irrevocably submits to the non-exclusive jurisdiction
of any state or federal court in the Borough of Manhattan, The City of New York
for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Agreement and to the laying of venue in the Borough of
Manhattan The City of New York. The Borrower and the Lender each hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
(b) Borrower agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 11.7 or at such other address of
which the Lender shall have been notified pursuant thereto. The Borrower further
agrees that nothing herein shall affect the right to effect service of process
in any other manner permitted by law or shall limit the right to sue in any
other jurisdiction; and
(c) The Borrower waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential damages.
Section 11.4 Confidentiality. The Lender agrees (on behalf of itself and
each of its Affiliates, partners, officers, employees and representatives) to
use its best efforts to keep confidential, in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with commercially reasonable business practices, any Confidential
Information; provided that nothing herein shall limit the disclosure of any such
information (i) to the extent required by statute, rule, regulation or judicial
process, (ii) to counsel for the Lender, (iii) to auditors or accountants, (iv)
by the Lender to an Affiliate thereof, or (v) in connection with any litigation
relating to enforcement of this Agreement; provided further, that, unless
specifically prohibited by applicable law or court order, the Lender shall,
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prior to disclosure thereof, notify the Borrower of any request for disclosure
of any Confidential Information (x) by any Governmental Authority or
representative thereof or (y) pursuant to legal process.
Section 11.5 Amendments and Waivers. (a) Any provision of this Agreement
may be amended, modified, supplemented or waived, but only by a written
amendment or supplement, or written waiver, signed by the Borrower and the
Lender.
(b) Except to the extent expressly set forth therein, any waiver shall be
effective only in the specific instance and for the specific purpose for which
such waiver is given.
Section 11.6 Cumulative Rights; No Waiver. Each and every right granted to
the Lender hereunder or under any other document delivered in connection
herewith, or allowed it by law or equity, shall be cumulative and not exclusive
and may be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by the Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right.
Section 11.7 Notices. Any communication, demand or notice to be given
hereunder will be duly given when delivered in writing or by telecopy to a party
at its address as indicated below or such other address as such party may
specify in a notice to the other party hereto. A communication, demand or notice
given pursuant to this Agreement shall be addressed:
If to the Borrower, to:
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 719-7400
Attention: Chief Financial Officer
If to the Lender, to:
Reckson Operating Partnership, L.P.
225 Broadhollow Road
Melville, New York 11747
Telecopy: (516) 694-6900
Attention: Chief Financial Officer
This Section 11.7 shall not apply to notices referred to in Article II of
this Agreement, except to the extent set forth therein.
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Section 11.8 Certain Acknowledgments. The Borrower hereby confirms and
acknowledges that (a) the Lender does not have any fiduciary or similar
relationship to the Borrower by virtue of this Agreement and the transactions
contemplated herein and that the relationship established by this Agreement
between the Lender and the Borrower is solely that of creditor and debtor and
(b) no joint venture exists between the Borrower and the Lender by virtue of
this Agreement and the transactions contemplated herein.
Section 11.9 Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
Section 11.10 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower may not assign any of its
rights hereunder without the prior written consent of the Lender, and any
purported assignment by the Borrower without such consent shall be void.
Section 11.11 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all the counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
RECKSON SERVICE INDUSTRIES, INC.,
as Borrower
By:
------------------------------------
Name:
Title:
RECKSON OPERATING PARTNERSHIP, L.P.,
as Lender
By: Reckson Associates Realty Corp.,
its general partner
By:
------------------------------------
Name:
Title:
27
Exhibit 10.8(d)
RECKSON SERVICE INDUSTRIES, INC.
2000 EMPLOYEE STOCK OPTION PLAN
ARTICLE 1. GENERAL
1.1. Purpose. The purpose of the Reckson Service Industries, Inc. 2000
Employee Stock Option Plan (the "Plan") is to provide for a broad base of
officers, directors and employees, as defined in Section 1.3, of Reckson Service
Industries, Inc. (the "Company"), and certain of its Affiliates (as defined
below) an equity-based incentive to maintain and enhance the performance and
profitability of the Company.
1.2. Administration.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which
Committee shall consist of two or more directors, or by the Board. It is
intended that from and after the initial public offering of Common Stock, the
directors appointed to serve on the Committee shall be "non-employee directors"
(within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 (the "Act")); however, the mere fact that a Committee member shall fail
to qualify under this requirement shall not invalidate any award made by the
Committee which award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all of the
powers granted to it under the Plan, (ii) to construe, interpret and implement
the Plan and any Plan agreements executed pursuant to the Plan, (iii) to
prescribe, amend and rescind rules relating to the Plan, (iv) to make any
determination necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating to the
Plan or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder.
(e) Notwithstanding anything to the contrary contained herein, the
Board may, in its sole discretion, at any time and from time to time, resolve to
administer the Plan, in which case, the term Committee as used herein shall be
deemed to mean the Board.
1.3. Persons Eligible for Awards. Awards under the Plan may be made to
such officers, directors and other employees ("key personnel") of the Company or
its Affiliates as the Committee shall from time to time in its sole discretion
select.
<PAGE>
1.4. Types of Awards Under Plan.
(a) Awards may be made under the Plan in the form of (i) stock options
("options"), (ii) restricted stock awards, and (iii) unrestricted stock awards
in lieu of cash compensation, all as more fully set forth in Articles 2 and 3.
(b) Options granted under the Plan shall be "nonqualified" stock
options ("NQSOs"). Grants of options made under the Plan may also be made in
lieu of cash fees otherwise payable to Directors of the Company or cash bonuses
payable to employees of the Company or any Affiliate.
1.5. Shares Available for Awards.
(a) Subject to Section 4.5 (relating to adjustments upon changes in
capitalization), as of any date the total number of shares of Common Stock with
respect to which awards may be granted under the Plan, shall equal the excess
(if any) of 2,500,000 shares of Common Stock, over (i) the number of shares of
Common Stock subject to outstanding awards under the Plan, (ii) the number of
shares in respect of which options have been exercised, or grants of restricted
or unrestricted Common Stock have been made pursuant to the Plan, and (iii) the
number of shares issued subject to forfeiture restrictions which have lapsed.
In accordance with (and without limitation upon) the preceding
sentence, awards may be granted in respect of the following shares of Common
Stock: shares covered by previously-granted awards that have expired, terminated
or been cancelled for any reason whatsoever (other than by reason of exercise or
vesting).
(b) Shares of Common Stock that shall be subject to issuance pursuant
to the Plan shall be authorized and unissued or treasury shares of Common Stock,
or shares of Common Stock purchased on the open market or from shareholders of
the Company for such purpose.
(c) Without limiting the generality of the foregoing, the Committee
may, with the grantee's consent, cancel any award under the Plan and issue a new
award in substitution therefor upon such terms as the Committee may in its sole
discretion determine, provided that the substituted award shall satisfy all
applicable Plan requirements as of the date such new award is made.
1.6. Definitions of Certain Terms.
(a) The term "Affiliate" as used herein means RSI Fund Management, LLC,
RSVP Holdings, LLC and Reckson Strategic Venture Partners, LLC, and any person
or entity as subsequently approved by the Board which, at the time of reference,
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company.
(b) The term "Cause" shall mean a finding by the Committee that the
recipient of an award under the Plan has (i) acted with gross negligence or
willful misconduct in connection with the performance of his material duties to
the Company or its Affiliates; (ii) defaulted in the performance of his material
duties to the Company or its Affiliates and has not corrected such
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action within 15 days of receipt of written notice thereof; (iii) willfully
acted against the best interests of the Company or its Affiliates, which act has
had a material and adverse impact on the financial affairs of the Company or its
Affiliates; or (iv) been convicted of a felony or committed a material act of
common law fraud against the Company, its Affiliates or their employees and such
act or conviction has, or the Committee reasonably determines will have, a
material adverse effect on the interests of the Company or its Affiliates.
(c) The term "Common Stock" as used herein means the shares of common
stock of the Company as constituted on the effective date of the Plan, and any
other shares into which such common stock shall thereafter be changed by reason
of a recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
(d) The "fair market value" (or "FMV") as of any date and in respect of
any share of Common Stock shall be:
(i) if the Common Stock is listed for trading on the New York
Stock Exchange, the closing price, regular way, of the Common
Stock as reported on the New York Stock Exchange Composite
Tape, or if no such reported sale of the Common Stock shall
have occurred on such date, on the next preceding date on
which there was such a reported sale; or
(ii) if the Common Stock is not so listed but is listed on
another national securities exchange or authorized for
quotation on the National Association of Securities Dealers
Inc.'s NASDAQ National Market System ("NASDAQ/NMS"), the
closing price, regular way, of the Common Stock on such
exchange or NASDAQ/NMS, as the case may be, on which the
largest number of shares of Common Stock have been traded in
the aggregate on the preceding twenty trading days, or if no
such reported sale of the Stock shall have occurred on such
date on such exchange or NASDAQ/NMS, as the case may be, on
the preceding date on which there was such a reported sale on
such exchange or NASDAQ/NMS, as the case may be; or
(iii) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS, the average of the closing bid and asked prices as
reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or, if no such prices
shall have been so reported for such date, on the next
preceding date for which such prices were so reported; or
(iv) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS or NASDAQ generally, the average of the closing bid
and asked prices as reported on the OTC Bulletin Board or, if
no such prices shall have been so reported for such date, on
the next preceding date for which such prices were so
reported.
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1.7. Agreements Evidencing Awards.
(a) Options and restricted stock awards granted under the Plan shall be
evidenced by written agreements. Any such written agreements shall (i) contain
such provisions not inconsistent with the terms of the Plan as the Committee may
in its sole discretion deem necessary or desirable and (ii) be referred to
herein as "Plan Agreements."
(b) Each Plan agreement shall set forth the number of shares of Common
Stock subject to the award granted thereby.
(c) Each Plan agreement with respect to the granting of an option shall
set forth the amount (the "option exercise price") payable by the grantee to the
Company in connection with the exercise of the option evidenced thereby. The
option exercise price per share may be less than, equal to or greater than the
fair market value of a share of Common Stock on the date the option is granted.
ARTICLE 2. STOCK OPTIONS
2.1. Option Awards.
(a) Grant of Stock Options. The Committee may grant options to purchase
shares of Common Stock in such amounts and subject to such terms and conditions
as the Committee shall from time to time in its sole discretion determine,
subject to the terms of the Plan.
(b) Dividend Equivalent Rights. To the extent expressly provided by the
Committee at the time of the grant, each NQSO granted under this Section 2.1
shall also generate Dividend Equivalent Rights ("DERs"), which shall entitle the
grantee to receive an additional share of Common Stock for each DER received
upon the exercise of the NQSO, at no additional cost, based on the formula set
forth herein. As of the last business day of each calendar quarter, the amount
of dividends paid by the Company on each share of Common Stock with respect to
that quarter shall be divided by the FMV per share to determine the actual
number of DERs accruing on each share subject to the NQSO. Such amount of DERs
shall be multiplied by the number of shares covered by the NQSO to determine the
number of DERs which accrued during such quarter. The provisions of this Section
2.1(b) shall not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act
("ERISA") or the rules thereunder.
For example. Assume that a grantee holds a NQSO to purchase 600 shares
of Common Stock. Further assume that the dividend per share for the first
quarter was $0.10, and that the FMV per share on the last business day of the
quarter was $20. Therefore, .005 DER would accrue per share for that quarter and
such grantee would receive three DERs for that quarter (600 X .005). For
purposes of determining how many DERs would accrue during the second quarter,
the NQSO would be considered to be for 603 shares of Common Stock.
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2.2. Exercisability of Options. Subject to the other provisions of the
Plan:
(a) Exercisability Determined by Plan Agreement. Each Plan agreement
shall set forth the period during which and the conditions subject to which the
option shall be exercisable (including, but not limited to vesting of such
options), as determined by the Committee in its discretion.
(b) Partial Exercise Permitted. Unless the applicable Plan agreement
otherwise provides, an option granted under the Plan may be exercised from time
to time as to all or part of the full number of shares for which such option is
then exercisable, in which event the DERs relating to the portion of the option
being exercised shall also be exercised.
(c) Notice of Exercise; Exercise Date.
(i) An option shall be exercisable by the filing of a written
notice of exercise with the Company, on such form and in such
manner as the Committee shall in its sole discretion
prescribe, and by payment in accordance with Section 2.4.
(ii) Unless the applicable Plan agreement otherwise provides,
or the Committee in its sole discretion otherwise determines,
the date of exercise of an option shall be the date the
Company receives such written notice of exercise and payment.
2.3. Limitation on Exercise. Notwithstanding any other provision of the
Plan, no Plan agreement shall permit an option to be exercisable more than 10
years after the date of grant.
2.4. Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the applicable Plan
agreement otherwise provides or the Committee in its sole discretion otherwise
determines, any written notice of exercise of an option shall be accompanied by
payment of the full purchase price for the shares being purchased.
(b) Manner of Payment. Payment of the option exercise price shall be
made in any combination of the following:
(i) by certified or official bank check payable to the Company
(or the equivalent thereof acceptable to the Committee);
(ii) by personal check (subject to collection), which may in
the Committee's discretion be deemed conditional;
(iii) with the consent of the Committee in its sole
discretion, by delivery of previously acquired shares of
Common Stock owned by the grantee for at least six months
having a fair market value (determined as of the option
exercise date) equal to the portion of the option exercise
price being paid thereby, provided that the Committee may
require the grantee to furnish an opinion of counsel
acceptable to the Committee to the effect that such delivery
would not result
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in the grantee incurring any liability under Section 16(b) of
the Act and does not require any Consent (as defined in
Section 4.2); and
(iv) with the consent of the Committee in its sole discretion,
by the full recourse promissory note and agreement of the
grantee providing for payment with interest on the unpaid
balance accruing at a rate not less than that needed to avoid
the imputation of income under Code Section 7872 and upon such
terms and conditions (including the security, if any,
therefor) as the Committee may determine; and
(v) by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the exercise.
(c) Cashless Exercise. Payment in accordance with Section 2.4(b) may be
deemed to be satisfied, if and to the extent provided in the applicable Plan
agreement, by delivery to the Company of an assignment of a sufficient amount of
the proceeds from the sale of Common Stock acquired upon exercise to pay for all
of the Common Stock acquired upon exercise and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be made at the
grantee's direction at the time of exercise, provided that the Committee may
require the grantee to furnish an opinion of counsel acceptable to the Committee
to the effect that such delivery would not result in the grantee incurring any
liability under Section 16 of the Act and does not require any Consent (as
defined in Section 4.2).
(d) Issuance of Shares. As soon as practicable after receipt of full
payment, the Company shall, subject to the provisions of Section 4.2, deliver to
the grantee one or more certificates for the shares of Common Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
2.5. Default Rules Concerning Termination of Employment.
Subject to the other provisions of the Plan and unless the applicable
Plan agreement otherwise provides:
(a) General Rule. All options granted to a grantee shall terminate upon
the grantee's termination of employment for any reason except to the extent
post-employment exercise of the option is permitted in accordance with this
Section 2.5.
(b) Termination for Cause. All unexercised or unvested options granted
to a grantee shall terminate and expire on the day a grantee's employment is
terminated for Cause.
(c) Regular Termination; Leave of Absence. If the grantee's employment
terminates for any reason other than as provided in subsection (b), (d) or (f)
of this Section 2.5, any awards granted to such grantee which were exercisable
immediately prior to such termination of employment may be exercised, and any
awards subject to vesting may continue to vest, until the earlier of either: (i)
90 days after the grantee's termination of employment and (ii) the date on which
such options terminate or expire in accordance with the provisions of the Plan
(other than this Section 2.5) and the Plan agreement; provided that the
Committee may, in its sole discretion,
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<PAGE>
determine such other period for exercise in the case of a grantee whose
employment terminates solely because the grantee's employer ceases to be an
Affiliate or the grantee transfers employment with the Company's consent to a
purchaser of a business disposed of by the Company. The Committee may, in its
sole discretion, determine (i) whether any leave of absence (including
short-term or long-term disability or medical leave) shall constitute a
termination of employment for purposes of the Plan and (ii) the effect, if any,
of any such leave on outstanding awards under the Plan.
(d) Retirement. If a grantee's employment terminates by reason of
retirement (i.e., the voluntary termination of employment by a grantee after
attaining the age of 55), the options exercisable by the grantee immediately
prior to the grantee's retirement shall be exercisable by the grantee until the
earlier of (i) 12 months after the grantee's retirement and (ii) the date on
which such options terminate or expire in accordance with the provisions of the
Plan (other than this Section 2.5) and the Plan agreement.
(e) Death After Termination. If a grantee's employment terminates in
the manner described in subsections (c) or (d) of this Section 2.5 and the
grantee dies within the period for exercise provided for therein, the options
exercisable by the grantee immediately prior to the grantee's death shall be
exercisable by the personal representative of the grantee's estate or by the
person to whom such options pass under the grantee's will (or, if applicable,
pursuant to the laws of descent and distribution) until the earlier of (i) 12
months after the grantee's death and (ii) the date on which such options
terminate or expire in accordance with the provisions of subsections (c) or (d)
of this Section 2.5.
(f) Death Before Termination. If a grantee dies while employed by the
Company or any Affiliate, all options granted to the grantee but not exercised
before the death of the grantee, whether or not exercisable by the grantee
before the grantee's death, shall immediately become and be exercisable by the
personal representative of the grantee's estate or by the person to whom such
options pass under the grantee's will (or, if applicable, pursuant to the laws
of descent and distribution) until the earlier of (i) 12 months after the
grantee's death and (ii) the date on which such options terminate or expire in
accordance with the provisions of the Plan (other than this Section 2.5) and the
Plan agreement.
ARTICLE 3. RESTRICTED STOCK AND UNRESTRICTED STOCK AWARDS
3.1. Restricted Stock Awards.
(a) Grant of Awards. The Committee may grant restricted stock awards,
alone or in tandem with other awards, under the Plan in such amounts and subject
to such terms and conditions as the Committee shall from time to time in its
sole discretion determine; provided, however, that the grant of any such
restricted stock awards may be made only in lieu of cash compensation and
bonuses. The vesting of a restricted stock award granted under the Plan may be
conditioned upon the completion of a specified period of employment with the
Company or any Affiliate, upon the attainment of specified performance goals,
and/or upon such other criteria as the Committee may determine in its sole
discretion.
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<PAGE>
(b) Payment. Each Plan agreement with respect to a restricted stock
award shall set forth the amount (if any) to be paid by the grantee with respect
to such award. If a grantee makes any payment for a restricted stock award which
does not vest, appropriate payment may be made to the grantee following the
forfeiture of such award on such terms and conditions as the Committee may
determine. The Committee shall have the authority to make or authorize loans to
finance, or to otherwise accommodate the financing of, the acquisition, vesting
or exercise of a restricted stock award.
(c) Forfeiture upon Termination of Employment. Unless the applicable
Plan agreement otherwise provides or the Committee otherwise determines, (i) if
a grantee's employment terminates for any reason (including death) before all of
his restricted stock awards have vested, such awards shall terminate and expire
upon such termination of employment, and (ii) in the event any condition to the
vesting of restricted stock awards is not satisfied within the period of time
permitted therefor, such unvested shares shall be returned to the Company.
(d) Issuance of Shares. The Committee may provide that one or more
certificates representing restricted stock awards shall be registered in the
grantee's name and bear an appropriate legend specifying that such shares are
not transferable and are subject to the terms and conditions of the Plan and the
applicable Plan agreement, or that such certificate or certificates shall be
held in escrow by the Company on behalf of the grantee until such shares vest or
are forfeited, all on such terms and conditions as the Committee may determine.
Unless the applicable Plan agreement otherwise provides, no share of restricted
stock may be assigned, transferred, otherwise encumbered or disposed of by the
grantee until such share has vested in accordance with the terms of such award.
Subject to the provisions of Section 4.2, as soon as practicable after any
restricted stock award shall vest, the Company shall issue or reissue to the
grantee (or to the grantee's designated beneficiary in the event of the
grantee's death) one or more certificates for the Common Stock represented by
such restricted stock award.
(e) Grantees' Rights Regarding Restricted Stock. Unless the applicable
Plan agreement otherwise provides: (i) a grantee may vote and receive dividends
on restricted stock awarded under the Plan; and (ii) any stock received as a
distribution with respect to a restricted stock award shall be subject to the
same restrictions as such restricted stock.
3.2. Unrestricted Shares. The Committee may issue stock under the Plan,
alone or in tandem with other awards, in such amounts and subject to such terms
and conditions as the Committee shall from time to time in its sole discretion
determine; provided, however, that the grant of any such unrestricted stock
awards may be made only in lieu of cash compensation and bonuses.
ARTICLE 4. MISCELLANEOUS
4.1. Amendment of the Plan; Modification of Awards.
(a) Plan Amendments. The Board may, without stockholder approval, at
any time and from time to time suspend, discontinue or amend the Plan in any
respect whatsoever, except that (i) no such amendment shall impair any rights
under any award theretofore made under the Plan without the consent of the
grantee of such award and (ii) except as and to the extent otherwise
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permitted by Section 4.5 or 4.11, no such amendment shall cause the Plan to fail
to satisfy any applicable requirement under Rule 16b-3 without stockholder
approval.
(b) Award Modifications. Subject to the terms and conditions of the
Plan (including Section 4.1(a)), the Committee may amend outstanding Plan
agreements with such grantee, including, without limitation, any amendment which
would (i) accelerate the time or times at which an award may vest or become
exercisable and/or (ii) extend the scheduled termination or expiration date of
the award, provided, however, that no modification having a material adverse
effect upon the interest of a grantee in an award shall be made without the
consent of such grantee.
4.2. Restrictions.
(a) Consent Requirements. If the Committee shall at any time determine
that any Consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any award under the Plan,
the acquisition, issuance or purchase of shares or other rights hereunder or the
taking of any other action hereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine not to
make any payment whatsoever until Consent has been given if (i) the Committee
may make any payment under the Plan in cash, Common Stock or both, and (ii) the
Committee determines that Consent is necessary or desirable as a condition of,
or in connection with, payment in any one or more of such forms.
(b) Consent Defined. The term "Consent" as used herein with respect to
any Plan Action means (i) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule or regulation, (ii)
the expiration, elimination or satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (iii)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(iv) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any Affiliate.
4.3. Nontransferability. Except as may otherwise be set forth in any
Plan agreement, (i) no award granted to any grantee under the Plan or under any
Plan agreement shall be assignable or transferable by the grantee other than by
will or by the laws of descent and distribution, and (ii) during the lifetime of
the grantee, all rights with respect to any award granted to the grantee under
the Plan or under any Plan agreement shall be exercisable only by the grantee.
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4.4. Withholding Taxes.
(a) Whenever under the Plan shares of Common Stock are to be delivered
pursuant to an award, the Committee may require as a condition of delivery that
the grantee remit an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto. Whenever cash is to
be paid under the Plan, the Company may, as a condition of its payment, deduct
therefrom, or from any salary or other payments due to the grantee, an amount
sufficient to satisfy all federal, state and other governmental withholding tax
requirements related thereto or to the delivery of any shares of Common Stock
under the Plan.
(b) Without limiting the generality of the foregoing, (i) a grantee may
elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Common Stock owned by the grantee for at
least six months (or such other period as the Committee may determine) having a
fair market value (determined as of the date of such delivery by the grantee)
equal to all or part of the amount to be so withheld, provided that the
Committee may require, as a condition of accepting any such delivery, the
grantee to furnish an opinion of counsel acceptable to the Committee to the
effect that such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act, (ii) the Committee may permit any such
delivery to be made by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the award giving rise to the tax withholding
obligation (in which event the date of delivery shall be deemed the date such
award was exercised), or (iii) the Committee may make or authorize loans to
finance, or to otherwise accommodate the financing of, the foregoing withholding
requirements.
4.5. Adjustments Upon Changes in Capitalization. If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued pursuant to awards under the Plan, the maximum number of options which
may be granted to any one person in any year, the number of shares of Common
Stock subject to awards, the option exercise price of options theretofore
granted under the Plan, and the amount payable by a grantee in respect of an
award, shall be appropriately adjusted (as the Committee may determine) for any
change in the number of issued shares of Common Stock resulting from the
subdivision or combination of shares of Common Stock or other capital
adjustments, or the payment of a stock dividend after the effective date of the
Plan, or other change in such shares of Common Stock effected without receipt of
consideration by the Company; provided that any awards covering fractional
shares of Common Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
4.6. Right of Discharge Reserved. Nothing in the Plan or in any Plan
agreement shall confer upon any person the right to continue in the employment
of the Company or an Affiliate or affect any right which the Company or an
Affiliate may have to terminate the employment of such person.
4.7. No Rights as a Stockholder. No grantee or other person shall have
any of the rights of a stockholder of the Company with respect to shares subject
to an award until the issuance of a stock certificate to him for such shares.
Except as otherwise provided in Section 4.5, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
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extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued. In the case
of a grantee of an award which has not yet vested, the grantee shall have the
rights of a stockholder of the Company if and only to the extent provided in the
applicable Plan agreement.
4.8. Nature of Payments.
(a) Any and all awards or payments hereunder shall be granted, issued,
delivered or paid, as the case may be, in consideration of services performed
for the Company or for its Affiliates by the grantee.
(b) No such awards and payments shall be considered special incentive
payments to the grantee or, unless otherwise determined by the Committee, be
taken into account in computing the grantee's salary or compensation for the
purposes of determining any benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate and the grantee.
(c) By accepting an award under the Plan, the grantee shall thereby
waive any claim to continued exercisability or vesting of an award or to damages
or severance entitlement related to non-continuation of the award beyond the
period provided herein or in the applicable Plan agreement, notwithstanding any
contrary provision in any written employment contract with the grantee, whether
any such contract is executed before or after the grant date of the award.
4.9. Non-Uniform Determinations. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, and (c) the
treatment of leaves of absence pursuant to Section 2.7(c).
4.10. Other Payments or Awards. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
4.11. Reorganization.
(a) In the event that the Company is merged or consolidated with
another corporation and, whether or not the Company shall be the surviving
corporation, there shall be any change in the shares of Common Stock by reason
of such merger or consolidation, or in the event that all or substantially all
of the assets of the Company are acquired by another person, or in the event of
a reorganization or liquidation of the Company (each such event being
hereinafter referred to as a "Reorganization Event") or in the event that the
Board shall propose that the Company enter into a Reorganization Event, then the
Committee may in its discretion, by written notice to a grantee, provide that
his options will be terminated unless exercised within 30 days (or such longer
period as the Committee shall determine in its sole discretion) after the date
of such notice; provided
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that if, and to the extent that, the Committee takes such action with respect to
the grantee's options not yet exercisable, the Committee shall also accelerate
the dates upon which such options shall be exercisable. The Committee also may
in its discretion by written notice to a grantee provide that all or some of the
restrictions on any of the grantee's awards may lapse in the event of a
Reorganization Event upon such terms and conditions as the Committee may
determine.
(b) Whenever deemed appropriate by the Committee, the actions referred
to in Section 4.11(a) may be made conditional upon the consummation of the
applicable Reorganization Event.
4.12. Section Headings. The section headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections.
4.13. Effective Date and Term of Plan.
(a) The Plan has been adopted and shall be effective as of January 19,
2000.
(b) The Plan shall terminate as of January 19, 2010, and no awards
shall thereafter be made under the Plan. Notwithstanding the foregoing, all
awards made under the Plan prior to such termination date shall remain in effect
until such awards have been satisfied or terminated in accordance with the terms
and provisions of the Plan and the applicable Plan agreement.
4.14. Governing Law. The Plan shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.
12
Exhibit 10.12
- -------------------------------------------------------------------------------
FIFTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JULY 29, 1999
BY AND AMONG
VANTAS INCORPORATED
AND
THE SECURITYHOLDERS IDENTIFIED HEREIN
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
RECITALS.....................................................................1
ARTICLE I DEFINITIONS......................................................3
1.1 Defined Terms....................................................3
ARTICLE II BOARD; COMMITTEES...............................................13
2.1 Board of Directors..............................................13
2.2 Removal of Directors............................................15
2.3 Committees......................................................16
2.4 Vacancies.......................................................17
2.5 Proxies.........................................................17
2.6 Compensation....................................................17
2.7 Subsidiary Boards...............................................17
ARTICLE III CERTAIN CORPORATE ACTION........................................18
3.1 Approval of Certain Board Action................................18
3.2 Approval of Certain Stockholders................................21
3.3 Appointment of Appraiser........................................22
3.4 Appointment of Certain Executive Personnel......................22
3.5 Resolution of Certain Tie Votes of the Board....................22
ARTICLE IV TRANSFER OF SHARES..............................................23
4.1 Restrictions on Transfer........................................23
4.2 Certain Permitted Transfers.....................................23
4.3 Rights of First Refusal.........................................24
4.4 Restrictions in Connection with Registrations...................28
4.5 Tag-Along Right.................................................28
4.6 Transfers to a Competitor.......................................30
4.7 Sales of Beale Securities.......................................31
4.8 Sale of the Company.............................................33
4.9 Repurchase of Equity Interests..................................34
4.10 Restrictions Following Qualified Public Offering................34
ARTICLE V PUT.............................................................35
5.1 Ability to Put..................................................35
5.2 Put Price.......................................................38
5.3 Appraisal Procedure.............................................38
5.4 Consent Required to Put.........................................39
ARTICLE VI REGISTRATION RIGHTS.............................................40
6.1 Public Offering Shares..........................................40
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ARTICLE VII PREEMPTIVE RIGHTS..............................................48
7.1 Preemptive Rights...............................................48
7.2 Standstill......................................................52
ARTICLE VIII TERMINATION...................................................52
8.1 Termination.....................................................52
ARTICLE IX MISCELLANEOUS...................................................54
9.1 Information.....................................................54
9.2 Certificate Legend..............................................56
9.3 Negotiable Form.................................................56
9.4 Enforcement.....................................................56
9.5 Specific Performance............................................56
9.6 Transferees.....................................................57
9.7 Notices.........................................................57
9.8 Binding Effect; Assignment......................................66
9.9 Governing Law...................................................66
9.10 Severability....................................................66
9.11 Entire Agreement................................................67
9.12 Counterparts....................................................67
9.13 Amendment; Waiver...............................................67
9.14 Captions........................................................67
9.15 Waivers.........................................................67
9.16 Subsequent Option Grants........................................68
9.17 Non-Competition.................................................68
SCHEDULE 1 Holdings of Securityholders
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FIFTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT OF
VANTAS INCORPORATED
STOCKHOLDERS' AGREEMENT dated as of July 29,1999 (this "Agreement") by and
among VANTAS INCORPORATED, a Nevada corporation (the "Company"); the parties
identified on the signature pages under the heading "Cahill, Warnock Holders"
(the "Cahill Holders"); the parties identified on the signature pages under the
heading "Northwood Holders" (the "Northwood Holders"); the party identified on
the signature pages under the heading "Paribas Holder" (the "Paribas Holder");
the party identified on the signature pages under the heading "PNA Holder" (the
"PNA Holder"); the parties identified on the signature pages under the heading
"Unit Holders" (the "Unit Holders"); the parties identified on the signature
pages under the heading the "Series C and D Holders" (the "Series C and D
Holders"); and the parties identified on the signature pages under the heading
"Other Holders" (collectively, the "Other Holders"). The Cahill Holders, the
Northwood Holders, the Paribas Holder, the PNA Holder, the Unit Holders, the
Series C and D Holders, and the Other Holders are referred to herein
collectively as the "Securityholders".
RECITALS
A. The Company entered into a Series A Convertible Preferred Stock Purchase
Agreement, dated as of November 15, 1996 (the "First Series A Stock Purchase
Agreement"), with the Cahill Holders, pursuant to which the Cahill Holders
acquired shares of the Company's Series A Convertible Preferred Stock and
warrants on the terms and conditions set forth therein.
B. The Company entered into a Stockholders' Agreement, dated as of November
15, 1996 (the "Initial Stockholders' Agreement"), with the Cahill Holders and
certain of the Other Holders identified therein.
C. The Company entered into a Series A Convertible Preferred Stock Purchase
Agreement, dated as of December 31, 1996 (the "Second Series A Stock Purchase
Agreement"), with the Northwood Holders, pursuant to which the Northwood Holders
acquired shares of the Company's Series A Convertible Preferred Stock and
warrants on the terms and conditions set forth therein.
D. The Company entered into Subscription Agreements, dated as of December
30, 1996 and January 14, 1997, with certain of the Other Holders pursuant to
which each of them acquired shares of the Company's Series A Convertible
Preferred Stock and warrants on the terms and conditions set forth therein.
E. The Company entered into an Amended and Restated Stockholders'
Agreement, dated as of December 31, 1996 (the "First Restated Stockholders'
Agreement"), with the Cahill Holders, the Northwood Holders and the Other
Holders who subscribed for Series A Preferred Stock, which amended, restated and
superseded in its entirety the Initial Stockholders' Agreement.
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F. The Company entered into an Amendment No. 1, dated as of January 14,
1997 ("Amendment No. 1"), to the First Restated Stockholders' Agreement with the
Cahill Holders, the Northwood Holders and the Other Holders who subscribed for
Series A Preferred Stock.
G. The Company entered into a Second Amended and Restated Stockholders'
Agreement, dated as of February 15, 1997 (the "Second Restated Stockholders
Agreement"), with the Cahill Holders, the Northwood Holders, the Other Holders
who subscribed for Series A Preferred Stock, and the Paribas Holder which
amended, restated and superseded in its entirety the First Restated Stockholders
Agreement.
H. The Company entered into a Series B Convertible Preferred Stock Purchase
Agreement, dated as of April 29, 1998 (the "Series B Stock Purchase Agreement"),
with the PNA Holder, the Cahill Holders, the Northwood Holders and certain of
the Other Holders, pursuant to which such Securityholders acquired shares of the
Company's Series B Convertible Preferred Stock.
I. The Company entered into a Third Amended and Restated Stockholders'
Agreement, dated as of April 29, 1998 (the "Third Restated Stockholders
Agreement"), with the Cahill Holders, the Northwood Holders, the Other Holders,
the PNA Holder and the Paribas Holder which amended, restated and superseded in
its entirety the Second Restated Stockholders Agreement.
J. The Company entered into Series B Convertible Stock Purchase Agreements
dated as of December 21, 1998 with the holders of units of limited partnership
interest (the "Unit Holders") of certain limited partnerships, of which various
Subsidiaries of the Company are the general partners, pursuant to which such
Unit Holders exchanged their units of limited partnership interest for shares of
the Company's Series B Convertible Preferred Stock.
K. The Company entered into an Amended and Restated Credit Agreement dated
as of November 6, 1998 (as such agreement may be amended, supplemented,
refinanced, modified or replaced, the "Credit Agreement") with certain financial
institutions party thereto from time to time and Paribas, as Agent, or any other
successor Agent thereto.
L. On January 8, 1999, ALLIANCE Holding, Inc., a wholly owned subsidiary of
the Company, was merged with and into Interoffice Superholdings Corporation
("Interoffice"), and, immediately thereafter, ANI Holding, Inc., a wholly owned
subsidiary of the Company, was merged with and into Reckson Executive Centers,
Inc. ("REC"), in each case pursuant to the respective merger agreements (the
"Merger Agreements") and in connection with such mergers (the "Mergers"), the
Series C and D Holders exchanged all of their shares of capital stock of REC and
Interoffice beneficially held on January 8, 1999 (the "Merger Date") for shares
of the Company's Series C Convertible Preferred Stock.
M. The Company entered into a Fourth Amended and Restated Stockholders'
Agreement, dated January 8, 1999 (the "Fourth Restated Stockholders'
Agreement"), with the Series A Holders, Series B Holders and Series C Holders,
which amended, restated and superceded in its entirety the Third Amended and
Restated Stockholders' Agreement.
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N. The Company entered into a Series D Convertible Preferred Stock Purchase
Agreement, dated as of July 29, 1999 (the "Series D Stock Purchase Agreement"),
with the Series C and D Holders who subscribed for Series D Preferred Stock.
O. The Company anticipates entering into a Series D and E Convertible
Preferred Stock Purchase Agreement (the "Series D and E Stock Purchase
Agreement") with certain Securityholders who will also subscribe for Series D
Preferred Stock or Series E Preferred Stock pursuant thereto, subject to
Super-Majority Approval (as defined herein).
P. On the date hereof, each Securityholder owns the shares of capital stock
of the Company or options or warrants exercisable for shares of capital stock of
the Company set forth opposite his, her or its name on Schedule 1 hereto (which
Schedule 1 does not, as of the date of this Agreement, include any shares of
Series D Preferred Stock or Series E Preferred Stock which may be issued
pursuant to the Series D and E Stock Purchase Agreement).
Q. The Securityholders desire to enter into this Agreement with the Company
which shall amend, restate and supersede in its entirety the Fourth Restated
Stockholders' Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. The following terms are defined as follows:
(1) "Adjusted Fully Diluted Capitalization" shall mean the number of issued
and outstanding shares of Common Stock, assuming that (i) any Options or
Warrants outstanding as of the Merger Date, and any Options outstanding under
the Company's 1996 Stock Option Plan, whether or not outstanding as of the date
of this Agreement, have been exercised in full, (ii) any outstanding options or
warrants to purchase Common Stock or to purchase any security convertible into
or exchangeable for Common Stock, other than those described in clause (i)
hereof, that are Exercisable and that have an exercise price that is lower than
the then fair market value of the Common Stock have been exercised in full, and
(iii) any outstanding securities that are then convertible into or exchangeable
for Common Stock have been converted or exchanged in full.
(2) "Affiliate" shall mean, with respect to any Person, (i) any Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with, such Person, (ii) any executive officer (as such term is defined by Rule
501 promulgated under the Securities Act) or director (or individual with a
similar capacity) of such Person, or (iii) when used with respect to an
individual, shall include the Family Group Members of such individual.
(3) "Annual Budget" shall mean the budget for the Company and its
Subsidiaries in respect of each fiscal year of the Company which shall include,
without limitation, a cash flow projection, an operating budget, a capital
expenditures budget and an acquisition budget.
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(4) "Beale Employment Agreement" shall mean that certain Employment
Agreement, dated as of November 15, 1996, between the Company and David W.
Beale.
(5) "Beneficially Own" shall have the meaning given such term under Rule
13d-3 promulgated under the Exchange Act. The term "Beneficial Ownership" shall
have the correlative meaning. The foregoing terms shall exclude any record or
Beneficial Ownership in any securities issued by RSI or any interest in JAH
Realties L.P.
(6) "Blackout Period" shall mean the period commencing on the consummation
of a Qualified Public Offering and ending on the earliest to occur of (i) the
second anniversary of the consummation of the Qualified Public Offering, (ii)
the consummation of a secondary offering of the Common Stock in which (X) the
gross proceeds of such offering equal or exceed 30% of the gross proceeds of the
Qualified Public Offering, and (Y) the offering price per share of Common Stock
is at least 10% higher than the offering price per share of Common Stock in the
Qualified Public Offering (as adjusted to reflect stock dividends, stock splits,
stock combinations or any other similar transaction occurring after the
Qualified Public Offering), and (iii) the presentation by any Securityholder
that is subject to restrictions on resale during the Blackout Period of evidence
reasonably satisfactory to a majority of the other Securityholders that are also
subject to such restrictions that the Company is capable of consummating an
offering of the type described in clause (ii) hereof. The parties agree that the
opinion of a bulge bracket underwriter to the foregoing effect based on the then
current market price of the Common Stock, earnings multiples and any other
relevant factors shall automatically be satisfactory evidence. (7) "Board" shall
mean the Board of Directors of the Company. (8) "Business Day" shall mean a day
(other than a Saturday or Sunday) on which both federally and New York State
chartered banks are generally open for business in New York City. (9)
"Certificates of Designation" shall collectively mean the Series A Certificate
of Designation, the Series B Certificate of Designation, the Series C
Certificate of Designation, the Series D Certificate of Designation and the
Series E Certificate of Designation. (10) "Commission" shall mean the Securities
and Exchange Commission or any other federal agency at the time administering
the Securities Act. (11) "Common Stock" shall mean the Company's common stock,
par value $.01 per share, whether designated as Class A Common Stock or Class B
Common Stock. (12) "Common Stock Equivalent" shall mean, with respect to any
Securityholder, the number of shares of Common Stock owned by such
Securityholder, plus the number of shares of Conversion Stock, the number of
Warrant Shares, and the number of Option Shares which such Securityholder has
the right to acquire (or would upon the full vesting of all Options have the
right to acquire) by conversion or exercise as of the date of determination
thereof.
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(13) "Control" shall mean the power to direct the management and policies
of any Person whether through voting control, by contract or otherwise, and the
terms "Controls" and "Controlled" shall have the correlative meanings.
(14) "Conversion Stock" shall mean Common Stock issuable upon the
conversion of the Preferred Stock.
(15) "Core Business" shall mean the business of the outsourcing of office
operations both on an on-site and off-site basis, and the outsourcing of
business support services to customers or clients of the Company which purchase
any of the Company's products or services.
(16) "Director" shall mean any member of the Board.
(17) "Encumbrances" shall mean any and all liens, pledges, claims, charges,
security interests, options or other legal or equitable encumbrances and
restrictions.
(18) "Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(19) "Exercisable" shall mean, with respect to any options or warrants to
purchase Common Stock or any security convertible into or exchangeable for
Common Stock, that at the time of determination, such options or warrants may be
exercised for Common Stock or any security convertible into or exchangeable for
Common Stock.
(20) "Family Group Members" shall mean (i) the parents, grandparents,
brothers, sisters, descendants (whether natural or adopted) and spouse of the
specified individual; (ii) any spouse or descendant of any specified individual
specified in clause (i) above; (iii) any trust created solely for the benefit of
any individual described in clauses (i) through (ii) above; (iv) any executor or
administrator for any of the individuals described in clauses (i) through (ii)
above; (v) any partnership solely of individuals described in clauses (i)
through (iv) above; and (vi) any tax exempt corporate foundation created by any
of the Persons described in clauses (i) through (v) above exclusively engaged in
charitable purposes.
(21) "Fully Diluted Capitalization" shall mean the number of issued and
outstanding shares of Common Stock assuming full issuance of all Conversion
Stock, Warrant Shares, Option Shares and other shares of Common Stock issuable
upon exercise of any other options to purchase Common Stock or any security
convertible or exchangeable for Common Stock and conversion of any such
convertible or exchangeable securities.
(22) "GAAP" shall mean generally accepted accounting principles.
(23) "Incapacity" with respect to an individual, shall mean that a
committee or conservator shall have been appointed for such individual or his
property.
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(24) "Initial Public Offering" shall mean the consummation of either I(i) a
public offering that has received Super-Majority Approval, or (ii) a Qualified
Public Offering.
(25) "Intercompany Agreement" means that certain Intercompany Agreement,
dated as of January 8, 1999, by and between the Company and the RSI Holder.
(26) "JAH Beneficial Holders" shall mean (i) Jon L. Halpern and any Person
Controlled by him, (ii) any Family Group Member of Jon L. Halpern so long as Jon
L. Halpern has the power to control, by contract or otherwise, the vote of the
Shares of Series C Preferred Stock or Series D Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group Member, and (iii) in the
event of the death or Incapacity of Jon L. Halpern, any of his Family Group
Members or any conservator or committee who, as a result of his death, obtain
Beneficial Ownership of the Shares of Series C Preferred Stock, Series D
Preferred Stock or Common Stock Equivalents, which were Beneficially Owned by
Jon L. Halpern prior to his death or Incapacity so long as Control with respect
to such Beneficial Ownership thereof resides in a single individual.
(27) "Majority of the Shares of Series A, B and E Preferred Stock" shall
mean at least 66_% of the Shares of the Series A, B and E Preferred Stock (taken
as a single class) issued and outstanding at the time any such vote is taken.
(28) "Majority of the Shares of Series C and D Preferred Stock" shall mean
at least 50.1% of the Shares of the Series C and D Preferred Stock (taken as a
single class) issued and outstanding at the time any such vote is taken.
(29) "OnSite" shall mean OnSite Ventures, L.L.C.
(30) "OnSite Agreement" means the agreement to be entered into between the
Company and OnSite with respect to the provision of Internet and
telecommunications services to the Company by OnSite.
(31) "Option Plan" shall mean the Company's 1996 Stock Option Plan, the
Company's 1999 Stock Option Plan, or any other stock option or phantom interest
plan that has received Super-Majority Approval.
(32) "Options" shall mean (i) the options to purchase Common Stock, each
originally dated as of June 30, 1996, issued to David W. Beale, Kelly G.
Besecker, Laura J. Kozelouzek and Alan M. Langer, (ii) the options to purchase
Common Stock, each originally dated as of November 1, 1996, issued to David W.
Beale, Louis Perlman, William E. Phillips and Arnold L. Cohen, (iii) the option
to purchase Common Stock, originally dated as of August 4, 1998, issued to David
W. Beale (as all of such options described in clauses (i), (ii) and (iii) have
been amended and restated as of January 8, 1999), and (iv) any options to
purchase Common Stock granted under an Option Plan.
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(33) "Option Shares" shall mean the shares of Common Stock of the Company
issuable (or which may become issuable upon vesting) upon the exercise of
Options.
(34) "Person" means any individual, proprietorship, partnership,
corporation, limited liability company, trust, estate, or other form of entity
including, if applicable, any governmental authority or agency.
(35) "Preferred Stock" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
(36) "Prime Rate" shall mean the prime rate publicly announced by The Chase
Manhattan Bank, N.A. from time to time.
(37) "Pro Rata Share" with respect to any Securityholder shall mean the
percentage equal to the fraction obtained by dividing the number of Common Stock
Equivalents such Securityholder owns by the aggregate number of all Common Stock
Equivalents owned by all Securityholders.
(38) "Prohibited Business" shall mean the executive office suite business
in which the Company is engaged at the time of determination, taken as a whole
and including (i) on-site and off-site operations and (ii) any product or
service which is part of the executive office suite business and is being
actively pursued for development by management of the Company and which has been
presented to the Executive Committee of the Company and not been rejected
thereby (provided that if such product or service has been rejected and
thereafter been taken to the Board and not been rejected, such product or
service shall be considered part of the Prohibited Business). The time of
determination shall be the time of the development of a business or the making
of any investment in question under Section 9.17 by any of the Persons subject
to the restrictions in Section 9.17.
(39) "Qualified Public Offering" shall mean the consummation of a
firm-commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock for the account of the Company in which (i) the aggregate gross
proceeds of such offering equal or exceed $75 million, (ii) the valuation of the
Company (as reflected by the quotient obtained by dividing (A) the product of
(1) the Adjusted Fully Diluted Capitalization (giving effect to the Qualified
Public Offering) and (2) the aggregate gross proceeds of such offering by (B)
the number of shares of Common Stock sold in such offering) equals or exceeds a
multiple of 20 times the Company's projected net income for the 12 month period
following the date of the most recent financial statements included in the
registration statement for such offering (which projected net income shall be
based on reasonable assumptions that have been disclosed to the Board and shall
be determined in a manner consistent with the last regularly prepared quarterly
financial statements of the Company, except for any change in accounting
practices made subsequent thereto with which the Company's independent
accountants concur and in accordance with applicable financial standards (e.g.
AICPA Professional Standards Section 200 for a Financial Forecast)), and (iii)
the lead managing underwriter is either a "bulge bracket" firm or BT Alex. Brown
Incorporated, NationsBank Montgomery Securities LLC or William Blair & Company,
L.L.C. The assumptions used in determining projected net income may
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include: (i) consistency in financial reporting policies and procedures
(except as otherwise required or suggested by GAAP), (ii) the earnings growth of
the Company during the relevant (e.g., prior 2-year) period, (iii) projected
events and transactions during the projected one year period per the Annual
Budget (as adjusted per variance analysis for the prior four quarters) and the
expected use of funds from the public offering, (iv) financial effect (pro
forma) of any acquisitions that are likely to be consummated and (v) such other
factors as any investment banking firm described above might consider in valuing
the Company.
(40) "Qualifying Series C and D Beneficial Holders" shall mean the RSI
Beneficial Holders, the JAH Beneficial Holders, the Rabinowitz Beneficial
Holders, the Rieger Beneficial Holders and the Widder Beneficial Holders.
(41) "Rabinowitz Beneficial Holders" shall mean (i) Martin Rabinowitz and
any Person Controlled by him, (ii) any Family Group Member of Martin Rabinowitz
so long as Martin Rabinowitz has the power to control, by contract or otherwise,
the vote of the Shares of Series C and D Preferred Stock or Common Stock
Equivalents Beneficially Owned by such Family Group Member, and (iii) in the
event of the death or Incapacity of Martin Rabinowitz, any of his Family Group
Members or any conservator or committee who, as a result of his death or
Incapacity, obtain Beneficial Ownership of the shares of Series C and D
Preferred Stock or the Common Stock Equivalents, which were Beneficially Owned
by Martin Rabinowitz prior to his death. Notwithstanding the foregoing
provisions of this definition, no Person shall be deemed a Rabinowitz Beneficial
Holder with respect to any shares of Series C and D Preferred Stock or Common
Stock Equivalents which were not acquired by a Rabinowitz Beneficial Holder
either (i) pursuant to the Merger Agreements, or (ii) by exercise of a right to
purchase under Article 4 or under Section 7.1 hereof.
(42) "Registered Securities" shall mean securities that (i) have been
registered under the Securities Act and (ii) are of a class (A) listed on a
national securities exchange or designated for quotation on NASDAQ, and (B)
having an aggregate market value (which shall include securities issued to the
holders of the Company's securities) of at least $50,000,000.
(43) "Rieger Beneficial Holders" shall mean (i) Robert Rieger and any
Person Controlled by him, (ii) any Family Group Member of Robert Rieger so long
as Robert Rieger has the power to control, by contract or otherwise, the vote of
the Shares of Series C and D Preferred Stock or Common Stock Equivalents, and
(iii) in the event of the death or Incapacity of Robert Rieger, any of his
Family Group Members or any conservator or committee who, as a result of his
death or Incapacity, obtain Beneficial Ownership of the shares of Series C and D
Preferred Stock or the Common Stock Equivalents, which were Beneficially Owned
by Robert Rieger prior to his death. Notwithstanding the foregoing provisions of
this definition, no Person shall be deemed a Rieger Beneficial Holder with
respect to any shares of Series C and D Preferred Stock or Common Stock
Equivalents which were not acquired by a Rieger Beneficial Holder either (i)
pursuant to the Merger Agreements, or (ii) by exercise of a right to purchase
under Article 4 or under Section 7.1 hereof.
(44) "RSI" shall mean Reckson Service Industries, Inc.
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(45) "RSI Beneficial Holders" shall mean RSI and any Affiliates of RSI
Controlled by RSI, in each case for so long as an acquisition of Control of RSI
of the type described in Section 4.6 has not occurred.
(46) "Sale of the Company" shall mean (i) consummation of a merger or
consolidation (or similar transaction) of the Company with or into another
Person that is not a direct or indirect parent or subsidiary of the Company
pursuant to which all or substantially all of the then outstanding shares of
capital stock of the Company are converted or exchanged into the right to
receive cash or securities of another Person, (ii) the consummation of the sale
or other disposition of all or substantially all of the outstanding Shares,
Options and Warrants that are the subject of this Agreement to a Person that is
not a direct or indirect parent or Subsidiary of the Company or (iii) the
consummation of the sale or other disposition of all or substantially all of the
Company's assets to a Person that is not a direct or indirect parent or
Subsidiary of the Company; provided, however, that notwithstanding anything to
the contrary contained herein, a Sale of the Company shall only be deemed to
have occurred if at least 80% of the consideration to be received by the
Securityholders in connection with such transaction is payable in (i) cash, (ii)
Registered Securities or (iii) any combination of cash and Registered
Securities.
(47) "Securities Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
(48) "Series A, B and E Holders" shall collectively mean Series A Holders,
Series B Holders and Series E Holders.
(49) "Series A, B and E Preferred Directors" shall mean the directors
nominated by the Series A, B and E Holders pursuant to Section 2.1(a) and (b).
(50) "Series A, B and E Preferred Stock" shall collectively mean the Series
A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock.
(51) "Series A Certificate of Designation" shall mean the Fifth Amended and
Restated Certificate of Designation of Series A Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
(52) "Series A Holders" shall mean the holders of the Series A Preferred
Stock issued and outstanding at any time.
(53) "Series A Preferred Stock" shall mean the Company's Series A
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(54) "Series B Certificate of Designation" shall mean the Second Amended
and Restated Certificate of Designation of Series B Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
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(55) "Series B Holders" shall mean the holders of the Series B Preferred
Stock issued and outstanding at any time.
(56) "Series B Preferred Stock" shall mean the Company's Series B
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(57) "Series C and D Adjusted Fully Diluted Capitalization" shall mean the
Adjusted Fully Diluted Capitalization,
(1) decreased by the number of Common Stock Equivalents (A) issued upon the
exercise of options to purchase Shares granted to directors or employees of, or
consultants to, the Company pursuant to the Company's 1999 Stock Option Plan or
any other stock option plan of the Company (other than the Company's 1996 Stock
Option Plan), (B) issued pursuant to the exercise of any rights, warrants,
options (other than as described in clause (A) hereof) or other agreements to
purchase Shares, which rights, warrants, options or other agreements are not
outstanding on the date of this Agreement (except if and to the extent that the
Series C and D Holders had the right to exercise preemptive rights under Article
7 with respect to the initial sale or grant by the Company of such rights,
warrants, options or agreements), (C) issued in an Initial Public Offering as to
which the RSI Beneficial Holders or the Series C and D Holders would have had
the right to exercise preemptive rights under Section 7.1(b) but for the
limitation set forth in Section 7.1(b) relating to the right to acquire up to
30% of the New Securities sold in such Initial Public Offering until other
Persons have purchased $75,000,000 of such New Securities, and (D) issued as
consideration for, or in connection with, any merger or acquisition of the stock
or assets of any acquired entity by the Company, and
(2) increased in the event there is an issuance of New Securities (as
defined in Section 7.1(a)) or Additional Securities (as defined in Section
7.1(b)) by the number of Unused Backlog CSE's (as hereinafter defined) as to
which the RSI Beneficial Holders or any of the Series C and D Holders have the
right to exercise (as determined below) preemptive rights under the second
paragraph of Section 7.1(a) or under Section 7.1(b) (the "Testing Sections").
As used herein, "Backlog CSE's" shall mean the aggregate number of Common Stock
Equivalents by which the Adjusted Fully Diluted Capitalization has been
decreased pursuant to clause (i) above of this Section 1.1(bbb), and "Unused
Backlog CSE's" shall mean the number of Backlog CSE's reduced by the number of
Backlog CSE's by which the Adjusted Fully Diluted Capitalization has been
increased pursuant to clause (ii) above of this Section 1.1(bbb). For the
purpose of determining whether the RSI Beneficial Holders or the Series C and D
Holders have the right to exercise preemptive rights under the Testing Sections
with respect to Unused Backlog CSEs, the RSI Beneficial Holders or the Series C
and D Holders, as the case may be, shall be deemed to have such rights if and to
the extent that the number of New Securities or Additional Securities which the
RSI Beneficial Holders or any of the Series C and D Holders have the right to
purchase under the Testing Sections is greater than the number of such New
Securities or Additional Securities which the RSI Beneficial Holders or any
Series C and D Holders would then have the right to purchase if the RSI
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Beneficial Holders and the Series C and D Holders (x) had actually exercised
preemptive rights to the maximum extent permitted to them under Sections 7.1(a)
and 7.1(b) with respect to all issuances of New Securities or Additional
Securities, and (y) had the right to exercise, and had actually exercised,
preemptive rights under the Testing Sections with respect to all issuances
described in clause (i) above of this Section 1.1(bbb). If at any time the
Company requests, and the RSI Beneficial Holders or the Series C and D Holders
agree to, the waiver of preemptive rights that the RSI Beneficial Holders or
such Series C and D Holders may then have with respect to New Securities or
Additional Securities, then for purposes of this Agreement, the RSI Beneficial
Holders and the Series C and D Holders shall not be deemed to have had the right
to exercise preemptive rights with respect to such New Securities or Additional
Securities.
(58) "Series C and D Holders" shall mean the holders of the Series C and D
Preferred Stock.
(59) "Series C and D Preferred Directors" shall mean the directors
nominated by the Series C and D Holders pursuant to Section 2.1(a) and (b).
(60) "Series C and D Preferred Stock" shall mean the Series C Preferred
Stock and Series D Preferred Stock.
(61) Series C Certificate of Designation" shall mean the Amended and
Restated Certificate of Designation of the Series C Preferred Stock, dated as of
July 20, 1999 to the Company's Articles of Incorporation.
(62) "Series C Holders" shall mean the holders of the Series C Preferred
Stock issued and outstanding at any time.
(63) "Series C Preferred Stock" shall mean the Company's Series C
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(64) "Series D Certificate of Designation" shall mean the Certificate of
Designation of Series D Preferred Stock, dated as of July 20, 1999, to the
Company's Articles of Incorporation.
(65) "Series D Holders" shall mean the holders of the Series D Preferred
Stock issued and outstanding at any time.
(66) "Series D Preferred Stock" shall mean the Company's Series D
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(67) "Series E Certificate of Designation" shall mean the Certificate of
Designation of Series E Preferred Stock, dated as of July 20, 1999, to the
Company's Articles of Incorporation.
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(68) "Series E Holders" shall mean the holders of the Series E Preferred
Stock issued and outstanding at any time.
(69) "Series E Preferred Stock" shall mean the Company's Series E
convertible preferred stock, par value $.01 per share, having such rights,
preferences and privileges as may be in effect from time to time.
(70) "Shares" shall mean any shares of capital stock of the Company,
including, without limitation, the Common Stock, Preferred Stock, Warrant Shares
and Option Shares, now or hereafter issued.
(71) "Subsidiary" shall mean any corporation, partnership or limited
liability company of which a majority of the outstanding voting securities or
other voting equity interests or voting power are owned, directly or indirectly,
by the Company.
(72) "Super-Majority Approval" shall mean approval of a majority of the
whole Board (which majority shall include a majority of the Series C and D
Preferred Directors and, solely with respect to the actions specified in
Sections 3.1(e), 3.1(f), and 3.1(j)(A), at least two Series A, B and E Preferred
Directors).
(73) "Warrants" shall mean (1) the warrants originally dated as of November
15, 1996 issued to the Cahill Holders, (2) the warrants originally dated as of
November 15, 1996, December 31, 1996, February 15, 1997 and April 29, 1998
issued to Thomas S. Shattan, Gregory E. Mendel and G. Kevin Fechtmeyer and the
warrants originally dated as of December 31, 1996 and April 29, 1998 issued to
The Shattan Group, LLC, (3) the warrants originally dated as of December 31,
1996 and February 15, 1997 issued to the Northwood Holders, (4) the warrants
originally dated as of December 31, 1996, January 14, 1997 and February 15, 1997
issued to certain of the Other Holders, and (5) the warrants originally dated as
of February 15, 1997 issued to the Paribas Holder (as all of such warrants
described in clauses (1), (2), (3), (4) and (5) have been amended and restated
as of January 8, 1999).
(74) "Warrant Shares" shall mean the shares of Common Stock of the Company
issuable upon the exercise of the Warrants.
(75) "Widder Beneficial Holders" shall mean (i) Arnold Widder and any
Person Controlled by him, (ii) any Family Group Member of Arnold Widder so long
as Arnold Widder has the power to control, by contract or otherwise, the vote of
the shares of Series C and D Preferred Stock or Common Stock Equivalents
Beneficially Owned by such Family Group Member, and (iii) in the event of the
death or Incapacity of Arnold Widder, any of his Family Group Members or any
conservator or committee who, as a result of his death or Incapacity, obtain
Beneficial Ownership of the shares of Series C and D Preferred Stock or the
Common Stock Equivalents, which were Beneficially Owned by Arnold Widder prior
to his death. Notwithstanding the foregoing provisions of this definition, no
Person shall be deemed a Widder Beneficial Holder with respect to any shares of
Series C and D Preferred Stock or Common Stock Equivalents which were not
acquired by a
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Widder Beneficial Holder either (i) pursuant to the Merger Agreements, or (ii)
by exercise of a right to purchase under Article 4 or under Section 7.1 hereof.
ARTICLE 2
BOARD; COMMITTEES
2.1 Board of Directors.
(1) The Board shall consist of ten Directors, (i) three Directors initially
nominated by David W. Beale (which nominees shall initially be David W. Beale,
Arnold L. Cohen, and Louis Perlman) (collectively, and as may be reduced
pursuant to Section 2.1 (b) hereof, the "Company Directors"), (ii) three
Directors (collectively, along with any additional Person nominated pursuant to
Section 2.1(b) hereof, the "Series A, B and E Preferred Directors") initially
nominated as follows: two shall be designated by the Cahill Holders (which
nominees shall initially be David L. Warnock and G. Lee Bohs), and one shall be
designated by the Northwood Holders (which nominee shall initially be Henry T.
Wilson), and (iii) four Directors (collectively, the "Series C and D Preferred
Directors") initially nominated by holders of a Majority of the Shares of Series
C and D Preferred Stock (which nominees shall initially be Scott Rechler, Jon
Halpern, Daniel DiSano and Stephen M. Rathkopf). The Chairman of the Board shall
be a Series C and D Preferred Director nominated by the holders of a Majority of
the Shares of Series C and D Preferred Stock and reasonably acceptable to the
Company Directors and the Series A, B and E Preferred Directors. The Chairman of
the Board shall not serve as an employee or officer of the Company but shall be
vested with the rights and privileges typically accorded the Chairman of the
Board of Directors under applicable corporate law, including, without
limitation, the right to call special meetings of the Board or stockholders in
accordance with the Company's By-laws. Notwithstanding the foregoing, the
Chairman of the Board and the Chief Executive Officer of the Company shall
jointly prepare the agenda for and chair each meeting of the Board. The initial
Chairman of the Board shall be Scott Rechler.
(2) On July 29, 2001, the Directors shall be reelected, such that there
shall be (A) two Company Directors who shall be nominated by David W. Beale, (B)
five Series C and D Preferred Directors who shall be nominated by the holders of
a Majority of the Shares of Series C and D Preferred Stock, and (C) three Series
A, B and E Preferred Directors who shall be nominated by the Cahill Holders and
the Northwood Holders as set forth in Section 2.1(a). In order to implement such
reelection, one of the Company Directors shall resign as a Director as of that
date, and, if such resignation has not occurred by such date, the Board shall
vote to remove one Company Director (other than David W. Beale) pursuant to a
designation to be made by a majority of the Series C and D Preferred Directors,
following which the Board shall be re-elected in accordance with the first
sentence of this Section 2.1(b). Upon any retirement, resignation, disability or
death of any Company Director (other than David W. Beale) following the date
that the Directors are reelected pursuant to this Section 2.1(b), the Cahill
Holders shall have the right to appoint his successor (who shall be reasonably
satisfactory to the Northwood Holders). Thereafter, there shall be (x) four
Series A, B and E Preferred Directors, three of whom shall be
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nominated by the Cahill Holders (one of whom shall be reasonably satisfactory to
the Northwood Holder) and one of whom shall be nominated by the Northwood
Holders, (y) one Company Director, who shall be nominated by David W. Beale, and
(z) five Series C and D Preferred Directors who shall be nominated by the
holders of a Majority of the Shares of the Series C and D Preferred Stock.
(3) Notwithstanding anything to the contrary contained herein, (i) David W.
Beale shall have the rights set forth herein to nominate all of the Company
Directors (as the number of Company Directors shall be reduced pursuant to
Section 2.1(b)) only so long as he maintains Beneficial Ownership of at least
50% of the Common Stock Equivalents held by him as of the date of this Agreement
and the Beale Employment Agreement has not been terminated by the Company for
Cause (as defined therein); provided, however, that so long as David W. Beale is
the Chief Executive Officer of the Company he shall serve as a Director, (ii)
the Cahill Holders and the Northwood Holders each shall have the rights set
forth herein to nominate the Series A, B and E Preferred Directors, and such
Series A, B and E Preferred Directors shall have the right to nominate members
of the Committees described in Section 2.3 hereof, only so long as the Cahill
Holders or the Northwood Holders, as the case may be, maintain Beneficial
Ownership in the aggregate of at least 50% of the Common Stock Equivalents
(excluding Warrant Shares) initially acquired by it pursuant to the First Series
A Stock Purchase Agreement and the Second Series A Stock Purchase Agreement, and
(iii) the holders of a Majority of the Shares of Series C and D Preferred Stock
shall have the rights set forth herein to nominate the Series C and D Preferred
Directors and to designate the Chairman of the Board, and the Series C and D
Preferred Directors shall have the right to nominate members of the Committees
described in Section 2.3 hereof, only so long as the Qualifying Series C and D
Beneficial Holders maintain Beneficial Ownership of at least 20% of the Series C
and D Adjusted Fully Diluted Capitalization. If any of David W. Beale, the
Cahill Holders, the Northwood Holders or the Series C and D Holders loses its
rights to designate Directors, the Directors which such Securityholder had been
entitled to designate shall promptly resign and the vacancies created by such
resignations shall be filled by the stockholders of the Company voting at a
special or general meeting or by written consent in lieu of any such meeting at
any time after the consummation of the transaction in which any such Person lost
its rights to designate Directors. If any Directors or Committee members who are
required to resign such positions pursuant to the preceding sentences fail to
promptly tender their written resignations, the stockholders and the remaining
Directors shall promptly take such steps as may be necessary or appropriate
under the Company's bylaws and applicable law in order to remove such Directors
and/or Committee members. The Directors designated by the stockholders of the
Company shall appoint successor committee members to fill any vacancies then
existing as a result of the resignations of the Directors referred to in the two
preceding sentences (other than any vacancy on the Executive Committee created
by the failure of David W. Beale to serve thereon which shall be handled in the
manner provided in Section 2.3(a)).
(4) The Company shall give William E. Phillips, a former Director of the
Company, notice of (in the same manner as notice is given to Directors), and
permit William E. Phillips to attend as a non-voting observer, all meetings of
the Board and shall provide to William E. Phillips the same information
concerning the Company, and access thereto, provided to members of the Board.
William E. Phillips shall keep all such information confidential and shall not
directly or indirectly use such information for any purpose other than
evaluating his continued investment in the Company's securities and to provide
such advice and counsel as may be requested by the
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Company. William E. Phillips shall have the rights set forth herein to be a
non-voting board observer until December 31, 2000.
(5) The Company shall give the PNA Holder notice of (in the same manner as
notice is given to Directors), and permit one Person designated by the PNA
Holder to attend as a non-voting observer, all meetings of the Board and shall
provide to such observer the same information concerning the Company, and access
thereto, provided to members of the Board. Such observer shall keep all such
information confidential and shall not directly or indirectly use such
information for any purpose other than evaluating the PNA Holder's continued
investment in the Series B Preferred Stock and Series E Preferred Stock. The
direct out-of-pocket expenses reasonably incurred by any such designee of the
PNA Holder in attending any board meetings shall be reimbursed by the Company.
The PNA Holder shall have the rights set forth herein to a non-voting board
observer only so long as the PNA Holder maintains ownership in the aggregate of
at least 50% of the Common Stock Equivalents initially acquired by it pursuant
to the Series B Stock Purchase Agreement and Series D and E Stock Purchase
Agreement. Notwithstanding the foregoing, the Company reserves the right to
excuse the non-voting board observer from all or any portion of any meeting of
the Board if the Board determines in its good faith discretion that there are
confidential matters to be discussed relating to the Company's debt financing.
(6) Election of Nominees. On the date hereof, and at each annual meeting of
stockholders of the Company or any special meeting called for the purpose of
electing Directors of the Company (or by consent of stockholders in lieu of any
such meeting) or at such other time or times as the Securityholders may agree,
the Securityholders shall vote all of their respective Shares entitled to vote
in favor of the election of all of the Persons so nominated in accordance with
Section 2.1(a) and Section 2.1(b) and no other Person.
(7) Term. Each of the Series A, B and E Preferred Directors, the Series C
and D Preferred Directors and the Company Directors shall hold office as a
Director of the Company for a term of one year.
2.2 Removal of Directors. No Securityholder shall vote any Shares, and no
Director shall vote, in favor of the removal of a Director designated by David
W. Beale, the Cahill Holders, the Northwood Holders or the Series C and D
Holders unless (i) the right of such other Securityholder(s) to so designate
such Director shall no longer exist as a result of Section 2.1(c), or (ii) such
other Securityholder(s) shall have requested that the Securityholders or
Directors vote for the removal of any such Director (provided the
Securityholder(s) making such request shall at such time remain entitled to
designate a Director pursuant to Section 2.1(c)). In the case of clause (ii) of
the immediately preceding sentence, the (x) Securityholders shall vote all of
their Shares entitled to vote and (y) Directors shall vote, as the case may be,
immediately upon request in favor of the removal of such Director and the
election of any replacement Director as may be designated by requesting
Securityholder(s).
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2.3 Committees.
(1) The Executive Committee of the Board shall consist of five Directors:
(i) two Directors nominated by the Series A, B and E Preferred Directors (which
nominees shall initially be David W. Beale, who shall be entitled to serve on
the Executive Committee for so long as he remains Chief Executive Officer of the
Company, and David L. Warnock) and (ii) three Directors nominated by the Series
C and D Preferred Directors (which nominees shall initially be Scott Rechler,
Jon Halpern and Daniel DiSano). The Chairman of the Executive Committee shall be
David W. Beale, who shall hold such title for so long as he serves on the
Executive Committee, and, thereafter, the Chairman shall be any successor Chief
Executive Officer to David W. Beale. To the extent permitted by law, the
Executive Committee shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Company;
provided, however, that, in no event, shall the Executive Committee have the
authority to authorize any action which requires Super-Majority Approval under
this Agreement. If at least four of the members of the entire Executive
Committee shall not agree on a decision with respect to any matter over which it
has authority to act, such matter shall be referred to the Board for its
determination. Without limiting the foregoing, it is intended that the Executive
Committee shall be responsible for such matters as non-annual (project level)
budget approvals, commitment of capital, incurrence of debt and significant
contractual relations. The Executive Committee shall maintain minutes of its
meetings and report to the Board on all of its proceedings.
(2) The Audit Committee of the Board shall consist of four Directors: (i)
two Directors nominated by the Series A, B and E Preferred Directors, who shall
not be officers or employees of the Company (which nominees shall initially be
Messrs. Arnold Cohen and G. Lee Bohs) and (ii) two Directors nominated by the
Series C and D Preferred Directors (which nominees shall initially be Messrs.
Scott Rechler and Daniel DiSano). Subject to Section 2.1(c), the Series C and D
Preferred Directors shall have the right to designate the Chairman of the Audit
Committee of the Board. The Audit Committee shall recommend the engagement of
independent auditors, review and consider actions of management in matters
relating to audit function, review with independent auditors the scope and
results of their audit engagement, review the system of internal controls and
procedures of the Company and its Subsidiaries, and review the effectiveness of
procedures intended to prevent violations of law and regulations. The Audit
Committee shall also approve the engagement letter of the Company's independent
accountants, direct the internal control (or internal audit) department, if any,
be authorized to direct agreed upon procedures review by independent public
accountants or consultants and review and approve all public securities filings
and audited financial statements.
(3) The Compensation Committee of the Board shall consist of four
Directors: (i) two Directors nominated by the Series A, B and E Preferred
Directors, who shall not be officers or employees of the Company (which nominees
shall initially be Messrs. Louis Perlman and David L. Warnock), and (ii) two
Directors nominated by the Series C and D Preferred Directors (which nominees
shall initially be Messrs. Scott Rechler and Jon Halpern). The grant or
allocation of rights, warrants, options or other agreements to purchase Common
Stock or any security convertible into or exchangeable for Common Stock under
any Option Plan or as compensation to any employee,
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consultant, Director or officer of the Company shall require approval of a
majority of the members of the Compensation Committee.
(4) The Board shall establish a Strategic Steering Committee, which shall
be a management committee. The Strategic Steering Committee shall consist of
David W. Beale, three members appointed by the Series C and D Preferred
Directors (which members need not be Directors and which members shall initially
include Jon L. Halpern) and three senior managers of the Company appointed by
the Chief Executive Officer of the Company. The Strategic Steering Committee
shall be responsible for evaluating and recommending new products, technologies
and strategies with a view towards ensuring the ultimate success of the Company
by continually meeting the changing needs of customers of the Company. There
shall be no chairman of the Strategic Steering Committee.
2.4 Vacancies. Subject to Sections 2.1(b), 2.1(c) and 2.3, if any vacancy
occurs in the Board or any Committee thereof because of death, disability,
resignation, retirement or removal of a Director or a Committee member in
accordance with this Agreement, the Securityholder or Securityholders that
nominated the Person creating such vacancy (or the Directors who nominated the
Committee member) shall nominate a successor (provided that such Securityholder
shall at such time remain entitled to designate a Director, or the relevant
Directors shall at such time remain entitled to nominate a Committee member, as
the case may be, pursuant to Sections 2.1(a), 2.1(b), 2.1(c) and 2.3), and all
Securityholders shall vote the Shares held by them which are entitled to vote in
favor of the election of such successor to the Board and all of the Directors
shall elect or appoint the successors to such Committee of the Board. Any
vacancy that occurs shall be filled as promptly as possible upon the request of
the group having the right to nominate a Person to fill such vacancy.
2.5 Proxies. Neither the Company nor any Securityholder shall give any
proxy or power of attorney to any Person or entity that permits the holder
thereof to vote in his discretion on any matter that may be submitted to the
Company's Securityholders for their consideration and approval, unless such
proxy or power of attorney is made subject to and is exercised in conformity
with the provisions of this Agreement.
2.6 Compensation. Each Director shall be reimbursed by the Company for all
direct out-of-pocket expenses incurred in the reasonable discretion of the
Director in connection with their services as a Director and a committee member
and each Director, other than any Director who is an officer of the Company,
shall receive from the Company an annual Director's fee of $5,000. In addition,
William E. Phillips shall be reimbursed by the Company for all direct
out-of-pocket expenses reasonably incurred by him in attending meetings of the
Board and providing advice to the Company, and shall receive from the Company an
annual fee of $5,000.
2.7 Subsidiary Boards. The board of directors of each Subsidiary shall be
comprised of a single director who shall be David W. Beale or any successor
Chief Executive Officer. No action taken by the board of directors of any
Subsidiary shall be contrary to or inconsistent with the policies,
recommendations or directions of the Board.
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ARTICLE 3
CERTAIN CORPORATE ACTION
3.1 Approval of Certain Board Action. None of the following actions shall
be taken by the Company or any of its Controlled Affiliates without
Super-Majority Approval (provided that if at the time of the proposed action (i)
the Qualifying Series C and D Beneficial Holders do not have aggregate
Beneficial Ownership of at least 20% of the Series C and D Adjusted Fully
Diluted Capitalization, then the approval of a majority of the Series C and D
Preferred Directors shall not be required as part of the Super-Majority
Approval, and (ii) the Cahill Holders and the Northwood Holders do not have
aggregate Beneficial Ownership of 50% of the Common Stock Equivalents (excluding
Warrant Shares) initially acquired by them pursuant to the First Series A Stock
Purchase Agreement and the Second Series A Stock Purchase Agreement, then the
approval of at least two of the Series A, B and E Preferred Directors shall not
be required as part of the Super-Majority Approval):
(1) any sale, exchange, lease or other disposition (whether in a single
transaction or a series of related transactions), of any asset, group of assets,
division or Subsidiary of the Company, which would have the effect of (i)
disposing of assets which produce gross revenues constituting 4% or more of the
Company's consolidated gross revenues (determined in each case as of the date of
the last regularly prepared quarterly financial statements of the Company but
giving effect to all acquisitions made by the Company and its Subsidiaries on or
after the beginning of the measurement period), (ii) disposing of the Company's
operations in a "metropolitan statistical area" as such term is defined by the
Bureau of the Census (with respect to domestic operations) or a country (with
respect to international operations), or (iii) terminating or substantially
terminating any material product line (e.g., executive office suites, Internet
services, telecommunications service, etc.);
(2) (i) any material amendment to or replacement or extension of the Credit
Agreement as it exists as of the date hereof, or (ii) any request for any waiver
by the Required Banks (as such term is defined in the Credit Agreement) of any
term or provision of the Credit Agreement, other than a waiver in connection
with a Permitted Acquisition (as such term is defined in the Credit Agreement);
(3) incurring any direct or indirect Indebtedness (as such term is defined
in the Credit Agreement as it exists as of the date hereof) for borrowed money,
loaning any money, guaranteeing the payment of any money or indebtedness for
borrowed money of another Person, guaranteeing the performance of any other
obligation of another Person (other than a wholly owned subsidiary), or
indemnifying another Person against any losses, damages or costs, provided that
the foregoing shall not include (i) any borrowing by the Company under its
Credit Agreement for acquisitions which have been approved by the Board or the
Executive Committee, working capital, letters of credit in connection with
leases of real property by the Company or any Subsidiary, or any other purpose
which is within the then current Annual Budget, (ii) any Capital Lease permitted
under Section 3.1(d), (iii) any trade debt of the Company or any Subsidiary
incurred in the ordinary course of business, or (iv) any indemnity which the
Company or any Subsidiary may give to a seller or
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related entities in connection with an acquisition that has received the
requisite Board approval, in respect of the liabilities or obligations which are
being assumed by the Company or a Subsidiary in connection with such
acquisition;
(4) making capital expenditures, including Capital Leases, in an aggregate
amount as capitalized on a balance sheet under GAAP, in any fiscal year which
exceeds by more than $500,000 the amount approved in the Annual Budget for such
year;
(5) entering into any business other than the Core Business;
(6) entering into any material transaction with any Affiliate of the
Company, except any transaction pursuant to the OnSite Agreement, the
Intercompany Agreement or any Product Agreement entered into pursuant thereto;
(7) any change in the name of the Company;
(8) any voluntary liquidation or dissolution of the Company or filing of a
voluntary petition of the Company under Chapter 7 or Chapter 11 of the
Bankruptcy Act or a determination to not contest an involuntary petition of
bankruptcy or otherwise institute insolvency proceedings or otherwise seek any
relief under laws relating to the relief from debts or the protections of
debtors generally; seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for such
entity or all or any portion of such entity's properties; make any assignment
for the benefit of such entity's creditors; take any action that would cause the
Company to become insolvent as defined by the Bankruptcy Act; or take any action
which consents to a case in a bankruptcy or other insolvency proceedings against
the Company or waives or releases any right or claims of the Company in any such
case or proceeding;
(9) any merger, consolidation or reorganization of the Company with another
Person which is not a Subsidiary of the Company, except if such merger,
consolidation or reorganization is an acquisition transaction that would not
require Super-Majority Approval under Section 3.1(n); provided, however, that
such exception shall not apply to mergers, consolidations, or reorganizations
(i) pursuant to which the Company is not the surviving corporation and the
shares of the Company's capital stock are converted or exchanged, or (ii) which
would materially and adversely affect the relative rights or preferences of the
Series C and D Preferred Stock (including, without limitation, through the
issuance of a security ranking senior to the Series C and D Preferred Stock as
to payment of dividends or liquidation preference);
(10) (A) any issuance or sale of equity securities (including pursuant to
the Series D and E Stock Purchase Agreement) or phantom interests of the Company
or of any security, warrant, option or right (contingent or otherwise) to
purchase or acquire any equity security of the Company or any phantom interests,
or the adoption of any option, phantom interests or similar plan (other than the
Company's 1996 Option Plan and the Company's 1999 Option Plan), except (i) any
issuance of securities pursuant to a Qualified Public Offering, (ii) any grant
of options pursuant to an Option Plan, (iii) any issuance of securities upon the
exercise of any Warrant or Option or upon the conversion of any outstanding
convertible security of the Company or (iv) any issuance of
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securities as consideration in connection with any merger, consolidation or
acquisition of stock or assets from any Person (if such merger, consolidation or
acquisition would not otherwise require Super-Majority Approval under any other
clause of this Section 3.1); or (B) commencement of the process of an Initial
Public Offering prior to nine months following the closing of the sale of the
Series D Preferred Stock pursuant to the Series D Stock Purchase Agreement (for
this purpose, meeting with potential investment bankers to discuss a public
offering, or delivering to potential investment bankers material, non-public
information about the Company, would be deemed commencing the process of an
Initial Public Offering, provided that this is not, however, intended to prevent
management of the Company from having a limited number of meetings with
investment bankers for the purpose of maintaining relationships and keeping them
informed of the Company's general progress, without disclosing material,
non-public information about the Company);
(11) creating, granting, or consenting to any Encumbrances which secure,
individually or in the aggregate, an amount in excess of $100,000 and which are
not otherwise required or permitted under the terms of the Credit Agreement,
provided that if the Credit Agreement is not then in effect, under the terms of
the Credit Agreement as such Credit Agreement exists as of the date hereof;
(12) any change in the accounting principles used by the Company or the
adoption of any change to the Company's financial reporting practices,
procedures or standards which would as a normal matter require the approval of
the Board, except for any such changes which are required by GAAP or the
Securities and Exchange Commission;
(13) retaining any accounting firm other than PricewaterhouseCoopers, LLP
or another "Big Five" accounting firm which is "independent" as such term is
used in Rule 2-01 of Regulation S-X under the Securities Act and under GAAP;
(14) any acquisition (in any transaction or series of related transactions)
of all or substantially all of the assets of, or of a controlling interest in,
any other Person, where such transaction (or related transactions) would have
the effect, on a pro forma basis, assuming such transaction or related
transactions were consummated, of increasing the consolidated gross revenues of
the Company by 10% or more (in the case of international acquisitions) or 20% or
more, (in the case of domestic acquisitions) over the existing consolidated
gross revenues of the Company, determined for the immediately preceding twelve
month period ending as of the date of the most recent quarterly financial
statements of the Company. For this purpose consolidated gross revenues shall be
calculated giving effect to all other acquisitions made by the Company and its
Subsidiaries on or after the beginning of the measurement period;
(15) entering into any agreement, other than any agreement that may be
entered into under the terms of the Intercompany Agreement (including the OnSite
Agreement), (i) with a real estate investment trust other than Reckson
Associates Realty Corp., except for leases of real property and related
agreements for services ancillary to a lease of real property, or (ii) which is
a material agreement with any Person (other than RSI, OnSite or their respective
Affiliates) which directly competes with RSI as a broad based provider of
multiple outsourced business services (i.e. this clause (ii) shall not apply to
an agreement with a provider of individual business services which
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RSI, OnSite or their respective Affiliates may offer; provided, that each such
agreement is not otherwise violative of the terms and conditions of the
Intercompany Agreement);
(16) any amendment to the Articles of Incorporation (including the
Certificates of Designation) or Bylaws of the Company, or any change in the
number of members of the Board, any Committee thereof or the Strategic Steering
Committee;
(17) the hiring or termination of employment of any of the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Company, or
of any other officer of the Company with a compensation package equal to or
greater than the compensation package of the Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer or the approval of any renewal,
extension or termination of any employment agreement with any such individual or
the waiver by or on behalf of the Company or any of its Controlled Affiliates of
any of the Company's rights thereunder;
(18) the adoption or amendment of the Annual Budget;
(19) the settlement of any action or proceeding before a federal regulatory
agency, or the commencement or settlement of any litigation by or against the
Company or any Subsidiary in which the amount at issue involves at least
$500,000;
(20) redemption or other purchase of outstanding Shares, Warrants or
Options except pursuant to the provisions of this Agreement, the Certificates of
Designation or the terms of the applicable Option Plan; or
(21) any amendment, modification or waiver of any provision of this
Agreement.
3.2 Approval of Certain Stockholders. The Company agrees it shall not,
without the approval of a Majority of the Shares of Series A, B and E Preferred
Stock and a Majority of the Shares of the Series C and D Preferred Stock:
(1) issue any class or series of equity security (including any issuance
pursuant to the Series D and E Stock Purchase Agreement) senior to or on a
parity with the Preferred Stock as to payment of dividends or senior to or on a
parity with the Preferred Stock as to payments on a dissolution, liquidation or
winding up of the Company;
(2) enter into any agreement or arrangement of any kind that would restrict
the Company's ability to perform its obligations under (i) this Agreement, (ii)
the First Series A Stock Purchase Agreement, the Second Series A Stock Purchase
Agreement, the Series B Stock Purchase Agreement and the Series D and E Stock
Purchase Agreement (it being agreed that no vote shall be required from the
holders of the Series C and D Preferred Stock with respect to the actions
specified in this clause (ii)), (iii) the Merger Agreements or (iv) the Series D
and E Stock Purchase Agreement (it being agreed that no vote shall be required
from the holders of the Series A, B and E Preferred Stock with respect to the
actions specified in this clause (iii));
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(3) amend the Articles of Incorporation (including the Certificates of
Designation) or the By-laws of the Company in any manner;
(4) merge or consolidate with any other entity or sell all or substantially
all of its assets or issue any voting securities to a Person or entity not then
a holder of Shares which would result in such Person or entity acquiring control
of the Company; or
(5) liquidate or dissolve.
Notwithstanding anything to the contrary contained above, neither the
Paribas Holder, nor any of its affiliated transferees or successors shall be
entitled to participate in any vote needing the approval of a Majority of the
Shares of Series A, B and E Preferred Stock.
3.3 Appointment of Appraiser. Notwithstanding anything to the contrary in
this Agreement or in the Certificates of Designation, any Initial Appraiser (as
defined in this Agreement or the Certificates of Designation) to be selected by
the Company shall be selected by a majority of the Directors of the Company who
are not Affiliates of the Securityholders whose Shares are the subject of the
appraisal and such appraiser shall be reasonably acceptable to the majority of
the Series C and D Preferred Directors.
3.4 Appointment of Certain Executive Personnel. In addition to the rights
contained in Section 3.1(q), the holders of a Majority of the Shares of Series C
and D Preferred Stock shall have the right to appoint on the Merger Date those
executive officers of Parent designated on Schedule 2 and, thereafter, the
employment of such executive officers shall be governed by the terms of such
agreements as the Company may enter into with such persons.
3.5 Resolution of Certain Tie Votes of the Board. Except for matters for
which Super-Majority Approval is required, actions of the Board shall be taken
by a simple majority vote of Directors present and voting at a meeting duly
called and at which a quorum is present and voting throughout (or by unanimous
written consent of the entire Board). If any vote of the entire Board on a
matter for which Super-Majority Approval is not required results in a tie vote,
at the request of any member of the Board the matter shall be put to a vote of
the holders of all outstanding Shares (i.e. excluding Option Shares and Warrant
Shares) voting as a single class, and the vote of such holders shall be
determinative of the matter in question.
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ARTICLE 4
TRANSFER OF SHARES
4.1 Restrictions on Transfer. So long as this Agreement is in effect, no
Securityholder shall sell, assign, transfer, give, encumber, pledge, hypothecate
or in any other way dispose of any Shares, Warrants or Options (any of which
being a "Transfer") except as provided in this Agreement. For purposes of
Section 4.1, Section 4.2, Section 4.3 and Section 4.6 of this Agreement, a
Transfer shall be deemed to include any Transfer by any Person who Beneficially
Owns any shares of Series C and D Preferred Stock by reason of any Transfer of
any interest (or portion thereof) by or through which such Person holds such
Beneficial Ownership of such shares (any such interest, a "Series C and D
Beneficial Interest"). In addition, each Securityholder agrees that it will not
Transfer any of its Shares, Warrants or Options except as permitted under the
Securities Act or applicable state securities laws or any rule or regulation
promulgated thereunder. No Transfer in violation of this Agreement shall be made
or recorded on the books of the Company and any such Transfer shall be void and
of no force or effect. Subject to the terms of this Agreement, the
Securityholders shall be entitled to exercise all rights of ownership of their
Shares and any such Options or Warrants, and the transferability of any such
Options or Warrants shall, in addition to the terms hereof, be subject to the
terms and conditions contained therein. Except as set forth in Section 4.6
hereof, nothing herein is intended to restrict the Transfer of any securities
issued by RSI or any interest in JAH Realties, L.P.
4.2 Certain Permitted Transfers. The Company and the Securityholders
acknowledge and agree that any of the following Transfers shall be deemed to be
in compliance with this Agreement (subject in each case to compliance with
applicable securities laws):
(1) subject to Section 4.6 and 9.6 hereof, a Transfer in accordance with
the provisions of Section 4.3, 4.5, 4.7 or 4.8 or Article 5 hereof, pursuant to
the redemption provisions applicable to the Preferred Stock as in effect from
time to time, or through a sale in a registered offering in accordance with
Article 6 hereof;
(2) subject to Section 4.6 and 9.6 hereof, a Transfer (i) upon the death of
a Securityholder or of a Beneficial Owner of shares of Series C and D Preferred
Stock to his executors, administrators and testamentary trustees and
beneficiaries of his estate or (ii) by the PNA Holder to not more than 15
employees of the PNA Holder or any of the PNA Holder's Affiliates (subject in
each case to compliance with applicable securities laws);
(3) subject to Section 4.6 and 9.6 hereof, a Transfer to (x) an Affiliate
or (y) to members, partners, limited partners, or stockholders of a
Securityholder in the event of a liquidation or other distribution of or by such
Securityholder, or (z) made for nominal consideration or as a gift to any of the
Securityholder's Family Group Members; and
(4) subject to Section 4.6 and 9.6 hereof, any Transfer by any of the
Series C and D Holders (or any member thereof) to any other Series C and D
Holder or by any Beneficial Owner of shares of Series C and D Preferred Stock to
any other Beneficial Owner of shares of Series C and
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D Preferred Stock or to any of their respective members, partners or
stockholders or any Family Group Members (any such transferee, together with any
transferee pursuant to Section 4.2(b) and (c), being a "Permitted Transferee");
(5) anything herein to the contrary notwithstanding, in the event that any
Securityholder or any of its Affiliates shall deliver to the Company an opinion
of counsel to such Securityholder or such Affiliate, as the case may be, to the
effect that if such Securityholder or such Affiliate, as the case may be, shall
continue to hold some or all of the Warrants or Shares held by it, there is a
material risk that such ownership will result in the violation of any statute,
regulation or rule of any governmental authority (including, without limitation,
Regulation Y promulgated under the Bank Holding Company Act of 1956, as amended
(the "BHCA")), such Securityholder or such Affiliate (a "Regulated Holder"), as
the case may be, may exchange its Shares or Warrants, as herein provided. The
Company shall cooperate with such Securityholder or such Affiliate as the case
may be, in exchanging all or any portion of its voting Shares on a
share-for-share basis for Shares of a non-voting security or warrants (which
shall thereafter be deemed Warrants hereunder) convertible into a nonvoting
security of the Company (such non-voting security shall be identical in all
respects to such voting Shares, except that they shall be non-voting and shall
be convertible or exercisable into voting securities on such conditions as are
requested by such Securityholder in light of the regulatory considerations
prevailing). Without limiting the forgoing, at the request of such
Securityholder or such Affiliate, as the case may be, the Company shall use
commercially reasonable efforts to amend this Agreement, the Articles of
Incorporation of the Company, the By-laws of the Company, and any related
agreements and instruments and shall take such additional actions in order to
effectuate the authorization of the issuance of nonvoting securities and the
exchange of such Securityholder's voting securities into such nonvoting
securities. The provisions of this Section 4.2(e) shall inure solely to the
benefit of the Securityholders and their Affiliates which are subject to the
provisions of the BHCA or the Small Business Investment Act of 1958, as amended
(the "SBIA"); and
(6) any pledge of a Series C and D Beneficial Interest to secure any bona
fide indebtedness, but in each case subject to Section 4.6 and provided that the
lender acknowledges in writing that any sale or Transfer of the pledged Series C
and D Beneficial Interests shall be subject to the provisions of this Agreement
and that it shall not have the right to take title, sell or exercise any rights
of ownership of the pledged Series C and D Beneficial Interests without first
having complied with the provisions of Article IV hereof (it being agreed and
understood among the Company and the Securityholders that any transfer of title
or sale of such pledged interests to any Series C and D Holder or any holder of
a Series C and D Beneficial Interest shall not be subject to the provisions of
Section 4.3).
4.3 Rights of First Refusal.
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(1) Each Securityholder agrees that, subject to the restrictions on
Transfers contained in Sections 4.3(i), 4.4 and 4.6, if any Securityholder (a
"Transferring Securityholder") proposes to Transfer any or all of the Shares or
Warrants then owned by such Transferring Securityholder pursuant to a bona fide
offer from a third party (who (x) is not an Affiliate of such Securityholder and
(y) reasonably has the ability to consummate such offer in accordance with its
terms), other than as provided in Section 4.2, 4.5, 4.7 or 4.8 or Article 5
hereof or pursuant to the redemption provisions in the Certificates of
Designation or through a sale in a registered offering in accordance with
Article 6 hereof (a "Section 4.3 Transfer"), then such Transferring
Securityholder shall first give a written notice (the "Transfer Notice") to the
Company and each of the other Securityholders (the "Securityholder Offerees")
specifying (i) the number of Shares or Warrants such Transferring Securityholder
proposes to Transfer (the "Transfer Shares"), (ii) the consideration to be
received for the Transfer Shares in the proposed Section 4.3 Transfer pursuant
to such bona fide offer, (iii) any other material terms of the proposed Section
4.3 Transfer, including, without limitation, the conditions precedent to such
offer, and (iv) whether any purchase of the Transfer Shares by the Company and
the Securityholder Offerees pursuant to this Section 4.3 is conditioned upon
purchase by the Company and the Securityholder Offerees of all the Transfer
Shares (an "All or Nothing Condition"). The Transfer Notice shall constitute an
irrevocable offer to the Company and the Securityholder Offerees (the "Transfer
Offer") to sell the Transfer Shares to the Company and the Securityholder
Offerees, pursuant to the provisions of this Section 4.3, for the consideration
and on the other terms stated in the Transfer Notice (or the reasonable
equivalent thereof in the case of non-monetary consideration of a type which is
personal to the third party offeror). For purposes of this Section 4.3, in the
case of a Transfer of a Series C and D Beneficial Interest, the Transfer Shares
shall not be the Series C and D Beneficial Interest proposed to be transferred
but rather shall be deemed to be the number of shares of respective Series C and
D Preferred Stock as to which the transferee of the Series C and D Beneficial
Interest would acquire Beneficial Ownership in such proposed transfer.
(2) The RSI Beneficial Holder shall have the initial right, exercisable, in
RSI's sole discretion, by the Series C and D Holders for the benefit of the RSI
Beneficial Holders or directly by any of the RSI Beneficial Holders (provided,
that, if such right is exercised directly by any of the RSI Beneficial Holders,
such Person shall become a party to this Agreement for all purposes hereunder),
to accept the Transfer Offer as to all or a portion of the Transfer Shares;
provided, however, that in no event shall the foregoing right to accept the
Transfer Offer and purchase Transfer Shares pursuant to this Section 4.3(b) by
or on behalf of the RSI Beneficial Holders entitle the Series C and D Holders or
the RSI Beneficial Holders, as the case may be, to purchase a number of Shares
that, immediately following such purchase, would result in the RSI Beneficial
Holders having Beneficial Ownership of Shares, Options and Warrants
representing, in the aggregate, more than 30% of the Adjusted Fully Diluted
Capitalization. Within 5 Business Days after the receipt of a Transfer Notice,
the Company shall notify the Transferring Securityholder and the Securityholder
Offerees in writing of the number of Transfer Shares that the Series C and D
Holders or the RSI Beneficial Holders, as the case may be, shall have the right
to purchase pursuant to this Section 4.3(b). Within 15 Business Days after
receipt of such notice from the Company, if the Series C and D Holders or the
RSI Beneficial Holders, as the case may be, shall be entitled to purchase any of
the Transfer Shares pursuant to this Section 4.3(b), the Series C and D Holders
or the RSI Beneficial Holders, as the case may be, shall give a written notice
to the Company and the
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Transferring Securityholder, accepting the Transfer Offer (an "Acceptance
Notice"), which shall specify the number of Transfer Shares that they desire to
purchase pursuant to this Section 4.3(b). The failure of the Series C and D
Holders or the RSI Beneficial Holders, as the case may be, to timely give an
Acceptance Notice shall be deemed to be an election by them to not purchase any
Transfer Shares pursuant to this Section 4.3. If the Series C and D Holders or
the RSI Beneficial Holders, as the case may be, have given timely Acceptance
Notices electing to purchase less than all, or are not entitled to purchase
pursuant to this Section 4.3(b) all, of the Transfer Shares, the number of
Transfer Shares as to which the Series C and D Holders or the RSI Beneficial
Holders, as the case may be, shall have not given timely Acceptance Notices
pursuant to this Section 4.3(b) (the "Initial Remaining Transfer Shares") shall
be deemed offered by the Transferring Securityholder to the Company pursuant to
Section 4.3(c). The rights set forth in this Section 4.3(b) shall terminate and
shall no longer apply in the event that the Qualifying Series C and D Beneficial
Holders do not Beneficially Own at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization. The Series C and D Holders shall provide such
information as the Company shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C and D Beneficial Holders. In the
event that any RSI Beneficial Holder transfers Beneficial Ownership in any
Shares, Options or Warrants to any Qualifying Series C and D Beneficial Holder,
then, notwithstanding such transfer, the Shares, Options or Warrants so
transferred shall be deemed to be Beneficially Owned by the RSI Beneficial
Holders for purposes of this Section 4.3.
(3) The Company shall have the right to accept the Transfer Offer as to all
or a portion of the Initial Remaining Transfer Shares. Within 15 Business Days
after the end of the 15 Business Day period provided to the Series C and D
Holders in Section 4.3(b), if the Company elects to purchase any of the Initial
Remaining Transfer Shares, the Company shall give an Acceptance Notice to the
Transferring Securityholder and each of the Securityholder Offerees, which shall
specify the number of Initial Remaining Transfer Shares that it desires to
purchase pursuant to this Section 4.3(c), up to the total of such Initial
Remaining Transfer Shares. The failure of the Company to timely give an
Acceptance Notice shall be deemed to be an election by the Company to not
purchase any Transfer Shares. If the Company has given a timely Acceptance
Notice electing to purchase less than all of the Initial Remaining Transfer
Shares, the number of Initial Remaining Transfer Shares as to which the Company
has not given a timely Acceptance Notice pursuant to this Section 4.3(c) (the
"Final Remaining Transfer Shares") shall be deemed offered by the Transferring
Securityholder to the Securityholder Offerees pursuant to Section 4.3(d).
(4) The Securityholder Offerees shall have the right to accept the Transfer
Offer as to the Final Remaining Transfer Shares. Within 15 Business Days after
the end of the 15 Business Day period provided to the Company in Section 4.3(c),
each Securityholder Offeree who wishes to purchase any of the Final Remaining
Transfer Shares shall give an Acceptance Notice to the Company and the
Transferring Securityholder, which shall specify the number of Final Remaining
Transfer Shares (up to such Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares, which for the RSI Beneficial Holders shall be
calculated including any Transfer Shares to be acquired by them or by the Series
C and D Beneficial Holders for their account pursuant to the exercise of the
rights set forth in Section 4.3(b)) which such Securityholder Offeree desires to
purchase. The Acceptance Notice may, at the Securityholder Offeree's option,
indicate the maximum number of Final Remaining Transfer Shares such
Securityholder Offeree would
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purchase in excess of such Securityholder Offeree's Pro Rata Share of the Final
Remaining Transfer Shares (the "Excess Amount"). If one or more Securityholder
Offerees does not give a timely Acceptance Notice, or elects in an Acceptance
Notice to purchase less than such Securityholder Offeree's Pro Rata Share of the
Final Remaining Transfer Shares, then the Final Remaining Transfer Shares shall
automatically be deemed to be accepted by Securityholder Offerees who specified
an Excess Amount in their respective Acceptance Notice, allocated among such
Securityholder Offerees (with rounding to the nearest whole share to avoid
fractional shares) in proportion to their respective Pro Rata Shares determined
based only on those Securityholder Offerees who have given timely Acceptance
Notices which specified an Excess Amount. In no event shall an amount greater
than a Securityholder Offeree's Excess Amount be allocated to such
Securityholder Offeree. Any excess Final Remaining Transfer Shares shall be
further allocated among the Securityholder Offerees whose specified Excess
Amount has not been satisfied (with rounding to the nearest whole share to avoid
fractional shares) in proportion to their respective Pro Rata Shares, determined
based only on those Securityholder Offerees whose specified Excess Amount has
not yet been satisfied, and such procedure shall be employed until the entire
Excess Amount of each Securityholder Offeree has been satisfied or all Final
Remaining Transfer Shares have been allocated.
(5) The closing of the purchase by the Series C and D Holders or the RSI
Beneficial Holders, as the case may be, the Company and/or the Securityholder
Offerees of the Transfer Shares pursuant to this Section 4.3 shall take place at
the principal offices of the Company on the fifteenth Business Day after the end
of the 15 Business Day period set forth in (i) Section 4.3(d) or (ii) if the
Series C and D Holders are purchasing all of the Transfer Shares, Section
4.3(c). At such closing, the Series C and D Holders or the RSI Beneficial
Holders, as the case may be, the Company and/or the Securityholder Offerees who
have elected to purchase Transfer Shares shall deliver a certified check or
checks in the appropriate amount to the Transferring Securityholder against
delivery of duly endorsed certificates with all stock transfer tax stamps
attached representing the Transfer Shares to be purchased. The Transfer Shares
shall be delivered free and clear of all Encumbrances other than those imposed
by this Agreement.
(6) If any Transfer Shares allocated to a Securityholder Offeree are not
purchased by such Securityholder Offeree, such Transfer Shares may be purchased
by the Company promptly following any such default. Nothing contained herein
shall prejudice any Person's right to maintain any cause of action or pursue any
other remedies available to it as a result of such default.
(7) If, at the end of the 15 Business Day period set forth in Section
4.3(d), timely Acceptance Notices have not been given covering all of the
Transfer Shares and the Transfer Notice contained an All or Nothing Condition,
then the Transferring Securityholder shall have 90 days in which to complete the
sale of all, but not less than all, of the Transfer Shares. If, at the end of
the 15 Business Day period set forth in Section 4.3(d), timely Acceptance
Notices have not been given covering all of the Transfer Shares and the Transfer
Notice did not contain an All or Nothing Condition, then the Transferring
Securityholder shall have 90 days in which to complete the sale of any or all of
the Transfer Shares as to which timely Acceptance Notices have not been given.
Any such sale of Transfer Shares shall be to a third party for a consideration
not less than the consideration, and on terms no more favorable to the
transferee, than those contained in the Transfer Notice. No such Transfer may be
made to any third party unless and until such third party delivers
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to the Company an executed consent to be bound by the provisions of this
Agreement in form and substance reasonably satisfactory to the Company. Promptly
after any Transfer pursuant to this Section 4.3, the Transferring Securityholder
shall notify the Company of the consummation thereof and shall furnish such
evidence of the completion and time of completion of such Transfer and of the
terms thereof as the Company may request. If, at the end of such 90 day period,
the Transferring Securityholder has not completed the Transfer of all of the
Transfer Shares, the Transferring Securityholder shall no longer be permitted to
Transfer such Shares pursuant to this Section 4.3(g) without again complying
with this Section 4.3 in its entirety. If the Transferring Securityholder
determines at any time within such 90 day period that the Transfer of all or any
part of such Transfer Shares for a consideration not less than and on terms no
more favorable to the transferee than those contained in the Transfer Notice is
impractical, the Transferring Securityholder may terminate all attempts to
Transfer such Transfer Shares and recommence the procedures of this Section 4.3
in their entirety without waiting for the expiration of such 90 day period by
delivering written notice of such decision to the Company.
(8) If any Regulated Holder has the right to purchase any Transfer Shares
but is prohibited from exercising such right under the BHCA or SBIA or the
regulations promulgated thereunder, such Regulated Holder may assign such right
to the Company and upon such assignment the Company shall, subject to any legal
or contractual restrictions and at no cost or expense to the Company, purchase
such Transfer Shares and concurrently sell to such Regulated Holder such
Transfer Shares, or if requested by such Regulated Holder, securities that do
not have voting rights but otherwise have the same terms as such Transfer
Shares, for the purchase price upon which such Transfer Shares were purchased by
the Company. The Company's obligations under this Section 4.3(h) are solely as
an accommodation to such Regulated Holder and the Company shall be under no
obligation to advance any funds or to obtain any financing to acquire such
Transfer Shares.
(9) No Transfer of Options may be made in a Section 4.3 Transfer.
(10) Any time periods contained in this Section 4.3 shall be extended to
the extent reasonably necessary to allow any Securityholder to obtain any
requisite approvals under the Hart-Scott-Rodino Act and any other approvals that
may be required under applicable state or federal law. The Company shall
cooperate (at the Securityholder's expense) in the obtaining of such approvals.
4.4 Restrictions in Connection with Registrations. Each Securityholder
agrees not to effect any public sale or distribution of Shares, including any
sale pursuant to Rule 144, during the seven (7) days prior to the effective date
of a registration statement effected pursuant to the terms hereof and during
such period of time beginning on such effective date as may be required by the
underwriters of such offering and agreed to by the Company, but in no event
exceeding nine (9) months (in each case except as part of such registration).
Each Securityholder hereby acknowledges that such Securityholder shall have no
right to include its Shares in any registration of Shares, except as expressly
provided in Article 6.
4.5 Tag-Along Right. Prior to the effective date of an Initial Public
Offering (or such longer period as set forth in the second following paragraph),
if any Transferring Securityholder wishes to Transfer any Shares or Warrants,
either in one transaction or a series of related
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transactions, and any portion of the Transfer Shares are not purchased by the
Series C and D Holders or the RSI Beneficial Holders, as the case may be, the
Company or the Securityholder Offerees under Section 4.3 (other than any
Transfer pursuant to Section 4.2, 4.7 or 4.8, or through a redemption or put of
Preferred Stock or a sale in a registered offering or pursuant to Rule 144 under
the Securities Act, or through the right of any Remaining Securityholder (as
defined below) to sell Shares provided by this Section 4.5), then as a condition
to such Transfer, the Transferring Securityholder shall permit (or cause to be
permitted) all other Securityholders who did not seek to purchase the Transfer
Shares pursuant to Section 4.3 (other than Securityholders who elected to
purchase Transfer Shares and failed to close on the purchase thereof) or were
unable to purchase the Transfer Shares as a result of the failure of the All or
Nothing Condition to be satisfied (the "Remaining Securityholders") to sell,
either to the prospective purchaser of the Transferring Securityholder's Shares
or Warrants or to another financially reputable purchaser reasonably acceptable
to such Remaining Securityholders, up to the same proportion of the Shares,
Warrants and Options (if then vested) then owned by such Remaining
Securityholder as the proportion that the number of Shares and Warrants the
Transferring Securityholder proposes to Transfer pursuant to this Section 4.5 in
the contemplated sale on the date of the Tag-Along Notice (as defined below)
bears to the total number of Shares and Warrants held by the Transferring
Securityholder on such date prior to any Shares or Warrants sold pursuant to
Section 4.3, on equivalent terms and at an equivalent price and for the same
type of consideration to that offered by the third-party offeror, taking into
account any difference in the type of securities (i.e., the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Common Stock) held (or acquirable) by the
Transferring Securityholder and the Remaining Securityholders who desire to sell
Shares, Warrants or Options. All numbers of Shares and Warrants and Options
(only to the extent then vested) under this Section 4.5 shall be determined on a
fully converted and fully exercised basis.
The Transferring Securityholder shall give written notice (the "Tag-Along
Notice") to the Remaining Securityholders of each proposed Transfer giving rise
to the rights referred to in this Section 4.5 (the "Tag-Along Rights")
immediately following the end of the 15 Business Day period provided in Section
4.3(d) and at least 20 days prior to the proposed consummation of such Transfer,
setting forth the name of the prospective purchaser, the maximum number of
Shares and Warrants proposed to be Transferred, the proposed amount and form of
consideration and the other terms and conditions of the proposed transaction.
The Tag-Along Notice shall also provide that each of the Remaining
Securityholders may elect to exercise such rights within 15 days following the
giving of the Tag-Along Notice, by delivery, on or before the expiration of such
time period, of a written notice to the Transferring Securityholder indicating
such Securityholder's desire to exercise its rights under this Section 4.5 and
specifying the number of Shares, Warrants or Options he, she or it desires to
sell. No present or future Tag-Along Rights of a Securityholder shall be
adversely affected by its failure to exercise such rights in the past.
Notwithstanding anything to the contrary contained herein, a holder of
Options shall only be entitled to exercise Tag-Along Rights with respect to such
Options if the Tag-Along Notice relates to the sale or other disposition of a
majority of the outstanding shares of voting capital stock of the Company (based
on the Fully Diluted Capitalization excluding Option Shares and Warrant Shares)
to a Person that is not a parent or Subsidiary of the Company. Notwithstanding
anything to the contrary contained herein, the provisions of this Section 4.5
shall apply to any Transfer
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following an Initial Public Offering if, at the time of any such Transfer, the
provisions of Rule 144 promulgated under the Securities Act are not generally
applicable to sales of the Company's securities due to the failure of the
condition set forth in Rule 144(c) to be satisfied. The Company shall use all
reasonable efforts to inform the Securityholders if such condition has not been
satisfied at any time following an Initial Public Offering; provided however,
the Company shall have no liability to any Securityholder arising out of the
failure of any Transferring Securityholder to comply with the provisions
contained in this Section 4.5.
The Transferring Securityholder's sale of Shares or Warrants in any sale
proposed in a Tag-Along Notice shall be effected on substantially the terms and
conditions set forth in such Tag-Along Notice (except in the case of
non-monetary consideration which is unique to the third party as to which there
shall be paid the reasonable equivalent thereof). The number of Shares or
Warrants to be sold by the Transferring Securityholder shall be reduced by the
aggregate number of Shares, Warrants or Options to be sold by each of the
Remaining Securityholders who have exercised Tag-Along Rights in connection with
such Transfer.
In no event shall any Securityholder transferring Shares, Warrants or
Options pursuant to this Section 4.5 receive any special consideration
(including, without limitation, financial advisory, finders, consulting or other
similar fees) in connection with any sale of Shares, Warrants or Options
pursuant to this Section 4.5, unless such consideration is shared among the
Transferring Securityholder and the other Remaining Securityholders pro rata
based on their respective Shares, Warrants or Options sold (on a fully exercised
and converted basis); provided, however, this sentence shall not apply with
respect to an arms-length negotiated engagement of The Shattan Group LLC or any
of its Affiliates (any such Persons are hereinafter referred to as "Shattan") to
act as the Company's financial advisor with respect to such sale of Shares,
Warrants or Options. Furthermore, no Remaining Securityholder shall be required
to provide any representations or warranties in connection with the sale of
Shares, Warrants or Options pursuant to this Section 4.5, except representations
as to the authority to transfer, and title to, such Shares, Warrants or Options
and the absence of any Encumbrances on the title of such Shares, Warrants or
Options.
4.6 Transfers to a Competitor. Each Securityholder agrees that it shall
not, except in connection with a Sale of the Company, without the approval of at
least two of the Series A, B and E Preferred Directors (in the case of Transfers
described in clauses (i), (iv) and (v) of this Section 4.6) and a majority of
the Series C and D Preferred Directors, directly or indirectly, Transfer any of
its Shares, Warrants or Options to (any of the Persons described in clauses (i)
through (v) hereof is referred to herein as a "Prohibited Transferee"): (i) any
entity that is engaged in owning, operating and/or managing executive office
suites and providing related business support services, including secretarial,
telecommunications, word processing, printing and copying; (ii) any real estate
investment trust (other than Reckson Associates Realty Corp.); (iii) any direct
competitor of RSI; (iv) any entity that Beneficially Owns 5 percent or more of
the outstanding equity securities or voting control of a Prohibited Transferee,
excluding transfers to an institutional holder that holds such equity securities
or voting control as a passive investment without the right to Control such
Prohibited Transferee; and (v) any Affiliate, officer or director of any
Prohibited Transferee. For purposes of this Section 4.6, a Transfer shall
include any indirect Transfer arising out of an acquisition of Control of RSI
(provided that for this purpose no presumption of Control shall arise
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solely from ownership of any specific percentage of equity securities of RSI) by
any of (w) CarrAmerica, (x) HQ Omni, or (y) Regus, so long as any of such
Persons named in clauses (w), (x) or (y) is engaged in the executive office
suite business, or (z) any other Person which owns or operates 50 executive
office suite centers as its primary business (any of the foregoing Persons, a
"Disqualified Transferee"), unless prior to or substantially contemporaneously
with such acquisition Beneficial Ownership of the Series C and D Preferred Stock
shall have been transferred to a Person that is (x) Controlled by the executive
officers of RSI immediately prior to such acquisition and (y) not an Affiliate
of RSI or the Disqualified Transferee following such acquisition.
4.7 Sales of Beale Securities.
(1) If the employment of David W. Beale ("Beale") by the Company is
terminated by reason of the occurrence of any of the events set forth in
Paragraph 7(d) of the Beale Employment Agreement, then at any time and from time
to time thereafter, Beale shall have the option (the "Beale Put"), subject to
Section 4.7(c), to require the Company to purchase all or any portion of his
Common Stock and Common Stock Equivalents, including the vested portion of any
Options granted to Beale under an Option Plan, and the non-vested portion of
such Options which otherwise would vest pursuant to the terms of such Plan
within two years of such termination (which unvested portion shall immediately
vest and become exercisable) (all of the foregoing being collectively referred
to as the "Beale Securities"), at the Beale Put Price (as hereinafter defined)
by delivery of written notice to the Company (the "Beale Put Notice"). Upon
receipt of such election(s), the Company will be obligated, subject to Section
4.7(c), to purchase the Beale Securities specified (collectively the "Offered
Shares") in such Beale Put Notice within ninety (90) days after the receipt by
the Company of the Beale Put Notice (or such longer period as may be reasonably
necessary to determine the Beale Put Price pursuant to the provisions of Section
4.7(b)) (such date of closing being hereinafter referred to as the "Beale Put
Closing Date").
Upon election exercised by Beale to require the Company to purchase the
Offered Shares pursuant to the provisions of this Section 4.7, the Company will,
subject to Section 4.7(c), notify Beale of the Beale Put Closing Date with
respect to such Offered Shares and Beale shall surrender the certificate or
certificates duly endorsed in blank or together with an acknowledgment of such
redemption representing such Offered Shares to the Company on or before such
date. On the Beale Put Closing Date, the Beale Put Price for such Offered Shares
shall be paid to Beale by certified or bank cashier's check or, at Beale's
option, by wire transfer in immediately available funds to an account designated
by Beale, and each surrendered certificate shall be canceled and retired. If
less than all of the Shares represented by such certificates are purchased, a
new certificate or certificates shall be issued representing the Shares not
purchased by the Company. If the Company does not have available legal surplus
to purchase all of the Offered Shares, the Company shall purchase the maximum
number of Offered Shares that it may purchase with such legal surplus available,
and the Company shall purchase the remainder of such Offered Shares as soon as
it has funds legally available to do so. If payment of the Beale Put Price shall
cause the Company to be in default under the provisions of any of its loan
agreements (a "Default Event"), the Company may defer payment of all or such
part of the Beale Put Price to Beale in an amount (a "Beale Deferred Amount")
and for such time as is necessary to avoid a Default Event. Interest shall
accrue on so much of the Beale Deferred Amount as is outstanding from time to
time at a rate per annum equal
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to 3 1/2% plus the Prime Rate and such interest shall be payable by the Company
to Beale at the time of payment of the Beale Deferred Amount in full.
(2) Determination of Beale Put Price. For purposes of this Section 4.7, the
"Beale Put Price" shall be an amount per Offered Share equal to the "fair market
value" thereof (as determined in accordance with this Section 4.7(b)). For
purposes of this Section 4.7(b), fair market value shall be determined by mutual
agreement of the Company and Beale or, if the Company and Beale are unable to
agree on a fair market value, then the fair market value shall be determined
pursuant to the procedure set forth in the immediately following paragraph.
If Beale and the Company are unable to mutually agree on a fair market
value within 60 days after the occurrence of the termination event, Beale and
the Company shall each appoint one appraiser (each, an "Appointed Appraiser")
within five (5) business days thereafter (the "Appointment Date"), which
Appointed Appraisers shall independently, within 25 days of Appointment Date
(the "Determination Date"), determine a fair market value (collectively the
"Original Estimates"). If the Original Estimates do not differ in amount by more
than 10% of the lower market value, then the fair market value shall be deemed
to be the average of such fair market values. If the Original Estimates differ
in amount by more than 10% of the lower market value, the Appointed Appraisers
shall within five (5) business days of the Determination Date appoint a third
appraiser, which third appraiser shall independently, within 25 days of the
Determination Date, determine a fair market value (the "Third Estimate"). The
Original Estimate that is nearest in amount to the Third Estimate shall be
deemed to be the fair market value, or if the Third Estimate is exactly the mean
of the two Original Estimates the Third Estimate shall be deemed to be the fair
market value, that shall be binding upon the Company and Beale. If either Beale
or the Company fails to appoint an Appointed Appraiser by the Appointment Date,
then the Appointed Appraiser who has been appointed shall be the sole appraiser
and the fair market value determined by such Appointed Appraiser shall be the
fair market value and shall be binding on the parties. All Appointed Appraisers
shall be qualified in valuing companies similar to the Company and shall not be
an Affiliate of either party. Any determination of the fair market value under
this Section 4.7(b) shall be made without any reduction as a result of the lack
of liquidity of the Offered Shares or the fact that the Offered Shares may
represent a minority interest in the Company. The Company and Beale shall
equally bear and be responsible for all costs and expenses of the appraisers
under this Section 4.7(b).
(3) Consent of Required Banks. Upon receipt of a Beale Put Notice, the
Company shall request the Required Banks (as such term is defined in the Credit
Agreement) to consent to the exercise of the Beale Put. Unless the Required
Banks have consented in writing to the exercise of the Beale Put, the Company
shall not be required to purchase the Offered Shares pursuant to Section 4.7(a),
the Beale Put Notice shall be deemed rescinded and withdrawn and of no force and
effect and no beneficiary of the Beale Put shall have any rights thereunder and
shall have no rights or remedies to enforce the Beale Put until such time as all
Obligations (as defined in the Credit Agreement) shall have been paid in full in
cash.
(4) Restriction on Sale of Beale Securities. Prior to the earliest to occur
of (i) an Initial Public Offering, or (ii) any termination of Beale's employment
with the Company, or (iii) any
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other time approved by Super-Majority Approval, Beale shall be prohibited from
making any Transfer of any of the Beale Securities, other than pursuant to
Section 4.2(b), Section 4.5, or Section 4.8, to a Permitted Transferee, or a
pledge of up to 50% of the Shares owned by Beale to secure any bona fide
indebtedness, but in each case subject to Section 4.6 and provided that the
lender acknowledges in writing that any sale or Transfer of such pledged Shares
shall be subject to the provisions of this Agreement. Any such lender also shall
agree in writing that upon the existence and continuance of an event of default
of any such indebtedness, the Series C and D Holders shall upon 10 Business
Days' prior notice have the right to purchase such indebtedness at an aggregate
price equal to the lower of (x) the "fair market value" or (y) the then
principal amount of such indebtedness and the accrued interest thereon (without
regard to costs, charges or additional interest or fees accruing as a result of
such default) provided that, in connection with such purchase, the Series C and
D Holders acknowledge in writing that they shall not have the right to foreclose
or otherwise acquire the pledged shares without first having complied with the
transfer provisions contained in Article IV hereof.
4.8 Sale of the Company. If (i) the Board (by Super-Majority Approval) and
the holders of a Majority of the Shares of Series A, B and E Preferred Stock and
a Majority of the Series C and D Preferred Stock approve a Sale of the Company
of the type described in clauses (i) or (iii) of the definition thereof, or (ii)
if the holders of a Majority of the Shares of the Series A, B and E Preferred
Stock and a Majority of the Series C and D Preferred Stock approve of a Sale of
the Company of the type described in clause (ii) of the definition thereof, in
each case to a third party which is not an Affiliate of any such Person or the
Company, the Company shall deliver a notice to each Securityholder containing
the material terms thereof (a "Sale Notice"). Each Securityholder agrees to
vote, if such a vote is required under applicable law, all of its Shares in
favor of such a Sale of the Company, and to sell all of its Shares, Warrants and
Options on the terms contained in the Sale Notice. Each Securityholder and the
Company agrees to cooperate in any such Sale of the Company (including, without
limitation, by not exercising any appraisal rights that may be available under
applicable law) and agrees to execute and deliver all documents and instruments
as is required in the Sale Notice and which the holders of a Majority of the
Shares of Series A, B and E Preferred Stock or a Majority of the Series C and D
Preferred Stock request to effect such Sale of the Company; provided, however,
that the Sale Notice (i) shall not require any Securityholder to provide any
representations or warranties in connection with the Sale of the Company
pursuant to this Section 4.8, except representations as to the authority to
transfer such Shares, Warrants or Options and the absence of any Encumbrances
(other than under this Agreement) on the title of such Shares, Warrants and
Options, and (ii) shall require that each Securityholder receive the same
percentage of each type of consideration delivered in connection with the Sale
of the Company.
Upon such Sale of the Company, each Securityholder shall receive its Pro
Rata Share of the consideration paid by the purchaser or received from the sale
of securities. In no event shall any Securityholder receive special
consideration (including, without limitation, financial advisory, finders,
consulting or other similar fees) in connection with a Sale of the Company
contemplated by this Section 4.8, unless such consideration is shared among all
Securityholders based on their Pro Rata Shares; provided, however, this sentence
shall not apply with respect to an arms-length negotiated engagement of Shattan
to act as the Company's financial advisor with respect to the Sale of the
Company.
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4.9 Repurchase of Equity Interests. The Company covenants and agrees that
it will not, without giving prior written notice to any Securityholder of which
the Company has written notice is a Regulated Holder, directly or indirectly,
purchase, redeem, retire or otherwise acquire any Shares or Warrants if, as a
result of such purchase, redemption, retirement or other acquisition, such
Regulated Holder, together with its Affiliates, will own, or be deemed to own,
Common Stock Equivalents representing capital equal to 25% or more of the
aggregate equity interests then outstanding of the Company.
4.10 Restrictions Following Qualified Public Offering. In the event of the
consummation of a Qualified Public Offering that has not been approved by a
majority of the Company Directors and the Series A, B and E Preferred Directors
(taken in the aggregate) then serving, and by a majority of the Series C and D
Preferred Directors then serving, then, during the Blackout Period, (x) none of
the Cahill Holders or Beale shall Transfer any Shares, Options or Warrants
Beneficially Owned by any of them, (y) the RSI Beneficial Holders shall not, and
shall cause the Series C and D Holders not to, make any Transfer of any of the
RSI Beneficial Holders' Beneficial Ownership of Shares, Options or Warrants,
except to a Permitted Transferee who agrees in writing to be bound by terms of
this Agreement, including the restrictions contained in this Section 4.10, and
(z) the JAH Beneficial Holders shall not, and shall cause the Series C and D
Holders not to, make any Transfer of any of the JAH Beneficial Holders'
Beneficial Ownership of Shares, Options or Warrants other than to a Permitted
Transferee who agrees in writing to be bound by this Agreement, including the
restrictions contained in this Section 4.10; provided, however, that (i) the
foregoing restrictions shall not apply to any Shares acquired by any such Person
in the open market following an Initial Public Offering and not directly from
the Company, (ii) the foregoing restrictions shall not apply to any Transfer
which is a pledge by any of (A) the RSI Beneficial Holders, (B) David W. Beale,
or (c) the JAH Beneficial Holders of their respective Beneficial Ownership of
Shares, Options or Warrants, provided that such pledgor retains voting control
of such pledged Shares, Options or Warrants, (iii) at any time following the
first anniversary of the consummation of the Qualified Public Offering, the
Cahill Holders shall be entitled to distribute any Shares, Options, or Warrants
held by any of them to any limited partners or non-managing members of such
Cahill Holders (provided such limited partners or non-managing members are not
Affiliates of the general partner or managing member of such Cahill Holders),
and such limited partners or non-managing members, other than David L. Warnock
and Edward Cahill, shall not be subject to any further restrictions pursuant to
this Section 4.10, and (iv) Beale shall be entitled to sell any Shares, Options,
or Warrants held by him in an amount sufficient to provide proceeds to pay any
tax liabilities arising in connection with the exercise of any Options that
would expire if not exercised during the Blackout Period (provided, such
exercise is made not more than five Business Days prior to the expiration date
thereof and that all of the proceeds therefrom will be used to pay such tax
liability and provided, further, that such a sale by Beale shall not be
permitted if "cashless exercise" of such Options is available to him to achieve
the same after tax result).
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ARTICLE 5
PUT
5.1 Ability to Put. (a) If (A) the Company has not, prior to November 15,
2001, either made an Initial Public Offering, or merged into a public company
resulting in the holders of the then outstanding Series A, B and E Preferred
Stock and Conversion Stock receiving Registered Securities in such merger in
exchange for their Shares, or (B) the Series C and D Holders Beneficially Own
Shares, Options and Warrants representing (on a fully exercised and converted
basis), in the aggregate, 65% or more of the Fully Diluted Capitalization, then
at any time and from time to time thereafter until the earlier of November 15,
2003 or two years after the occurrence of the event described in clause (B) of
this paragraph, the holders of a Majority of the Shares of Series A, B and E
Preferred Stock shall have the option (the "Put") to require, subject to Section
5.4, the Company to purchase all of the outstanding Series A , B and E Preferred
Stock respectively held by the Series A, B and E Holders who have voted in favor
of the exercise of the Put, at the Put Price (as hereinafter defined) by
delivery of written notice to the Company (the "Put Notice"). Upon receipt of
the Put Notice, the Company shall notify each other Series A, B and E Holder,
who shall have the right to join in the Put by written notice to the Company
(the "Supplemental Put Notice"). The Company shall also provide notice thereof
to the holders of the Series C and D Preferred Stock. The Company shall be
obligated to purchase, subject to Section 5.4, the Series A, B and E Preferred
Stock specified in the Put Notice and the Supplemental Put Notice within 90 days
after the receipt by the Company of the Put Notice (or such longer period as may
be reasonably necessary to determine the Put Price pursuant to the provisions of
Sections 5.2 and 5.3). The closing of the purchase by the Company of the Series
A, B and E Preferred Stock shall occur at the Company's principal office, or at
such other place as shall be mutually agreeable to the Series A, B and E Holders
and the Company as soon as possible (and in any event within 10 days after the
determination of the Put Price in accordance with Sections 5.2 and 5.3) (such
date of closing being hereinafter referred to as the "Put Closing Date").
(b) If the holders of a Majority of the Shares of Series A, B and E
Preferred Stock are entitled to exercise the Put pursuant to the preceding
paragraph and shall not have done so, then at any time and from time to time
thereafter until the earlier of November 15, 2003 or two years after the
occurrence of the event described in clause (B) of the preceding paragraph, the
PNA Holder shall have the option, subject to all of the terms and conditions set
forth in this Article 5 (other than those pertaining to the repurchase of all of
the outstanding shares of the Series A, B and E Preferred Stock), to require the
Company to purchase all of the outstanding Series B Preferred Stock and Series E
Preferred Stock then held by the PNA Holder at the Put Price by delivery of
written notice to the Company (the "PNA Holder Put Notice"). Following the
receipt of the PNA Holder Put Notice, the Company shall promptly (and in any
event within 10 days after its receipt of the PNA Put Holder Notice) provide
notice thereof to the Cahill Holders, the Northwood Holders and the holders of
the Series C and D Preferred Stock. Each of the Cahill Holders and the Northwood
Holders shall have the right, subject to all of the terms and conditions set
forth in this Article Five (other than those pertaining to the repurchase of all
of the outstanding shares of the Series A, B and
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E Preferred Stock), to require the Company to purchase all of the outstanding
shares of Series A, B and E Preferred Stock then held by it at the Put Price by
delivery of written notice to the Company within 20 days after such holder's
receipt of the PNA Holder Put Notice. If the Cahill Holders or the Northwood
Holders exercise the Put pursuant to this paragraph, each other Series B Holder
and Series E Holder shall be entitled to join in the Put by written notice to
the Company. Any repurchase of Series A Preferred Stock, Series B Preferred
Stock or Series E Preferred Stock pursuant to this paragraph shall be made on
one closing date.
(c) If the Company has not, prior to November 15, 2001, either made an
Initial Public Offering, or merged into a public company resulting in the
holders of the then outstanding Series C and D Preferred Stock and Conversion
Stock receiving Registered Securities in such merger in exchange for their
Shares, then at any time and from time to time thereafter until November 15,
2003, the holders of a Majority of the Shares of Series C and D Preferred Stock
shall have the option (the "Series C and D Put") to require, subject to Section
5.4, the Company to purchase all of the outstanding Series C and D Preferred
Stock held by the Series C and D Holders who have voted in favor of the exercise
of the Series C and D Put, at the Series C and D Put Price (as hereinafter
defined) by delivery of written notice to the Company (the "Series C and D Put
Notice"). Upon receipt of the Series C and D Put Notice, the Company shall
notify each other Series C and D Holder, who shall have the right to join in the
Series C and D Put by written notice to the Company (the "Supplemental Series C
and D Put Notice"). The Company shall also provide notice thereof to the holders
of the Series A, B and E Preferred Stock. The Company shall be obligated to
purchase, subject to Section 5.4, the Series C and D Preferred Stock specified
in the Series C and D Put Notice and the Series C and D Supplemental Put Notice
within 90 days after the receipt by the Company of the Series C and D Put Notice
(or such longer period as may be reasonably necessary to determine the Series C
and D Put Price pursuant to the provisions of Sections 5.2 and 5.3). The closing
of the purchase by the Company of the Series C and D Preferred Stock shall occur
at the Company's principal office, or at such other place as shall be mutually
agreeable to the Series C and D Holders and the Company as soon as possible (and
in any event within 10 days after the determination of the Series C and D Put
Price in accordance with Sections 5.2 and 5.3) (such date of closing being
hereinafter referred to as the "Series C and D Put Closing Date").
Notwithstanding anything to the contrary contained herein, in the event of an
acquisition of Control of RSI of the type described in Section 4.6 hereof, the
Series C and D Put may only be exercised in the event that the Put has been
exercised.
(d) The Company shall not be required to purchase any Preferred Stock
pursuant to this Section 5.1 to the extent that the Company does not have
available legal surplus pursuant to the General Corporation Law of the State of
Nevada from which it can purchase such stock at the Put Price or the Series C
and D Put Price, as the case may be, provided that the Company shall use all
legally permissible methods in the reduction of capital and in the revaluation
of its assets, including appraisal, in obtaining such legal surplus, and the
Company gives written notice to the electing Securityholders within 30 days
after the date of the notice of exercise of the Put or the Series C and D Put by
such Securityholders that it is not required to purchase the number of Shares of
Preferred Stock set forth in such notice by reason of this clause and setting
forth the facts relating thereto.
(e) It is acknowledged and agreed that any Put Notice, Supplemental Put
Notice, PNA Holder Put Notice, Series C and D Put Notice, and Supplemental
Series C and D Put Notice received
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by the Company within any 30 day period shall be treated in all respects under
the terms and provisions of this Agreement as though such notices were received
on the same date at the same time. Accordingly, the Put Closing Date, the
closing date related to a PNA Holder Put Notice and the Series C and D Put
Closing Date related to such notices shall occur simultaneous on one closing
date and the payments to all such Securityholders shall be made pro rata on the
basis of the Common Stock Equivalents subject to such put rights.
(f) Upon election to require the Company to purchase the Preferred Stock
pursuant to the provisions of this Article 5, the Company will, subject to
Section 5.4, notify each Series A, B and E Holder or Series C and D Holder of
the Put Closing Date or the Series C and D Put Closing Date, as the case may be,
and each such Series A, B and E Holder or Series C and D Holder, as the case may
be, shall surrender the certificate or certificates representing such Shares to
the Company on or before such date. On the Put Closing Date or the Series C and
D Put Closing Date, as the case may be, the Put Price or the Series C and D Put
Price, as the case may be, for such Shares shall be payable to each such Series
A, B and E Holder or Series C and D Holder, as the case may be, by certified or
bank cashier's check or, at the option of the Series A, B and E Holder and
Series C and D Holder, as the case may be, receiving the same, by wire transfer
in immediately available funds to an account designated by each such holder, and
each surrendered certificate shall be canceled and retired. If less than all of
the Shares represented by such certificate are purchased, a new certificate or
certificates shall be issued representing the Shares not purchased by the
Company. If the Company does not have available legal surplus to purchase all of
the Series A, B and E Preferred Stock or Series C and D Preferred Stock that
each such Series A, B and E Holder or Series C and D Holder has requested the
Company to purchase under this Article 5, the Company shall purchase the maximum
number of Shares of Series A, B and E Preferred Stock and Series C and D
Preferred Stock that it may purchase with such legal surplus available, pro rata
to the Put Price or the Series C and D Put Price, as the case may be, thereof,
and the Company shall repurchase the remainder of such Series A, B and E
Preferred Stock and Series C and D Preferred Stock, as the case may be, as soon
as it has funds legally available to do so.
(g) The Company shall be permitted to pay the Put Price or the Series C and
D Put Price, as the case may be, by delivery of a subordinated note payable in
three annual installments of principal commencing on the first anniversary of
the Put Closing Date or the Series C and D Put Closing Date, as the case may be,
with interest at an annual rate equal to 3 1/2% plus the Prime Rate, it being
acknowledged and agreed that with respect to the decision to pay the Put Price
in cash or in such annual installments, the Series A, B and E Directors shall
not be entitled to vote if such decision is with respect to the redemption or
repurchase of the Series A, B and E Preferred Stock and the Series C and D
Directors shall not be entitled to vote if such decision is with respect to the
redemption or repurchase of the Series C and D Preferred Stock.
(h) If payment of the Put Price to the Series A, B and E Holders or the
Series C and D Put Price to the Series C and D Holders shall cause the Company
to be in default under the provisions of any of its loan agreements (a "Default
Event"), the Company may defer payment of all or such part of the Put Price or
the Series C and D Put Price, as the case may be, to each Series A, B and E
Holder or Series C and D Holder, as the case may be, pro rata to the Put Price
or the Series C and D Put Price, as the case may be, thereof, in an amount (a
"Deferred Amount") and for
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such time as is necessary to avoid a Default Event. Interest shall accrue on so
much of the Deferred Amount as is outstanding from time to time at a rate per
annum (based on the actual number of days elapsed in a 365 day year) equal to 3
1/2% percent plus the Prime Rate and such interest shall be payable by the
Company to the Series A, B and E Holders or Series C and D Holders, as the case
may be, at the time of payment of the Deferred Amount in full. In addition, the
Company shall use its best efforts to pay the Put Price or the Series C and D
Put Price in full on the Put Closing Date or the Series C and D Put Closing
Date, as the case may be, and, in this regard, the Company shall (i) seek to
negotiate with its lenders to permit the Company, under the terms of its loan
agreements, to perform its obligations under this Article 5 and/or (ii) seek to
obtain new financing.
5.2 Put Price. (a) For purposes of this Article 5, the Put Price shall be
the greater of (i) the Appraised Value of the Conversion Stock underlying the
Series A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock,
as the case may be, or (ii) the Adjusted Value of the Series A Preferred Stock,
Series B Preferred Stock or Series E Preferred Stock, as the case may be. The
"Appraised Value" shall mean the fair market value of the Conversion Stock
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock or Series E Preferred Stock, as the case may be, determined pursuant to
the appraisal procedure set forth in the immediately succeeding section. The
"Adjusted Value" shall be an amount per share equal to the Adjusted Purchase
Price of the Series A Preferred Stock (determined in accordance with the Series
A Certificate of Designation), or of the Series B Preferred Stock (determined in
accordance with the Series B Certificate of Designation) or of the Series E
Preferred Stock (determined in accordance with the Series E Certificate of
Designation), as the case may be, plus a cumulative accretion computed on the
Adjusted Purchase Price at the rate of 8% per annum (compounded annually) from
the date of issue up to the date of the Put Notice, reduced by an amount equal
to the aggregate of all declared and paid cash dividends, if any.
(b) For purposes of this Article 5, the Series C and D Put Price shall be
the greater of (i) the Series C and D Appraised Value of the Conversion Stock
underlying the Series C Preferred Stock or Series D Preferred Stock, or (ii) the
Series C and D Adjusted Value. The "Series C and D Preferred Stock Appraised
Value" shall mean the fair market value of the Conversion Stock issuable upon
conversion of the Series C Preferred Stock or Series D Preferred Stock
determined pursuant to the appraisal procedure set forth in the immediately
succeeding section (the "Series C and D Preferred Stock Appraised Value"). The
"Series C and D Adjusted Value" shall be an amount per share equal to the
Adjusted Purchase Price of the Series C Preferred Stock (determined in
accordance with the Series C Certificate of Designation) or Series D Preferred
Stock (determined in accordance with the Series D Certificate of Designation),
plus a cumulative accretion computed on the Adjusted Purchase Price at the rate
of 8% per annum (compounded annually) from the date of issue up to the date of
the Series C and D Put Notice, reduced by an amount equal to the aggregate of
all declared and paid cash dividends, if any.
5.3 Appraisal Procedure. In order to determine the Appraised Value or the
Series C and D Appraised Value, the holders of a Majority of the Shares of
Series A, B and E Preferred Stock (in the case of determinations of the
Appraised Value) or the holders of a Majority of the Shares of Series C and D
Preferred Stock (in the case of determinations of the Series C and D Appraised
Value), on the one hand, and the Board (excluding the Series A and Series B
Preferred Directors,
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in the case of the determination of the Appraised Value of the Series A, B and E
Preferred Stock, and excluding the Series C and D Preferred Directors, in the
case of the determination of the Appraisal Value of the Series C and D Preferred
Stock), on the other hand, shall each appoint one appraiser (collectively, the
"Initial Appraisers"), within 20 days after delivery of the Put Notice or the
Series C and D Put Notice, as the case may be, which appraisers shall promptly
determine a fair market value based on the going concern value of the Company as
a whole and without adjustment for minority interest or lack of liquidity,
within 30 days. In the event that the fair market values determined by the
Initial Appraisers (collectively, the "Original Estimates") do not differ in
amount by more than 10 percent, the fair market value for purposes of this
Section 5.3 shall be the amount equal to the average of the Original Estimates.
In the event that the Original Estimates differ in amount by more than 10
percent, the holders of a Majority of the Shares of Series A, B and E Preferred
Stock (in the case of determinations of the Appraised Value) or the holders of a
Majority of the Shares of Series C and D Preferred Stock (in the case of
determinations of the Series C and D Appraised Value) and the Company shall
mutually agree on a third appraiser within 5 days thereafter, provided that if
such holders and the Company fail to appoint a third appraiser within such 5-day
period, then the Initial Appraisers shall appoint a third appraiser within 5
days thereafter. The third appraiser shall independently, within 30 days of such
third appraiser's appointment, determine such a fair market value (the "Third
Estimate"). The Original Estimate that is nearest in amount to the Third
Estimate shall be deemed to be the fair market value that shall be binding on
the Company and the holders of the Shares subject to the Put. The Company shall
bear all costs of appraisers under this Section 5.3. All appraisers appointed
pursuant to this Section 5.3 shall be qualified in valuing companies similar to
the Company and shall be unaffiliated with any party hereto. Any determination
of the Appraised Value or the Series C and D Appraised Value under this Section
5.3 shall be made without reduction resulting from the lack of liquidity of the
Shares subject to Put or the Series C and D Put or the fact that such Shares
may, at such time, represent a minority interest in the Company.
5.4 Consent Required to Put. Upon receipt of a Put Notice or a Series C and
D Put Notice, the Company shall request the Required Banks to consent to the
exercise of the Put or the Series C and D Put, as the case may be. The Company
shall not be required to purchase Series A, B and E Preferred Stock or Series C
and D Preferred Stock, as the case may be, pursuant to Section 5.1, and the Put
Notice or the Series C and D Put Notice, as the case may be, shall be deemed
rescinded and withdrawn and of no force and effect and no beneficiary of any Put
or Series C and D Put, as the case may be, shall have any rights thereunder, and
no beneficiary of any Put or Series C and D Put, as the case may be, shall have
any rights or remedies to enforce any Put or Series C and D Put, as the case may
be, until such time as all Obligations shall have been paid in full in cash,
unless the Required Banks have consented in writing to the exercise of the Put
or Series C and D Put, as the case may be.
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ARTICLE 6
REGISTRATION RIGHTS
6.1 Public Offering Shares.
(1) Demand Registration Rights. (i) Subject to Section 6.1(a)(ii), at any
time and from time to time following the one year anniversary of an Initial
Public Offering, if the Company receives written notice from either (A) holders
of Class A Common Stock (as defined in Section 8.1(e)) who, immediately prior to
the Initial Public Offering, constituted the holders of a majority of the Shares
of the Series A, B and E Preferred Stock, or (B) holders of Class B Common Stock
(as defined in Section 8.1(e)) who immediately prior to the Initial Public
Offering, constituted the holders of a Majority of the Shares of the Series C
and D Preferred Stock, which notice demands the registration of all or any
portion of the Common Stock, Conversion Stock or Warrant Shares held by such
Series A, B and E Holders or Series C and D Holders and specifies the intended
methods of disposition thereof (which may include a delayed and continuous
offering pursuant to Rule 415 promulgated under the Securities Act), then the
Company shall promptly (and in any event within 10 days after its receipt of
such demand) provide notice thereof to the other Securityholders in accordance
with this Section 6.1 (which other Securityholders shall have the right, subject
to Section 6.1(c)(ii) to include in such registration any shares of Common
Stock, and any shares of Common Stock issuable upon conversion of Preferred
Stock or upon exercise of Warrants or Options held by them) and cause to be
prepared a registration statement, file and obtain a receipt for the
registration statement as soon as practicable (but not later than 90 days after
the date of such demand), and exercise its best efforts to file a final
registration statement, to obtain a receipt therefor as soon as practicable
thereafter and to have such registration statement declared effective as soon as
practicable thereafter, under the Securities Act and such other securities laws
as shall be directed by such Securityholders, to the end that the Shares
(including Shares issuable upon conversion of Preferred Stock or upon exercise
of Warrants or Options) held by all demanding Securityholders, may be sold
thereunder as soon as practicable after the receipt of such notice, and the
Company will use its best efforts to ensure that a distribution of such Shares
pursuant to the registration statement may continue for up to six months from
the date of the effective date of the registration statement or such later time
pursuant to the method of disposition specified in the demand for registration;
provided, however, that the Company shall not be obligated to take any action to
effect such registration, qualification or compliance pursuant to this Section
6.1(a) unless the Company shall have received requests for such registration of
such Shares having a minimum anticipated aggregate net offering price (based on
the then market price of the Common Stock and customary underwriter's discounts
and commissions, if applicable) of $20.0 million, subject, however, to the right
of the Company pursuant to Section 6.1(c)(ii), upon advice of the managing
underwriters, to reduce the number of Shares that are requested to be registered
by such holders (a "Market Cut Back"). Notwithstanding the foregoing, the
holders of Class B Common Stock shall be entitled to exercise the registration
rights contained herein solely with respect to the Class A Common Stock issuable
upon conversion of such Class B Common Stock. The Class B Common Stock shall be
automatically converted into Class A Common Stock upon the consummation of an
underwritten offering for such Class A Common Stock or upon the sale of such
Class A Common Stock pursuant to any delayed and continuous offering pursuant to
Rule 415 promulgated under the Securities Act. Each such registration shall
hereinafter be called a "Demand Registration." The Series A, B and E Holders
shall be entitled to request one Demand Registration and the Series C and D
Holders shall be entitled to request two Demand Registrations; provided,
however, that if all of the Series C and D Preferred Stock may have been (x)
included in the registration statement prepared upon the exercise of the Series
C and D Holders' first exercised right for a Demand Registration and (y) offered
and sold in such offering in accordance with the plan of distribution described
therein (after giving full force and
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effect to the Company's right to a Market Cut Back and the Company's rights
under Section 6.1(a)(ii)), then the Series C and D Holders shall not have the
right to the second Demand Registration (but will continue to have the rights
provided under Section 6.1(b)). A Demand Registration shall not count as such
until a registration statement becomes effective; provided, that if, after such
registration statement has become effective, the offering pursuant to the
registration statement is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental authority, such
registration shall be deemed not to have been effected unless such stop order,
injunction or other order shall subsequently have been vacated or otherwise
removed. The holders of a Majority of the Shares of the Series A, B and E
Preferred Stock or the holders of a Majority of the Shares of the Series C and D
Preferred Stock requesting such registration shall select the underwriters of
any underwritten offering pursuant to a registration statement filed pursuant to
this Section 6.1(a).
(ii) (A) If, upon receipt of a registration request pursuant to Section
6.1(a)(i), the Company is advised in writing (with a copy to the person(s)
requesting registration pursuant to Section 6.1(a)) by a nationally recognized
investment banking firm selected by the Company that, in such firm's opinion, a
registration at the time and on the terms requested would materially and
adversely affect any immediately planned underwritten public equity financing by
the Company for the primary purpose of raising capital for the Company that had
been contemplated by the Board prior to receipt of notice requesting
registration pursuant to Section 6.1(a)(i) (a "Transaction Blackout"), the
Company shall not be required to effect a registration pursuant to Section
6.1(a)(i) until the earliest of (1) the abandonment of such financing, (2) 90
days after the completion of such financing, (3) the termination of any "hold
back" or "lock-up" period obtained by the underwriter(s) selected by the Company
from any person in connection with such financing, or (4) 180 days after notice
to the Securityholders requesting registration of written notice of such
Transaction Blackout (together with a copy of the investment banking firm
opinion referred to above in this Section 6.1(a)(ii)(A)); provided, however,
that the Company shall be entitled to exercise this right on only one occasion
during any twelve-month period; or
(B) If, while a registration request is pending pursuant to Section 6.1(a),
counsel to the Company has determined in good faith that the filing of a
registration statement would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential and which has not been disclosed to the public (which determination
shall be made promptly), the Company shall not be required to effect a
registration pursuant to Section 6.1(a) until the earlier of (1) the date upon
which such material information is disclosed to the public or ceases to be
material and (2) 45 days after counsel to the Company makes such good faith
determination.
(iii) For purposes of this Article VI, whenever there are references to
Series A, B or E Holders or Series C and D Holders at a time following an
Initial Public Offering, such terms shall be deemed to refer to the same Persons
but in their capacity as holders of Class A Common Stock or Class B Common
Stock, as the case may be.
(2) "Piggyback" Registration Rights. Subject to applicable stock exchange
rules and securities regulations, at least 30 days prior to the filing of any
registration statement for any
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public offering of any of its Common Stock for the account of the Company or any
other Person, (other than an Initial Public Offering or registration statement
on Form S-4 or S-8 (or any successor forms under the Securities Act) or other
registrations relating solely to employee benefit plans or any transaction
governed by Rule 145 of the Securities Act), the Company shall give written
notice of such proposed filing and of the proposed date thereof to each
Securityholder and if, on or before the twentieth (20th) day following the date
on which such notice is given, the Company shall receive a written request from
any such Securityholder requesting that the Company include among the securities
covered by such registration statement any Shares (including Shares issuable
upon conversion of Preferred Stock or upon exercise of Warrants or Options) held
by such Securityholder for offering for sale in a manner and on terms set forth
in such request, the Company shall include such Shares in such registration
statement, if filed, so as to permit such Shares to be sold or disposed of in
the manner and on the terms of the offering thereof set forth in such request.
Each such registration shall hereinafter be called a "Piggyback Registration."
The holders of a majority of the Shares of Preferred Stock (taken as a single
class) participating in the registration shall have the right to select an
underwriter of any offering pursuant to a registration statement filed pursuant
to this Section 6.1(b).
(3) Terms and Conditions of Registration or Qualification. In connection
with any registration statement filed pursuant to Section 6.1(a) or 6.1(b)
hereof, the following provisions shall apply:
(1) Each selling Securityholder shall, if requested by the managing
underwriter, agree not to sell any Shares held by such selling Securityholder
(other than the Shares so registered) for such period of time following the
effective date of the registration statement relating to such offering, but in
no event in excess of three (3) months in the case of a secondary offering, or
such other longer period as the managing underwriter may require and the Company
shall agree.
(2) If the managing underwriter advises in writing that the inclusion in
such registration or qualification of some or all of the Shares sought to be
registered exceeds the number (the "Saleable Number") that can be sold in an
orderly fashion within a price range acceptable to the Company, if such
registration is being effected at the Company's determination, or holders of a
Majority of the Shares of the Series A, B and E Preferred Stock, if such
registration is being effected at the request of the holders of a Majority of
the Shares of Series A, B and E Preferred Stock or the holders of a Majority of
the Shares of the Series C and D Preferred Stock, if such registration is being
effected at the request of the holders of a Majority of the Shares of Series C
and D Preferred Stock, then the number of Shares offered shall be limited to the
Saleable Number and shall be allocated as follows:
(A) If such registration is being effected at the Company's determination
to sell Shares for its own account, (1) first, all the Shares the Company
proposes to register and (2) second, the difference between the Saleable Number
and the number to be included pursuant to clause (1) above, allocated first to
the Series A, B and E Holders and Series C and D Holders pro rata on the basis
of the relative number of Shares offered for sale by each such
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Securityholder, and then among all other selling Securityholders pro rata on the
basis of the relative number of Shares offered for sale by each such other
Securityholder; and
(B) in all other cases, including if the registration is being effected
pursuant to a Demand Registration, (1) first, the entire Saleable Number
allocated first to the holders of the Series A, B and E Preferred Stock, if the
Demand Registration was initiated by the holders of a Majority of the Shares of
the Series A, B and E Preferred Stock, or to the holders of the Series C and D
Preferred Stock, if the Demand Registration was initiated by the holders of a
Majority of the Shares of the Series C and D Preferred Stock, and then among all
other selling Securityholders pro rata on the basis of the relative number of
Shares offered for sale by each such Securityholder and (2) second, the
difference (if positive) between the Saleable Number and the number to be
included pursuant to clause (1) above, allocated to the Company.
(3) The selling Securityholders will promptly provide the Company with such
information concerning the selling Securityholder, its ownership of Shares and
its intended methods of distribution as the Company shall reasonably request in
order to prepare such registration statement and, upon the Company's request,
each selling Securityholder shall provide such information in writing and signed
by such Securityholder and stated to be specifically for inclusion in the
registration statement. If the distribution of the Shares covered by the
registration statement shall be effected by means of an underwriting, the right
of any selling Securityholder to include its Shares in such registration shall
be conditioned on such Securityholder's execution and delivery of a customary
underwriting agreement with respect thereto; provided, however, that except with
respect to information concerning such Securityholder and its ownership of
Shares to be included in such registration and such Securityholder's intended
manner of distribution of the Shares, no selling Securityholder shall be
required to make any representations or warranties in such agreement as a
condition to the inclusion of its Shares in such registration.
(4) The Company shall bear all expenses in connection with the preparation
of any registration statement filed pursuant to Section 6.1(a), including the
fees and disbursements of one counsel for the selling Securityholders, except
for the underwriting discounts or commissions with respect to Shares of the
selling Securityholders which shall be borne by the selling Securityholders.
(5) The Company shall bear all expenses in connection with the preparation
of any registration statement filed pursuant to Section 6.1(b), including the
fees and disbursement of one counsel to the selling Securityholders, except for
the underwriting discounts or commissions with respect to Shares of the selling
Securityholders, which shall be borne by the selling Securityholders.
(6) Following the effective date of such registration statement, the
Company shall, upon the request of the selling Securityholders, forthwith supply
such number of prospectuses (including preliminary prospectuses and amendments
and supplements thereto) meeting the requirements of the Securities Act or such
other securities laws where the registration statement or prospectus has been
filed and such other documents as are referred to in the registration statement
as shall be requested by the selling Securityholders to permit such
Securityholders to make a public
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distribution of their Shares, provided that the selling Securityholders furnish
the Company with such appropriate information relating to such Securityholders'
intentions in connection therewith as the Company shall reasonably request in
writing.
(7) The Company shall prepare and file such amendments and supplements to
such registration statement as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act or
such other securities laws where the registration statement has been filed with
the respect to the offer and sale or other disposition of the Shares covered by
such registration statement during the period required for distribution of the
Shares, which period shall not be in excess of six (6) months from the effective
date of such registration statement or such longer period specified in the
demand for registration.
(8) The Company shall use its best efforts to register or qualify the
Shares of the selling Securityholders covered by any such registration statement
under such securities or Blue Sky laws in such jurisdictions as the
Securityholders may request; provided, however, that the Company shall not be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified in order to comply with such request.
(9) The Company will as expeditiously as possible:
(A) cause the Shares covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the selling Securityholders to consummate the disposition of such Shares;
(B) notify each selling Securityholder at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(C) cause all Shares covered by the registration statement to be listed on
each securities exchange or designated for quotation on NASDAQ on which similar
securities issued by the Company are then so listed or designated and, unless
the same already exists, provide a transfer agent, registrar and CUSIP number
for all such Shares not later than the effective date of the registration
statement;
(D) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the holders of a
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majority of the voting power of the Shares being sold or the underwriters
retained by such holders, if any, reasonably request in order to expedite or
facilitate the disposition of such Shares;
(E) make available for inspection by any selling Securityholder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any such Inspector in connection with such registration statement;
(F) obtain "cold comfort" letters and updates thereof from the Company's
independent public accountants and an opinion from the Company's counsel, in
each case addressed to the selling Securityholders, in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
and opinion of counsel, respectively, as the holders of a majority of the voting
power of the Shares of the selling Securityholders shall request;
(G) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its Securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12 months, beginning
within three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(H) cause its officers to use their reasonable best efforts to support the
marketing of the Shares covered by the registration statement (including,
without limitation, the participation in "road shows," at the request of the
managing underwriter) taking into account the Company's business needs.
(10) Each selling Securityholder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
6.1(c)(ix)(B), such Securityholder will forthwith discontinue disposition of its
Shares pursuant to the registration statement covering such Shares until such
Securityholder's receipt of the copies of the supplemented or amended prospectus
contemplated by such Section 6.1(c)(ix)(B) and, if so directed by the Company,
such Securityholder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Securityholder's
possession, of the prospectus covering such its Shares current at the time of
receipt of such notice.
(4) Transfer Restrictions. The transfer restrictions contained in Article
4, including, without limitation, those set forth in Section 4.3, of this
Agreement shall not apply to any offering of Shares pursuant to this Section
6.1.
(5) Indemnification.
(1) In the event of the registration or qualification of any Shares of the
Securityholders under the Securities Act or any other applicable securities laws
pursuant to the
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provisions of this Section 6.1, the Company agrees to indemnify and hold
harmless each Securityholder thereby offering such Shares for sale (a "Seller")
and each of their officers, directors, partners, members or agents, the
underwriter, broker or dealer, if any, of such Shares, and each other Person, if
any, who controls any such Seller, underwriter, broker or dealer within the
meaning of the Securities Act or any other applicable securities laws (each an
"Indemnified Seller"), from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Seller may become subject under the Securities Act or any other
applicable securities laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Shares were registered or
qualified under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, offering circular or other document or any
amendment or supplement thereto or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation under the Securities Act, the
Exchange Act or any other applicable securities laws applicable to the Company
or relating to any action or inaction required by the Company in connection with
any such registration or qualification and will promptly reimburse each such
Indemnified Seller for any legal or other expenses reasonably incurred by such
Indemnified Seller in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission made in
such registration statement, such preliminary prospectus, such final prospectus
or such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Seller
specifically and expressly for use in the preparation thereof, or to the extent
that an Indemnified Seller sold securities to a Person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the final prospectus as then amended or supplemented if the Company previously
furnished copies thereof to such Indemnified Seller and the loss, claim, damage,
liability or action results from an untrue statement or omission contained in
the preliminary prospectus that was corrected in the final prospectus.
(2) In the event of the registration or qualification of any Shares of the
Securityholders under the Securities Act or any other applicable securities laws
for sale pursuant to the provisions of this Section 6.1, each selling
Securityholder, each underwriter, broker and dealer, if any, of such Shares, and
each other Person, if any, who controls any such selling Securityholder,
underwriter, broker or dealer within the meaning of the Securities Act, agrees
severally, and not jointly, to indemnify and hold harmless the Company, each
Person who controls the Company within the meaning of the Securities Act, and
each officer and director of the Company from and against any and all losses,
claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Company, such controlling Person or any such officer or
director may become subject under the Securities Act or any other applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in any registration statement
under which such Shares were registered or qualified under the Securities Act or
any other applicable securities laws,
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any preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon an untrue
statement or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which untrue
statement or omission was made therein in reliance upon and in conformity with
written information furnished to the Company by such selling Securityholder,
underwriter, broker, dealer or controlling Person specifically for use in
connection with the preparation thereof, and will reimburse the Company, such
controlling Person and each such officer or director for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that no selling Securityholder will be liable under this Section 6.1(e)(ii) for
any amount in excess of the net proceeds paid to such selling Securityholder in
respect of Shares sold by it.
(3) Promptly after receipt by a Person entitled to indemnification under
this Section 6.1(e) (an "Indemnified Party") of notice of the commencement of
any action or claim relating to any registration statement filed under Section
6.1(a) or 6.1(b) or as to which indemnity may be sought hereunder, such
indemnified party will, if a claim for indemnification hereunder in respect
thereof is to be made against any other party hereto (an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the omission to so notify the Indemnifying Party will not
relieve the Indemnifying Party from any liability that it may have to any
Indemnified Party otherwise than pursuant to the provisions of this Section
6.1(e) and shall also not relieve the Indemnifying Party of its obligations
under this Section 6.1(e) except to the extent that the Indemnifying Party is
actually prejudiced thereby. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense, with counsel
reasonably satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable cost of investigation;
provided, however, that no Indemnifying Party shall enter into any settlement
agreement without the prior written consent of the Indemnified Party unless such
Indemnified Party is fully released and discharged from any such liability.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (A) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such suit, action, claim or
proceeding, (B) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of the defense
of such action, suit, claim or proceeding, or (C) such Indemnified Party shall
have reasonably concluded, based upon the advice of counsel, that there may be
defenses available to it that are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the reasonable fees and expenses of one
counsel or firm of counsel
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selected by a majority in interest of the Indemnified Parties (and reasonably
acceptable to the Indemnifying Party) shall be borne by the Indemnifying Party.
If, in any such case, the Indemnified Party employs separate counsel, the
Indemnifying Party shall not have the right to direct the defense of such
action, suit, claim or proceeding on behalf of the Indemnified Party and the
Indemnified Party shall assume such defense and/or settle such action; provided,
however, that an Indemnifying Party shall not be liable for the settlement of
any action, suit, claim or proceeding effected without its prior written
consent, which consent shall not be unreasonably withheld.
ARTICLE 7
PREEMPTIVE RIGHTS
7.1 Preemptive Rights.
(1) Prior to an Initial Public Offering. If, after the date hereof and
prior to an Initial Public Offering, the Company shall propose to issue or sell
New Securities (as hereinafter defined) or enter into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any New Securities, then subject to the immediately
following paragraph, each Securityholder shall have the right to purchase that
number of New Securities, at the same price and on the same terms proposed to be
issued or sold by the Company, so that each such Securityholder would, after the
issuance or sale of all such New Securities (and after giving effect to the
preference given to the Series C and D Holders set forth in the immediately
following paragraph), hold the same proportionate interest of the Fully Diluted
Capitalization as was held by each such Securityholder immediately after any
issuance or sale of New Securities as set forth in the immediately following
paragraph and immediately prior to the issuance or sale of the balance of such
New Securities (the "Proportionate Percentage"). "New Securities" shall mean any
Shares or other securities or other rights convertible or exchangeable into or
exercisable for Shares; provided, however, that "New Securities" does not
include: (i) any Warrants, Options or Common Stock issued or issuable on
conversion of the Preferred Stock, or upon the exercise of Warrants or Options
(other than options referred to in clause (v) below); (ii) Shares issued
pursuant to the exercise of any rights, warrants, options (other than options
referred to in clause (v) below) or other agreements not outstanding on the date
of this Agreement including, without limitation, any security convertible or
exchangeable, with or without consideration, into or for any stock, options and
warrants, provided that the rights established by this Section 7.1 apply with
respect to the initial sale or grant by the Company of such rights or
agreements; (iii) securities issued by the Company as part of any public
offering pursuant to an effective registration statement under the Securities
Act; (iv) Shares issued in connection with any stock split, stock dividend or
recapitalization of the Company; (v) Shares issued to management, directors or
employees of, or consultants to, the Company pursuant to options outstanding as
of the date hereof and options to purchase Shares issued pursuant to any Option
Plan or as otherwise approved by the Compensation Committee and Shares issuable
upon exercise thereof; and (vi) securities issued as consideration for, or in
connection with, any merger or acquisition of the stock or assets of any
acquired entity by the Company.
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Notwithstanding the provisions of the foregoing paragraph, if, at the time
of any proposed issuance or sale by the Company of New Securities prior to an
Initial Public Offering, the RSI Beneficial Holders have Beneficial Ownership of
Shares, Options and Warrants (which in the case of Options or Warrants shall
include only those Options or Warrants that are Exercisable) representing (on a
fully exercised and converted basis), in the aggregate, less than 30% of the
Adjusted Fully Diluted Capitalization, then the RSI Beneficial Holders shall
have the initial right, exercisable, in the sole discretion of RSI, by the
Series C and D Holders for the benefit of the RSI Beneficial Holders or directly
by any of the RSI Beneficial Holders (provided, that, if such right is exercised
directly by any of the RSI Beneficial Holders, such Person shall become a party
to this Agreement for all purposes hereunder), to purchase that number of New
Securities (subject to the maximum number of New Securities proposed to be
issued or sold) at, except as set forth in the two immediately following
sentences, the same price and on the same terms proposed to be issued or sold by
the Company so that after such priority purchase under this paragraph the RSI
Beneficial Holders would have Beneficial Ownership of Shares, Options and
Warrants representing (on a fully exercised and converted basis), in the
aggregate, 30% of the Adjusted Fully Diluted Capitalization on a pro forma basis
giving effect to the maximum number of New Securities proposed to be issued or
sold. If, at the time of any issuance of New Securities, there are Unused
Backlog CSE's that are derived from a previous issuance of shares as
consideration for, or in connection with, any merger or acquisition of the stock
or assets of any acquired entity by the Company ("Merger Shares"), then,
notwithstanding the proposed price of the New Securities to be issued, the price
per share of the New Securities (only for that number of New Securities as are
purchasable under this paragraph with respect to such Unused Backlog CSE's
derived from the Merger Shares which number of New Securities shall be deemed to
be the first New Securities issued unless there are at the time Unused Backlog
CSE's derived from In-the-Money Option Shares with respect to which such Unused
Backlog CSE's came into existence prior to the Unused Backlog CSE's derived from
the Merger Shares) acquirable by the Series C and D Holders or the RSI
Beneficial Holders, as the case may be, shall be equal to the price per share at
which the Merger Shares were valued at the time of issuance, as determined in
good faith by the Board at the time of such acquisition (provided that if RSI
disagrees with such valuation, then the Company and RSI shall utilize the
appraisal procedures set forth in Section 5.3 hereof to determine such fair
market value). If, at the time of any issuance of New Securities, there are
Unused Backlog CSE's that are derived from the issuance of rights, warrants,
options or other agreements to purchase Common Stock or any security convertible
or exchangeable therefor (other than options granted under the Company's 1996
Option Plan) which such rights, warrants, options or other agreements were
either (x) issued as consideration for, or in connection with, any merger or
acquisition of the stock or assets of any acquired company (other than such
issuances which are made as incentive compensation for future services and are
approved by the Compensation Committee), or (y) issued with an exercise price
below the then fair market value of the Common Stock, as determined in good
faith by the Board (provided that if RSI disagrees with such valuation, then the
Company and RSI shall utilize the appraisal procedures set forth in Section 5.3
hereof to determine such fair market value and provided further that the
exercise price of any options issued pursuant to any Option Plan or as
compensation to any consultant to the Company shall be deemed to be at or above
fair market value and shall not be subject to the appraisal procedures if such
exercise price has been established by the Compensation Committee), and which
rights, warrants, options or other agreements described in clause (x) or clause
(y) are Exercisable ("In-the-Money Option Shares"), then, notwithstanding the
proposed price of the New Securities to
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be issued, the price per share (only for that number of New Securities as are
purchasable under this paragraph with respect to such Unused Backlog CSE's
derived from the In-the-Money Option Shares which number of New Securities shall
be deemed to be the first New Securities issued unless there are at the time
Unused Backlog CSE's derived from Merger Shares with respect to which such
Unused Backlog CSE's came into existence prior to the Unused Backlog CSE's
derived from the In-the-Money Option Shares) of the New Securities acquirable by
the Series C and D Holders or the RSI Beneficial Holders, as the case may be,
shall be equal to the exercise price for such In-the-Money Option Shares. The
failure of the RSI Beneficial Holders to exercise or to cause the Series C and D
Holders to exercise such preemptive rights shall constitute an irrevocable
waiver of the RSI Beneficial Holders' preemptive rights with respect to such New
Securities. The Company shall comply with the procedural requirements of this
Section 7.1 in connection with the offer of New Securities to the Series C and D
Holders or the RSI Beneficial Holders, as the case may be. The rights set forth
in this paragraph shall terminate and shall be of no force and effect at such
time as the Qualifying Series C and D Beneficial Holders shall no longer
maintain Beneficial Ownership of at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization. The Series C and D Holders shall provide such
information as the Company shall reasonably request in order to determine the
Beneficial Ownership of the Qualifying Series C and D Beneficial Holders. In the
event that any RSI Beneficial Holder transfers Beneficial Ownership in any
Shares, Options or Warrants, then, notwithstanding such transfer, the Shares,
Options or Warrants so transferred shall be deemed to be Beneficially Owned by
the RSI Beneficial Holders for purposes of this Section 7.1.
Subject to the immediately preceding paragraph, the Company shall give the
Securityholders written notice of its intention to issue and sell New
Securities, describing the type of New Securities, the price and the general
terms and conditions upon which the Company proposes to issue the same. Subject
to the immediately preceding paragraph, the Securityholders shall have 15 days
from the giving of such notice to agree to purchase all (or any part) of its
Proportionate Percentage of New Securities for the price and upon the terms and
conditions specified in the notice by giving written notice of the Company and
stating therein the quantity of New Securities to be purchased.
If the Securityholders fail to exercise in full such right within such 15
days, the Company shall have 120 days thereafter to sell the New Securities in
respect of which the Securityholders' rights were not exercised, at a price and
upon general terms and conditions no more favorable to the purchasers thereof
than specified in the Company's notice to the Securityholders pursuant to this
Section 7.1(a). If the Company has not sold the New Securities within such 120
days, the Company shall not thereafter issue or sell any New Securities, without
first offering such securities to the Securityholders in the manner provided
above.
If a Securityholder which is a SBIC has the right to acquire any voting New
Securities under this Section 7.1(a), the Company shall, at such
Securityholder's request, offer to sell to such Securityholder, New Securities
that do not have voting rights but otherwise have the same terms as such voting
New Securities.
Prior to the consummation of an Initial Public Offering, if there remain
any Unused Backlog CSE's that are derived from Merger Shares or In-the-Money
Option Shares, upon request of the RSI Beneficial Holders, the Company shall
issue to the RSI Beneficial Holders or the Series C and D
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Holders, as determined by RSI in its sole discretion, that number of shares of
Series C and D Preferred Stock as are purchasable under the second paragraph of
this Section 7.1(a) with respect to such Unused Backlog CSE's derived from the
Merger Shares and the In-the-Money Option Shares. The per share price for such
shares to be issued shall be calculated in the manner set forth in the second
and third sentences, as applicable, contained in the second paragraph of this
Section 7.1(a). The Company shall notify the Series C and D Holders of the
consummation of an Initial Public Offering at least 30 days, prior thereto and
the Series C and D Holders or the RSI Beneficial Holders, as the case may be,
shall have 15 days after receipt of such notice to exercise the rights contained
in this paragraph. The rights set forth in this paragraph, if not exercised by
the RSI Beneficial Holders or the Series C and D Holders for the account of the
RSI Beneficial Holders, prior to the consummation of an Initial Public Offering,
shall terminate upon the effectiveness of an Initial Public Offering.
(2) Initial Public Offering and Following an Initial Public Offering. If,
in connection with an Initial Public Offering or thereafter, the Company shall
propose to issue or sell Additional Securities or enter into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any Additional Securities, then the Series C and D
Holders shall have the right to purchase that number of Additional Securities,
at the same price and on the same terms proposed to be issued or sold by the
Company, so that the Series C and D Holders would, after the issuance or sale of
all such Additional Securities, Beneficially Own the greater of (i) 46% of the
Adjusted Fully Diluted Capitalization or (ii) the same percentage of the
Adjusted Fully Diluted Capitalization as they held immediately prior to such
issuance or sale of all such Additional Securities, provided, however, that (x)
in connection with an Initial Public Offering, the right of the Series C and D
Holders to purchase Additional Securities pursuant to this Section 7.1(b) also
shall be limited to a right to acquire 30% of the Additional Securities until
the dollar amount of such Additional Securities sold in such Initial Public
Offering to Persons other than the Series C and D Holders (or any Beneficial
Owner of the Series C and D Preferred Stock or Shares acquired by conversion
thereof) is at least $75,000,000 and thereafter shall be exercisable to the
extent provided above. Notwithstanding the immediately preceding sentence, if,
at the time of issuance of any Additional Securities, the Series C and D Holders
Beneficially Own less than 46% of the Adjusted Fully Diluted Capitalization and
the Series C and D Holders do not exercise their right in full to acquire
Additional Securities pursuant to the previous sentence, then, in any subsequent
issuance of Additional Securities, the Series C and D Holders shall have the
rights to purchase only that number of Additional Securities, at the same price
and on the same terms proposed to be issued or sold by the Company, so that the
Series C and D Holders would, after the issuance or sale of all such Additional
Securities, Beneficially Own the same percentage of the Adjusted Fully Diluted
Capitalization as such Series C and D Holders Beneficially Owned after the
issuance of Additional Securities in which such Series C and D Holders did not
so exercise their right in full (for these purposes any capital stock of the
Company subsequently acquired by the Series C and D Holders other than pursuant
to a direct issuance by the Company shall not be deemed to be Beneficially Owned
by such Series C and D Holders). For purposes of this Section 7.1(b), the term
"Additional Securities" shall mean New Securities plus all securities issued by
the Company as part of any public offering pursuant to an effective registration
statement under the Securities Act ("Additional Securities").
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Subject to the immediately preceding paragraph, the Company shall give the
Series C and D Holders written notice of its intention to issue and sell
Additional Securities, describing the type of Additional Securities, the price
and the general terms and conditions upon which the Company proposes to issue
the same. Subject to the immediately preceding paragraph, the Series C and D
Holders shall have 15 days from the giving of such notice to agree to purchase
all (or any part) of the Additional Securities which they are entitled to
purchase pursuant to this Section 7.1(b) for the price and upon the terms and
conditions specified in the notice by giving written notice of the Company and
stating therein the quantity of Additional Securities to be purchased.
If the Series C and D Holders fail to exercise in full such right within
such 15 days, the Company shall have 180 days thereafter to sell the Additional
Securities in respect of which the Series C and D Holders' rights were not
exercised, at a price and upon general terms and conditions no more favorable to
the purchasers thereof than specified in the Company's notice to the Series C
and D Holders pursuant to this Section 7.1(b). If the Company has not sold the
Additional Securities within such 180 days, the Company shall not thereafter
issue or sell any Additional Securities, without first offering such securities
to the Series C and D Holders in the manner provided above. The rights set forth
in this Section 7.1(b) shall terminate and shall be of no force and effect at
such time as the Qualifying Series C and D Beneficial Holders shall no longer
maintain Beneficial Ownership of at least 20% of the Series C and D Adjusted
Fully Diluted Capitalization.
7.2 Standstill. Except as expressly provided in Section 7.1, no Series A
Holder, Series B Holder, Series C Holder, Series D Holder or Series E Holder or
any Affiliate thereof shall purchase or otherwise acquire any securities of the
Company that are not subject to the provisions of this Agreement, without the
prior approval of a majority of the Series A, B and E Preferred Directors and
the Company Directors (taken in the aggregate) and a majority of the Series C
and D Preferred Directors. Notwithstanding the generality of the foregoing, this
Section 7.2 shall not apply to restrict the granting by the Company to any
Person of Options pursuant to any Option Plan and/or to the exercise of any such
Options.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement shall terminate automatically upon the
consummation of (i) an Initial Public Offering, or (ii) a Sale of the Company;
provided, however, that, notwithstanding the foregoing:
(a) the provisions of Section 4.5 shall survive an Initial Public Offering
and shall terminate upon the third anniversary thereof;
(b) the provisions of Section 4.10 shall survive in accordance with the
terms thereof;
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(c) the provisions of Article 6 shall survive an Initial Public Offering
until each Securityholder has disposed of its Shares that are the subject of
this Agreement; provided, however, that the provisions of Section 6.1(a) shall
terminate upon the third anniversary of the date of consummation of such Initial
Public Offering and the provisions of Section 6.1(b) shall terminate when each
Securityholder is eligible to sell all of the securities held by it and covered
by this Agreement in a single transaction pursuant to Rule 144 promulgated under
the Securities Act (taking into account the volume limitations contained
therein); and
(d) the provisions of (i) Section 7.1(b), (ii) Section 2.1(a) exclusively
as it relates to the right to nominate the Chairman of the Board, (iii) Section
3.1(e), (iv) Section 3.1(h), (v) Section 3.1(o), and (vi) Section 3.1(p), in
each case, shall survive an Initial Public Offering and continue until such time
as the RSI Beneficial Holders no longer have Beneficial Ownership of 15% of the
Series C and D Adjusted Fully Diluted Capitalization; provided, however, that
following the fifth anniversary of the Initial Public Offering, such percentage
shall be increased to 23%. Notwithstanding the foregoing, from and after an
Initial Public Offering, Section 3.1(e) and Section 3.1(p) shall be modified to
read as follows:
(A) Section 3.1(e): "entering into any business other than the Core
Business if, as a result of the entering into such business, the Core
Business would no longer be the predominant business of the Company;"
and
(B) Section 3.1(p): "any amendment to the Articles of Incorporation
(including the Certificates of Designation) or By-laws of the Company
or any change in the number of members of the Board, any Committee
thereof, or the Strategic Steering Committee, which amendment or
change would materially and adversely affect the rights of the Series
C and D Holders under this Agreement that survive an Initial Public
Offering (it being agreed and understood that any amendment that
increases the authorized capital stock of the Company shall not be
deemed to materially and adversely affect such rights)";
(e) upon an Initial Public Offering, the Shares of Series C Preferred Stock
and Series D Preferred Stock shall automatically be converted pursuant to and in
accordance with the Series C Certificate of Designation and Series D Certificate
of Designation, respectively, into shares of the Company's Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), to be issued solely to
the Series C and D Holders (provided that, to the extent that any Shares of
Series C and D Preferred Stock are Beneficially Owned by Persons who are not
Qualifying Series C and D Beneficial Holders, such Shares of Series C and D
Preferred Stock shall be converted pursuant to and in accordance with the Series
C Certificate of Designation and Series D Certificate of Designation into Shares
of Class A Common Stock, and such Persons who are not Qualifying Series C and D
Beneficial Holders, by their execution of a consent pursuant to Section 9.6
hereof, irrevocably elect such conversion to Shares of Class A Common Stock,
provided further however, that if any such Person shall not have executed such a
consent for any reason, such Person shall
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nonetheless be deemed bound by the obligation set forth herein to convert Shares
of Series C and D Preferred Stock to Shares of Class A Common Stock; and
provided, further, that the Qualifying Series C and D Beneficial Holders shall
be deemed to have irrevocably elected to receive Shares of Class B Common
Stock). Prior to such Initial Public Offering, the Board shall by resolution
grant the Shares of Class B Common Stock the rights set forth in the immediately
following sentence and shall provide for the automatic conversion of Shares of
Class B Common Stock into Shares of Class A Common Stock upon any transfer
thereof to a Person who is not a Qualifying Series C and D Beneficial Holder or
upon the events set forth in clause (y) of the second sentence of Section
9.17(d). Shares of Class B Common Stock shall (i) carry the right to elect that
number of Directors, but in no event more than four, as are equal to (A) 1, if
the outstanding shares of the Class B Common Stock then represent 10% or more
but less than 20% of the Series C and D Adjusted Fully Diluted Capitalization,
(B) 2, if the outstanding shares of the Class B Common Stock then represent 20%
or more but less than 30% of the Series C and D Adjusted Fully Diluted
Capitalization, (C) 3, if the outstanding shares of the Class B Common Stock
then represent 30% or more but less than 40% of the Series C and D Adjusted
Fully Diluted Capitalization, or (D) 4, if the outstanding shares of the Class B
Common Stock then represent 40% or more of the Series C and D Adjusted Fully
Diluted Capitalization, (ii) automatically convert into Common Stock upon any
Person that is not a Qualifying Series C and D Beneficial Holder acquiring
Beneficial Ownership thereof, and (iii) otherwise be identical to the Common
Stock in all respects. From and after an Initial Public Offering, the reference
to the Series C and D Preferred Directors in the definition of Super-Majority
Approval shall mean the Directors elected by the holders of the Class B Common
Stock. Nothing in this paragraph shall diminish any other rights of such holders
contained in this Agreement that shall survive an Initial Public Offering which
provisions shall survive in accordance with the terms thereof, notwithstanding
the conversion of the Preferred Stock into Class A Common Stock or Class B
Common Stock, as the case may be; and
(f) the provisions of Section 9.17 shall survive in accordance with their
terms.
ARTICLE 9
MISCELLANEOUS
9.1 Information. The Company covenants and agrees to deliver to each
Securityholder who continues to own at least 2% of the Fully Diluted
Capitalization (any such Securityholder, a "Large Securityholder") the
information specified in this Section 9.1 unless any such Large Securityholder
at any time specifically requests that such information not be delivered to it.
(1) Monthly and Quarterly Financial Statements. As soon as available, but
in any event not later than forty-five (45) days after the end of each monthly
or quarterly fiscal period as the case may be (other than the last quarterly
fiscal period in any fiscal year of the Company), the unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of each such
period and the related unaudited consolidated statements of income and cash
flows of the Company and its Subsidiaries for such period and for the elapsed
period in such fiscal year, all in reasonable detail and stating, in comparative
form (i) the figures as of the end of and for the comparable periods
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of the preceding fiscal year and (ii) the figures reflected in the operating
budget for such period as specified in the financial plan of the Company
delivered pursuant to Section 9.1(e) hereof. All such financial statements shall
be prepared in accordance with GAAP applied on a consistent basis throughout the
periods reflected therein except as stated therein and shall be accompanied by a
certificate of the Company's president or chief financial officer to such
effect.
(2) Annual Financial Statements. As soon as available, but in any event
within ninety (90) days after the end of each fiscal year of the Company, a copy
of the audited consolidated (and unaudited consolidating) balance sheets of the
Company and its Subsidiaries as at the end of such fiscal year and the related
audited consolidated (and unaudited consolidating) statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal year, all in reasonable detail and stating in comparative form the
figures as at the end of and for the immediately preceding fiscal year,
accompanied (in the case of the audited consolidated financial statements) by an
opinion of an accounting firm of recognized national standing selected by or
such Subsidiary, which opinion shall state that such accounting firm's audit was
conducted in accordance with generally accepted auditing standards. All such
financial statements shall be prepared in accordance with GAAP applied on a
consistent basis throughout the periods reflected therein except as stated
therein.
(3) Material Litigation. Within ten (10) days after the Company learns of
the commencement or written threat of commencement of any litigation or
proceeding against the Company or any of its Subsidiaries or any of their
respective assets that could reasonably be expected to have a material adverse
effect on the Company, written notice of the nature and extent of such
litigation or proceeding.
(4) Material Agreement. Within five (5) days after the receipt by the
Company of written notice of the occurrence of a default by the Company or any
of its Subsidiaries under any material contract, agreement or document that
could reasonably be expected to have a material adverse effect on the Company,
written notice of the nature and extent of such default.
(5) Budgets. As soon as available, but in any event not later than thirty
(30) days prior to the beginning of each fiscal year of the Company, the Annual
Budget as well as any updates or revisions to such plan as soon as available.
(6) Accountants' Management Letters, Etc. Promptly after receipt by the
Company, copies of all accountants' management letters and all management and
board responses to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material litigation or similar
matters relating to the Company and its Subsidiaries, which shall be prepared by
the Company or its officers and delivered to the third parties.
(7) Stockholders' Lists. Within sixty (60) days after the end of each
fiscal year, a stockholders' list, showing the authorized and outstanding shares
by class (including the Common Stock equivalents of any convertible security),
the holders of all outstanding shares (both before giving effect to dilution and
on a fully diluted basis) and all outstanding options, warrants and convertible
securities, and detailing all options and warrants granted, exercised or lapsed
(including
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in each case, without limitation, all option and warrant exercise prices, stock
issuance prices and other terms) and all shares issued or sold (whether to
directors or managers, in connection with financing or otherwise).
(8) Other Information and Access. From time to time, and promptly, such
additional information regarding results of operations, financial condition or
business of the Company and its Subsidiaries, including, without limitation,
cash flow analyses, projections and minutes of any meetings of the Board, as any
Large Securityholder may reasonably request. The Company shall also afford to
any Large Securityholder (and its representatives) access, at reasonable times
and on reasonable prior notice, to the books, records and properties of the
Company and its Subsidiaries.
9.2 Certificate Legend. Upon execution of this Agreement, the stock
certificates representing Shares held by the Securityholders shall contain
substantially the following legend, in addition to any other legends deemed
reasonably appropriate or necessary by the Company:
"This certificate is transferable only upon compliance with and subject to
the provisions of a Stockholders' Agreement among the Company and certain
Securityholders, a copy of which Agreement is on file in the office of the
Secretary of the Company at its principal place of business. The Company
will furnish a copy of such Agreement to the record holder of this
Certificate, without charge, upon written request to the Company at its
principal place of business or registered office."
9.3 Negotiable Form. Whenever any Shares, Warrants or Options are to be
delivered or sold pursuant to this Agreement, the Person selling such Shares,
Warrants or Options shall deliver such certificates or other instruments duly
endorsed or accompanied by appropriate stock powers or assignments separate from
the instrument along with attached stock transfer tax stamps.
9.4 Enforcement. No Shares, Warrants or Options shall be transferred on the
books of the Company and no Transfer thereof shall be effective unless and until
the terms and provisions of this Agreement are complied with, and in cases of
violation of this Agreement by the attempted Transfer of the Shares, Warrants or
Options without compliance with the terms and provisions thereof, such Transfer
shall be invalid and of no effect and be deemed in all respects void ab initio,
and the Company and/or any of the Securityholders who are not attempting to
Transfer the Shares, Warrants or Options shall have the right to compel the
Securityholder who is attempting to Transfer the Shares, Warrants or Options,
and/or the purported transferee, to Transfer and deliver the same in accordance
with the applicable provisions of this Agreement.
9.5 Specific Performance. The parties hereto recognize that the Shares,
Warrants or Options cannot be readily purchased or sold on the open market and
that it is to the benefit of the Company and the Securityholders that this
Agreement be carried out; and for those and other reasons, the parties hereto
would be irreparably damaged if this Agreement is not specifically enforced in
the event of a breach hereof. If any controversy concerning the rights or
obligations to purchase or sell any Shares, Warrants or Options arises, or if
this Agreement is breached, the parties hereto hereby agree that remedies at law
might be inadequate and that, therefore, such rights and
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obligations, and this Agreement, shall be enforceable by specific performance.
The remedy of specific performance shall not be an exclusive remedy, but shall
be cumulative of all other rights and remedies of the parties hereto at law, in
equity or under this Agreement.
9.6 Transferees. The Company and the Securityholders shall cause any
transferee of any Shares, Warrants or Options held by any Securityholder to
execute a consent, in form and substance reasonably acceptable to the Company,
to be bound by the terms and conditions of this Agreement and upon execution
thereof such future Securityholder shall be entitled to the rights of an owner
of the Shares, Warrants or Options held by such transferee hereunder, provided
that the foregoing shall not apply to Shares that have been sold pursuant to an
effective registration statement under the Securities Act or Rule 144
thereunder.
9.7 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in person,
transmitted by telecopier or sent by registered or certified mail (return
receipt requested) or recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address as any such party may notify to
the other parties in writing:
(1) if to the Company:
VANTAS Incorporated
90 Park Avenue
Suite 3100
New York, New York 10016
Attn: David W. Beale
Facsimile No.: (212) 907-6444
with a copy to :
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Lawrence B. Rodman, Esq.
Facsimile No.: (212) 735-8708
(2) if to the Cahill Holders:
Cahill, Warnock & Company LLC
1 South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David Warnock
Facsimile No.: (410) 895-3805
with a copy to:
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Wilmer, Cutler & Pickering
100 Light St.
Baltimore, Maryland 21202
Attn: John B. Watkins, Esquire
Facsimile No.: (410) 986-2828
(3) if to the Northwood Holders:
Northwood Ventures LLC
485 Underhill Boulevard
Syosset, New York 11791
Attn: Henry T. Wilson
Facsimile No.: (516) 364-0879
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attn: Bradley P. Cost, Esquire
Facsimile No.: (212) 682-0200
and a copy to:
Kuhn, Loeb & Co.
485 Madison Avenue, 20th Floor
New York, New York 10022
(4) if to the Paribas Holder or the PNA Holder:
Paribas, acting through its
Cayman Island Branch
787 Seventh Avenue
New York, New York 10019
Attn: Donald J. Ercole
Facsimile No.: (212) 841-2363
Paribas North America
787 Seventh Avenue
New York, New York 10019
Attn: Donald J. Ercole
Facsimile No.: (212) 821-2363
with a copy to:
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White & Case
1155 Avenue of the Americas
New York, New York 10036
Attn: John Reiss, Esq.
Facsimile: (212) 354-8113
(5) if to the Series C and D Holders:
RSI I/O Holdings, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Scott Rechler
Jason Barnett, Esq.
Fax: (516) 622-6788
InterOffice Superholdings LLC
225 Broadhollow Road
Melville, New York 11747
Attn: Scott Rechler
Jason Barnett, Esq.
Fax: (516) 622-6788
Reckson Office Centers LLC
225 Broadhollow Road
Melville, New York 11747
Attn: Scott Rechler
Jason Barnett, Esq.
Fax: (516) 622-6788
with a copy to:
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attn: Irwin Kishner, Esq.
David Lubin, Esq.
Fax: (212) 889-7577
and to:
JAH I/O LLC
2 Manhattanville Road
Purchase, New York 10577
Attn: Jon L. Halpern
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and to:
Battle, Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Michael Mishaan, Esq.
Fax: (212) 856-7811
(6) if to any of the Other Holders, to the respective Other Holder as set
forth below:
David W. Beale
3230 Hewlett Avenue
Merrick, New York 11564
Thomas S. Shattan
930 Park Avenue
New York, New York 10028
Kate Dundes Shattan
930 Park Avenue
New York, New York 10028
Thomas S. Shattan and
Kate Dundes Shattan Trust
FBO Cecily Bay Shattan,
Gregory E. Mendel, Trustee
930 Park Ave.
New York, New York 10028
Thomas S. Shattan and
Kate Dundes Shattan Trust
FBO Ward Harrison Shattan,
Gregory E. Mendel, Trustee
930 Park Ave.
New York, New York 10028
Gregory E. Mendel
354 Hartshorn Drive
Short Hills, New Jersey 07078
Nancy Warshauer Mendel
Cust for Erica Brooke Mendel UTMA NJ
354 Hartshorn Drive
Short Hills, New Jersey 07078
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Nancy Warshauer Mendel
Cust for David Ross Mendel UTMA NJ
354 Hartshorn Drive
Short Hills, New Jersey 07078
G. Kevin Fechtmeyer
5 Jackie Lane
Westport, Connecticut 06880
Facsimile No.: (203) 222-8231
The Shattan Group LLC
590 Madison Avenue, 18th Floor
New York, New York 10022
Attn: Thomas S. Shattan
Facsimile: (212) 308-5205
Arnold L. Cohen
105 Captain Road
North Woodmere, New York 11581
Barbara Cohen
105 Captain Road
North Woodmere, New York 11581
Louis Perlman
1239 Veedor Drive
Hewlett Bay Park, New York 11557
Louis Perlman IRA Rollover,
Gruntal & Co., LLC Custodian
1239 Veedor Drive
Hewlett Bay Park, New York 11557
Wilma Perlman
1239 Veedor Drive
Hewlett Bay Park, New York 11557
William E. Phillips
200 North Cove Road
Old Saybrook, Connecticut 06475
Michael Phillips
30 Winchester Drive
Atherton California 94027
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Thomas Phillips and Tracy Phillips
43 Jennifer Lane
New Canaan, Connecticut 06840
Willis Pember and Sarah Pember
P.O. Box 8073
Aspen, Colorado 81612
Alan M. Langer
Strawberry Lane
Irvington, New York 10533
Laura J. Kozelouzek
50 West 72nd Street
Apt. 712
New York, New York 10023
Edward M. Caravalho
39 16th Street
West Babylon, New York 11704
Daniel Felix Robitaille
2 Fadore Lane
Apt. 6-G
Yonkers, New York 10710
Deborah Baker
28 Cove Road
South Salem, New York 10590
M.L.P.F. & S. Custodian for Deborah Baker
28 Cove Road
South Salem, New York 10590
Kelly J. Besecker
21930 Hyde Park Drive
Ashburn, Virginia 20147
Jerry Daniels
166 East 63rd Street
Apt. 11C
New York, New York 10021
Mitchell Knecht
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37 Barnside Road
Short Hills, New Jersey 07078
Linda Harris
340 East 93rd Street, # 6L
New York, New York 10128
Bonnie Deininger
4342 Laclede Place
St. Louis, Missouri 63108
G. Lee Bohs
1720 Clockwater Drive
Westchester, Pennsylvania 19380
David L. Warnock
c/o Cahill, Warnock & Co.
1 South Street, Suite 2150
Baltimore, Maryland 21202
Bennett Schmidt
31 West 93rd Street
Apt. 1C/2C
New York, New York 10025
Peter Samitt
15 West 104th Street
Apartment 1B
New York, New York 10025
Carol Whalin
350 East 79th Street
Apt C
New York, New York 10021
Donaldson Lufkin & Jenrette
Custodian for Dottie Wight
8 Bohler Lane
Atlanta, Georgia 30327
Leslie Flynn
223 Hillside Place
Eastchester, New York 10709
Winnie Huynh
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108-10 66th Avenue
Forest Hills, New York 11375
Rommel Mapa
47-28 Parsons Boulevard
Flushing, New York 11355
Rita Michaelson
301 East 62nd Street
New York, New York 10021
Susan Melchner
150 Larchmont Avenue
Larchmont, New York 10538
Gerald Kaminsky
136 Harold Road
Woodmere, New York 11598
Bettylu Saltzman
161 Chicago Avenue East
Chicago, Illinois 60611
Alan Goldberg
10 Kenneth Court
Kings Point, New York 11024
Francis G. Hickey, Jr.
6333 North Scottsdale
Casita No. 6
Scottsdale, Arizona 85253
Peggyanne Kahn
5 Lakewood Lane
Larchmont, New York 10538
William Spier
One West 81st Street, Apt. 5-D
New York, New York 10024
Samuel Klutznick
111 East Wacker Drive
Suite 2400
Chicago, Illinois 60601
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Peter A. Halstead, Trustee
for Eliza Finkelstein
Tippet Alley
P.O. Box 1454
Edwards, Colorado 81632-1454
Peter A. Halstead, Trustee
for Jennifer Finkelstein
Tippet Alley
P.O. Box 1454
Edwards, Colorado 81632-1454
Tippet Partners
Tippet Alley
P.O. Box 1454
Edwards, Colorado 81632-1454
Karen Scharfberg
1058 Kingsley Road
Rydal, Pennsylvania 19046
Douglas Scharfberg
1058 Kingsley Road
Rydal, Pennsylvania 19046
Bette Ann Spielman
33 The Oaks
Roslyn, New York 11576
The Spielman Group
c/o Bette Ann Spielman
General Partner
33 The Oaks
Roslyn, New York 11576
Gerald Spielman
Fortrend International, LLC
7960 L'Aquila Way, First Floor
Delray Beach, FL 33446
Robert Spielman
7 Windemere Crest
Woodbury, New York 11797
Robin Spielman
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7 Windemere Crest
Woodbury, New York 11797
4364 Kasso Circle Realty, Inc. Profit Sharing Plan
c/o Stanley Spielman and Phyllis Spielman, Trustees
7 Acric Court
Manhasset, New York 11030
Stanley Spielman
7 Acric Court
Manhasset, New York 11030
Stanley Spielman, IRA
7 Acric Court
Manhasset, New York 11030
Kenneth Witover
12 Sabine Road
Oyster Bay Cove
Syosset, New York 11791
Erica Witover
12 Sabine Road
Oyster Bay Cove
Syosset, New York 11791
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, 3 business days
after dispatch.
9.8 Binding Effect; Assignment. This Agreement, including the rights and
conditions contained herein in connection with disposition of Shares, Warrants
or Options shall be binding upon the parties hereto, together with their
respective executors, administrators, successors, Personal representatives,
heirs and assigns permitted under this Agreement.
9.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York for contracts executed and to
be fully performed in such state and without regard to principles regarding
conflict of laws.
9.10 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable
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provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as part
of this Agreement, a provision as similar in its terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.11 Entire Agreement. This Agreement together with the Certificates of
Designation and the Warrants and Options embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to the subject
matter hereof. To the extent that any provision contained herein conflicts or is
otherwise inconsistent with any provision contained in the Warrants or Options,
including, without limitation, any provision relating to preemptive rights, the
provisions contained herein shall be controlling.
9.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
9.13 Amendment; Waiver. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Company and
Securityholders holding Common Stock Equivalents in excess of 66 2/3% of the
Common Stock Equivalents that are then subject to this Agreement (which
approving Securityholders shall include each Securityholder who, either alone or
together with its Affiliates, holds 2% or more of the Common Stock Equivalents
that are then subject to this Agreement); provided, however, that any amendment,
modification or supplement that would (i) impose additional restrictions on any
Securityholder's right to transfer its Options, Warrants or Shares or eliminate
any Securityholder's rights under the Agreement to transfer its Options,
Warrants or Shares pursuant to Article 4, in each case in a manner that does not
affect all similarly situated Securityholders equally, or (ii) materially and
adversely affect any Securityholder's registration rights (other than as a
result of any increase in the number of shares that may be covered by such
registration rights), in each case in a manner that does not affect all
similarly situated Securityholders equally, or preemptive rights shall, in each
case, require the approval of each such affected Securityholder. Section 4.7(c)
and Section 5.4 of this Agreement shall not be permitted to be amended without
the consent of the Required Banks.
9.14 Captions. The captions of this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
9.15 Waivers. (a) By executing this Agreement, each Securityholder shall be
deemed to have waived any preemptive rights such Securityholder may have had
under this Agreement or under any other instrument or agreement in connection
with the issuance and sale of Series C Preferred Stock pursuant to the Merger
Agreements.
(b) By executing this Agreement, each Securityholder who had the right to
receive information concerning the Company pursuant to the provisions of the
First Series A Stock Purchase Agreement, the Second Series A Stock Purchase
Agreement or the Series B Stock Purchase Agreement shall be deemed to have
irrevocably waived the right to receive any such information.
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The foregoing waiver shall not limit the rights of any Securityholder to receive
information pursuant to Section 9.1 hereof.
9.16 Subsequent Option Grants. In the event of any grant by the Company of
any Option pursuant to the Company's 1996 Stock Option Plan, (i) if the grantee
is a party to this Agreement, such Options and Option Shares shall
automatically, and without any action on the part of such grantee, become
subject to the provisions of this Agreement, and (ii) if the grantee is not a
party to this Agreement, such grantee shall become a party with respect to such
Options and Option Shares by executing a signature page hereto. Schedule 1
hereto shall be amended by the Company, without any action on the part of any
Securityholder, from time to time to reflect such additions. The Company shall
not be required to give notice to any Securityholder of any such amendments to
Schedule 1 but shall, upon the request of any Securityholder, provide a copy of
Schedule 1, as so amended.
9.17 Non-Competition. (a) Each of the Cahill Holders, the Northwood
Holders, the RSI Beneficial Holders and the JAH Beneficial Holders (each of the
foregoing Persons, a "Non-Competing Party" and collectively, the "Non-Competing
Parties") shall not, and shall cause each of its Affiliates Controlled by such
Person not to, directly or indirectly, (i) "Compete" with the Company, or act as
a director, officer, consultant to, or as an employee of, any Person that
directly or indirectly Competes with the Company, or (ii) knowingly own or
control any voting securities or other securities convertible into voting
securities in any Person that Competes with the Company. A Person shall be
deemed to "Compete" with the Company, for purposes of this Section 9.17, if a
business conducted by such Person is materially competitive with the Prohibited
Business. In determining whether a business conducted by a Person is materially
competitive with the Prohibited Business, the factors to be considered shall
include, without limitation, the respective customer base and distribution
channels of such Person and the Prohibited Business with respect to the specific
products and services which compete with each other. Notwithstanding the
foregoing, a Person shall not be deemed to Compete with the Company if it offers
for sale one or more products or services which are part of the Prohibited
Business so long as the provision of any such products or services taken in the
aggregate are not materially competitive with the Prohibited Business. In the
event that the Company believes that any proposed investment or the conduct of
any business by any Non-Competing Party would violate such restrictions, it
shall so notify such Non-Competing Party within six months after receipt of
written notice from the Non-Competing Party of such investment or business. The
failure of the Company to so notify such Non-Competing Party within such
six-month period shall constitute an irrevocable waiver of the Company's right
to contest such investment or business.
(b) Notwithstanding the foregoing, each of the Non-Competing Parties shall
be permitted to make an investment in any Person whose business Competes with
the Company, provided that within 9 months after the consummation of such
investment, such Person ceases to engage in the business which Competes with the
Company provided, that if there is a dispute with respect to whether an
investment Competes, then any required divestiture shall not be required until
nine (9) months after the date of final determination of such Dispute adverse to
the Non-Competing Party. If such Person ceases to engage in the business which
Competes with the Company through the divestiture of the competing business
lines (including any divestiture following a final
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determination described above), the Non-Competing Party shall use and cause each
of its Affiliates Controlled by it to use its reasonable good faith efforts to
offer the Company the first opportunity to acquire such business lines which
such Person is divesting.
(c) Nothing in this Section 9.17 shall limit the right of (i) the iRSI
Beneficial Holders to provide products and services under the terms of the
Intercompany Agreement, or (ii) any Non-Competing Party to own not more than
4.9% of the outstanding shares of a corporation or other entity whose shares or
other equity or debt interests are listed on any United States national or
regional securities exchange or reported by NASDAQ or any successor thereto. In
the event of a final determination by a court of competent jurisdiction that any
Non-Competing Party has breached the covenants in this Section 9.17, then,
except as set forth in Section 9.17(d) below, the Company shall be entitled to
all available remedies at law and in equity for such breach. It is acknowledged
and agreed that no provision of this Section 9.17 shall require any
Non-Competing Party to divest or refrain from conducting any investment or
business (a "Pre-Existing Business") which it acquired or developed prior to the
time that, as a result of developments of or modifications to the Prohibited
Business, such Pre-Existing Business taken as a whole Competes with the
Prohibited Business. However, the restrictions set forth in Section 9.17 shall
apply to such Pre-Existing Business if, as a result of developments of or
modifications to such Pre-Existing Business, such Pre-Existing Business taken as
a whole then Competes with the Prohibited Business.
(d) In the event of a final determination by a court of competent
jurisdiction that any of the RSI Beneficial Holders or the JAH Beneficial
Holders has breached the covenants in this Section 9.17, then, without
duplication or limitation of any rights and remedies that may be available to
the Company under the Intercompany Agreement, the Company shall have the right
to recover the profits (taking into account the consideration set forth in the
last sentence of this Section 9.17(d)), to the RSI Beneficial Holders and their
Affiliates (in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders and their Affiliates (in the
case of a breach of this Section 9.17 by any of the JAH Beneficial Holders)
derived from the operations of the business or investment that has been
determined to Compete with the Company for the period commencing on the
notification of a dispute with respect to such business or investment pursuant
to Section 9.17 hereof and ending on the earlier to occur of (i) the date of
divestiture of the business line that Competes with the Company, (ii) the
termination of the Intercompany Agreement in accordance with the terms thereof
(solely in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders), and (iii) the exercise of the Call Right (as defined below)
or the conversion of the Class B Common Stock described below, as applicable
(which right to recover profits (taking into account the consideration set forth
in the last sentence of this Section 9.17(d)) shall be Alliance's sole and
exclusive remedy at law and in equity for such breach other than Alliance's
rights set forth in this Section 9.17(d), (e) and (f) and in the Intercompany
Agreement). Further, in the event that such final determination occurs (x) prior
to an Initial Public Offering, the Company shall have the right to acquire all
of the Shares, Options and Warrants then Beneficially Owned by the RSI
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.17 by any of the JAH Beneficial Holders) in accordance with
the provisions of Section 9.17(e) and the rights granted to the Series C and D
Holders pursuant to this Agreement shall terminate to the extent provided in
Section 9.17(e), or (y) after an Initial Public Offering: (1)
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all of the shares of Class B Common Stock shall automatically, and without any
action on the part of any Person, convert into an equal number of shares of
Class A Common Stock; provided, however, that if only the JAH Beneficial Holders
are the parties that have been determined to breach the provisions of this
Section 9.17, then only the shares of Class B Common Stock then Beneficially
Owned by such JAH Beneficial Holders shall be converted as described above; (2)
all of the rights of the RSI Beneficial Holders and the Series C and D Holders
that survive an Initial Public Offering shall automatically terminate and be of
no further force and effect; provided, however, that if only the JAH Beneficial
Holders are the parties that have been determined to breach the provisions of
this Section 9.17, then such rights shall survive in accordance with their
terms; and (3) any Directors then serving that are Affiliates or appointees
(other than Jon A. Halpern who shall continue to serve as a Director if the JAH
Beneficial Holders would then remain entitled to designate a Director under the
provisions of Section 9.17(e) (assuming for the purpose of applying said Section
9.17(e) to this clause (3) that an Initial Public Offering has not occurred) and
other than the Special Series C and D Director if he is then serving), of the
RSI Beneficial Holders (in the case of a breach of this Section 9.17 by any of
the RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the JAH Beneficial Holders) shall
immediately resign or shall be removed from the Board. Nothing herein shall
preclude the RSI Beneficial Holders or the JAH Beneficial Holders from
exercising their rights as holders of Common Stock following any automatic
conversion of the Class B Common Stock, including, without limitation, the right
to vote for, and nominate Directors, in accordance with the Company's Articles
of Incorporation and By-Laws and applicable law. The Company agrees that,
following any automatic conversion of the Class B Common Stock, it shall
continue to hold its annual meetings for stockholders in accordance with the
Company's By-laws. Notwithstanding the foregoing, the Company shall not have the
rights described in clause (x) of the second preceding sentence and the actions
described in clause (y) of the second preceding sentence shall not occur if,
within thirty days after the final determination referred to in the first
sentence of this Section 9.17(d), the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders), at its option, delivers written notice to the Company
that the business line which Competes with the Company will be divested, and
such divestiture is actually completed within nine months after the date of such
final determination. If a breach of the covenant contained in this Section 9.17
arises out of an investment in an entity that is not a wholly owned subsidiary
of a Non-Competing Party or its Affiliates (an "Acquired Competing Party"),
then, for purposes of this Section 9.17(d), the profits referred to herein shall
include only those profits that a Non-Competing Party or its Affiliates (other
than the Acquired Competing Party and its Affiliates Controlled by such Acquired
Competing Party) shall have received and the portion of the profits of the
Acquired Competing Party as to which such Non-Competing Party or its Affiliates
(other than the Acquired Competing Party and its Affiliates Controlled by such
Acquired Competing Party) would be entitled by virtue of their proportionate
ownership in the Acquired Competing Party (whether or not such profits have been
distributed to a Non-Competing Party or its Affiliates).
(e) The Company shall have the right (the "Call Right") to acquire, upon
written notice delivered to RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17
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by any of the JAH Beneficial Holders) within 30 days after the final
determination referred to in the first sentence of Section 9.17(d) (only if such
final determination occurs prior to an Initial Public Offering), all (but not
less than all) of the Shares (including any Class B Common Stock acquired upon
conversion of the Series C and D Preferred Stock), Options and Warrants then
Beneficially Owned by the RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) at the fair market value of such Shares, Options and
Warrants at the time of exercise of the Call Right (without giving effect to any
actions that the Company may take to effectuate the payment of the Call Purchase
Price (as defined below) and without giving effect to the impact, if any, of any
termination of the Intercompany Agreement) as determined pursuant to and in
accordance with the appraisal procedures set forth in Section 5.3 hereof. The
aggregate amount payable to RSI Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the JAH
Beneficial Holders) upon exercise of the Call Right shall be referred to herein
as the "Call Purchase Price." Upon exercise of the Call Right with respect to
the RSI Beneficial Holders, the Company shall be required to pay to such RSI
Beneficial Holders in immediately available funds an amount equal to the lesser
of (1) 10% of the estimated Call Purchase Price, and (ii) $7,000,000, which
amount shall be refunded to the Company in the event that the Call Right shall
not be consummated due to the failure of the RSI Beneficial Holders to deliver
the Shares, Options and Warrants that are the subject of the Call Right. Upon
exercise of the Call Right with respect to the JAH Beneficial Holders, the
Company shall be required to pay to such JAH Beneficial Holders in immediately
available funds an amount equal to the lesser of (i) 10% of the estimated Call
Purchase Price, and (ii) $2,800,000, which amount shall be refunded to the
Company in the event that the Call Right shall not be consummated due to the
failure of the JAH Beneficial Holders to deliver the Shares, Options and
Warrants that are the subject of the Call Right. Following any exercise of the
Call Right, the Series C and D Holders and the Series C and D Preferred
Directors shall not utilize any of the rights granted to any of them pursuant to
this Agreement or under the Series C Certificate of Designation and Series D
Certificate of Designation to prohibit the Company from taking any actions
reasonably necessary to effect the consummation of the Call Right. The closing
of the purchase by the Company of the Shares, Options and Warrants that are the
subject of the Call Right shall occur at the Company's principal office, or at
such other place as shall be mutually agreeable to the RSI Beneficial Holders
(in the case of a breach of this Section 9.17 by any of the RSI
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Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the JAH Beneficial Holders) and the Company as soon
as possible (and in any event within 9 months after the final determination
referred to in Section 9.17) (such date of closing being hereinafter referred to
as the "Call Closing Date"). Notwithstanding anything to the contrary contained
herein, if the Call Right has been exercised and an Initial Public Offering (as
evidenced by a filing of a registration statement with the Securities and
Exchange Commission) or a Rule 144A offering is pending or is being undertaken
in connection with the exercise of the Call Right, then, (x) the Call Closing
Date shall occur prior to or contemporaneous with the consummation of such
offering, and (y) the payment of the Call Purchase Price shall be made in
immediately available funds at a price per share equal to the greater of (i) the
price per share of Common Stock in such offering and (ii) the fair market value
of a share of Common Stock as determined in accordance with the first sentence
of this Section 9.17(e). At the Call Closing Date, each of the RSI Beneficial
Holders (in the case of a breach of this Section 9.17 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.17 by any of the JAH Beneficial Holders) shall surrender to the
Company any Options, Warrants and the certificate or certificates representing
its Shares, in each case free and clear of all Encumbrances and the Company
shall pay the Call Purchase Price by wire transfer in immediately available
funds to an account designated by the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders). Notwithstanding the foregoing, the Company shall be
permitted to pay the Call Purchase Price by delivery of a subordinated note
payable in three annual installments of principal commencing on the first
anniversary of the Call Closing Date, with interest at an annual rate equal to 3
1/2% plus the Prime Rate. Upon payment of the Call Purchase Price, any Directors
then serving that are Affiliates or appointees (other than Jon A. Halpern if the
JAH Beneficial Holders remain entitled to designate a director under the
provisions of this Section 9.17(e) and other than the Special Series C and D
Director if he is then serving) of the RSI Beneficial Holders (in the case of a
breach of this Section 9.17 by any of the RSI Beneficial Holders) or the JAH
Beneficial Holders (in the case of a breach of this Section 9.17 by any of the
JAH Beneficial Holders) shall immediately resign or shall be removed from the
Board. In the event of a breach of this Section 9.17 by any of the RSI
Beneficial Holders and upon payment of the Call Purchase Price to the RSI
Beneficial Holders, all of the rights of the RSI Beneficial Holders and the
Series C and D Holders contained in this Agreement shall automatically terminate
and be of no further force and effect; provided, however, that (x) the JAH
Beneficial Holders shall have the right to designate that number of Directors as
are equal to the number of Directors they would have had the right to designate
pursuant to Section 8.1(e), assuming that the shares of Series C and D Preferred
Stock Beneficially Owned by such JAH Beneficial Holders had been converted to
Class B Common Stock as provided therein and that there were no other
outstanding shares of Class B Common Stock, (y) for purposes of any
Super-Majority Approval requirements thereafter, any Directors designated by the
JAH Beneficial Holders or any other Series C and D Holders shall not be
considered Series C and D Preferred Directors but any actions specified in
Sections 3.1(e), 3.1(f), and 3.1(j) shall require the approval of a majority of
the Directors then designated by the JAH Beneficial Holders and (z) the JAH
Beneficial Holders shall remain entitled to exercise the rights granted to all
Securityholders generally as set forth in Section 3.2, Article IV, Article V,
Article VI, and Section 7.1(a) which rights shall survive in accordance with
their terms. Notwithstanding the previous sentence, if the JAH Beneficial
Holders shall Beneficially Own less than 10% of the Series C and D Adjusted
Fully Diluted Capitalization but shall not have disposed of any shares of Series
C Preferred Stock originally issued to them pursuant to the Merger Agreements,
or any shares of Series D Preferred Stock issued to them pursuant to the Series
D Stock Purchase Agreement or the Series D and E Stock Purchase Agreement, and
shall have exercised in full all rights previously available to them under
Section 4.3 and Section 7.1 hereof, then the JAH Beneficial Holders shall be
entitled to designate one Director. In the event of a breach of this Section
9.17 by any of the JAH Beneficial Holders, all of the rights of the RSI
Beneficial Holders and the Series C and D Holders contained in this Agreement
shall survive in accordance with their respective terms. In the event of the
Company's failure to exercise the Call Right or pay the Call Purchase Price, the
rights of the Series C and D Holders shall remain unaffected.
(f) Upon exercise of the Call Right, the Company shall request the Required
Banks to consent to such exercise. The Company shall not be required to
consummate the Call
72
<PAGE>
Right, and the exercise of such Call Right shall be deemed rescinded and
withdrawn and of no force and effect and no RSI Beneficial Holder or JAH
Beneficial Holder, as the case may be, shall have any rights or remedies to
enforce the Call Right, until such time as all Obligations (as defined in the
Credit Agreement) shall have been paid in full in cash, unless the Required
Banks have consented in writing to the exercise of the Call Right. The Company
may assign the Call Right, in whole or in part, to any Person provided that such
Person must pay the Call Purchase Price with respect to any Shares, Options or
Warrants acquired by it in immediately available funds.
(g) The prohibitions set forth in this Section 9.17 shall apply to each of
the Cahill Holders and the Northwood Holders only so long such Cahill Holders or
Northwood Holders maintain Beneficial Ownership in the aggregate of 50% or more
of the Common Stock Equivalents (excluding Warrant Shares) initially acquired by
them pursuant to the First Series A Stock Purchase Agreement and the Second
Series A Stock Purchase Agreement. The prohibitions set forth in this Section
9.17 shall apply to the JAH Beneficial Holders for so long as such JAH
Beneficial Holders maintain Beneficial Ownership in the aggregate of 50% or more
of the Common Stock Equivalents initially acquired by them pursuant to the
Merger Agreements, the Series D Stock Purchase Agreement and the Series D and E
Stock Purchase Agreement. The prohibitions set forth in this Section 9.17 shall
apply to the RSI Beneficial Holders for so long as such RSI Beneficial Holders
maintain Beneficial Ownership in the aggregate of 15% or more of the Series C
and D Adjusted Fully Diluted Capitalization.
[NO FURTHER TEXT ON THIS PAGE]
[PAGES FOLLOW]
<PAGE>
VANTAS INCORPORATED
FIFTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JULY 29, 1999
SIGNATURE PAGE
VANTAS INCORPORATED
By: /s/ David W. Beale
-------------------------------------------
Name: David W. Beale
Title: President
CAHILL, WARNOCK STRATEGIC
PARTNERS FUND, L.P.
By: CAHILL, WARNOCK STRATEGIC
PARTNERS, L.P., its General Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY,
L.L.C., its General Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: Managing Member
NORTHWOOD VENTURES LLC
By: /s/ Henry T. Wilson
-------------------------------------------
Name: Henry T. Wilson
Title: Managing Director
1
<PAGE>
NORTHWOOD CAPITAL PARTNERS LLC
By: /s/ Henry T. Wilson
-------------------------------------------
Name: Henry T. Wilson
Title: Managing Director
/s/ Henry T. Wilson
-----------------------------------------------
HENRY T. WILSON
2
<PAGE>
PARIBAS, acting through its
Cayman Island Branch
By: /s/ D. Ercole
-------------------------------------------
Name: D. Ercole
Title: M. Director
PARIBAS NORTH AMERICA, INC.
By: /s/ John G. Martinez
-------------------------------------------
Name: John G. Martinez
Title: Financial Controller
INTEROFFICE SUPERHOLDINGS LLC
By: RSI I/O HOLDINGS, INC.,
its managing member
By: /s/ Scott Rechler
-------------------------------------------
Name: Scott Rechler
Title: Chairman
3
<PAGE>
RECKSON OFFICE CENTERS LLC
By: RSI I/O HOLDINGS, INC.,
its managing member
By: /s/ Scott Rechler
-------------------------------------------
Name: Scott Rechler
Title: Chairman
/s/ David W. Beale
---------------------------------------------
DAVID W. BEALE
/s/ Thomas S. Shattan
---------------------------------------------
THOMAS S. SHATTAN
/s/ Kate Dundes Shattan
---------------------------------------------
KATE DUNDES SHATTAN
4
<PAGE>
/s/ Gregory E. Mendel
---------------------------------------------
GREGORY E. MENDEL, AS TRUSTEE OF THE THOMAS
S. SHATTAN AND KATE DUNDES SHATTAN TRUST FBO
CECILY BAY SHATTAN
/s/ Gregory E. Mendel
---------------------------------------------
GREGORY E. MENDEL, AS TRUSTEE OF THE THOMAS
S. SHATTAN AND KATE DUNDES
SHATTAN TRUST FBO WARD HARRISON
SHATTAN
/s/ Gregory E. Mendel
---------------------------------------------
GREGORY E. MENDEL
5
<PAGE>
/s/ Nancy Warshauer Mendel
---------------------------------------------
NANCY WARSHAUER MENDEL CUST FOR ERICA BROOKE
MENDEL UTMA NJ
/s/ Nancy Warshauer Mendel
---------------------------------------------
NANCY WARSHAUER MENDEL CUST FOR DAVID ROSS
MENDEL UTMA NJ
/s/ G. Kevin Fechtmeyer
---------------------------------------------
G. KEVIN FECHTMEYER
6
<PAGE>
THE SHATTAN GROUP LLC
By: /s/ Thomas S. Shattan
---------------------------------------------
Name: Thomas S. Shattan
Title: Managing Director
/s/ Arnold L. Cohen
---------------------------------------------
ARNOLD L. COHEN
/s/ Barbara Cohen
---------------------------------------------
BARBARA COHEN
7
<PAGE>
/s/ Louis Perlman
---------------------------------------------
LOUIS PERLMAN
/s/ Louis Perlman
---------------------------------------------
LOUIS PERLMAN IRA ROLLOVER
GRUNTAL & CO., LLC CUSTODIAN
/s/ Wilma Perlman
---------------------------------------------
WILMA PERLMAN
8
<PAGE>
/s/ William E. Phillips
---------------------------------------------
WILLIAM E. PHILLIPS
/s/ Michael Phillips
---------------------------------------------
MICHAEL PHILLIPS
/s/ Thomas Phillips and Tracy Phillips
---------------------------------------------
THOMAS PHILLIPS AND TRACY PHILLIPS
9
<PAGE>
/s/ Willis Pember and Sarah Pember
---------------------------------------------
WILLIS PEMBER AND SARAH PEMBER
/s/ Alan M. Langer
---------------------------------------------
ALAN M. LANGER
/s/ Laura J. Kozelouzek
---------------------------------------------
LAURA J. KOZELOUZEK
10
<PAGE>
/s/ Edward M.Caravalho
---------------------------------------------
EDWARD M. CARAVALHO
/s/ Daniel Felix Robitaille
---------------------------------------------
DANIEL FELIX ROBITAILLE
/s/ Deborah Baker
---------------------------------------------
DEBORAH BAKER
11
<PAGE>
/s/ M.L.P.F. & S.
---------------------------------------------
M.L.P.F. & S. CUSTODIAN FOR DEBORAH BAKER
/s/ Kelly J. Besecker
---------------------------------------------
KELLY J. BESECKER
/s/ Jerry Daniels
---------------------------------------------
JERRY DANIELS
/s/ Mitchell Knecht
---------------------------------------------
MITCHELL KNECHT
12
<PAGE>
/s/ Linda Harris
---------------------------------------------
LINDA HARRIS
/s/ Bonnie Deininger
---------------------------------------------
BONNIE DEININGER
/s/ Steven Ginensky
---------------------------------------------
STEVEN GINENSKY
/s/ G. Lee Bohs
---------------------------------------------
G. LEE BOHS
13
<PAGE>
/s/ David L. Warnock
---------------------------------------------
DAVID L. WARNOCK
/s/ Bennett Schmidt
---------------------------------------------
BENNETT SCHMIDT
/s/ Peter Samitt
---------------------------------------------
PETER SAMITT
/s/ Carol Whalin
---------------------------------------------
CAROL WHALIN
14
<PAGE>
/s/ Dean Witter Reynolds
---------------------------------------------
DEAN WITTER REYNOLDS
CUSTODIAN FOR DOTTIE WIGHT
/s/ Leslie Flynn
---------------------------------------------
LESLIE FLYNN
/s/ Winnie Huynh
---------------------------------------------
WINNIE HUYNH
/s/ Rommel Mapa
---------------------------------------------
ROMMEL MAPA
15
<PAGE>
/s/ Arnold Widder
---------------------------------------------
ARNOLD WIDDER
/s/ Rita Michaelson
---------------------------------------------
RITA MICHAELSON
/s/ Susan Melchner
---------------------------------------------
SUSAN MELCHNER
/s/ Gerald Kaminsky
---------------------------------------------
GERALD KAMINSKY
16
<PAGE>
/s/ Bettelu Saltzman
---------------------------------------------
BETTELU SALTZMAN
/s/ Alan Goldberg
---------------------------------------------
ALAN GOLDBERG
/s/ Frank Hickey
---------------------------------------------
FRANK HICKEY
/s/ Peggyanne Kahn
---------------------------------------------
PEGGYANNE KAHN
17
<PAGE>
/s/ William Spier
---------------------------------------------
WILLIAM SPIER
/s/ Samuel Klutznick
---------------------------------------------
SAMUEL KLUTZNICK
/s/ Peter A. Halstead
---------------------------------------------
PETER A. HALSTEAD, TRUSTEE FOR ELIZA
FINKELSTEIN
/s/ Peter A. Halstead
---------------------------------------------
PETER A. HALSTEAD, TRUSTEE FOR
JENNIFER FINKELSTEIN
18
<PAGE>
TIPPET PARTNERS
By: /s/ Peter Halstead
-------------------------------------------
Name: Peter Halstead
Title: General Partner
/s/ Karen Scharfberg
---------------------------------------------
KAREN SCHARFBERG
/s/ Douglas Scharfberg
---------------------------------------------
DOUGLAS SCHARFBERG
THE SPIELMAN GROUP
By: /s/ Bette Ann Spielman
-----------------------------------------
Name: Bette Ann Spielman
Title: General Partner
19
<PAGE>
/s/ Gerald Spielman
---------------------------------------------
GERALD SPIELMAN
/s/ Robert Spielman
---------------------------------------------
ROBERT SPIELMAN
/s/ Robin Spielman
---------------------------------------------
ROBIN SPIELMAN
/s/ Stanley Spielman and Phyllis Spielman
---------------------------------------------
STANLEY SPIELMAN AND PHYLLIS SPIELMAN,
TRUSTEES FOR KASSO CIRCLE REALTY, INC.
PROFIT SHARING PLAN
20
<PAGE>
/s/ Stanley Spielman
---------------------------------------------
STANLEY SPIELMAN
/s/ Stanley Spielman
---------------------------------------------
STANLEY SPIELMAN, IRA
/s/ Kenneth Witover
---------------------------------------------
KENNETH WITOVER
/s/ Erica Witover
---------------------------------------------
ERICA WITOVER
21
<PAGE>
/s/ Scott Rechler
---------------------------------------------
SCOTT RECHLER, in his personal capacity (solely
for purposes of Section 2.1, Section 2.2 and
Section 2.4) /s/ Jon Halpern
---------------------------------------------
JON HALPERN, in his personal capacity
(solely for purposes of Section 2.1, Section
2.2. and Section 2.4)
RECKSON SERVICE INDUSTRIES, INC.,
By: /s/ Scott Rechler
------------------------------------------
Name: Scott Rechler
Title: President and Chief
Executive Officer
22
Exhibit 10.39
[CONFORMED COPY WITH
EXHIBITS F-1, F-2, AND H CONFORMED
AS EXECUTED]
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
among
VANTAS INCORPORATED,
VARIOUS BANKS
and
PARIBAS,
as Agent
$157,875,000
---------------------------------------
Dated as of January 16, 1997
and
Amended and Restated as of November 6, 1998
and further
Amended and Restated as of August 3, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Amount and Terms of Credit......................................1
1.01 The Commitments.................................................1
1.02 Minimum Amount of Each Borrowing................................2
1.03 Notice of Borrowing.............................................2
1.04 Disbursement of Funds...........................................3
1.05 Notes...........................................................3
1.06 Conversions.....................................................5
1.07 Pro Rata Borrowings.............................................5
1.08 Interest........................................................6
1.09 Interest Periods................................................7
1.10 Increased Costs, Illegality, etc................................8
1.11 Compensation...................................................10
1.12 Replacement of Banks...........................................10
Section 1A. Letters of Credit..............................................12
1A.01 Letters of Credit..............................................12
1A.02 Minimum Stated Amount..........................................13
1A.03 Letter of Credit Requests......................................13
1A.04 Letter of Credit Participations................................13
1A.05 Agreement to Repay Letter of Credit Drawings...................15
1A.06 Increased Costs................................................16
Section 2. Commitment Commission; Fees; Reductions of Commitment..........16
2.01 Fees...........................................................16
2.02 Voluntary Termination of Unutilized Commitments................17
2.03 Mandatory Reduction of Commitments.............................18
Section 3. Prepayments; Payments; Taxes...................................19
3.01 Voluntary Prepayments..........................................19
3.02 Mandatory Repayments and Commitment Reductions.................20
3.03 Method and Place of Payment....................................26
3.04 Net Payments...................................................27
Section 4. Conditions Precedent to Loans on the Restatement
Effective Date.................................................28
4.01 Execution of Agreement; Notes..................................28
4.02 Officer's Certificate..........................................28
4.03 Opinions of Counsel............................................29
4.04 Corporate Documents; Proceedings...............................29
4.05 Plans; Shareholders' Agreements; Management Agreements;
Employment Agreements; Collective Bargaining Agreements;
Debt Agreements; Affiliate Contracts; Tax Sharing Agreements
and Material Contracts........................................29
4.06 Assignment of Leases and Rents.................................31
4.07 Pledge Agreement...............................................31
4.08 Security Agreement.............................................32
4.09 Subsidiaries Guaranty..........................................32
4.10 Material Adverse Change, etc...................................32
4.11 Litigation.....................................................33
4.12 Fees, etc......................................................33
4.13 Solvency Certificate; Insurance Analyses.......................33
4.14 Approvals......................................................33
4.15 Financial Statements; Projections; Management Letter Reports...34
4.16 Refinancing....................................................34
4.17 Consent Letter.................................................35
4.18 Equity Financing...............................................35
Section 5. Conditions Precedent to All Credit Events......................35
5.01 No Default; Representations and Warranties.....................35
5.02 Notice of Borrowing; Letter of Credit Request..................35
5.03 Permitted Acquisitions.........................................35
2
<PAGE>
Section 6. Representations, Warranties and Agreements.....................36
6.01 Corporate and Limited Liability Company Status.................36
6.02 Corporate Power and Authority..................................36
6.03 No Violation...................................................36
6.04 Governmental Approvals.........................................37
6.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc.................................37
6.06 Litigation.....................................................38
6.07 True and Complete Disclosure...................................38
6.08 Use of Proceeds; Margin Regulations............................39
6.09 Tax Returns and Payments.......................................39
6.10 Compliance with ERISA..........................................40
6.11 The Security Documents.........................................41
6.12 Representations and Warranties in Credit Documents.............41
6.13 Properties.....................................................41
6.14 Capitalization.................................................42
6.15 Subsidiaries...................................................42
6.16 Compliance with Statutes, etc..................................42
6.17 Investment Company Act.........................................43
6.18 Public Utility Holding Company Act.............................43
6.19 Environmental Matters..........................................43
6.20 Labor Relations................................................43
6.21 Patents, Licenses, Franchises and Formulas.....................44
6.22 Indebtedness...................................................44
3
<PAGE>
6.23 Restrictions on or Relating to Subsidiaries....................44
6.24 Foreign Pension Plans..........................................45
6.25 The Transaction................................................45
6.26 Concentration Account..........................................45
6.27 Material Contracts.............................................45
6.28 Business Centers; Owners.......................................45
6.29 Year 2000 Reprogramming........................................45
6.30 Immaterial Subsidiary..........................................46
Section 7. Affirmative Covenants..........................................46
7.01 Information Covenants..........................................46
7.02 Books, Records and Inspections.................................49
7.03 Maintenance of Property, Insurance.............................49
7.04 Corporate Franchises...........................................50
7.05 Compliance with Statutes, etc..................................50
7.06 Compliance with Environmental Laws.............................50
7.07 ERISA..........................................................51
7.08 End of Fiscal Years; Fiscal Quarters...........................52
7.09 Performance of Obligations.....................................52
7.10 Payment of Taxes...............................................53
7.11 Interest Rate Protection.......................................53
7.12 Use of Proceeds................................................53
7.13 Year 2000 Reporting............................................53
7.14 Intellectual Property Rights...................................54
7.15 Permitted Acquisitions.........................................54
7.16 Registry.......................................................59
7.17 Further Actions................................................59
7.18 Concentration Account..........................................60
Section 8. Negative Covenants.............................................60
8.01 Liens..........................................................60
8.02 Consolidation, Merger, Purchase or Sale of Assets, etc.........62
8.03 Dividends......................................................63
8.04 Concentration Account..........................................63
8.05 Indebtedness...................................................63
8.06 Advances, Investments and Loans................................64
8.07 Transactions with Affiliates...................................65
8.08 Capital Expenditures...........................................65
8.09 Fixed Charge Coverage Ratio....................................66
8.10 Interest Coverage Ratio........................................66
8.11 Consolidated Indebtedness to Consolidated EBITDA...............67
8.12 Minimum EBITDA.................................................68
8.13 Limitation on Voluntary Payments and Modification of Existing
Indebtedness; Limitation on Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; etc.......69
8.14 Limitation on Certain Restrictions on Subsidiaries.............70
4
<PAGE>
8.15 Limitation on Issuance of Capital Stock........................70
8.16 Business.......................................................70
8.17 Limitation on Creation of Subsidiaries.........................70
8.18 Lease Agreements...............................................71
Section 9. Events of Default..............................................71
9.01 Payments.......................................................71
9.02 Representations, etc...........................................71
9.03 Covenants......................................................71
9.04 Default Under Other Agreements.................................71
9.05 Bankruptcy, etc................................................72
9.06 ERISA..........................................................72
9.07 Security Documents.............................................73
9.08 Guaranties.....................................................73
9.09 Judgments......................................................73
9.10 Change in Control..............................................73
Section 10. Definitions and Accounting Terms...............................74
10.01 Defined Terms..................................................74
Section 11. The Agent......................................................98
11.01 Appointment....................................................98
11.02 Nature of Duties...............................................98
11.03 Lack of Reliance on the Agent..................................99
11.04 Certain Rights of the Agent....................................99
11.05 Reliance.......................................................99
11.06 Indemnification................................................99
11.07 The Agent in Its Individual Capacity..........................100
11.08 Holders.......................................................100
11.09 Resignation by the Agent......................................100
Section 12. Miscellaneous.................................................101
12.01 Payment of Expenses, etc. ....................................101
12.02 Right of Setoff...............................................102
12.03 Notices.......................................................102
12.04 Benefit of Agreement..........................................102
12.05 No Waiver; Remedies Cumulative................................104
12.06 Payments Pro Rata.............................................104
12.07 Calculations; Computations....................................105
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL..................................................105
12.09 Counterparts..................................................106
12.10 Effectiveness.................................................106
12.11 Headings Descriptive..........................................106
12.12 Amendment or Waiver...........................................107
12.13 Survival......................................................108
12.14 Domicile of Loans.............................................108
12.15 Post-Closing Obligations......................................108
12.16 Default Exception.............................................108
12.17 Permitted Stock Issuance Adjustment...........................109
SCHEDULE I - COMMITMENTS
SCHEDULE II - INSURANCE
SCHEDULE III - PROJECTIONS
SCHEDULE IV - REAL PROPERTY
SCHEDULE V - CONCENTRATION ACCOUNT
SCHEDULE VI - TAX MATTERS
SCHEDULE VII - ERISA
SCHEDULE VIII - CAPITALIZATION
SCHEDULE IX - SUBSIDIARIES
SCHEDULE X - EXISTING INDEBTEDNESS
SCHEDULE XI - MATERIAL CONTRACTS
SCHEDULE XII - EXISTING LIENS
SCHEDULE XIII - BUSINESS CENTERS; OWNERS
SCHEDULE XIV - DUE DILIGENCE REQUIREMENTS
SCHEDULE XV - CHANGED NAMES
5
<PAGE>
SCHEDULE XVI - GENERAL CORPORATE POWERS
EXHIBIT A-1 - NOTICE OF BORROWING
EXHIBIT A-2 - NOTICE OF CONVERSION
EXHIBIT B-1 - A TERM NOTE
EXHIBIT B-2 - B TERM NOTE
EXHIBIT B-3 - ACQUISITION NOTE
EXHIBIT B-4 - REVOLVING NOTE
EXHIBIT B-5 - LETTER OF CREDIT REQUEST
EXHIBIT C - SECTION 3.04(B)(ii) CERTIFICATE
EXHIBIT D - FORM OF OPINION OF MORRISON COHEN
SINGER & WEINSTEIN, LLP
EXHIBIT E - OFFICERS' CERTIFICATE OF CREDIT PARTIES
EXHIBIT F-1 - CORPORATE PLEDGE AGREEMENT
EXHIBIT F-2 - LLC PLEDGE AGREEMENT
EXHIBIT G - SECURITY AGREEMENT
EXHIBIT H - SUBSIDIARIES GUARANTY
EXHIBIT I - SOLVENCY CERTIFICATE
EXHIBIT J - CONSENT LETTER
EXHIBIT K - CASH COLLATERAL AGREEMENT
EXHIBIT L - BANK ASSIGNMENT AND ASSUMPTION
AGREEMENT
6
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 16, 1997,
amended and restated as of November 6, 1998, and further amended and restated as
of August 3, 1999, among VANTAS INCORPORATED (formerly known as Alliance
National Incorporated), a corporation organized and existing under the laws of
the State of Nevada (the "Borrower"), the Banks party hereto from time to time,
and PARIBAS (formerly known as Banque Paribas), as agent (the "Agent"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 10 are used herein as therein defined.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of January 16, 1997, and amended and restated as of November
6, 1998 (as the same has been amended, modified or supplemented to, but not
including, the Restatement Effective Date, the "Existing Credit Agreement");
WHEREAS, the Borrower has requested that the Existing Credit Agreement be
further amended and restated and the Banks and the Agent are willing to amend
and restate the same upon the terms and conditions set forth below;
NOW, THEREFORE, the parties hereto agree that the Existing Credit Agreement
shall be and hereby is amended and restated in its entirety as follows:
Section 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and conditions set
forth herein, each Bank with an A Term Loan Commitment severally agrees to make,
on the Restatement Effective Date, a term loan (each, an "A Term Loan" and,
collectively, the "A Term Loans") to the Borrower, which A Term Loans (i) shall
be made and initially maintained as a single Borrowing of Base Rate Loans
(subject to the option to convert such Base Rate Loans pursuant to Section 1.06)
and (ii) shall not exceed for any Bank, in initial aggregate principal amount,
that amount which equals the A Term Loan Commitment of such Bank on such date
(before giving effect to any reductions thereto on such date pursuant to Section
2.03(b)(i) but after giving effect to any reductions thereto on or prior to such
date pursuant to Section 2.03(b)(ii)). Once repaid, A Term Loans incurred
hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions set forth herein, each
Bank with a B Term Loan Commitment severally agrees to make, on the Restatement
Effective Date, a term loan (each, a "B Term Loan" and, collectively, the "B
Term Loans") to the Borrower, which B Term Loans (i) shall be made and initially
maintained as a single Borrowing of Base Rate Loans (subject to the option to
convert such B Term Loans pursuant to Section 1.06) and (ii) shall not exceed
for any Bank, in initial aggregate principal amount, that amount which equals
the B Term Loan Commitment of such Bank on such date (before giving effect to
any reductions thereto on such date pursuant to Section 2.03(c)(i) but after
giving effect to any reductions thereto on or prior to such date pursuant to
Section 2.03(c)(ii)). Once repaid, B Term Loans incurred hereunder may not be
reborrowed.
<PAGE>
(c) Subject to and upon the terms and conditions set forth herein, each
Bank with an Acquisition Loan Commitment severally agrees to make, at any time
and from time to time after the Restatement Effective Date and prior to the
Acquisition Loan Termination Date, a loan or loans (each an "Acquisition Loan"
and, collectively, the "Acquisition Loans") to the Borrower, which Acquisition
Loans (i) shall, at the option of the Borrower, be Base Rate Loans or Eurodollar
Loans; provided that (x) except as otherwise specifically provided in Section
1.10(b) all Acquisition Loans comprising the same Borrowing shall at all times
be of the same Type and (y) no Eurodollar Loans may be incurred prior to the
Syndication Termination Date and (ii) shall not exceed for any Bank at any time
outstanding that aggregate principal amount which equals the Acquisition Loan
Commitment of such Bank at such time after giving effect to any reductions
thereto on or prior to such date pursuant to Section 2.03(d)(ii)). Once repaid,
Acquisition Loans incurred may be reborrowed prior to the Acquisition Loan
Termination Date in accordance with the provisions hereof.
(d) Subject to and upon the terms and conditions set forth herein, each
Bank with a Revolving Loan Commitment severally agrees at any time and from time
to time after the Restatement Effective Date and prior to the Revolving Loan
Maturity Date, to make a loan or loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans (i)
shall, at the option of the Borrower, be Base Rate Loans or Eurodollar Loans;
provided that (x) except as otherwise specifically provided in Section 1.10(b)
all Revolving Loans comprising the same Borrowing shall at all times be of the
same Type and (y) no Eurodollar Loans may be incurred prior to the Syndication
Termination Date except that Eurodollar Loans may be incurred on the Initial
Eurodollar Loan Borrowing Date so long as any Eurodollar Loans incurred on such
date have an Interest Period equal to one month, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, and (iii) shall not exceed
for any Bank at any time outstanding that aggregate principal amount which, when
added to the product of (x) such Bank's Percentage and (y) the aggregate amount
of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans), equals the Revolving Loan Commitment
of such Bank at such time.
1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of
each Borrowing hereunder shall not be less than the Minimum Borrowing Amount
and, if greater, shall be in integral multiples of $100,000. More than one
Borrowing may occur on the same date, but at no time shall there be outstanding
more than twenty Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make a
Borrowing hereunder, it shall give the Agent at its Notice Office, prior to
10:00 a.m. (New York time) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans and at least three Business Days' prior written notice (or telephonic
notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans.
Each such notice (each a "Notice of Borrowing"), except as otherwise expressly
provided in Section 1.10, shall be irrevocable and shall be given by the
Borrower in the form of Exhibit A-1, appropriately completed to specify (i) the
aggregate principal amount of the Loans to be made pursuant to such Borrowing,
(ii) the date of such Borrowing (which shall be a Business Day), (iii) whether
the Loans being made pursuant to such Borrowing shall constitute A Term
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Loans, B Term Loans, Revolving Loans or Acquisition Loans and (iv) whether the
Loans being made pursuant to such Borrowing are to be initially maintained as
Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial
Interest Period to be applicable thereto. Any notice received after 10:00 a.m.
(New York time) shall be deemed to be received on the next succeeding Business
Day. The Agent shall promptly give each Bank which is required to make Loans of
the Tranche specified in the respective Notice of Borrowing notice of such
proposed Borrowing, of such Bank's proportionate share thereof and of the other
matters specified in the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower to confirm
in writing any telephonic notice permitted to be given hereunder, the Agent or
the respective Issuing Bank (in the case of Letters of Credit) may, prior to
receipt of written confirmation, act without liability upon the basis of
telephonic notice believed by the Agent or the respective Issuing Bank (in the
case of Letters of Credit) in good faith to be from the President, Senior Vice
President of Finance, the Chief Executive Officer, Chief Financial Officer or
Controller of the Borrower. In each such case, the Agent's or such Issuing
Bank's record of the terms of such telephonic notice shall be conclusive absent
manifest error.
1.04 Disbursement of Funds. No later than 12:00 Noon (New York time) on the
date specified in each Notice of Borrowing, each Bank with a Commitment of the
respective Tranche will make available its pro rata portion (determined in
accordance with Section 1.07) of each such Borrowing requested to be made on
such date. All such amounts shall be made available in Dollars and in
immediately available funds at the Payment Office of the Agent, and the Agent
will make available to the Borrower at the Payment Office the aggregate of the
amounts so made available by the Banks. Unless the Agent shall have been
notified in writing by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Agent such Bank's portion of any
Borrowing to be made on such date, the Agent may assume that such Bank has made
such amount available to the Agent on such date of Borrowing and the Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Bank, the Agent shall be entitled to recover such corresponding amount
on demand from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding amount to
the Agent. The Agent shall also be entitled to recover on demand from such Bank
or the Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by the Agent to the Borrower, until the date such corresponding amount is
recovered by the Agent, at a rate per annum equal to (i) if recovered from such
Bank, the cost to the Agent of acquiring overnight federal funds and (ii) if
recovered from the Borrower, the rate of interest applicable to the respective
Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04
shall be deemed to relieve any Bank from its obligation to make Loans hereunder
or to prejudice any rights which the Borrower may have against any Bank as a
result of any failure by such Bank to make Loans hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of, and
interest on, the Loans made by each Bank shall be evidenced (i) if A Term Loans,
by a promissory note duly executed and delivered by the Borrower substantially
in the form of Exhibit B-1 with blanks
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appropriately completed in conformity herewith (each, an "A Term Note" and,
collectively, the "A Term Notes"), (ii) if B Term Loans, by a promissory note
duly executed and delivered by the Borrower substantially in the form of Exhibit
B-2 with blanks appropriately completed in conformity herewith (each, a "B Term
Note" and, collectively, the "B Term Notes"), (iii) if Acquisition Loans, by a
promissory note duly executed and delivered by the Borrower substantially in the
from of Exhibit B-3, with blanks appropriately completed in conformity herewith
(each an "Acquisition Note" and collectively, the "Acquisition Notes"), and (iv)
if Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-4, with blanks appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving Notes").
(b) The A Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Restatement Effective Date, (iii) be in a stated principal
amount equal to the A Term Loan Commitment of such Bank on the Restatement
Effective Date and be payable in the principal amount of the A Term Loans
evidenced thereby, (iv) mature on the A Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby,
(vi) be subject to voluntary repayment as provided in Section 3.01, and
mandatory repayment as provided in Section 3.02 and (vii) be entitled to the
benefits of this Agreement and the Guaranties and be secured by the Security
Documents.
(c) The B Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Restatement Effective Date, (iii) be in a stated principal
amount equal to the B Term Loan made by such Bank on the Restatement Effective
Date and be payable in the principal amount of the B Term Loan evidenced
thereby, (iv) mature on the B Term Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary repayment as provided in Section 3.01, and mandatory
repayment as provided in Section 3.02 and (vii) be entitled to the benefits of
this Agreement and the Guaranties and be secured by the Security Documents.
(d) The Acquisition Note issued to each Bank with an Acquisition Loan
Commitment shall (i) be executed by the Borrower, (ii) be payable to the order
of such Bank or its registered assigns and be dated the Restatement Effective
Date, (iii) be in a stated principal amount equal to the Acquisition Loan
Commitment of such Bank and be payable in the principal amount of the
Acquisition Loans evidenced thereby, (iv) mature on the Acquisition Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 3.01, and mandatory repayment as provided in Section 3.02 and (vii) be
entitled to the benefits of this Agreement and the Guaranties and be secured by
the Security Documents.
(e) The Revolving Note issued to each Bank with a Revolving Loan Commitment
shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank
or its registered assigns and be dated the Restatement Effective Date, (iii) be
in a stated principal
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amount equal to the Revolving Loan Commitment of such Bank and be payable in the
principal amount of the Revolving Loans evidenced thereby, (iv) mature on the
Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to voluntary repayment as
provided in Section 3.01, and mandatory repayment as provided in Section 3.02
and (vii) be entitled to the benefits of this Agreement and the Guaranties and
be secured by the Security Documents.
(f) Each Bank will note on its internal records the amount of each Loan
made by it and each payment in respect thereof and will prior to any transfer of
any of its Notes endorse on the reverse side thereof the outstanding principal
amount of Loans evidenced thereby. Failure to make any such notation or the
making of an incorrect notation shall not affect the Borrower's obligations in
respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert, on any
Business Day, all or a portion at least equal to the Minimum Borrowing Amount of
the outstanding principal amount of the Loans made pursuant to one or more
Borrowings (so long as of the same Tranche) of one Type of Loan into a Borrowing
or Borrowings (of the same Tranche) of the other Type of Loan; provided that:
(i) except as otherwise provided in Section 1.10(b), Eurodollar Loans
may be converted into Base Rate Loans only on the last day of an Interest
Period applicable to the Loans being converted and no such partial
conversion of Eurodollar Loans shall reduce the outstanding principal
amount of such Eurodollar Loans made pursuant to a single Borrowing to less
than the Minimum Borrowing Amount applicable thereto;
(ii) Base Rate Loans may only be converted into Eurodollar Loans if no
Default or Event of Default is in existence on the date of the conversion;
(iii) no conversion pursuant to this Section 1.06 shall result in a
greater number of Borrowings than is permitted under Section 1.02; and
(iv) prior to the Syndication Termination Date, no Loan may be
converted into Eurodollar Loans except that on the Initial Eurodollar Loan
Borrowing Date, Revolving Loans may be converted into Eurodollar Loans with
an Interest Period of one month.
Each such conversion shall be effected by the Borrower by giving the Agent at
its Notice Office prior to 12:00 Noon (New York time) at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
(each a "Notice of Conversion") which notice shall be in the form of Exhibit
A-2, appropriately completed to specify the Loans to be so converted, the
Borrowing(s) pursuant to which such Loans were made and, if to be converted into
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of Loans under this Agreement
shall be incurred from the Banks pro rata on the basis of their respective A
Term Loan Commitments, B Term Loan Commitments, Acquisition Loan Commitments or
Revolving Loan Commitments, as the case may be. It is understood that no Bank
shall be responsible for any default by any
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other Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder regardless of
the failure of any other Bank to make its Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Base Rate Loan made to it from the date of the
Borrowing thereof until the earlier of (i) the maturity thereof (whether by
acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of
such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per
annum which shall at all times be equal to the sum of the Applicable Margin plus
the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Loan made to it from the date of the Borrowing thereof
until the earlier of (i) the maturity thereof (whether by acceleration or
otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar
Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as
applicable, at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the sum of the Applicable Margin plus the Quoted
Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable hereunder shall, in
each case, bear interest at a rate per annum equal to the greater of (x) 2% per
annum in excess of the rate otherwise applicable to Base Rate Loans of the
respective Tranche of Loans from time to time and (y) the rate which is 2% in
excess of the rate borne by such Loans. Interest which accrues under this
Section 1.08(c) shall be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment
Day, (ii) in respect of each Eurodollar Loan on (x) the date of any prepayment
or repayment thereof (on the amount prepaid or repaid), (y) the date of any
conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as
applicable (on the amount converted) and (z) on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three month intervals after the first
day of such Interest Period and (iii) in respect of each Loan, at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
Notwithstanding anything to the contrary in this Agreement or in the Existing
Credit Agreement, all accrued (but theretofore unpaid) interest with respect to
Loans under and as defined in the Existing Credit Agreement which were
outstanding prior to the Restatement Effective Date shall be payable on the
Restatement Effective Date.
(e) Upon each Interest Determination Date, the Agent shall determine the
Quoted Rate for the Interest Period applicable to Eurodollar Loans and shall
promptly notify the Borrower and the Banks thereof. Each such determination
shall, absent manifest error, be final and conclusive and binding on all parties
hereto.
(f) All computations of interest hereunder shall be made in accordance with
Section 12.07(b).
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1.09 Interest Periods. At the time it gives any Notice of Borrowing or
Notice of Conversion in respect of the making of, or conversion into, a
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or prior to 10:00 a.m. (New York time) on the third Business Day prior to the
expiration of an Interest Period applicable to such Eurodollar Loan (in the case
of any subsequent Interest Period), the Borrower shall have the right to elect,
by giving the Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be a one, three or six-month period; provided that:
(i) all Eurodollar Loans comprising a single Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Loan (including the date of any
conversion thereto from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Loan shall commence on the
day on which the next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end on
the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if any Interest Period for
a Eurodollar Loan would otherwise expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(v) no Interest Period for a Borrowing under a Tranche shall be
selected which extends beyond the respective Maturity Date of such Tranche;
(vi) no Interest Period may be selected at any time when any Default
or Event of Default is then in existence;
(vii) no Interest Period in respect of any Borrowing of A Term Loans,
B Term Loans or Acquisition Loans, as the case may be, shall be selected
which extends beyond any date upon which a mandatory repayment of such A
Term Loans, B Term Loans or Acquisition Loans will be required to be made
under Section 3.02(A)(b), (c) or (d), as the case may be, if, after giving
effect to the selection of such Interest Period, the aggregate principal
amount of such A Term Loans, B Term Loans or Acquisition Loans, as the case
may be, maintained as Eurodollar Loans which have Interest Periods expiring
after such date will be in excess of the aggregate principal amount of such
A Term Loans, B Term Loans or Acquisition Loans, as the case may be, then
outstanding less the aggregate amount of such required prepayment; and
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(viii) no Interest Period may be selected prior to the Syndication
Termination Date, except that with respect to Revolving Loans, on the
Initial Eurodollar Loan Borrowing Date, Interest Periods of one month may
be selected.
If upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans the Borrower has failed to elect a new Interest Period to be
applicable to such Eurodollar Loans as provided above or a Default or Event of
Default then exists, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto but, with respect to clause (i)
below, may be made only by the Agent):
(i) on any Interest Determination Date that, by reason of any changes
arising after the Original Effective Date affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Quoted Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the Original Effective
Date in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payments to any Bank of the principal of or interest on the
Notes or any other amounts payable hereunder (except for changes in the
rate of tax on, or determined by reference to, the net income or profits of
such Bank imposed by the jurisdiction in which its principal office or
applicable lending office is located) or (B) a change in official reserve
requirements (but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Quoted Rate)
and/or (y) other circumstances since the Original Effective Date affecting
such Bank or the interbank Eurodollar market or the position of such Bank
in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule, regulation
or order, (y) impossible by compliance by any Bank in good faith with any
governmental request (whether or not having the force of law) or (z)
impracticable as a result of a contingency occurring after the Original
Effective Date which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (if by telephone, promptly confirmed in
writing) to the Borrower, and, except in the case of clause (i) above, to the
Agent of such determination (which notice the Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i)
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above, Eurodollar Loans shall no longer be available until such time as the
Agent notifies the Borrower and the Banks that the circumstances giving rise to
such notice by the Agent no longer exist, and any Notice of Borrowing or Notice
of Conversion given by the Borrower with respect to Eurodollar Loans which have
not yet been incurred (including by way of conversion) shall be deemed rescinded
by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the circumstances
described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of
a Eurodollar Loan affected by the circumstances described in Section
1.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is then being
made initially or pursuant to a conversion, by giving the Agent telephonic
notice (confirmed in writing) on the same date that the Borrower was notified by
the affected Bank or the Agent pursuant to Section 1.10(a)(ii) or (iii), cancel
the respective Borrowing or conversion, or (ii) if the affected Eurodollar Loan
is then outstanding, upon at least three Business Days' written notice to the
Agent, require the affected Bank to convert such Eurodollar Loan into a Base
Rate Loan; provided that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If at any time after the Original Effective Date hereof, any Bank
determines that the introduction of or any change in applicable law or
governmental rule, regulation, order, guideline or request (whether or not
having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Commitments
hereunder or its obligations hereunder, then the Borrower shall pay to such
Bank, upon its written demand therefor, such additional amounts as shall be
required to compensate such Bank for the increased cost to such Bank or such
other corporation or the reduction in the rate of return to such Bank or such
other corporation as a result of such increase of capital. In determining such
additional amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable; provided that such
Bank's determination of compensation owing under this Section 1.10(c) shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto. Each Bank, upon determining that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show in reasonable detail the basis for calculation
of such additional amounts, although the failure to give any such notice shall
not release or diminish any of the Borrower's obligations to pay additional
amounts pursuant to this Section 1.10(c).
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1.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans) which such Bank may sustain: (i) if for
any reason (other than a default by such Bank or the Agent) a Borrowing of, or
conversion from or into, Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii)
if any repayment (including any repayment made pursuant to Section 3.02 or as a
result of an acceleration of the Loans pursuant to Section 9 and including any
repayment of Loans under and as defined in the Existing Credit Agreement on the
Restatement Effective Date from the proceeds of Loans) or conversion of any of
its Eurodollar Loans occurs on a date which is not the last day of an Interest
Period with respect thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by the Borrower to
repay its Loans when required by the terms of this Agreement or any Note held by
such Bank or (y) any election made pursuant to Section 1.10(b). A Bank's basis
for requesting compensation pursuant to this Section, and a Bank's calculations
of the amount thereof, shall, absent manifest error, be final and conclusive and
binding on all the parties hereto.
1.12 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank or (y)
if any Bank (other than the Agent) refuses to consent to certain proposed
changes, waivers, discharges or terminations with respect to this Agreement
which have been approved by the Required Banks as provided in Section 12.12(b),
then the Borrower shall have the right, if no Default or Event of Default then
exists, to replace such Bank (the "Replaced Bank") with any other Bank or with
one or more Eligible Transferee or Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank") reasonably acceptable to the Agent or, at the option of the Borrower, to
replace only (a) the Revolving Loan Commitment (and Revolving Loans outstanding
pursuant thereto) of the Replaced Bank with an identical Revolving Loan
Commitment (and Revolving Loans outstanding pursuant thereto) provided by the
Replacement Bank or (b) in the case of a replacement as provided Section
12.12(b) when a consent of the respective Bank is required, with respect to less
than all Tranches of its Loans or Commitments, the Commitments and/or
outstanding Loans of such Bank in respect of each Tranche when a consent of such
Bank would otherwise be individually required, with identical Commitments and/or
Loans of the respective Tranche provided by the Replacement Bank; provided that:
(i) at the time of any replacement pursuant to this Section 1.12, the
Replacement Bank shall enter into one or more assignment agreements
pursuant to Section 12.04(b) (and with all fees payable pursuant to said
Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire all of the Commitments and outstanding Loans
of (or, in the case of the replacement of only (a) the Revolving Loan
Commitment, the Revolving Loan Commitment and outstanding Revolving Loans
and participations in Letter of Credit Outstandings, (b) the Acquisition
Loan Commitment, prior to the Acquisition Loan Termination Date, the
Acquisition Loan Commitment and outstanding Acquisition Loans and
thereafter, the outstanding Acquisition Loans, (c) the A Term Loan
Commitment, the outstanding A Term Loans
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and/or (d) the B Term Loan Commitment, the outstanding B Term Loans) the
Replaced Bank and in each case (except for replacement of only the
outstanding A Term Loans, B Term Loans or Acquisition Loans of the
respective Bank) participations in Letters of Credit by, the Replaced Bank
and in connection therewith, shall pay to (x) the Replaced Bank in respect
thereof an amount equal to the sum of (A) an amount equal to the principal
of, and all accrued interest on, all outstanding Loans (or, in the case of
the replacement of only (I) the Revolving Loan Commitment, the outstanding
Revolving Loans, (II) prior to the Acquisition Loan Termination Date, the
Acquisition Loan Commitment, the Acquisition Loans, (III) after the
Acquisition Loan Termination Date, the outstanding Acquisition Loans of the
Replaced Banks, (IV) the A Term Loans, the outstanding A Term Loans of the
Replaced Bank), (V) the B Term Loans, the outstanding B Term Loans of the
Replaced Banks, and (B) except in the case of the replacement of only the
outstanding A Term Loans of the Replaced Bank, only the outstanding B Term
Loans of the Replaced Banks or only the Acquisition Loan Commitment or
outstanding Acquisition Loans, an amount equal to such Replaced Bank's
Percentage of all Unpaid Drawings that have been funded by (and not
reimbursed to) such Replaced Bank, together with all then unpaid interest
with respect thereto at such time and (C) an amount equal to all accrued,
but theretofore unpaid, Fees owing to the Replaced Bank but only with
respect to the relevant Tranche, in the case of the replacement of less
than all the Tranches of Loans then held by the respective Replaced Bank)
pursuant to Section 2.01 hereof and (y) except in the case of the
replacement of only the outstanding A Term Loans, B Term Loans, Acquisition
Loan Commitment or Acquisition Loans of the Replaced Bank, the Issuing Bank
or Banks, an amount equal to such Replaced Bank's Percentage of any Unpaid
Drawing (which at such time remains an Unpaid Drawing) with respect to a
Letter of Credit issued by such Issuing Bank to the extent such amount was
not theretofore funded by such Replaced Bank; and
(ii) all obligations of the Borrower owing to the Replaced Bank (other
than those (a) specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being,
paid or (b) relating to any Tranche of Loans and/or Commitments of the
respective Replaced Bank which will remain outstanding after giving effect
to the respective replacement) shall be paid in full by the Borrower to
such Replaced Bank concurrently with such replacement.
Upon the execution of the respective assignment documentation, the payment of
amounts referred to in clauses (i) and (ii) above, recordation of the assignment
on the Register by the Agent pursuant to Section 7.16 and, if so requested by
the Replacement Bank, delivery to the Replacement Bank of the appropriate Note
or Notes, executed by the Borrower, (x) the Replacement Bank shall become a Bank
hereunder, unless the respective Replaced Bank continues to have outstanding A
Term Loans, B Term Loans, an Acquisition Loan Commitment or Acquisition Loans,
or a Revolving Loan Commitment hereunder the Replaced Bank shall cease to
constitute a Bank hereunder with respect to the Loans and Commitments so
transferred, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Bank, and the Percentages and
Acquisition Commitment Percentages of the Banks shall be automatically adjusted
at such time to give effect to such replacement.
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Section 1A. Letters of Credit.
1A.01 Letters of Credit. (a) Subject to and upon the terms and conditions
herein set forth, the Borrower may request any Issuing Bank at any time and from
time to time on and after the Restatement Effective Date and prior to the third
Business Day immediately preceding the Revolving Loan Maturity Date to issue,
for the account of the Borrower or any of its Subsidiaries and for the benefit
of any holder (or any trustee, agent or other similar representative for any
such holders) of L/C Supportable Indebtedness, an irrevocable standby letter of
credit in a form customarily used by such Issuing Bank or in such other form as
has been approved by such Issuing Bank in support of said L/C Supportable
Indebtedness (each such letter of credit, a "Letter of Credit" and,
collectively, the "Letters of Credit"). All Letters of Credit outstanding under
and as defined in the Existing Credit Agreement (the "Existing Letters of
Credit"), which have an aggregate stated amount of $5,725,812, shall remain
outstanding under this Agreement and shall be considered Letters of Credit for
all purposes of this Agreement. All Letters of Credit shall be denominated in
Dollars. In the event a Letter of Credit is issued for the account of a
Subsidiary of the Borrower, the Borrower agrees that it shall be obligated with
respect to the Letter of Credit Outstandings related to such Letter of Credit
notwithstanding that such Letter of Credit was issued for the account of a
Subsidiary of the Borrower.
(b) Each Issuing Bank (other than Paribas) may agree in its sole discretion
and Paribas hereby agrees that it will (subject to the terms and conditions
contained herein), at any time and from time to time after the Restatement
Effective Date and prior to the Revolving Loan Maturity Date, following its
receipt of the respective Letter of Credit Request, issue for the account of the
Borrower or any of its Subsidiaries one or more Letters of Credit in support of
such L/C Supportable Indebtedness as is permitted to remain outstanding without
giving rise to a Default or Event of Default hereunder; provided that the
respective Issuing Bank shall be under no obligation to issue any Letter of
Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over such Issuing Bank shall prohibit, or request that such Issuing Bank
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon such Issuing Bank with respect to
such Letter of Credit any restriction or reserve or capital requirement
(for which such Issuing Bank is not otherwise compensated) not in effect on
the date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank as of the date hereof
and which such Issuing Bank in good faith deems material to it;
(ii) such Issuing Bank shall have received a notice of the type
described in the second sentence of Section 1A.03(b) from any Bank prior
to the issuance of such Letter of Credit; or
(iii) a Bank Default exists, unless such Issuing Bank has entered
into arrangements satisfactory to it and the Borrower to eliminate such
Issuing Bank's risk
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with respect to the Bank which is the subject of the Bank Default,
including by cash collateralizing such Bank's Percentage of the Letter of
Credit Outstandings.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued
the Stated Amount of which, when added to the Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid on the date of, prior to the
issuance of, the respective Letter of Credit) at such time, would exceed (x)
$15,000,000 or (y) when added to the aggregate principal amount of all Revolving
Loans then outstanding, an amount equal to the Total Revolving Loan Commitment
then in effect (after giving effect to any reductions to the Total Revolving
Loan Commitment on such date) and (ii) each Letter of Credit shall by its terms
terminate on or before the earlier of (x) the date which occurs 12 months after
the date of the issuance thereof (although any such Letter of Credit may be
renewable for successive periods of up to 12 months, but not beyond the
Revolving Loan Maturity Date, on terms acceptable to the Issuing Bank) and (y)
the third Business Day immediately preceding the Revolving Loan Maturity Date.
1A.02 Minimum Stated Amount. The Stated Amount of each Letter of Credit
shall be not less than $25,000 or such lesser amount as is acceptable to the
Issuing Bank but in no event shall there be more than 75 Letters of Credit
outstanding at any one time.
1A.03 Letter of Credit Requests. (a) Whenever the Borrower desires that a
Letter of Credit be issued for its account, the Borrower shall give the Agent
and the respective Issuing Bank at least 7 Business Days' (or such shorter
period as is acceptable to the respective Issuing Bank in any given case)
written notice prior to the proposed date of issuance (which shall be a Business
Day). Each notice shall be in the form of Exhibit B-5 (each a "Letter of Credit
Request").
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
1A.01(c). Unless the Issuing Bank has received notice from any Bank before it
issues a Letter of Credit that one or more of the conditions specified in
Section 5 are not then satisfied, or that the issuance of such Letter of Credit
would violate Section 1A.01(c), then such Issuing Bank may issue the requested
Letter of Credit for the account of the Borrower in accordance with the Issuing
Bank's usual and customary practices.
1A.04 Letter of Credit Participations. (a) Immediately upon the issuance by
the respective Issuing Bank of any Letter of Credit (or on the Restatement
Effective Date in the case of Letters of Credit under and as defined in the
Existing Credit Agreement), such Issuing Bank shall be deemed to have sold and
transferred to each Bank with a Revolving Loan Commitment, other than such
Issuing Bank (each such Bank, in its capacity under this Section 1A.04, a
"Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from such Issuing Bank, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's Percentage in such Letter of Credit, each substitute letter
of credit, each drawing made thereunder and the obligations of the Borrower
under this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. Upon any change in the Revolving Loan Commitments of the
Banks pursuant to Section 12.04, it is hereby agreed that, with respect to all
outstanding Letters of Credit and
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Unpaid Drawings, there shall be an automatic adjustment to the participations
pursuant to this Section 1A.04 to reflect the new Percentages of the assignor
and assignee Bank or of all Banks with Revolving Loan Commitments, as the case
may be.
(b) In determining whether to pay under any Letter of Credit, the Issuing
Bank shall not have any obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit. Any action taken or omitted to be
taken by any Issuing Bank under or in connection with any Letter of Credit if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create for such Issuing Bank any resulting liability to the Borrower or any
Bank.
(c) In the event that any Issuing Bank makes any payment under any Letter
of Credit and the Borrower shall not have reimbursed such amount in full to the
Issuing Bank pursuant to Section 1A.05(a), such Issuing Bank shall promptly
notify the Agent, which shall promptly notify each Participant of such failure,
and each Participant shall promptly and unconditionally pay to the Agent for the
account of such Issuing Bank the amount of such Participant's Percentage of such
unreimbursed payment in Dollars and in same day funds. If the Agent so notifies,
prior to 11:00 a.m. (New York time) on any Business Day, any Participant
required to fund a payment under a Letter of Credit, such Participant shall make
available to the Agent at the Payment Office of the Agent for the account of
such Issuing Bank in Dollars such Participant's Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its Percentage of the amount of such payment
available to the Agent for the account of such Issuing Bank, such Participant
agrees to pay to the Agent for the account of such Issuing Bank, forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Agent for the account of such Issuing
Bank at the overnight Federal Funds Rate. The failure of any Participant to make
available to the Agent for the account of such Issuing Bank its Percentage of
any payment under any Letter of Credit shall not relieve any other Participant
of its obligation hereunder to make available to the Agent for the account of
such Issuing Bank its Percentage of any Letter of Credit on the date required,
as specified above, but no Participant shall be responsible for the failure of
any other Participant to make available to the Agent for the account of such
Issuing Bank such other Participant's Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which the Agent has received for the account of such Issuing
Bank any payments from the Participants pursuant to clause (c) above, such
Issuing Bank shall pay to the Agent and the Agent shall promptly pay each
Participant which has paid its Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based on the proportionate
aggregate amount funded by such Participant to the aggregate amount funded by
all Participants) of the principal amount of such reimbursement obligation and
interest thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent for
the account of each Issuing Bank with respect to Letters of Credit issued shall
be irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the
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terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the Credit Documents;
(ii) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit, any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), the Agent, any Participant, or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
1A.05 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby
agrees to reimburse the respective Issuing Bank, by making payment to the Agent
in immediately available funds at the Payment Office (or by making the payment
directly to such Issuing Bank at such location as may otherwise have been agreed
upon by the Borrower and such Issuing Bank), for any payment or disbursement
made by such Issuing Bank under any Letter of Credit (each such amount so paid
until reimbursed, an "Unpaid Drawing"), immediately after, and in any event on
the date of, such payment or disbursement, with interest on the amount so paid
or disbursed by such Issuing Bank, to the extent not reimbursed prior to 12:00
Noon (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but excluding the date such Issuing Bank
is reimbursed by the Borrower therefor at a rate per annum which shall be the
Base Rate in effect from time to time plus 4%, in each case with such interest
to be payable on demand.
(b) The obligations of the Borrower under this Section 1A.05 to reimburse
the respective Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against any Bank (including in its
capacity as Issuing Bank or as Participant), including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit (each a
"Drawing") to conform to the terms of the Letter of Credit or any nonapplication
or misapplication by the beneficiary of the proceeds of such Drawing; provided,
however, that the Borrower shall not be obligated to reimburse any Issuing Bank
for any wrongful payment made by such Issuing Bank under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross negligence
on the part of such Issuing Bank.
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1A.06 Increased Costs. If at any time after the Original Effective Date
hereof any Issuing Bank or any Participant determines that the introduction of
or any change in any applicable law, rule, regulation, order, guideline or
request or in the interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by such Issuing Bank or any Participant, or any corporation
controlling such Person, with any request or directive by any such authority
(whether or not having the force of law), shall either (i) impose, modify or
make applicable any reserve, deposit, capital adequacy or similar requirement
against letters of credit issued by such Issuing Bank or participated in by any
Participant, or (ii) impose on such Issuing Bank or any Participant, or any
corporation controlling such Person, any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to such Issuing Bank or any Participant of
issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by such Issuing Bank or any Participant
hereunder or reduce the rate of return on its capital with respect to Letters of
Credit, then, upon demand to the Borrower by such Issuing Bank or any
Participant (a copy of which demand shall be sent by such Issuing Bank or such
Participant to the Agent), the Borrower shall pay to such Issuing Bank or such
Participant such additional amount or amounts as will compensate such Bank for
such increased cost or reduction in the amount receivable or reduction on the
rate of return on its capital. Such Issuing Bank or any Participant, upon
determining that any additional amounts will be payable pursuant to this Section
1A.06, will give prompt written notice thereof to the Borrower, which notice
shall include a certificate submitted to the Borrower by such Issuing Bank or
such Participant (a copy of which certificate shall be sent by such Issuing Bank
or such Participant to the Agent), setting forth in reasonable detail the basis
for the calculation of such additional amount or amounts necessary to compensate
such Issuing Bank or such Participant, although failure to give any such notice
shall not release or diminish the Borrower's obligations to pay additional
amounts pursuant to this Section 1A.06. The certificate required to be delivered
pursuant to this Section 1A.06 shall, absent manifest error, be final,
conclusive and binding on the Borrower.
Section 2. Commitment Commission; Fees; Reductions of Commitment.
2.01 Fees. (a) The Borrower agrees to pay to the Agent for distribution to
each Bank with a Revolving Loan Commitment or an Acquisition Loan Commitment a
commitment commission (the "Commitment Commission") for the period from and
including the Restatement Effective Date to and excluding the later of the
Acquisition Loan Termination Date and the Revolving Loan Maturity Date (or such
earlier date as the Total Commitment shall have been terminated) computed at a
rate for each day equal to 1/2 of 1% per annum on the daily Aggregate Unutilized
Commitment of such Bank. Accrued Commitment Commission shall be due and payable
quarterly in arrears on each Quarterly Payment Date and on the later of the
Acquisition Loan Termination Date and the Revolving Loan Maturity Date or such
earlier date upon which the Total Commitment is terminated.
(b) The Borrower agrees to pay to each Issuing Bank, for its own account, a
facing fee in respect of each Letter of Credit issued by such Issuing Bank
hereunder (the "Facing Fee"), for the period from and including the date of
issuance of such Letter of Credit (which, in the case of the Existing Letters of
Credit shall be deemed to be the Restatement Effective Date) to and including
the date of termination of such Letter of Credit, equal to 1/4 of 1% per annum
of
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the daily Stated Amount of such Letter of Credit; provided that in no event
shall the annual Facing Fee with respect to each Letter of Credit be less than
$500. Accrued Facing Fees shall be due and payable in arrears to the Issuing
Bank in respect of each Letter of Credit issued by it on each Quarterly Payment
Date and the date of the termination of the Total Revolving Loan Commitment on
which no Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the Agent for distribution to each Bank
with a Revolving Loan Commitment a fee in respect of each Letter of Credit
issued hereunder (the "Letter of Credit Fee"), for the period from and including
the date of issuance of such Letter of Credit (which, in the case of the
Existing Letters of Credit shall be deemed to be the Restatement Effective Date)
to and including the date of termination of such Letter of Credit, computed at a
rate per annum equal to the product of (x) the Applicable Margin for Revolving
Loans which are maintained as Eurodollar Loans and (y) the daily Stated Amount
of such Letter of Credit. Letter of Credit Fees shall be distributed by the
Agent to the Banks on the basis of the respective Percentages as in effect from
time to time. Accrued Letter of Credit Fees shall be due and payable quarterly
in arrears on each Quarterly Payment Date and on the date of the termination of
the Total Revolving Loan Commitment on which no Letters of Credit remain
outstanding.
(d) The Borrower hereby agrees to pay in immediately available funds
directly to the Issuing Bank upon each issuance of, drawing under, and/or
amendment of, a Letter of Credit issued by the Issuing Bank such amount as shall
at the time of such issuance, drawing or amendment be the administrative charge
which the Issuing Bank is customarily charging for issuances of, drawings under
(including wire charges) or amendments of, letters of credit issued by it or
such alternative amounts as may have been agreed upon in writing by the Borrower
and the Issuing Bank.
(e) Notwithstanding anything to the contrary contained in this Agreement or
in the Existing Credit Agreement, all unpaid Fees included, and as defined in,
the Existing Credit Agreement (including, without limitation, Commitment
Commissions, Facing Fees, and Letter of Credit Fees (each as defined in the
Existing Credit Agreement) accrued prior to the Restatement Effective Date)
shall be payable on the Restatement Effective Date.
(f) The Borrower shall pay to the Agent, for its account, such other fees
and other consideration as have been agreed to in writing by the Borrower or any
of its Subsidiaries and the Agent.
2.02 Voluntary Termination of Unutilized Commitments. (a) Upon at least
three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the Agent at its Notice Office (which notice the Agent
shall promptly transmit to each of the Banks), the Borrower shall have the
right, without premium or penalty, to terminate the Total Unutilized Revolving
Loan Commitment and/or the Total Unutilized Acquisition Loan Commitment, in
whole or in part; provided that (i) each such reduction shall apply
proportionately to reduce the Revolving Loan Commitment or the Acquisition Loan
Commitment, as the case may be, of each Bank with such a Commitment and (ii) any
partial reduction pursuant to this Section 2.02 shall be in integral multiples
of at least $100,000.
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(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to terminate all of the Acquisition
Loan Commitment and/or the Revolving Loan Commitment of such Bank, so long as
all Loans, together with accrued and unpaid interest, Fees and all other
amounts, owing to such Bank (other than amounts owing in respect of A Term
Loans, B Term Loans or Acquisition Loans maintained by such Bank, if such A Term
Loans, B Term Loans or Acquisition Loans are not being repaid pursuant to
Section 12.12(b)) are repaid concurrently with the effectiveness of such
termination pursuant to Section 3.01(b) and the Borrower shall pay to the Agent
at such time an amount in cash and/or Cash Equivalents equal to such Bank's
applicable Percentage of the outstanding Letters of Credit (which cash and/or
Cash Equivalents shall be held by the Agent as security for the obligations of
the Borrower hereunder in respect of the outstanding Letters of Credit pursuant
to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Agent (at which time Annex I shall be deemed
modified to reflect such changed amounts)), and at such time, unless the
respective Bank continues to act as a Bank with respect to A Term Loans, B Term
Loans or Acquisition Loans or has a Revolving Loan Commitment or Acquisition
Loan Commitment hereunder, such Bank shall no longer constitute a "Bank" for
purposes of this Agreement, except with respect to indemnifications and similar
provisions under this Agreement, which shall survive as to such repaid Bank.
2.03 Mandatory Reduction of Commitments. (a) The Total Commitment (and the
A Term Loan Commitment, B Term Loan Commitment, the Revolving Loan Commitment
and the Acquisition Loan Commitment of each Bank with such a Commitment) shall
terminate on August 3, 1999 unless the Restatement Effective Date has occurred
on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total A Term Loan Commitment (and the A Term Loan
Commitment of each Bank with such a Commitment) shall (i) terminate in its
entirety on the Restatement Effective Date (after giving effect to the making of
the A Term Loans on such date) and (ii) prior to the termination of the Total A
Term Loan Commitment as provided in clause (i) above, be reduced from time to
time to the extent required by Section 3.02.
(c) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total B Term Loan Commitment (and the B Term Loan
Commitment of each Bank with such a Commitment) shall (i) terminate in its
entirety on the Restatement Effective Date (after giving effect to the making of
the B Term Loans on such date) and (ii) prior to the termination of the Total B
Term Loan Commitment as provided in clause (i) above, be reduced from time to
time to the extent required by Section 3.02.
(d) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total Acquisition Loan Commitment (and the Acquisition
Loan Commitment of each Bank with such a Commitment) shall (i) terminate in its
entirety on the Acquisition Loan Termination Date (after giving effect to the
making of Acquisition Loans on such date), and (ii) prior to the termination of
the Total Acquisition Loan Commitment as provided in clause (i) above, be
reduced from time to time to the extent required by Section 3.02.
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(e) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the Revolving Loan Maturity Date.
(f) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank with such a Commitment) shall be reduced at the time any
payment is required to be made on the principal amount of Revolving Loans (or
would be required to be made if Revolving Loans were then outstanding) pursuant
to Section 3.02(B)(a), by an amount equal to the maximum amount of Revolving
Loans that would be required to be repaid pursuant to Section 3.02(B)(a)
assuming that Revolving Loans were outstanding in an aggregate principal amount
equal to the Total Revolving Loan Commitment.
(g) In addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total Acquisition Loan Commitment (and the Acquisition
Loan Commitment of each Bank with such a Commitment) shall be reduced at the
time any payment is required to be made on the principal amount of Acquisition
Loans (or would be required to be made of Acquisition Loans then outstanding)
pursuant to Section 3.02(B)(a), by an amount equal to the maximum amount of
Acquisition Loans that would be required to be repaid pursuant to Section
3.02(B)(a) assuming that Acquisition Loans were outstanding in an aggregate
principal amount equal to the Total Acquisition Loan Commitment.
(h) Each reduction to the Total A Term Loan Commitment, the Total B Term
Loan Commitment, the Total Acquisition Loan Commitment and the Total Revolving
Loan Commitment, pursuant to this Section 2.03 shall be applied proportionately
to reduce the A Term Loan Commitment, B Term Loan Commitment, Acquisition Loan
Commitment or the Revolving Loan Commitment, as the case may be, of each Bank
with such a Commitment.
Section 3. Prepayments; Payments; Taxes.
3.01 Voluntary Prepayments. (a) The Borrower shall have the right to prepay
Loans, without premium or penalty, in whole or in part from time to time on the
following terms and conditions:
(i) The Borrower shall give the Agent prior to 10:00 a.m. (New York
time) at its Notice Office at least three Business Days' prior written
notice in the case of Eurodollar Loans and one Business Day's prior written
notice in the case of Base Rate Loans of its intent to prepay the Loans,
whether A Term Loans, B Term Loans, Acquisition Loans or Revolving Loans
shall be prepaid (which Loans may be selected at the discretion of the
Borrower subject to any limitations contained in clauses (ii) through (vi)
below), the amount of such prepayment and the Types of Loans to be prepaid
and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings
pursuant to which made, which notice the Agent shall promptly transmit to
each of the Banks;
(ii) each prepayment shall be in an aggregate principal amount of at
least the applicable Minimum Borrowing Amount and, if greater, in integral
multiples of $100,000; provided that no partial prepayment of Eurodollar
Loans made pursuant to any
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Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount;
(iii) no prepayments of Eurodollar Loans made pursuant to this Section
3.01 may be made on a day other than the last day of an Interest Period
applicable thereto;
(iv) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans;
(v) each prepayment of Term Loans or Acquisition Loans pursuant to
this Section 3.01 must consist of a prepayment of A Term Loans (in an
amount equal to the A TL Percentage of such prepayment), B Term Loans (in
an amount equal to the B TL Percentage of such prepayment) and Acquisition
Loans (in an amount equal to the Acquisition TL Percentage of such
prepayment); provided, however, prior to the Acquisition Loan Termination
Date a prepayment of Acquisition Loans shall not be required to be
accompanied by a prepayment of Term Loans and a prepayment of Term Loans
shall not be required to be accompanied by a prepayment of Acquisition
Loans; and
(vi) each prepayment of Acquisition Loans after the Acquisition Loan
Termination Date and each prepayment of Term Loans pursuant to this Section
3.01 shall be applied to reduce the then remaining Scheduled Repayments of
the respective Tranche being repaid on a pro rata basis (based upon the
then remaining principal amount of each such Scheduled Repayment).
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks) to repay all Loans, together with
accrued and unpaid interest, Fees and all other amounts owing to such Bank (or
owing to such Bank with respect to each Tranche which gave rise to the need to
obtain such Bank's individual consent) in accordance with said Section 12.12(b)
so long as (A) in the case of the repayment of Revolving Loans of any Bank with
a Revolving Loan Commitment or Acquisition Loans of any Bank with an Acquisition
Loan Commitment pursuant to this clause (b) the Revolving Loan Commitment or
Acquisition Loan Commitment, as the case may be, of such Bank is terminated
concurrently with such repayment pursuant to Section 2.02(b) (at which time
Schedule I shall be deemed modified to reflect the changed Revolving Loan
Commitments), and (B) in the case of the repayment of Loans of any Bank the
consents required by Section 12.12(b) in connection with the repayment pursuant
to this clause (b) shall have been obtained.
3.02 Mandatory Repayments and Commitment Reductions.
(A) Requirements:
(a) On any day on which the sum of the aggregate outstanding principal
amount of the Revolving Loans and Letter of Credit Outstandings at such time
exceeds the Total Revolving Loan Commitment as then in effect, the Borrower
shall prepay the principal of
20
<PAGE>
Revolving Loans in an amount equal to such excess. If, after giving effect to
the prepayment of all outstanding Revolving Loans, the aggregate amount of the
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the Borrower shall pay to the Agent at its Payment Office on
such date an amount of cash or Cash Equivalents equal to the amount of such
excess, such cash or Cash Equivalents to be held as security for all Obligations
of the Borrower hereunder in a manner satisfactory to the Collateral Agent. On
any day on or prior to the Acquisition Loan Termination Date on which the
aggregate outstanding principal amount of Acquisition Loans exceeds the Total
Acquisition Loan Commitment, the Borrower shall repay the principal of
Acquisition Loans in the amount equal to such excess.
(b) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02(A), the Borrower shall be required to repay on
each date set forth below (to the extent any day set forth below is not a
Business Day then the required date of repayment shall be the immediately
preceding Business Day) the principal amount of A Term Loans, to the extent then
outstanding, set forth below opposite such date (each such repayment as the same
may be reduced after the Restatement Effective Date as provided in Sections 3.01
and 3.02(B), a "Scheduled A Term Loan Repayment"):
<TABLE>
<CAPTION>
Scheduled A Term Loan Repayment Date Amount
------------------------------------ ------
<S> <C>
September 30, 1999 $3,500,000
December 31, 1999 $3,500,000
March 31, 2000 $3,000,000
June 30, 2000 $3,000,000
September 30, 2000 $3,000,000
December 31, 2000 $3,000,000
March 31, 2001 $3,575,000
June 30, 2001 $3,575,000
September 30, 2001 $3,575,000
December 31, 2001 $3,575,000
March 31, 2002 $3,700,000
June 30, 2002 $1,000,000
</TABLE>
(c) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02(A), the Borrower shall be required to repay on
each date set forth below (to the extent any date set forth below is not a
Business Day then the required date of repayment shall be the immediately
preceding Business Day) the principal amount of B Term Loans, to the extent then
outstanding, set forth below opposite such date (each such repayment as the same
may be reduced after the Restatement Effective Date as provided in Sections 3.01
and 3.02(B), a "Scheduled B Term Loan Repayment"):
<TABLE>
<CAPTION>
Scheduled B Term Loan Repayment Date Amount
------------------------------------ ------
<S> <C>
September 30, 1999 $125,000
December 31, 1999 $125,000
March 31, 2000 $125,000
June 30, 2000 $125,000
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
September 30, 2000 $125,000
December 31, 2000 $125,000
March 31, 2001 $125,000
June 30, 2001 $125,000
September 30, 2001 $125,000
December 31, 2001 $125,000
March 31, 2002 $3,812,500
June 30, 2002 $3,812,500
September 30, 2002 $3,812,500
December 31, 2002 $3,812,500
March 31, 2003 $4,875,000
June 30, 2003 $4,875,000
September 30, 2003 $4,875,000
December 31, 2003 $4,875,000
March 31, 2004 $5,922,000
June 30, 2004 $5,922,000
September 30, 2004 $5,922,000
December 31, 2004 $5,985,000
March 31, 2005 $7,531,000
June 30, 2005 $7,531,000
September 30, 2005 $7,531,000
B Term Loan Maturity Date $7,531,000
</TABLE>
(d) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02(A), the Borrower shall be required to repay on
each date set forth below a principal amount of Acquisition Loans, to the extent
then outstanding, equal to (i) the aggregate principal amount of Acquisition
Loans outstanding on the Acquisition Loan Termination Date (after giving effect
to any Acquisition Loans made on such date) multiplied by (ii) the percentage
set forth below opposite such date (each such repayment as the same may be
reduced as provided in Sections 3.01 and 3.02(B), a "Scheduled Acquisition Loan
Repayment" and the Scheduled A Term Loan Repayments and Scheduled B Term Loan
Repayments, together with the Scheduled Acquisition Loan Repayments,
collectively referred to as the "Scheduled Repayments"):
<TABLE>
<CAPTION>
Scheduled Acquisition Loan Repayment Dates Percentage
- ------------------------------------------ -----------
<S> <C>
Each Quarterly Payment Date occurring during the
12 month period commencing on November 6, 2001 2.5%
Each Quarterly Payment Date
occurring during the 12 month period commencing
on November 6, 2002 10.0%
Acquisition Loan Maturity Date 50%
</TABLE>
(e) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02, on the date of the receipt thereof by the
Borrower or any of its Subsidiaries, an amount equal to:
22
<PAGE>
(i) 100% of the cash proceeds (net of underwriting discounts and
commissions and all other reasonable costs associated with such
transaction) from any sale or issuance after the Restatement Effective Date
of equity of the Borrower or any Subsidiary of the Borrower (other than
Permitted Equity Issuances except as otherwise required by Section 12.17);
provided that proceeds of equity sold or issued to officers, directors or
employees of the Borrower ("Employee Stock Proceeds") shall not be required
to be paid on the date of the receipt thereof (unless such date of receipt
is also a date specified below) but instead shall be required to be paid on
each date on which the aggregate amount of such Employee Stock Proceeds
received during the period commencing on the later of (x) the Restatement
Effective Date and (y) the immediately preceding date on which a mandatory
repayment or commitment reduction was made pursuant to this Section
3.02(A)(e) as a result of the receipt of Employee Stock Proceeds and ending
on the date of determination (the "Employee Stock Proceeds Payment
Period"), equals or exceeds $100,000 (beyond the $2 million exclusion set
forth in the last proviso in this Section 3.02(A)(e)), with the amount of
the repayments or commitment reductions required on each such date to equal
100% of the aggregate amount of Employee Stock Proceeds received on or
before such date during the applicable Employee Stock Proceeds Payment
Period; and
(ii) 100% of the cash proceeds (net of underwriting discounts and
commissions, loan fees and all other reasonable costs associated with such
transaction) from any incurrence of any Indebtedness by the Borrower or any
Subsidiary of the Borrower (other than Indebtedness permitted by Section
8.05 as said Section is in effect on the Restatement Effective Date),
shall be applied as provided in Section 3.02(B); provided, however, that in the
case of the initial public offering of common equity by the Borrower ("IPO") a
sufficient amount of the net cash proceeds of the IPO shall be applied as
provided in Section 3.02(B) to reduce the Leverage Ratio on the date of closing
of the IPO to 2.0:1 (with the Consolidated EBITDA component of the Leverage
Ratio to be based on the most recently delivered Officer's Certificate delivered
pursuant to Section 7.01(f) or 7.15(a) (xv)) and the remaining proceeds may be
retained by the Borrower; provided, further, that so long as there shall exist
no Default or Event of Default at the time of exercise thereof, the first $2
million of cash proceeds received by the Borrower after the Restatement
Effective Date from the exercise of warrants and/or options by employees and
directors of the Borrower with respect to the Borrower's Common Stock may be
retained by the Borrower.
(f) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02, no later than 90 days after the last day of each
fiscal year of the Borrower ending after the Acquisition Loan Termination Date,
an amount equal to 75% of Excess Cash Flow of the Borrower and its Subsidiaries
for the relevant Excess Cash Flow Payment Period shall be applied as provided in
Section 3.02(B).
(g) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02, on each date after the Restatement Effective Date
on which the Borrower or any Subsidiary of the Borrower receives cash proceeds
from any sale of assets (including capital stock and securities other than
capital stock the proceeds from the sale of
23
<PAGE>
which is recaptured under Section 3.02(A)(e) but excluding sales of assets so
long as the aggregate amount of Net Sale Proceeds excluded pursuant to this
clause does not exceed $100,000 in the aggregate for all such asset sales in any
fiscal year of the Borrower), an amount equal to 100% of the Net Sale Proceeds
thereof shall be applied as provided in Section 3.02(B).
(h) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02, on each date after the Restatement Effective Date
of the receipt thereof by the Borrower or any Subsidiary of the Borrower, an
amount equal to 100% of the cash proceeds of any Recovery Event (net of
reasonable costs incurred in connection with such Recovery Event (including the
estimated marginal increase in income taxes which will be payable as a result of
such Recovery Event by the Borrower or any Subsidiary of the Borrower)) shall be
applied as provided in Section 3.02(B); provided that proceeds from Recovery
Events which relate to destruction of property (and do not relate to key-man
insurance or liability insurance) not in excess of $500,000 in the aggregate for
all Recovery Events occurring during one fiscal year of the Borrower shall not
be required to be so applied on such date to the extent that the Borrower
delivers a certificate to the Agent on or prior to such date stating that such
proceeds shall be used to replace or restore any properties or assets in respect
of which such proceeds were paid within a period specified in such certificate
not to exceed 180 days after the date of receipt of such proceeds (which
certificate shall set forth estimates of the proceeds to be so expended); and
provided further, that if all or any portion of such proceeds not so applied
pursuant to Section 3.02(B) are not so used within the period specified in the
proviso, such remaining portion shall be applied on the last day of such
specified period as provided in Section 3.02(B).
(i) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 3.02(A), on each date upon which the Borrower or any of
its Subsidiaries receives cash proceeds pursuant to any agreement or
understanding relating to any Permitted Acquisition, including, without
limitation, indemnification or similar payments and post-closing adjustments,
but excluding in each case post-closing working capital adjustments and
reimbursement of out-of-pocket costs and expenses, an amount equal to 100% of
such proceeds (net of reasonable expenses incurred in connection with obtaining
such proceeds and the estimated marginal increase in income taxes payable in
respect thereof) shall be applied as provided in Section 3.02(B).
(j) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, all then outstanding Loans of each respective Tranche shall be repaid
in full on the Maturity Date for such Tranche.
(k) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, so long as at the time of issuance there shall exist no Default or
Event of Default, the proceeds of the Permitted Stock Issuances may be used for
the purpose set forth in Section 4.18.
(B) Application:
(a) Each mandatory repayment of Loans pursuant to Section 3.02(A)(e)
through (i), inclusive, shall be applied:
24
<PAGE>
(i) first, (A) prior to the Acquisition Loan Termination Date, to
prepay the principal of outstanding A Term Loans and B Term Loans on a pro
rata basis, with the A Term Loan Facility to receive the A TL Percentage
and the B Term Loan Facility to receive the B TL Percentage, in each case,
of the total amount to be applied as a mandatory repayment of Term Loans
pursuant to this Section 3.02(B); which prepayments of such Term Loans (or
mandatory reductions to Term Loan Commitments) shall be applied to reduce
the then remaining Scheduled A Term Loan Repayments and Scheduled B Term
Loan Repayments on a pro rata basis (based on the then remaining amounts of
such Scheduled A Term Loan Repayments or Scheduled B Term Loan Repayments)
and (B) after the Acquisition Loan Termination Date, to prepay the
principal of outstanding Term Loans and Acquisition Loans on a pro rata
basis, with the A Term Loan Facility to receive the A TL Percentage, the B
Term Loan Facility to receive the B TL Percentage and the Acquisition Loan
Facility to receive the Acquisition TL Percentage, in each case of the
total amount to be applied as a mandatory repayment of Term Loans and
Acquisition Loans pursuant to this Section 3.02(B), and which prepayments
of such Term Loans and Acquisition Loans shall be applied to reduce the
then remaining Scheduled Repayments of the respective Tranche on a pro rata
basis (based on the then remaining amounts of such Scheduled Repayments);
(ii) second, prior to the Acquisition Loan Termination Date, to prepay
the principal of outstanding Acquisition Loans (with a corresponding
reduction to the Total Acquisition Loan Commitment);
(iii) third, prior to the Acquisition Loan Termination Date, to reduce
the Total Acquisition Loan Commitment (with a corresponding reduction to
the Total Acquisition Loan Commitment of each Bank (it being understood and
agreed that the amount of such reduction shall be deemed to be an
application of proceeds for purposes of this Section 3.02(B)(a)(iii) even
though cash is not actually applied));
(iv) fourth, to prepay the principal of outstanding Revolving Loans
(with a corresponding reduction to the Total Revolving Loan Commitment);
(v) fifth, to cash collateralize Letter of Credit Outstandings by
depositing cash in a letter of credit cash collateral account on terms
satisfactory to the Collateral Agent in an amount equal to such Letter of
Credit Outstandings (it being understood that the Total Revolving Loan
Commitment shall be reduced by the amount of cash collateral required to be
deposited by this clause (v)); and
(vi) sixth, to reduce the remaining (i.e., after giving effect to all
prior reductions thereto, including, without limitation, to the reductions
theretofore effected pursuant to the preceding clauses (iv) and (v)) Total
Revolving Loan Commitment (it being understood and agreed that the amount
of such reduction shall be deemed to be an application of proceeds for
purposes of this Section 3.02(B)(a)(vi) even though cash is not actually
applied).
(b) With respect to each repayment of Loans required by this Section 3.02,
the Borrower may designate the Types of Loans which are to be repaid and, in the
case of Eurodollar
25
<PAGE>
Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant
to which made; provided that: (i) repayments of Eurodollar Loans pursuant to
this Section 3.02 may only be made on the last day of an Interest Period
applicable thereto unless all Eurodollar Loans of the respective Tranche with
Interest Periods ending on such date of required repayment and all Base Rate
Loans of the respective Tranche have been paid in full; (ii) if any repayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less
than the applicable Minimum Borrowing Amount, such Borrowing shall immediately
be converted into Base Rate Loans; and (iii) each repayment of any Loans made
pursuant to a single Borrowing shall be applied pro rata among such Loans. In
the absence of a designation by such Borrower as described in the preceding
sentence, the Agent shall, subject to the above, make such designation in its
sole discretion.
(C) Waiver of Certain Mandatory Repayments:
Notwithstanding anything to the contrary contained in this Section 3.02 or
elsewhere in this Agreement (including, without limitation, in Section 12.12),
the Borrower shall have the option, in its sole discretion, to give the Banks
with outstanding B Term Loans (the "B Banks") the option to waive a mandatory
repayment of such Loans pursuant to Section 3.02(A) (each such repayment, a
"Waivable Mandatory Repayment") upon the terms and provisions set forth in this
Section 3.02(C). If the Borrower elects to exercise the option referred to in
the preceding sentence, the Borrower shall give to the Agent written notice of
its intention to give the B Banks the right to waive a Waivable Mandatory
Repayment at least five Business Days prior to the applicable Scheduled B Term
Repayment Date, which notice the Agent shall promptly forward to all B Banks
(indicating in such notice the amount of such repayment to be applied to each
such Bank's outstanding B Term Loans). The Borrower's offer to permit such Banks
to waive any such Waivable Mandatory Repayment may apply to all or part of such
repayment, provided that any offer to waive part of such repayment must be made
ratably to such Banks on the basis of their outstanding B Term Loans. In the
event any such B Bank desires to waive such Bank's right to receive any such
Waivable Mandatory Repayment in whole or in part, such Bank shall so advise the
Agent no later than the close of business two Business Days after the date of
such notice from the Agent, which notice shall also include the amount such Bank
desires to receive in respect of such repayment. If any Bank does not reply to
the Agent within the two Business Days, it will be deemed not to have waived any
part of such repayment. If any Bank does not specify an amount it wishes to
receive, it will be deemed to have accepted 100% of the total payment. In the
event that any such Bank waives all or part of such right to receive any such
Waivable Mandatory Repayment, the Agent shall apply 100% of the amount so waived
by such Bank to the A Term Loans in accordance with Section 3.02(B).
3.03 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement or any Note shall be made to the Agent
for the account of the Bank or Banks entitled thereto not later than 12:00 Noon
(New York time) on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office of the Agent. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
26
<PAGE>
3.04 Net Payments. (a) All payments made by the Borrower hereunder or under
any Note will be made without setoff, counterclaim or other defense. Except as
provided in Section 3.04(b), all such payments will be made free and clear of,
and without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding,
except as provided in the second succeeding sentence, any tax imposed on or
measured by the net income of a Bank pursuant to the laws of the jurisdiction in
which it is organized or the jurisdiction in which the principal office or
applicable lending office of such Bank is located or any political subdivision
or taxing authority thereof or therein) and all interest, penalties or similar
liabilities with respect to such non- excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such non- excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due hereunder or under any
Note, after withholding or deduction for or on account of any Taxes, will not be
less than the amount provided for herein or in such Note. If any amounts are
payable in respect of Taxes pursuant to the preceding sentence, the Borrower
agrees to reimburse each Bank, upon the written request of such Bank, for taxes
imposed on or measured by the net income or net profits of such Bank pursuant to
the laws of the jurisdiction or any political subdivision or taxing authority
thereof or therein in which such Bank is organized or in which the principal
office or applicable lending office of such Bank is located and for any
withholding of income or similar taxes as such Bank shall determine are payable
by, or withheld from, such Bank in respect of such amounts so paid to or on
behalf of such Bank pursuant to the preceding sentence and in respect of any
amounts paid to or on behalf of such Bank pursuant to this sentence. The
Borrower will furnish to the Agent within 45 days after the date of the payment
of any Taxes due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower agrees to indemnify and
hold harmless each Bank, and reimburse such Bank upon its written request, for
the amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the
Agent on or prior to the Restatement Effective Date, or in the case of a Bank
that is an assignee or transferee of an interest under this Agreement pursuant
to Section 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form W-8EC1 or Form W-8BEN (with
respect to a complete exemption under an income tax treaty) (or successor forms)
certifying to such Bank's entitlement to a complete exemption
27
<PAGE>
from United States withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Bank is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either
Internal Revenue Service Form W-8EC1 or Form, W-8BEN (with respect to a complete
exemption under an income tax treaty) pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit C (any such certificate, a
"Section 3.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8BEN (with respect to the
portfolio interest exemption) (or successor form) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. In addition, each Bank agrees that from time to time after the Restatement
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Agent two new accurate and complete original
signed copies of Internal Revenue Service Form W-8EC1, Form W-8BEN (with respect
to the benefits of any income tax treaty), Form W-8BEN (with respect to the
portfolio interest exemption) and a Section 3.04(b)(ii) Certificate, as the case
may be, and such other forms as may be required in order to confirm or establish
the entitlement of such Bank to a continued exemption from or reduction in
United States withholding tax with respect to payments under this Agreement and
any Note, or it shall immediately notify the Borrower and the Agent of its
inability to deliver any such Form or Certificate, in which case such Bank shall
not be required to deliver any such form of certificate pursuant to this Section
3.04(b). Notwithstanding anything to the contrary contained in Section 3.04(a),
but subject to the immediately succeeding sentence, (x) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 3.04(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided the Borrower the Internal Revenue Service Forms
required to be provided the Borrower pursuant to this Section 3.04(b) or (II) in
the case of a payment, other than interest, to a Bank described in clause (ii)
above, to the extent that such forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 3.04, the Borrower agrees to
pay additional amounts and to indemnify each Bank in the manner set forth in
Section 3.04(a) (without regard to the identity of the jurisdiction requiring
the deduction or withholding) in respect of any amounts deducted or withheld by
it as described in the immediately preceding sentence as a result of any changes
after the Restatement Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of income or similar Taxes.
Section 4. Conditions Precedent to Loans on the Restatement Effective Date.
The obligation of each Bank to make Loans on the Restatement Effective Date (and
the occurrence of the Restatement Effective Date) is subject on the Restatement
Effective Date to the satisfaction of the following conditions:
4.01 Execution of Agreement; Notes. On or prior to the Restatement
Effective Date there shall have been delivered to the Agent for the account of
each of the Banks the appropriate A Term Note, B Term Note, Acquisition Note or
Revolving Note executed by the Borrower, in each case in the amount, maturity
and as otherwise provided herein.
4.02 Officer's Certificate. On the Restatement Effective Date, the Agent
shall have received a certificate dated the Restatement Effective Date signed on
behalf of the Borrower
28
<PAGE>
by the President or Chief Financial Officer of the Borrower stating that all of
the conditions in Sections 4.10, 4.11, 4.14, 4.16 and 5.01 have been satisfied
on such date; provided the certificate shall not be required to certify as to
the acceptability of any items to the Agent and/or the Banks or as to whether
the Agent and/or the Banks are satisfied with any of the matters described in
said Sections.
4.03 Opinions of Counsel. On the Restatement Effective Date, the Agent
shall have received from (i) Morrison Cohen Singer & Weinstein, LLP, counsel to
the Borrower and its Subsidiaries, an opinion addressed to the Agent, the
Collateral Agent and each of the Banks and dated the Restatement Effective Date
covering the matters set forth in Exhibit D, and (ii) from Nevada counsel to the
Borrower, an opinion addressed to the Agent, the Collateral Agent and each of
the Banks and dated the Restatement Effective Date, covering such matters
incident to the transactions contemplated herein as the Agent may reasonably
request and in form and substance satisfactory to the Agent.
4.04 Corporate Documents; Proceedings. (a) On the Restatement Effective
Date, the Agent shall have received a certificate, dated the Restatement
Effective Date, signed by the President or any Vice President of each Credit
Party, and attested to by the Secretary or any Assistant Secretary of such
Credit Party, in the form of Exhibit E with appropriate insertions, together
with copies of the Certificate of Incorporation, By-Laws or other organizational
documents of such Credit Party and the resolutions of such Credit Party referred
to in such certificate, and the foregoing shall be acceptable to the Agent and
the Required Banks in their sole discretion.
(b) All corporate and legal proceedings and all instruments and agreements
relating to the transactions contemplated by this Agreement and the other Credit
Documents shall be satisfactory in form and substance to the Agent and the
Required Banks, and the Agent shall have received all information and copies of
all documents and papers, including records of corporate proceedings,
governmental approvals, good standing certificates and bring-down telegrams, if
any, which the Agent or the Required Banks may have requested in connection
therewith, such documents and papers where appropriate to be certified by proper
corporate or governmental authorities.
4.05 Plans; Shareholders' Agreements; Management Agreements; Employment
Agreements; Collective Bargaining Agreements; Debt Agreements; Affiliate
Contracts; Tax Sharing Agreements and Material Contracts. On or prior to the
Restatement Effective Date, there shall have been delivered to the Banks true
and correct copies, certified as true and complete by an appropriate officer of
the Borrower of:
(i) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most
recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, the most recently prepared actuarial valuation therefor) and any
other "employee benefit plans," as defined in Section 3(3) of ERISA, and
any other material agreements, plans or arrangements, with or for the
benefit of current or former employees of the
29
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Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that
the foregoing shall apply in the case of any Multiemployer Plan, only to
the extent that any document described therein is in the possession of the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate or
reasonably available thereto from the sponsor or trustee of any such plan)
(collectively, the "Employee Benefit Plans");
(ii) all agreements entered into by the Borrower or any Subsidiary of
the Borrower governing the terms and relative rights of its capital stock
and any agreements entered into by shareholders relating to any such entity
with respect to their capital stock (collectively, the "Shareholders'
Agreements");
(iii) all agreements with members of, or with respect to the,
management of the Borrower or any Subsidiary of the Borrower other than
Employment Agreements (collectively, the "Management Agreements");
(iv) any employment agreements entered into by the Borrower or any
Subsidiary of the Borrower (collectively, the "Employment Agreements");
(v) all collective bargaining agreements applying or relating to any
employee of the Borrower or any Subsidiary of the Borrower (collectively,
the "Collective Bargaining Agreements");
(vi) all agreements evidencing or relating to Indebtedness of the
Borrower or any Subsidiary of the Borrower whether or not such agreement is
to remain outstanding after giving effect to the incurrence of Loans on the
Restatement Effective Date (collectively, the "Debt Agreements");
(vii) all tax sharing, tax allocation and other similar agreements
entered into by the Borrower or any Subsidiary of the Borrower
(collectively, the "Tax Sharing Agreements");
(viii) all contracts, agreements or understandings entered into
between the Borrower or any of its Subsidiaries on the one hand, and any of
its Affiliates, on the other hand (collectively, the "Affiliate
Contracts"); and
(ix) all material contracts and licenses of the Borrower or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction, including without limitation, all leases
pursuant to which the Borrower or any of its Subsidiaries are lessees, all
partnership agreements and all management contracts (collectively, the
"Material Contracts");
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Employment Agreements, Collective Bargaining Agreements, Debt
Agreements, Tax Sharing Agreements, Affiliate Contracts and Material Contracts
shall be in form and substance satisfactory to the Agent and the Required Banks
and shall be in full force and effect on the Restatement Effective Date;
provided, however, that only those Plans, Shareholders' Agreements, Management
Agreements, Employment Agreements, Collective Bargaining Agreements, Debt
Agreements, Tax Sharing Agreements, Affiliate Contracts and Material Contracts
which were
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not in existence on the Existing Effective Date or, if in existence on the
Existing Effective Date, which have been changed in any material respect since
such date, shall be required to be delivered pursuant to this Section 4.05.
4.06 Assignment of Leases and Rents. On the Restatement Effective Date, the
Borrower and each of its Subsidiaries shall have duly authorized, executed and
delivered one or more Assignment of Leases and Rents covering all leases,
subleases, rental agreements, occupancy agreements, licenses and other
agreements pursuant to which the Borrower or any of its Subsidiaries provide
space or other services to persons utilizing space at executive office suite
centers in form and substance satisfactory to the Agent (as modified,
supplemented and amended from time to time, each an "Assignment of Leases and
Rents") and shall take all other actions necessary or desirable in the
reasonable opinion of counsel to the Agent, appropriate to perfect and protect
the first priority security interest created by such Assignment, including,
without limitation, presentment for filing in the appropriate mortgage recording
offices of the various state and local offices in which the Borrower and its
Subsidiaries operate executive office suites centers. The Agent shall receive
acknowledgment copies of all such filings.
4.07 Pledge Agreement. (a) On the Restatement Effective Date, the Borrower
and each of its Subsidiaries shall have duly authorized, executed and delivered
an Amended and Restated Pledge Agreement substantially in the form of Exhibit
F-1 (as modified, supplemented or amended from time to time, the "Corporate
Pledge Agreement") and shall have delivered to the Collateral Agent, as Pledgee
thereunder, all of the Pledged Securities referred to therein then owned by the
Borrower (except for securities of ALLIANCE Business Centers National Sales
Company, Inc.) (x) endorsed in blank in the case of promissory notes
constituting Pledged Securities and (y) together with executed and undated
irrevocable stock powers, in the case of capital stock constituting Pledged
Securities.
(b) On the Restatement Effective Date, the Borrower shall have duly
authorized, executed and delivered a Limited Liability Company Pledge Agreement
substantially in the form of Exhibit F-2 (as modified, supplemented or amended
from time to time, the "LLC Pledge Agreement") and shall have delivered to the
Collateral Agent, as Pledgee thereunder, if certificated all of the membership
interests referred to therein then owned by the Borrower together with executed
and undated irrevocable stock powers or other acceptable instruments of transfer
and:
(i) evidence that all other actions necessary or, in the reasonable
opinion of counsel to the Agent, appropriate to perfect and protect the
first priority security interest created by the LLC Pledge Agreement have
been taken;
(ii) acknowledgment copies of all UCC-l financing statements filed,
registered or recorded (or other evidence satisfactory to the Agent that
there has been filed, registered or recorded all financing statements
necessary and advisable to perfect the security interest of the Secured
Creditors);
(iii) consents and/or acknowledgments from the requisite number of
members of [each limited liability company] to permit the granting of the
security interests
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purported to be granted pursuant to the LLC Pledge Agreement as the Agent
shall have reasonably requested; and
(iv) copies of lien and judgment searches as the Agent shall
reasonably request (and such termination statements or other documents as
may be necessary to release any Lien in favor of any third party not
otherwise permitted by Section 8.01).
4.08 Security Agreement. On the Restatement Effective Date, each Credit
Party shall have duly authorized, executed and delivered an Amended and Restated
Security Agreement in the form of Exhibit G (as modified, supplemented or
amended from time to time, the "Security Agreement") covering all of such Credit
Party's present and future Security Agreement Collateral, together with:
(i) proper financing statements (Form UCC-1 or such other financing
statements or similar notices as shall be required by local law) fully
executed for filing under the UCC or other appropriate filing offices of
each jurisdiction as may be necessary or, in the opinion of the Collateral
Agent, desirable to perfect the security interests purported to be created
by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all judgment liens, tax liens or
effective financing statements that name the Borrower or any of its
Subsidiaries, or a division or other operating unit of any such Person, as
debtor and that are filed in the jurisdictions referred to in said clause
(i), together with copies of such other financing statements (none of which
shall cover the Collateral except to the extent evidencing Permitted Liens
or for which the Collateral Agent shall receive termination statements
(Form UCC-3 or such other termination statements as shall be required by
local law) fully executed for filing);
(iii) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created by such Security Agreement;
(iv) evidence that all other actions necessary or, in the opinion of
the Collateral Agent, desirable to perfect and protect the security
interests purported to be created by the Security Agreement have been
taken; and
(v) all necessary third-party consents to the granting of the Liens
purported to be granted pursuant to the Security Documents, including,
without limitation, consents under all management contracts.
4.09 Subsidiaries Guaranty. On the Restatement Effective Date, each
Subsidiary of the Borrower shall have duly authorized, executed and delivered an
Amended and Restated Guaranty in the form of Exhibit H (as modified,
supplemented or amended from time to time, the "Subsidiaries Guaranty").
4.10 Material Adverse Change, etc. Since December 31, 1998, nothing shall
have occurred (and the Banks shall have become aware of no facts or conditions
not previously
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known) which the Agent or the Required Banks shall determine (a) could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the ability of the Borrower or any of
its Subsidiaries to perform their obligations to the Agent and the Banks under
this Agreement or any other Credit Document, (b) could reasonably be expected to
have a materially adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole, (c)
indicates the inaccuracy in any material respect of the information previously
provided to the Agent or the Banks (taken as a whole) in connection with their
analysis of the transactions contemplated hereby or indicates that the
information previously provided omitted to disclose any material information or
(d) could reasonably be expected to have a materially adverse effect on the
financial, banking, or capital markets for the market for senior syndicated debt
financings for leveraged transactions generally.
4.11 Litigation. On the Restatement Effective Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect to
this Agreement, any other Credit Document or any documentation executed in
connection herewith or with respect to the transactions contemplated hereby, or
which the Agent or Required Banks shall determine could reasonably be expected
to have a materially adverse effect on the Transaction or on the performance,
business, assets, nature of assets, liabilities, operations, properties,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
4.12 Fees, etc. On the Restatement Effective Date, the Borrower shall have
paid in full to the Agent and the Banks all costs, fees and expenses (including,
without limitation, all legal fees and expenses) payable to the Agent and the
Banks to the extent then due pursuant hereto or as otherwise agreed between the
Borrower and the Agent.
4.13 Solvency Certificate; Insurance Analyses. On the Restatement Effective
Date, the Borrower shall cause to be delivered to the Agent and the Banks: (i) a
certificate from the chief financial officer of the Borrower, in the form of
Exhibit I hereto, supporting the conclusions that, after giving effect to the
Transaction and the incurrence of all financings contemplated herein, that each
Credit Party, and all Credit Parties taken as a whole, as the case may be, are
not insolvent and will not be rendered insolvent by the Indebtedness incurred in
connection therewith, will not be left with unreasonably small capital with
which to engage in Credit Party businesses and will not have incurred debts
beyond their ability to pay such debts as they mature and (ii) evidence
(including, without limitation, certificates with respect to each insurance
policy listed on Schedule II) of insurance, complying with the requirements of
Section 7.03, with respect to the business and properties of the Borrower and
its Subsidiaries, in scope, form and substance satisfactory to the Agent and the
Required Banks and naming each of the Collateral Agent, the Agent and the Banks
as an additional insured and the Collateral Agent as loss payee and stating that
such insurance shall not be cancelled or revised without 30 days' prior written
notice by the insurer to the Collateral Agent.
4.14 Approvals. All material necessary governmental and third party
approvals in connection with the Transaction and the transactions contemplated
by the Credit Documents and otherwise referred to herein or therein (including,
but not limited to, those approvals required in respect of existing permits,
landlord consents and transfers of contract rights) shall have been obtained and
remain in effect, and all applicable waiting periods shall have expired without
any
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action being taken by any competent authority which restrains, prevents or
imposes, in the sole judgment of the Agent or the Required Banks, adverse
conditions upon the consummation of the Transaction or the other transactions
contemplated by the Credit Documents and otherwise referred to herein or
therein. Additionally, there shall not exist any judgment, order, injunction or
other restraint issued or filed or a hearing seeking injunction relief or other
restraint pending or notified prohibiting or imposing materially adverse
conditions upon the consummation of the Transaction, the transactions
contemplated by the Credit Documents, the making of the Loans or the issuance of
Letters of Credit.
4.15 Financial Statements; Projections; Management Letter Reports. (a) On
or prior to the Restatement Effective Date, the Banks shall have received the
consolidated balance sheet of the Borrower and its Subsidiaries as at June 30,
1996, June 30, 1997, June 30, 1998, December 31, 1998 and March 31, 1999, and
the consolidated statements of operations, stockholders' equity and cash flows
of the Borrower and its Subsidiaries for the fiscal periods ended as of said
dates, which, in the case of the annual statements, have been examined by
PricewaterhouseCoopers LLP, independent certified public accountants, all of
which financial statements shall be prepared in accordance with generally
accepted accounting principles consistent with past practices and shall be in
for and substance satisfactory to the Agent and the Required Banks, and shall
not disclose any material adverse differences in the business, properties,
assets, liabilities, results of operations, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole from that
previously disclosed to the Agent and the Required Banks.
(b) On the Restatement Effective Date, the Banks shall have received
detailed consolidated financial projections, certified by the Chief Financial
Officer of the Borrower, for the Borrower and its Subsidiaries, which include
the projected consolidated results of the Borrower, after giving effect to the
Transaction and the other transactions contemplated herein, for the period
commencing on the Restatement Effective Date and ending on or after December 31,
2005 (the "Projections"), which Projections, and the supporting assumptions and
explanations thereto, and the accounting practices and procedures to be utilized
by the Borrower following the Restatement Effective Date, shall be satisfactory
in form and substance to the Agent and the Required Banks and shall be as set
forth on Schedule III hereto.
(c) On or prior to the Restatement Effective Date, the Agent shall have
received a copy of any "management letter" received by the Borrower or any of
its Subsidiaries from its certified public accountants on or after November 6,
1998.
4.16 Refinancing. On the Restatement Effective Date and after giving effect
to the Loans incurred on the Restatement Effective Date and the other
transactions contemplated hereby, neither the Borrower nor any of its
Subsidiaries shall have any Indebtedness or preferred stock outstanding except
for the Convertible Preferred Stock, the Loans, the Letters of Credit and the
Existing Indebtedness, which Existing Indebtedness shall not exceed $16,000,000
and shall consist of $2,500,000 in Capital Leases and $50,000,000 in Borrower's
guarantees to landlords of Subsidiaries.. All of the Existing Indebtedness shall
remain outstanding after the transactions contemplated hereby without any
defaults or events of default existing thereunder or arising as a result of the
transactions contemplated hereby. None of the Existing Indebtedness shall have
been incurred in anticipation of the transactions contemplated hereby.
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4.17 Consent Letter. The Agent shall have received a letter from
Corporation Service Company, with offices on the date hereof at 500 Central
Avenue, Albany, New York 12206-2290, substantially in the form of Exhibit J
hereto, indicating its consent to its appointment by the Borrower and its
Subsidiaries as their agent to receive service of process as specified in
Section 12.08 of this Agreement and Section 21 of the Subsidiaries Guaranty.
4.18 Equity Financing. On or prior to the Restatement Effective Date, the
Borrower shall have raised at least $17,500,000 through the sale of Convertible
Preferred Stock on terms and conditions and pursuant to documentation
satisfactory to the Agent and the Required Banks (the "Required Equity
Issuance"). The proceeds of the Permitted Stock Issuances will be used for the
purposes set forth on Schedule XVI hereto.
Section 5. Conditions Precedent to All Credit Events. The obligation of
each Bank to make Loans (including Loans made on the Restatement Effective Date)
and the obligation of an Issuing Bank to issue any Letter of Credit and the
occurrence of the Restatement Effective Date, is subject, at the time of each
such Credit Event or at the time of the Restatement Effective Date, as the case
may be (except as hereinafter indicated), to the satisfaction of the following
conditions:
5.01 No Default; Representations and Warranties. On the Restatement
Effective Date and at the time of each such Credit Event and also after giving
effect thereto (i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein and in the other Credit
Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the date
of the Restatement Effective Date and/or the date of making of such Credit Event
(except to the extent such representations specifically relate to earlier dates
in which case such representations shall be correct in all material respects on
and as of such dates).
5.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making
of each Loan, the Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03.
(b) Prior to the issuance of each Letter of Credit, the Issuing Bank shall
have received a Letter of Credit Request meeting the requirements of Section
1A.03.
5.03 Permitted Acquisitions. Prior to the making of each Acquisition Loan,
all conditions to such Permitted Acquisition set forth in Section 7.15 and in
the definition thereof shall have been satisfied and the president or chief
financial officer of the Borrower shall have delivered an officer's certificate
certifying that such conditions have been met.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to each of the Banks that all the
conditions specified in Section 4 and in this Section 5 and applicable to such
Credit Event exist as of that time. All of the Notes, certificates, legal
opinions and other documents and papers referred to in Section 4 and in this
Section 5, unless otherwise specified, shall be delivered to the Agent at the
Notice Office for the account of each of the Banks and, except for the Notes, in
sufficient
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counterparts for each of the Banks and, unless otherwise specified, shall be in
form and substance satisfactory to the Banks.
Section 6. Representations, Warranties and Agreements. In order to induce
the Banks to enter into this Agreement and to make the Loans, and issue (or
participate in) the Letters of Credit as provided herein, the Borrower makes the
following representations, warranties and agreements as to itself and as to each
of its Subsidiaries (to the extent applicable), as of the Restatement Effective
Date (both before and after giving effect to the Credit Events occurring on such
date, the Transaction and the other transactions contemplated by the Credit
Documents, and all references to the Borrower herein and elsewhere in this
Agreement, shall, unless otherwise specifically indicated, be references to the
Borrower after giving effect to the Transaction) and as of the date of each
subsequent Credit Event which representations, warranties and agreements shall
survive the execution and delivery of this Agreement and the Notes and any
subsequent Credit Event, with the occurrence of each Credit Event on or after
the Restatement Effective Date being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct on
and as of the Restatement Effective Date and on the date of each such Credit
Event (except to the extent such representations specifically relate to earlier
dates in which case such representations shall be correct in all material
respects on and as of such dates):
6.01 Corporate and Limited Liability Company Status. Each of the Borrower
and its Subsidiaries (i) is a duly organized and validly existing corporation or
limited liability company in good standing under the laws of the jurisdiction of
its organization, (ii) has the power and authority to own its property and
assets and to transact the business in which it is engaged and presently
proposes to engage and (iii) is duly qualified and is authorized to do business
and is in good standing in each jurisdiction where the ownership, leasing or
operation of property or the conduct of its business requires such
qualifications except for failures to be so qualified which, in the aggregate,
could not reasonably be expected to have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
6.02 Corporate Power and Authority. Each of the Borrower and its
Subsidiaries has the corporate power to execute, deliver and perform the terms
and provisions of each of the Credit Documents to which it is party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of each of such Credit Documents. Each of the Borrower and its
Subsidiaries has duly executed and delivered each of the Credit Documents to
which it is party, and each of such Credit Documents constitutes its legal,
valid and binding obligation enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
6.03 No Violation. Neither the execution, delivery or performance by the
Borrower or any of its Subsidiaries of the Credit Documents to which it is a
party, nor compliance by it with the terms and provisions thereof, (i) will
contravene any provision of any
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applicable law, statute, rule or regulation or any order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except pursuant to the
Security Documents) upon any of the property or assets of the Borrower or any of
its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement or loan agreement, or any other agreement, contract or
instrument to which the Borrower or its Subsidiaries is a party or by which it
or any of its property or assets is bound or to which it may be subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws (or
similar organizational documents) of the Borrower or any of its Subsidiaries.
6.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made on or prior to the Restatement Effective
Date and are in full force and effect), or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with, (i) the execution, delivery and performance
of any Credit Document or (ii) the legality, validity, binding effect or
enforceability of any such Credit Document.
6.05 Financial Statements; Financial Condition; Undisclosed Liabilities;
Projections; etc. (a) (i) The consolidated balance sheet of the Borrower as at
June 30, 1996, June 30, 1997, June 30, 1998, December 31, 1998 and March 31,
1999 and the related statements of earnings and cash flows of the Borrower and
its Subsidiaries for the fiscal periods ended as of such dates, in the case of
the annual statements, have been examined by PricewaterhouseCoopers LLP,
independent certified public accountants, who delivered unqualified opinions in
respect thereto and (ii) the pro forma (after giving effect to the Transaction
and the related financing thereof) consolidated balance sheet of the Borrower as
at the Restatement Effective Date, copies of all of which financial statements
referred to in the preceding clauses (i) and (ii) have heretofore been furnished
to each Bank, present fairly the financial position of the respective entities
at the dates of said statements and the results of operations for the period
covered thereby (or, in the case of the pro forma balance sheet, present a good
faith estimate of the pro forma financial condition of the Borrower and its
Subsidiaries (after giving effect to the Transaction) on a consolidated basis at
the date thereof). All such financial statements have been prepared in
accordance with generally accepted accounting principles and practices
consistently applied except to the extent provided in the notes to said
financial statements and with respect to interim financial statements, subject
to normal year end adjustments. Since December 31, 1998, there has been no
material adverse change in the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
(b) On and as of the Restatement Effective Date, on a pro forma basis after
giving effect to the Transaction and all other transactions contemplated by the
Credit Documents and to all Indebtedness (including the Loans) being incurred in
connection with the Transaction, and Liens created, and to be created, by each
Credit Party in connection therewith: (a) the sum of the assets (including all
intangible assets), at a fair valuation, of each Credit Party will exceed its
debts; (b) no Credit Party has incurred or intends to, or believes that it will,
incur debts beyond its ability to pay such debts as such debts mature; and (c)
each Credit Party will have
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sufficient capital with which to conduct its business. For purposes of this
Section 6.05(b) "debt" means any liability on a claim, and "claim" means (i)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully reflected in the financial statements and the notes
related thereto described in Section 6.05(a) there were as of the Restatement
Effective Date (and after giving effect to the Transaction and the other
transactions contemplated hereby and by the Credit Documents) no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to the Borrower and its Subsidiaries taken as a
whole. As of the Restatement Effective Date, neither the Borrower nor any of its
Subsidiaries knows of any basis for the assertion against the Borrower or any of
its Subsidiaries of any liability or obligation of any nature whatsoever that is
not fully reflected in the financial statements and the notes related thereto
described in Section 6.05(a) which, either individually or in the aggregate,
could reasonably be expected to be material to the Borrower and its Subsidiaries
taken as a whole. As of the Restatement Effective Date (and after giving effect
to the Transaction and the repayment of the Reckson Loan) none of the Borrower
or any of its Subsidiaries will have any outstanding Indebtedness or preferred
stock other than (i) the Loans, (ii) the Existing Indebtedness and (iii) the
Convertible Preferred Stock.
(d) On and as of the Restatement Effective Date, the Projections have been
prepared in good faith by the Borrower and there are no statements or
conclusions in any of the Projections which are based upon or include
information known to the Borrower to be misleading or which fail to take into
account material information regarding the matters reported therein. On the
Restatement Effective Date, the Borrower believes that the Projections were
reasonable and attainable (although actual results may differ from the
Projections and no representation is made that the Projections will in fact be
attained).
6.06 Litigation. There are no actions, suits or proceedings pending or, to
the best knowledge of the Borrower, threatened (i) with respect to any Credit
Document, or (ii) that are reasonably likely to materially and adversely affect
the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
6.07 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
or any Subsidiary of the Borrower in writing to any Bank (including, without
limitation, all information contained in the Credit Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole with all information
previously furnished) hereafter furnished by or on behalf of the Borrower or any
Subsidiary of the Borrower in writing to any Bank will be, true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact.
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6.08 Use of Proceeds; Margin Regulations. (a) All proceeds of Loans
incurred by the Borrower on the Restatement Effective Date shall be used to
repay Loans under and as defined in the Existing Credit Agreement (together with
accrued interest thereon and all Fees under and as defined in the Existing
Credit Agreement) and to the extent Loans incurred by the Borrower are in excess
of such amounts, such excess amounts (but not to exceed $36.2 million) shall be
deposited in the Cash Collateral Account to be utilized solely to pay the
purchase price and closing costs with respect to Permitted Acquisitions in
accordance with the terms of the Cash Collateral Agreement including, but not
limited to, the requirement that each Permitted Acquisition must satisfy the
requirements to be a Permitted Acquisition prior to the drawing of funds from
the Cash Collateral Account.
(b) All proceeds of Revolving Loans shall be used by the Borrower for
general corporate and working capital purposes of the Borrower but shall not be
permitted to be used to effect Permitted Acquisitions.
(c) All proceeds of Acquisition Loans shall be used by the Borrower only to
effect Permitted Acquisitions and to pay fees, costs and expenses related to
such acquisitions.
(d) No part of the proceeds of any Loan will be used to purchase or carry
any Margin Stock or to extend credit for the purpose of purchasing or carrying
any Margin Stock. Neither the making of any Loan nor the use of the proceeds
thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
6.09 Tax Returns and Payments. Except as set forth on Schedule VI, each of
the Borrower and its Subsidiaries has timely filed or caused to be timely filed
(including pursuant to any valid extensions of time for filing) with the
appropriate taxing authority, all returns, statements, forms and reports for
taxes (the "Returns") required to be filed by or with respect to the income,
properties or operations of the Borrower and/or any of its Subsidiaries. The
Returns accurately reflect in all material respects all liability for taxes of
the Borrower and its Subsidiaries as a whole for the periods covered thereby.
Each of the Borrower and each of its Subsidiaries have paid all material taxes
(including, without limitation, all federal payroll withholding taxes) payable
by them which have become due other than those contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles. There is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the best knowledge of the
Borrower or any of its Subsidiaries, threatened by any authority regarding any
taxes relating to the Borrower or any of its Subsidiaries. Except as set forth
on Schedule VI, as of the Restatement Effective Date, neither the Borrower nor
any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations. Neither the Borrower nor any of its Subsidiaries has provided, with
respect to themselves or property held by them, any consent under Section 341 of
the Code. None of the Borrower or any of its Subsidiaries has incurred, or will
incur, any material tax liability in connection with the Transaction or any
other transactions contemplated hereby.
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6.10 Compliance with ERISA. (a) Schedule VII sets forth each Plan; each
Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including, without
limitation, ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a Multiemployer Plan is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period, within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan and each Multiemployer Plan have been timely made; neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any material liability (including any indirect, contingent or secondary
liability) to or on account of a Plan or Multiemployer Plan pursuant to Section
409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such
liability under any of the foregoing sections with respect to any Plan or
Multiemployer Plan; no condition exists which presents a material risk to the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a
liability to or on account of a Plan or Multiemployer Plan pursuant to the
foregoing provisions of ERISA and the Code; no proceedings have been instituted
to terminate or appoint a trustee to administer any Plan which is subject to
Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation
with respect to the administration, operation or the investment of assets of any
Plan (other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Borrower, its Subsidiaries and/or its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event using
actuarial assumptions and computation methods consistent with Part 1 of subtitle
E of Title IV of ERISA, the aggregate liabilities of the Borrower and its
Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Multiemployer Plan ended prior to the date of the most recent
Credit Event, would not exceed $50,000; each group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has
covered employees or former employees of the Borrower, any Subsidiary of the
Borrower, or any ERISA Affiliate has at all times been operated in compliance
with the provisions of Part 6 of subtitle B of Title I of ERISA and Section
4980B of the Code; no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is
likely to arise on account of any Plan or Multiemployer Plan and the Borrower
and its Subsidiaries may cease contributions to or terminate any employee
benefit plan maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in substantial compliance
with its terms and with the requirements of any and all applicable laws,
statutes, rules, regulations and orders and has been maintained, where required,
in good standing with applicable regulatory authorities. All contributions
required to be made with respect to a Foreign
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Pension Plan have been timely made. Neither the Borrower nor any of its
Subsidiaries has incurred any obligation in connection with the termination of,
or withdrawal from, any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan,
determined as of the end of the Borrower's most recently ended fiscal year on
the basis of actuarial assumptions, each of which is reasonable, did not exceed
the current value of the assets of such Foreign Pension Plan allocable to such
benefit liabilities.
6.11 The Security Documents. (a) The provisions of the Security Agreement
are effective to create in favor of the Collateral Agent for the benefit of the
Secured Creditors a legal, valid and enforceable security interest in all right,
title and interest of the respective Credit Parties in the Collateral described
therein and the Collateral Agent, for the benefit of the Secured Creditors, has
a fully perfected Lien on, and security interest in, all right, title and
interest of the respective Credit Parties, in all of the Collateral described
therein, subject to no other Liens other than Permitted Liens. The recordation
of the Security Agreement in the United States Patent and Trademark Office
together with filings on Form UCC-1 made pursuant to the Security Agreement will
be effective, under federal and state law, to perfect the security interest
granted to the Collateral Agent in the trademarks and patents covered by the
Security Agreement and the filing of the Security Agreement with the United
States Copyright Office together with filings on Form UCC-1 made pursuant to the
Security Agreement will be effective under federal and state law to perfect the
security interest granted to the Collateral Agent in the copyrights covered by
the Security Agreement. Each of the Credit Parties party to the Security
Agreement has good and merchantable title to all Collateral described therein,
free and clear of all Liens except those described above in this clause (a).
(b) The security interests created in favor of the Collateral Agent, as
Pledgee for the benefit of the Secured Creditors, under the Pledge Agreements
constitute first perfected security interests in the Pledged Securities and
Pledged Limited Liability Company Interests described in the Pledge Agreements,
subject to no security interests of any other Person. No filings or recordings
are required in order to perfect (or maintain the perfection or priority of) the
security interests created in the Pledged Securities and Pledged Limited
Liability Company Interests and the proceeds thereof under the Pledge
Agreements.
6.12 Representations and Warranties in Credit Documents. All
representations and warranties set forth in the Credit Documents are true and
correct in all material respects at the time as of which such representations
and warranties were made and on the Restatement Effective Date.
6.13 Properties. Each of the Borrower and its Subsidiaries has good and
merchantable title to all properties owned by them, including all property
reflected in the consolidated pro forma balance sheet (after giving effect to
the Transaction) referred to in Section 6.05(a) (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business or as permitted by Section 8.02), free and clear of all Liens, other
than (i) as referred to in the consolidated balance sheet or in the notes
thereto or in the pro forma balance sheet or (ii) otherwise permitted by Section
8.01. Schedule IV contains a true and complete list of each parcel of Real
Property owned or leased by the Borrower and each of its Subsidiaries on the
Restatement Effective Date, and the type of interest therein held by the
Borrower and/or its Subsidiaries.
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6.14 Capitalization. On the Restatement Effective Date, after giving effect
to the Transaction, the authorized capital stock of the Borrower consists of (i)
61,000,000 shares of common stock, $.01 par value per share of which (y)
41,000,000 have been designated as Class A Common Stock ("Class A Common Stock")
of which 4,901,860 shares are issued and outstanding and (z) 20,000,000 have
been designate as Class B Common ("Class B Common Stock") none of which shares
are issued and outstanding (the Class A Common Stock and the Class B Common
Stock collectively, "Borrower Common Stock") and (ii) 31,000,000 shares of
preferred stock, $.01 per share, of which (v) 7,754,711 shares have been
designated as Series A Convertible Preferred Stock ("Series A Convertible
Preferred Stock"), all of which shares are issued and outstanding, (w) 3,222,851
shares have been designated as Series B Convertible Preferred Stock ("Series B
Convertible Preferred Stock), all of which are issued and outstanding, (x)
13,325,424 shares are designated Series C Convertible Preferred Stock ("Series C
Convertible Preferred Stock"), all of which are issued and outstanding, (y)
5,200,000 shares are designated Series D Convertible Preferred Stock ("Series D
Convertible Preferred Stock"), of which 3,347,961 are issued and outstanding and
(z) 1,000,000 shares are designated Series E Convertible Preferred Stock
("Series E Convertible Preferred Stock"), none of which are issued and
outstanding (the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series C Convertible Preferred Stock, the Series D
Convertible Preferred Stock and the Series E Convertible Preferred Stock
collectively, the "Convertible Preferred Stock") and such Borrower Common Stock
and Convertible Preferred Stock is owned in the amounts, and by the Persons, set
forth on Schedule VIII. All of such outstanding shares have been duly and
validly issued, are fully paid and nonassessable and are free of preemptive
rights. Except as set forth in this Section and on Schedule VIII, on the
Restatement Effective Date, neither the Borrower nor any of its Subsidiaries has
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
6.15 Subsidiaries. On the Restatement Effective Date, the corporations and
limited liability companies listed on Schedule IX are the only Subsidiaries of
the Borrower. Except as indicated on Schedule IX, all Subsidiaries of the
Borrower are direct Subsidiaries of the Borrower. Schedule IX correctly sets
forth, as of the Restatement Effective Date, the percentage ownership direct and
indirect of the Borrower in each class of capital stock or other equity interest
of each of its Subsidiaries and also identifies the direct owner thereof.
6.16 Compliance with Statutes, etc. Each of the Borrower and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except with
respect to each of the foregoing such noncompliance as could not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
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6.17 Investment Company Act. None of the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.18 Public Utility Holding Company Act. None of the Borrower nor any of
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.19 Environmental Matters. (a) The Borrower and each of its Subsidiaries
have complied with, and on the date of such Credit Event are in compliance with,
in all respects, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws except such noncompliances which,
in the aggregate, could not reasonably be expected to have a material adverse
effect on the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole. There are no past, pending or,
to the best knowledge of the Borrower, threatened material Environmental Claims
against the Borrower or any of its Subsidiaries or any Real Property currently
owned or operated by the Borrower or any of its Subsidiaries. There are no
facts, circumstances, conditions or occurrences concerning the business or
operations of the Borrower or any of its Subsidiaries or any Real Property or
facility at any time owned, operated or used by the Borrower or any of its
Subsidiaries or, to the knowledge of the Borrower, any property adjoining any
such Real Property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any Real
Property owned or operated by the Borrower or any of its Subsidiaries or (ii) to
cause such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any Environmental
Law except such Environmental Claims and restrictions which individually or in
the aggregate could not reasonably be expected to have a material adverse effect
on the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
(b) Except for immaterial amounts in compliance with applicable law,
neither the Borrower nor any of its Subsidiaries has, at any time, generated,
used, treated, stored, transported or released Hazardous Materials on, to or
from any Real Property at any time owned, leased or at any time operated by the
Borrower or any of its Subsidiaries.
(c) To the best knowledge of the Borrower, there are no underground storage
tanks located on any Real Property owned or operated by the Borrower or any of
its Subsidiaries the existence of which could reasonably be expected to have a
material adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
6.20 Labor Relations. None of the Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice that could reasonably be expected to have a
material adverse effect on the Borrower and its Subsidiaries taken as a whole.
There is (i) no significant unfair labor practice complaint pending against the
Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of them, before the National Labor Relations
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Board, and no significant grievance or significant arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against any of them and (ii) no significant strike, labor
dispute, slowdown or stoppage pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries.
6.21 Patents, Licenses, Franchises and Formulas. (a) The Borrower, together
with its Subsidiaries, has a license to use or otherwise has the right to use,
free and clear of pending or threatened Liens, all the material patents, patent
applications, trademarks, service marks, trade names, trade secrets, copyrights,
proprietary information, computer programs, data bases, licenses, franchises and
formulas, or rights with respect to the foregoing (collectively, "Intellectual
Property"), and has obtained all licenses and other rights of whatever nature,
necessary for the present conduct of its business, without any known conflict
with the rights of others which, or the failure to obtain which, as the case may
be, could reasonably be expected to have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
(b) Neither the Borrower nor any of its Subsidiaries has knowledge of any
claim by any third party contesting the validity, enforceability, use or
ownership of the Intellectual Property, or of any existing state of facts that
would support a claim that use by the Borrower or any of its Subsidiaries of any
such Intellectual Property has infringed or otherwise violated any Intellectual
Property right of any other Person and that to the best knowledge of the
Borrower and its Subsidiaries no claim is threatened except for such claims that
could not individually or in the aggregate reasonably be expected to have a
material adverse affect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
6.22 Indebtedness. Schedule X sets forth a true and complete list of all
Indebtedness (other than the Loans) of the Borrower and each of its Subsidiaries
as of the Restatement Effective Date after giving effect to the Transaction and
the other transactions contemplated hereby (the "Existing Indebtedness"), in
each case showing the aggregate amount thereof and the name of the respective
obligor and any other entity which directly or indirectly guaranteed such debt.
None of the Existing Indebtedness was incurred in connection with, or in
contemplation of, the Transaction or the other transactions contemplated hereby.
6.23 Restrictions on or Relating to Subsidiaries. There does not exist any
encumbrance or restriction on the ability of (i) any Subsidiary of the Borrower
to pay dividends or make any other distributions on its capital stock or any
other interest or participation in its profits owned by the Borrower or any
Subsidiary of the Borrower, or to pay any Indebtedness owed to the Borrower or a
Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower to make loans or
advances to the Borrower or any of the Borrower's Subsidiaries or (iii) any
Subsidiary of the Borrower to transfer any of its properties or assets to the
Borrower or any Subsidiary of the Borrower, except for such encumbrances or
restrictions existing under or by reason of (x) applicable law, (y) this
Agreement and the other Credit Documents and (z)
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customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Borrower or a Subsidiary of the Borrower.
6.24 Foreign Pension Plans. Neither the Borrower nor any of its
Subsidiaries has maintained, currently maintains or will maintain a Foreign
Pension Plan without the consent of the Agent and the Required Banks.
6.25 The Transaction. All aspects of the Transaction have been effected in
all material respects in accordance with the Credit Documents and applicable
law. At the time of consummation thereof, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in order to
consummate the Transaction shall have been obtained, given, filed or taken and
are in full force and effect (or effective judicial relief with respect thereto
has been obtained). All applicable waiting periods with respect thereto have or,
prior to the time when required, will have, expired without, in all such cases,
any action being taken by any competent authority which restrains, prevents or
imposes material adverse conditions upon the consummation of the Transaction.
Additionally, at the time of consummation thereof, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the consummation of the Transaction.
6.26 Concentration Account. Schedule V sets forth a true and complete
description of the Concentration Account maintained with the Concentration
Account Bank by the Borrower and each of its Subsidiaries. Each Credit Party
represents and warrants that it does not now maintain, and will not in the
future maintain, any other Concentration Account with any Concentration Account
Bank other than the applicable Concentration Account; provided, however, that
each such Credit Party shall be permitted to establish new Concentration
Accounts pursuant to the terms of the Security Agreement.
6.27 Material Contracts. All Material Contracts of the Borrower and each of
its Subsidiaries as of the Restatement Effective Date are listed on Schedule XI.
6.28 Business Centers; Owners. Set forth on Schedule XIII is a list of each
of the Borrower's business centers as of the date hereof, and identifies the
owners of each such business center, those that are owned by limited liability
companies, and those that Borrower or any of its Subsidiaries manages pursuant
to a management contract.
6.29 Year 2000 Reprogramming. Any reprogramming required to permit the
proper functioning, in and following the Year 2000, of the Borrower's or any of
its Subsidiaries' (i) computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which the
Borrower's systems interface) and the testing of all such systems and equipment,
as so reprogrammed, has been completed by June 30, 1999, except that certain
non-mission critical issues and testing has not been completed but will be
completed by September 30, 1999. The costs to the Borrower of such reprogramming
and testing and of the reasonably foreseeable consequences of Year 2000
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) could not reasonably be expected to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects
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of the Borrower and its Subsidiaries taken as a whole. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are, and with ordinary course upgrading and maintenance will continue to be for
the term of this Agreement, sufficient to permit the Borrower and its
Subsidiaries to conduct their business without such conduct resulting in a
material adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
6.30 Immaterial Subsidiary. The Borrower's ownership interest in ALLIANCE
Business Centers National Sales Company, Inc. has a book value and fair market
value of less than $40,000 and ALLIANCE Business Centers National Sales Company,
Inc. is not a party to any material contracts effecting Borrower (other than the
Shareholders Agreement, dated September 27, 1997 and amended as of October 23,
1998, among EOG Marketing, Inc., OTG, Inc. and Arbor National Sales, Inc.).
Section 7. Affirmative Covenants. The Borrower covenants and agrees that on
and after the Restatement Effective Date and until the Total Commitment and all
Letters of Credit have terminated and the Loans and Notes and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full:
7.01 Information Covenants. The Borrower will furnish to each Bank:
(a) Monthly Reports. Within 30 days after the end of each fiscal month
other than the last such month of any fiscal quarter of the Borrower, the
consolidated financial statements of the Borrower and its Subsidiaries as
at the end of such month and for the elapsed portion of the fiscal year
ended with the last day of such month setting forth comparative figures for
the corresponding month and elapsed portion of such fiscal year for the
prior fiscal year and comparable budgeted figures for such period as well
as a management discussion and analysis of such results, all of which shall
be certified by the chief financial officer or controller of the Borrower,
subject to normal year-end audit adjustments.
(b) Quarterly Financial Statements. Within 45 days after the close of
each of the first three quarterly accounting periods in each fiscal year of
the Borrower, the consolidated financial statements of the Borrower and its
Subsidiaries as at the end of such quarterly period for such quarterly
period and for the elapsed portion of the fiscal year ended with the last
day of such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year and comparable
budgeted figures for such period as well as a management discussion and
analysis of such results, all of which shall be certified by the chief
financial officer or controller of the Borrower, subject to normal year-end
audit adjustments.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Borrower, the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related consolidated and
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consolidating statements of operations, stockholders' equity and cash flows
for such fiscal year and setting forth comparative figures for the
preceding fiscal year and comparable budgeted figures for such period and
certified, (x) in the case of the consolidating statements, by the chief
financial officer or controller of the Borrower and (y) in the case of the
consolidated financial statements of the Borrower and its Subsidiaries, by
PricewaterhouseCoopers LLP or any other independent certified public
accountants of recognized national standing reasonably acceptable to the
Required Banks, together with a signed opinion of such accounting firm
(which opinion shall not be qualified as to the scope of the audit or the
status of the Borrower or any Subsidiary as a going concern in any respect)
stating that in the course of its regular audit of the financial statements
of the Borrower which audit was conducted in accordance with generally
accepted auditing standards, such accounting firm obtained no knowledge of
any Default or Event of Default which has occurred and is continuing or, if
in the opinion of such accounting firm such a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof.
(d) Management Letters. Promptly after the receipt thereof by the
Borrower or any of its Subsidiaries, a copy of any "management letter"
received by the Borrower or any of its Subsidiaries from its certified
public accountants.
(e) Budgets. As soon as available but in no event later than 30 days
after the first day of each fiscal year of the Borrower, a budget for the
Borrower and its Subsidiaries in form customarily prepared by the Borrower
(including budgeted statements of earnings as well as sources and uses of
cash and balance sheets and budgeted openings of new business centers which
may be made available on a quarterly basis only) prepared by the Borrower
for each calendar month of such fiscal year prepared in reasonable detail
with appropriate presentation and discussion of the principal assumptions
upon which such budgets are based, accompanied by the statement of the
chief financial officer or controller of the Borrower to the effect that,
to the best of his knowledge, the budget is a reasonable estimate for the
period covered thereby.
(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 7.01(a), (b) and (c), a
certificate of the chief financial officer or controller of the Borrower to
the effect that no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate,
(x) in the case of certificates delivered pursuant to Section 7.01(b) or
(c), shall set forth the calculations required to establish whether the
Borrower was in compliance with the provisions of Sections 2.03, 3.02,
7.15, 8.02, 8.04, 8.05 and 8.08 through 8.12, inclusive at the end of such
fiscal quarter or year, as the case may be, and (y) in the case of
certificates delivered pursuant to Section 7.01(c), the amount of Excess
Cash Flow for the relevant Excess Cash Flow Payment Period.
(g) Notice of Default or Litigation. (A) Promptly, and in any event
within three Business Days after an officer of the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or Event of Default, (ii) any litigation
or governmental investigation or proceeding
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pending (x) against the Borrower or its Subsidiaries which could reasonably
be expected to materially and adversely affect the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole or (y) with respect to any Credit Document and (iii) any
other event which could reasonably be expected to materially and adversely
affect the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole. (B) Promptly, and in
any event within five Business Days after an officer of the Borrower or any
of its Subsidiaries obtains knowledge thereof, notice of (i) any material
default of the Borrower or any of its Subsidiaries under any material lease
under which the Borrower or any of its Subsidiaries is a lessee and (ii)
any termination, renewal, expiration or entering into of any material lease
under which the Borrower or any of its Subsidiaries is or will be a lessee.
(h) Other Reports and Filings. Promptly upon transmission thereof,
copies of any financial information, proxy materials and other information
and reports, if any, which any Credit Party or any of its Subsidiaries (x)
has filed with the Securities and Exchange Commission or any successor
thereto (the "SEC") or (y) has delivered to holders of, or any agent or
trustee with respect to, Indebtedness of any Credit Party or any of its
Subsidiaries in its capacity as such a holder, agent, or trustee.
(i) Environmental Matters. Promptly upon, and in any event within three
Business Days after an officer of the Borrower or of any of its
Subsidiaries obtains knowledge thereof, notice of any of the following
environmental matters (i) any pending or threatened material Environmental
Claim against the Borrower or any of its Subsidiaries or any Real Property
owned or operated at any time by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on or arising from any Real Property owned
or operated at any time by the Borrower or any of its Subsidiaries that (a)
could reasonably be anticipated to result in a material noncompliance by
the Borrower or any of its Subsidiaries with any material applicable
Environmental Law, or (b) could reasonably be anticipated to form the basis
of a material Environmental Claim against the Borrower or any of its
Subsidiaries or any Real Property owned or operated by the Borrower or any
of its Subsidiaries; (iii) any condition or occurrence on any material Real
Property owned or operated by the Borrower or any of its Subsidiaries that
could reasonably be anticipated to cause such Real Property to be subject
to any material restrictions on the ownership, occupancy, use or
transferability of such Real Property under any Environmental Law; and (iv)
the taking of any removal or remedial action in response to a material
Release or material threatened Release or the actual or alleged presence of
any Hazardous Material on or from any Real Property owned or operated at
any time by the Borrower or any of its Subsidiaries in each case as
required by any Environmental Law or any governmental or other
administrative agency. All such notices shall describe in reasonable detail
the nature of the claim, investigation, condition, occurrence or removal or
remedial action and the Borrower or such Subsidiary's response thereto. In
addition, the Borrower will provide the Banks with copies of all material
communications with any government or governmental agency relating to
material Environmental Claims, all material communications with any person
relating to material Environmental Claims, and
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such detailed reports of any Environmental Claim as may reasonably be
requested by the Required Banks.
(j) Annual Meetings with Banks. Within 120 days after the close of
each fiscal year of the Borrower, the Borrower shall, at the request of the
Agent or Required Banks, hold a meeting (at a mutually agreeable location
and time) with all Banks who choose to attend such meeting at which meeting
shall be reviewed the financial results of the previous fiscal year and the
financial condition of the Borrower and its Subsidiaries and the budgets
presented for the current fiscal year of the Borrower and its Subsidiaries.
(k) Reconciliation of Accrued Rent Liabilities. In connection with any
financial information furnished by the Borrower which contains a
calculation of Consolidated EBITDA, the Borrower shall also furnish a
statement reconciling any increase or decrease in accrued rent liabilities.
(l) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to any Credit Party or any
of its Subsidiaries, as the Agent, or the Required Banks may reasonably
request.
7.02 Books, Records and Inspections. The Borrower will, and will cause each
of its Subsidiaries to, keep proper books of record and account in which full,
true and correct entries, in conformity with United States generally accepted
accounting principles and all requirements of law, shall be made of all dealings
and transactions in relation to its business and activities. The Borrower will,
and will cause each of its Subsidiaries to, permit officers and designated
representatives of the Agent or any Bank to visit and inspect, under guidance of
officers of the Borrower or of such Subsidiary, any of the properties of the
Borrower or such Subsidiary, and to examine the books of account of the Borrower
or such Subsidiary and discuss the affairs, finances and accounts of the
Borrower or of such Subsidiary with, and be advised as to the same by, its and
their officers, all at such reasonable times and intervals and to such
reasonable extent as the Agent or such Bank may request.
7.03 Maintenance of Property, Insurance. (a) Schedule II sets forth a true
and complete listing of all insurance maintained by the Borrower and each of its
Subsidiaries as of the Restatement Effective Date. The Borrower will, and will
cause each of its Subsidiaries to, (i) keep all material property useful and
necessary in its business in good working order and condition (ordinary wear and
tear excepted), (ii) maintain with financially sound and reputable insurance
companies key-man life insurance, liability insurance and insurance on all its
property in at least such amounts and against at least such risks as are
described on Schedule II and (iii) furnish to each Bank, upon written request,
full information as to the insurance carried. The provisions of this Section
7.03 shall be deemed to be supplemental to, but not duplicative of, the
provisions of any of the Security Documents that require the maintenance of
insurance.
(b) The Borrower will at all times keep, and will cause each of its
Subsidiaries to keep, its property insured in favor of the Collateral Agent, and
all policies (including mortgage policies) or certificates (or certified copies
thereof) with respect to such insurance (and any other insurance maintained by
the Borrower or its Subsidiaries (other than employee benefit insurance)) (i)
shall be endorsed to the Collateral Agent's satisfaction for the benefit of the
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Collateral Agent (including, without limitation, by naming the Collateral Agent
as loss payee and naming the Collateral Agent, the Agent and each Bank as an
additional insured) with respect to Collateral, (ii) shall state that such
insurance policies shall not be cancelled or revised in a manner adverse to the
Banks without 30 days' prior written notice thereof by the respective insurer to
the Collateral Agent, (iii) shall provide that the respective insurers
irrevocably waive any and all rights of subrogation with respect to the
Collateral Agent, (iv) shall contain the standard noncontributory mortgagee
clause endorsement in favor of the Collateral Agent with respect to hazard
insurance coverage, (v) shall provide that any losses shall be payable
notwithstanding (A) any act or neglect of the Borrower or any of its
Subsidiaries, (B) the occupation or use of the properties for purposes more
hazardous than those permitted by the terms of the respective policy if such
coverage is obtainable at commercially reasonable rates and is of the kind from
time to time customarily insured against by Persons owning or using similar
property and in such amounts as are customary, (C) any foreclosure or other
proceeding relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties and (vi) shall be deposited
with the Collateral Agent. If the Borrower or any of its Subsidiaries shall fail
to insure its property in accordance with this Section 7.03, or if the Borrower
or any of its Subsidiaries shall fail to endorse and deposit all policies or
certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and the Borrower
jointly and severally agrees, to reimburse the Collateral Agent for all costs
and expenses of procuring such insurance.
7.04 Corporate Franchises. The Borrower will do, and will cause each of its
Subsidiaries to do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its rights, franchises, licenses
and patents; provided, however, that nothing in this Section 7.04 shall prevent
(x) the withdrawal by the Borrower or any Subsidiary of the Borrower of its
qualification as a foreign corporation in any jurisdiction where such withdrawal
could not reasonably be expected to have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, properties,
operations, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole, or (y) the dissolution of any Subsidiary of
the Borrower if no Permitted Business is run in connection with such Subsidiary
and such dissolution could not reasonably be expected to have a material adverse
effect on the performance, business, assets, nature of assets, liabilities,
properties, operations, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.
7.05 Compliance with Statutes, etc. The Borrower will, and will cause each
of its Subsidiaries to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
7.06 Compliance with Environmental Laws. (a) The Borrower will comply, and
will cause each of its Subsidiaries to comply, in all material respects with all
Environmental Laws applicable to ownership or use of the Real Property, will
promptly pay or cause the Borrower to pay all costs and expenses incurred in
such compliance, and will keep or cause to be
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kept all such Real Properties free and clear of any Liens imposed pursuant to
such Environmental Laws. None of the Borrower nor any Subsidiary of the Borrower
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, Release or disposal of Hazardous Materials
on any Real Property, or transport or permit the transportation of Hazardous
Materials to or from any Real Property, other than in compliance in all material
respects with applicable law.
(b) At the request of the Agent or the Required Banks at any time and from
time to time during the existence of this Agreement: (i) if an Event of Default
exists under this Agreement, (ii) upon the reasonable belief by the Agent that
the Borrower or any of its Subsidiaries has breached any representation or
covenant herein with respect to any environmental matters and such breach is
continuing, or (iii) in the event notice is provided under Section 7.01(i)
herein, the Borrower will provide, at its sole cost and expense (or will cause
the relevant Subsidiary to provide at its sole cost and expense), an
environmental site assessment report reasonable in scope concerning any Real
Property of the Borrower or its Subsidiaries, prepared by an environmental
consulting firm approved by the Agent and the Required Banks, indicating the
presence or Release of Hazardous Materials on or from any of the Real Property
and the potential cost of any removal or remedial action in connection with any
Hazardous Materials on such Real Property. If the Borrower fails to provide the
same after thirty (30) days notice, the Agent may order the same, and the
Borrower shall grant and hereby grants to the Agent and the Banks and their
agents access to such Real Property and specifically grants the Agent and the
Banks an irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment all at the Borrower's expense, which assessments,
if obtained, will be provided to the Borrower.
7.07 ERISA. As soon as possible and, in any event, within ten (10) days
after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following, the Borrower
will deliver to each of the Banks a certificate of the chief financial officer
of the Borrower setting forth the full details as to such occurrence and the
action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by such Borrower, such Subsidiary, the Plan
administrator or such ERISA Affiliate to or with the PBGC or any other
government agency, or a Plan or Multiemployer Plan participant and any notices
received by such Borrower, such Subsidiary or ERISA Affiliate from the PBGC or
any other government agency, or a Plan or Multiemployer Plan participant with
respect thereto: that a Reportable Event has occurred (except to the extent that
the Borrower has previously delivered to the Banks a certificate and notices (if
any) concerning such event pursuant to the next clause hereof); that a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA is subject to the advance reporting requirement of
PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof),
and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC
Regulation Section 4043 is reasonably expected to occur with respect to such
Plan within the following 30 days; that an accumulated funding deficiency,
within the meaning of Section 412 of the Code or Section 302 of ERISA, has been
incurred or an application may be or has been made for a waiver or modification
of the minimum funding standard (including any required installment payments) or
an extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA with respect to a Plan or Multiemployer Plan; that any
contribution required to be made
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with respect to a Plan, Multiemployer Plan, or Foreign Pension Plan has not been
timely made; that a Plan or Multiemployer Plan has been or may be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA; that a
Plan or Multiemployer Plan has an Unfunded Current Liability; that proceedings
may be or have been instituted to terminate or appoint a trustee to administer a
Plan which is subject to Title IV of ERISA; that a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Multiemployer Plan; that the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate will or may incur any liability (including any indirect,
contingent, or secondary liability) to or on account of the termination of or
withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of
ERISA or with respect to a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or
that the Borrower or any Subsidiary of the Borrower may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any Plan or
Foreign Pension Plan. The Borrower will deliver to each of the Banks copies of
any records, documents or other information that must be furnished to the PBGC
with respect to any Plan pursuant to Section 4010 of ERISA. The Borrower will
also deliver to each of the Banks a complete copy of the annual report (on
Internal Revenue Service Form 5500-series) of each Plan (including, to the
extent required, the related financial and actuarial statements and opinions and
other supporting statements, certificates, schedules and information) required
to be filed with the Internal Revenue Service. In addition to any certificates
or notices delivered to the Banks pursuant to the first sentence hereof, copies
of annual reports and any records, documents or other information required to be
furnished to the PBGC or any other government agency, and any material notices
received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan or Foreign Pension Plan or received from any
governmental agency or plan administrator or sponsor or trustee with respect to
any Multiemployer Plan, shall be delivered to the Banks no later than ten (10)
days after the date such annual report has been filed with the Internal Revenue
Service or such records, documents and/or information has been furnished to the
PBGC or any other government agency or such notice has been received by the
Borrower, the Subsidiary or the ERISA Affiliate, as applicable. The Borrower and
each of its applicable Subsidiaries shall ensure that all Foreign Pension Plans
administered by it or into which it makes payments obtains or retains (as
applicable) registered status under and as required by applicable law and is
administered in a timely manner in all respects in compliance with all
applicable laws except where the failure to do any of the foregoing would not be
reasonably likely to result in a material adverse effect upon the business,
operations, condition (financial or otherwise) or prospects of the Borrower or
any Subsidiary of the Borrower.
7.08 End of Fiscal Years; Fiscal Quarters. The Borrower will cause its, and
each of its Subsidiaries', fiscal years to end on December 31 of each year and
each of its, and each of its Subsidiaries', first three fiscal quarters end on
March 31, June 30 and September 30.
7.09 Performance of Obligations. The Borrower will, and will cause each of
its Subsidiaries to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement and other debt instrument by which it is
bound, except such non-performances as could not, individually or in the
aggregate, reasonably be expected to have a
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material adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
7.10 Payment of Taxes. The Borrower will pay and discharge, and will cause
each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties would
otherwise attach thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any properties of the Borrower or any of its Subsidiaries
not otherwise permitted under Section 8.01; provided that neither the Borrower
nor any of its Subsidiaries shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves with respect thereto in
accordance with generally accepted accounting principles.
7.11 Interest Rate Protection. The Borrower shall (a) no later than 60 days
following the Restatement Effective Date enter into arrangements acceptable to
the Agent establishing (I) a maximum interest rate equal to the product of (x)
the Quoted Rate for a principal amount of loans equal to $60 million for an
interest period of one month times (y) 1.30 and (II) for an aggregate notional
amount of at least $60 million for a period of at least three years and (b) upon
the Acquisition Loan Termination Date enter into arrangements acceptable to the
Agent establishing (I) a maximum interest rate equal to the product of (x) the
Quoted Rate for a principal amount of loans equal to 50% of the aggregate
outstanding principal amount of Acquisition Loans on the Acquisition Loan
Termination Date (after giving effect to all Acquisition Loans incurred on such
date) for an interest period of one month times (y) 1.30 and (II) for an
aggregate notional amount of at least an amount equal to 50% of the aggregate
outstanding principal amount of Acquisition Loans on the Acquisition Loan
Termination Date (after giving effect to the incurrence of all Acquisition Loans
on such date) for a period of at least 3 years after the Acquisition Loan
Termination Date.
7.12 Use of Proceeds. All proceeds of the Loans shall be used as provided
in Section 6.08.
7.13 Year 2000 Reporting. The Borrower will ensure that any reprogramming
required to permit the proper functioning, in and following the Year 2000, of
the Borrower's or any of its Subsidiaries' (i) computer systems and (ii)
equipment containing embedded microchips (including systems and equipment
supplied by others or with which the Borrower's systems interface) and the
testing of all such systems and equipment, as so reprogrammed, has been
completed by June 30, 1999, or in certain cases as described in Section 6.29,
will be completed by September 30, 1999, except insofar as the failure to do so
will not have a material adverse effect on the performance, business, assets,
nature of assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole,
and the Borrower will notify the Agent and any Bank promptly upon detecting any
failure to achieve Year 2000 computer readiness. In addition, the Borrower will
provide the Agent and any Bank with such information about its Year 2000
computer readiness (including, without limitation, information as to contingency
plans, budgets and testing results) as the Agent or such Bank shall reasonably
request.
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7.14 Intellectual Property Rights. The Borrower will, and will cause each
of its Subsidiaries to, make all filings in connection with the transfer of the
Intellectual Property rights in any acquisition. The Borrower will, and will
cause each of its Subsidiaries to, maintain in full force and effect all
Intellectual Property rights necessary or appropriate to the business of the
Borrower or any Subsidiary of the Borrower and take no action (including,
without limitation, the licensing of Intellectual Property), or fail to take an
action, as the case may be, in connection with such Intellectual Property rights
which could reasonably be expected to result in a material adverse effect on the
performance, business, assets, nature of assets, liabilities, properties,
operations, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole. The Borrower will, and will cause each of its
Subsidiaries to, diligently prosecute all pending applications filed in
connection with seeking or seeking to perfect the Intellectual Property rights
and take all other reasonable actions necessary for the protection and
maintenance of the Intellectual Property rights necessary or appropriate to the
business of the Borrower or any Subsidiary of the Borrower at all times from and
after the Restatement Effective Date other than any such actions the failure of
which, in the aggregate, could not reasonably be expected to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
7.15 Permitted Acquisitions. (a) Subject to the remaining provisions of
this Section 7.15 applicable thereto and the requirements contained in the
definition of Permitted Acquisition, the Borrower and its Subsidiaries may from
time to time after the Restatement Effective Date effect Permitted Acquisitions,
so long as with respect to each Permitted Acquisition:
(i) the Borrower demonstrates that no Default or Event of Default is
in existence at the time of the consummation of such Permitted Acquisition
or would exist after giving effect thereto and all representations and
warranties contained herein and in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties were made on and as of the date of such
Permitted Acquisition (both before and after giving effect thereto);
(ii) the Borrower shall have given the Agent and the Banks at least 15
days prior written notice of any such Permitted Acquisition (each such
notice, a "Permitted Acquisition Notice"), which notice shall (r) contain
the estimated date such Permitted Acquisition is scheduled to be
consummated, (s) attach a true and correct copy of the draft purchase
agreement, letter of intent, description of material terms or similar
agreement executed by the Borrower and the seller in connection with such
Permitted Acquisition, (t) contain the estimated aggregate purchase price
of such Permitted Acquisition (including, without limitation, the amount of
Capitalized Lease Obligations assumed in connection with the Permitted
Acquisition) and the amount of related costs and expenses and the intended
method of financing thereof, (u) contain the estimated amount of
Acquisition Loans required to effect such Permitted Acquisition, (v)
contain a description of any Permitted Earn-Out Debt to be incurred by the
Borrower in connection with such Permitted Acquisition and the maximum
potential liability of the Borrower with respect thereto and (w) contain a
description of the Permitted Seller Notes, the Borrower Common Stock or
Seller Preferred Stock to be issued by the Borrower in
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connection with such Permitted Acquisition; provided, however, that if the
estimated aggregate purchase price (including, without limitation, the
amount of Capitalized Lease Obligations assumed in connection with the
Permitted Acquisition) of such Permitted Acquisition is less than
$1,000,000, such notice need not contain the information described in
clause(s) above unless the Agent requests such information; provided
further, however, in the event that after delivery of the documentation
described in clause (s) above any material economic terms of the Permitted
Acquisition shall be amended in any material way, then promptly after such
amendment the Borrower shall provide the Agent and the Banks written notice
of such changes;
(iii) the Borrower shall have given the Banks such other information
related to the Person or business, division or product line being acquired
and the Permitted Acquisition as the Agent shall reasonably request;
(iv) (I) as soon as available but not later than the date of the
consummation of such Permitted Acquisition, a copy of the executed purchase
agreement and all related agreements, schedules and exhibits with respect
to such Permitted Acquisition and (II) at the time of delivery of the
purchase agreement, a certification from the Borrower as to the purchase
price for the acquisition (including, without limitation, the amount of
Capitalized Lease Obligations assumed in connection with the Permitted
Acquisition) and the estimated amount of all related costs, fees and
expenses and that, except as described, there are no other amounts which
will be payable in connection with the respective Permitted Acquisition;
(v) with respect to Permitted Acquisitions effected during any
twelve-month period (including Permitted Acquisitions effected under and as
defined in the Existing Credit Agreement, the sum (without duplication) of
(I) Acquisition Loans incurred by the Borrower and Acquisition Loans
incurred by the Borrower under the Existing Credit Agreement, (II) the fair
market value (as determined in good faith by the Board of Directors of the
Borrower) of the Borrower Common Stock issued as consideration in such
Permitted Acquisitions, (III) the aggregate amount (determined by using the
face amount of the debt or the amount payable at maturity, whichever is
greater) of Permitted Seller Notes issued by the Borrower in connection
with such Permitted Acquisitions, (IV) the maximum potential liability of
the Borrower with respect to the Permitted Earn-Out Debt issued in
connection with such Permitted Acquisitions, (V) the aggregate liquidation
preference of Seller Preferred Stock issued by the Borrower in connection
with such Permitted Acquisitions and (VI) the amount of Capitalized Lease
Obligations assumed in connection with such Permitted Acquisitions shall
not exceed $30,000,000 (excluding the Reckson Mergers and other Permitted
Acquisitions effected with moneys from the Cash Collateral Account) during
such rolling twelve-month period with the first such period commencing on
the Original Effective Date;
(vi) with respect to each Permitted Acquisition (other than the
Permitted Acquisitions effected with moneys from the Cash Collateral
Account) the sum (without duplication) of (I) Acquisition Loans incurred by
the Borrower, (II) the fair market value (as determined in good faith by
the Board of Directors of the Borrower) of the Borrower Common Stock issued
as consideration in such Permitted Acquisition, (III) the aggregate
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amount (determined by using the face amount of the debt or the amount
payable at maturity, whichever is greater) of Permitted Seller Notes
issued by the Borrower in connection with such Permitted Acquisition, (IV)
the maximum potential liability of the Borrower with respect to all
Permitted Earn-Out Debt issued in connection with such Permitted
Acquisition, (V) the aggregate liquidation preference of Seller Preferred
Stock issued by the Borrower in connection with such Permitted Acquisition
and (VI) the amount of Capitalized Lease Obligations assumed in connection
with the Permitted Acquisition, shall not exceed $7,500,000;
(vii) except in connection with Permitted Acquisitions consisting of
Start-Up Costs, calculations are made by the Borrower of the Consolidated
EBITDA of the Person or business, division or product line being acquired
pursuant to the respective Permitted Acquisition (determined in accordance
with the definition of Consolidated EBITDA contained herein, but treating
references therein and in any other defined terms used in determining
Consolidated EBITDA to "the Borrower" to instead be references to the
Person or business, division or product line being acquired pursuant to
the respective Permitted Acquisition), and the amount thereof shall exceed
$50,000 for the period of four consecutive fiscal quarters (taken as one
accounting period and including fiscal quarters ending prior to the
Restatement Effective Date) most recently ended prior to the date of the
Permitted Acquisition (the "Calculation Period"); provided, however, in
the case of calculations based on unaudited financial statements, the
Agent shall be reasonably satisfied that the Consolidated EBITDA of such
Person or business, division or product line being acquired pursuant to
the respective Permitted Acquisition exceeds $50,000 for the Calculation
Period; provided further, however, that, so long as the Permitted
Acquisition Notice has been given as required above and so long as the
Borrower has furnished the Agent information with respect to the
Consolidated EBITDA of such Person or business, division or product line
being acquired pursuant to the respective Permitted Acquisition, if the
Agent has not notified the Borrower on or prior to the fifth Business Day
prior to the consummation of the Permitted Acquisition that the Agent has
not yet been reasonably satisfied that the $50,000 threshold is satisfied,
the Agent shall be deemed for purposes of this clause (vii) to be so
satisfied;
(viii) the Agent and the Required Banks shall be satisfied in their
reasonable discretion that the proposed Permitted Acquisition will not
reasonably likely result in materially increased liabilities (contingent
or otherwise) of the Borrower or any of its Subsidiaries other than
Permitted Seller Notes, Permitted Earn-Out Debt and Capitalized Lease
Obligations incurred in accordance with the provisions of this Agreement
(including, without limitation, tax, ERISA or environmental liabilities);
provided that, so long as the Permitted Acquisition Notice has been given
as required above and so long as the Borrower has furnished each Bank,
following request by the Agent, information with respect to liabilities of
the type described in this clause with all information so requested, if
any Bank has not notified the Borrower or the Agent on or prior to the
tenth day prior to the consummation of the Permitted Acquisition that such
Bank has not yet been satisfied that the proposed Permitted Acquisition
would not be reasonably likely to result in materially increased
liabilities of the Borrower or any of its Subsidiaries, such Bank shall be
deemed for purposes of this clause (viii) to be so satisfied;
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(ix) recalculations are made by the Borrower of compliance with the
covenant contained in Section 8.11 on a Pro Forma Basis, and such
recalculations shall show that such covenant would have been complied with
throughout the Calculation Period on a Pro Forma Basis;
(x) the Borrower in good faith believes, based on calculations made
by the Borrower, on a Pro Forma Basis, (as if the Calculation Period were
the one-year period following the date of the consummation of the
respective Permitted Acquisition) that the financial covenant contained in
such Section 8.11 will continue to be met for the one year period
following the date of the consummation of the respective Permitted
Acquisition;
(xi) in no event may (a) the aggregate amount of Start-Up Costs
relating to any Permitted Acquisition with respect to any one new
executive office suite center exceed $2,000,000, (b) Start-Up Costs
constituting Permitted Acquisitions be incurred in connection with more
than twenty-four new executive office centers (which shall mean new
executive office centers that are not open for occupancy on that
Restatement Effective Date, but exclude the centers located at Highland
Oaks, Tampa, Florida, Westshore, Tampa, Florida, and Northpoint, Orlando,
Florida) in the aggregate and ten new executive office centers at any one
time (which shall mean a new executive office center for which the
Borrower is negotiating a lease and/or preparing for occupancy on or after
the Restatement Effective Date) and (c) aggregate Start-Up Costs
constituting Permitted Acquisitions exceed $20,000,000 (excluding amounts
spent under the Existing Credit Agreement and, subject to the terms,
conditions and restrictions set forth in this Section 7.15(xi)(a) and (b),
amounts to be funded out of proceeds raised in the Permitted Stock
Issuances);
(xii) with respect to each Permitted Acquisition the Borrower shall
conduct the customary due diligence set forth on Schedule XIV for the
prior four consecutive fiscal quarters which shall be performed in
accordance with standards established by the American Institute of
Certified Public Accountants;
(xiii) with respect to Permitted Acquisitions with an aggregate
consideration equal to or greater than $3,000,000, the Borrower shall
engage a "big five" accounting firm or other accounting firm acceptable to
the Agent to perform financial due diligence set forth on Schedule XIV and
produce a report of their findings which shall be delivered to the Banks
and be acceptable to the Required Banks in their sole judgment and to the
extent a Bank has not indicated in writing within five Business Days after
receipt of the materials required by this Section 7.15(a)(xiii) that it is
not acceptable to such Bank then it shall be deemed to be acceptable to
such Bank; provided, however, that this Section 7.15(xiii) shall not apply
to Permitted Acquisitions which have been audited by a "big five"
accounting firm within four months prior to the date of closing of a
Permitted Acquisition;
(xiv) the consent of the Agent shall have been obtained with respect
to such Permitted Acquisition which consent shall not be unreasonably
withheld; provided that, so long as the Permitted Acquisition Notice has
been given as required above and so long
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as the Borrower has otherwise complied with this Section 7.15, if the
Agent has not notified the Borrower on or prior to the fifth Business Day
prior to the consummation of the Permitted Acquisition that the Agent does
not approve of the Permitted Acquisition, then the Agent shall be deemed
for purposes of this clause (xiv) to have so approved such Permitted
Acquisition; and
(xv) prior to the consummation of the respective Permitted
Acquisition, the Borrower shall furnish the Agent and the Banks an
officer's certificate executed by the chief financial officer of the
Borrower, certifying as to compliance with the requirements of preceding
clauses (i) through (xiv) and containing the calculations required by
preceding clauses (v) through (vii), (ix), (x) and (xi). The consummation
of each Permitted Acquisition shall be deemed to be a representation and
warranty by the Borrower that all conditions thereto have been satisfied
and that same is permitted in accordance with the terms of this Agreement,
which representation and warranty shall be deemed to be a representation
and warranty for all purposes hereunder, including, without limitation,
Sections 5 and 9.
(b) At the time of each Permitted Acquisition after the Restatement
Effective Date involving the creation or acquisition of a Subsidiary, not less
than 100% of the capital stock of such Subsidiary shall be directly owned by the
Borrower or a Guarantor and such 100% owned by the Borrower or Guarantor shall
be pledged for the benefit of the Secured Creditors pursuant to the applicable
Pledge Agreement or pursuant to a similar agreement satisfactory to the Agent.
(c) The Borrower shall cause each Subsidiary which is formed to effect, or
is acquired pursuant to, a Permitted Acquisition after the Restatement Effective
Date to execute and deliver, prior to or on the date of the respective Permitted
Acquisition, the Subsidiaries Guaranty (or by an amendment thereto pursuant to
which it shall be a party thereto) or a substantially similar guaranty, in
either case with the documentation to be in form and substance satisfactory to
the Agent.
(d) The Borrower shall on the date of a Permitted Acquisition after the
Restatement Effective Date, in the case of Permitted Acquisitions involving the
acquisition of assets by the Borrower (including Permitted Acquisitions
constituting Start-Up Costs), or, in the case of an acquisition by the
respective Subsidiary, shall cause the respective Subsidiary to, grant to the
Collateral Agent, for the benefit of the Secured Creditors, first priority
perfected security interests in all property of the Borrower or such
Subsidiaries acquired in connection with the Permitted Acquisition and to take,
or cause such Subsidiary to take, all actions requested by the Agent or the
Required Banks (including, without limitation, the obtaining of UCC-11's and the
filing of UCC-1's) in connection with the granting of such security interests.
All security interests required to be granted pursuant to this Section 7.15(d)
shall be granted pursuant to such security documentation (which shall be
substantially similar to the analogous Security Documents already executed and
satisfactory in form and substance to the Agent) and shall (except as otherwise
consented to by the Agent and the Required Banks) constitute valid and
enforceable perfected security interests prior to the rights of all third
Persons and subject to no other Liens except such Liens as are permitted by
Section 8.01. The security documents and other instruments related thereto shall
be duly recorded or filed in such manner and in such
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places as are required by law to establish, perfect, preserve and protect the
Liens, in favor of the Collateral Agent for the benefit of the Secured
Creditors, required to be granted pursuant to the respective Additional Security
Documents and all taxes, fees and other charges payable in connection therewith
shall be paid in full by the Borrower. At the time of the execution and delivery
of Additional Security Documents, the Borrower shall cause to be delivered to
the Collateral Agent such opinions of counsel, environmental appraisals and
other related documents as may be reasonably requested by the Collateral Agent
or the Required Banks to assure themselves that this Section has been complied
with. All actions required to be taken by this Section 7.15(d) with respect to
the Additional Collateral shall be completed no later than the date on which the
Permitted Acquisition is effected unless otherwise consented to by the Agent.
7.16 Registry. The Borrower hereby designates the Agent to serve as its
agent, solely for purposes of this Section 7.16, to maintain a register (the
"Register") on which it will record the Commitments from time to time of each of
the Banks, the Loans made by each of the Banks and each repayment in respect of
the principal amount of the Loans of each Bank. Failure to make any such
recordation, or any error in such recordation shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Bank, the transfer of
the Commitments of such Bank and the rights to the principal of, and interest
on, any Loan made pursuant to such Commitments shall not be effective until such
transfer is recorded on the Register maintained by the Agent with respect to
ownership of such Commitments and Loans and prior to such recordation all
amounts owing to the transferor with respect to such Commitments and Loans shall
remain owing to the transferor. The registration of an assignment or transfer of
all or part of any Commitments and Loans shall be recorded by the Agent on the
Register only upon the acceptance by the Agent of a properly executed and
delivered assignment and assumption agreement pursuant to Section 12.04(b).
Coincident with the delivery of such an assignment and assumption agreement to
the Agent for acceptance and registration of assignment or transfer of all or
part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 7.16.
7.17 Further Actions. (a) Each Credit Party shall grant to the Collateral
Agent, for the benefit of the Secured Creditors, at the request of the Agent or
the Required Banks, at any time, a security interest in any Real Property or
vehicles owned by any such Credit Party and any other assets of such Credit
Party and not already subject to a Security Document and shall take all actions
requested by the Agent or the Required Banks (including, without limitation, the
obtaining of mortgage policies, title surveys and real estate appraisals
satisfying the requirements of all applicable laws) in connection with the
granting of such security interest.
(b) The security interests required to be granted pursuant to clause (a)
above shall be granted pursuant to mortgages, deeds of trust and security
agreements, in each case satisfactory in form and substance to the Agent and the
Required Banks, which mortgages and security agreements shall create valid and
enforceable perfected security interests prior to the rights of all third
Persons and subject to no other Liens except such Liens as are permitted by
Section 8.01. The mortgages and other instruments related thereto and security
agreements shall
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<PAGE>
be duly recorded or filed in such manner and in such places and at such times as
are required by law to establish, perfect, preserve and protect the Liens, in
favor of the Collateral Agent for the benefit of the Secured Creditors, required
to be granted pursuant to such documents and all taxes, fees and other charges
payable in connection therewith shall be paid in full by the Borrower. At the
time of the execution and delivery of the additional documents, the Borrower
shall cause to be delivered to the Collateral Agent such opinions of counsel,
mortgage policies, title surveys, real estate appraisals, certificates of title
and other related documents as may be reasonably requested by the Agent or the
Required Banks to assure themselves that this Section 7.17 has been complied
with.
(c) Each Credit Party agrees that each action required by Section 7.17(a),
or (b) shall be completed within 60 days of the date such action is requested to
be taken.
7.18 Concentration Account. On the Restatement Effective Date, the Borrower
shall, and shall have caused each of its Subsidiaries to, have duly authorized,
executed and delivered a Concentration Account Consent Letter in such form as
approved by the Collateral Agent (each as amended and restated, modified,
amended or supplemented from time to time in accordance with the terms thereof
and hereof, a "Concentration Account Consent Letter") with the Collateral Agent
and the Concentration Account Bank, acknowledging that the Concentration Account
listed on Schedule V and maintained at the Concentration Account Bank is under
the exclusive dominion and control of the Collateral Agent and that all moneys,
instruments and other securities deposited in such Concentration Account are to
be held by the Concentration Account Bank for the benefit of the Collateral
Agent. Each Credit Party represents and warrants that it does not now maintain,
and will not in the future maintain, any other Concentration Account with any
Concentration Account Bank other than the applicable Concentration Account;
provided, however, that each such Credit Party shall be permitted to establish
new Concentration Accounts pursuant to the terms of the Security Agreement.
Section 8. Negative Covenants. The Borrower hereby covenants that on and
after the Restatement Effective Date and until the Total Commitment and all
Letters of Credit have terminated and the Loans and Notes and all Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:
8.01 Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
the Borrower or any of its Subsidiaries, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable with recourse to the Borrower or any of
its Subsidiaries), or assign any right to receive income or permit the filing of
any financing statement under the UCC or any other similar notice of Lien under
any similar recording or notice statute; provided that the provisions of this
Section 8.01 shall not prevent the Borrower or any of its Subsidiaries from
creating, incurring, assuming or permitting the existence of the following
(liens described below are herein referred to as "Permitted Liens"):
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(i) inchoate Liens with respect to the Borrower or any of its
Subsidiaries for taxes (including social security charges in France) not
yet due or Liens for taxes (including social security charges in France)
being contested in good faith and by appropriate proceedings for which
adequate reserves have been established in accordance with generally
accepted accounting principles;
(ii) unperfected Liens in respect of property or assets of the
Borrower or any of its Subsidiaries imposed by law or, in the case of
landlord liens, pursuant to contractual rights, which were incurred in the
ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers', warehousemen's, materialmen's, mechanics' and
landlords' liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from the
value of the Borrower's or any of its Subsidiaries' property or assets or
materially impair the use thereof in the operation of the business of the
Borrower or its Subsidiaries or (y) which are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or assets subject to any such Lien;
(iii) Liens of the Borrower or its Subsidiaries in existence on the
Restatement Effective Date which are listed, and the property subject
thereto described, on Schedule XII, but only to the respective date, if
any, set forth in such Schedule XII for the removal and termination of any
such Liens except, that, any Lien may be continued or renewed in connection
with the refinancing of any Indebtedness secured thereby, provided that (x)
such Lien does not encumber additional property, and (y) the principal
amount of Indebtedness secured by such Lien is not increased;
(iv) Liens created pursuant to the Security Documents; (v) easements,
rights-of-way, restrictions, encroachments and other similar charges or
encumbrances on the property of the Borrower or any of its Subsidiaries
arising in the ordinary course of business and not materially interfering
with the conduct of the business of the Borrower or any of its
Subsidiaries;
(vi) Liens on property of the Borrower and its Subsidiaries subject
to, and securing only, Capitalized Lease Obligations to the extent such
Capitalized Lease Obligations are permitted by Section 8.05(iii) or
8.05(vi); provided that such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and the Lien
encumbering the asset giving rise to the Capitalized Lease Obligation does
not encumber any other asset of the Borrower or any of its Subsidiaries;
(vii) Liens (other than any Lien imposed by ERISA) on property of the
Borrower or any of its Subsidiaries incurred or deposits made in the
ordinary course of business in connection with (x) workers' compensation,
unemployment insurance and other types of social security or (y) to secure
the performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); provided that the aggregate
amount of
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cash and the fair market value of the property encumbered by Liens
described in this clause (vii)(y) shall not exceed $100,000;
(viii) Liens placed upon equipment or machinery used in the ordinary
course of the business of the Borrower or any of its Subsidiaries within 60
days following the time of purchase thereof by the Borrower or any of its
Subsidiaries and improvements and accretions thereto to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof or any
Indebtedness incurred to refinance such Indebtedness, provided that (x) the
aggregate principal amount of all Indebtedness secured by Liens permitted
by this clause (viii) does not exceed at any one time outstanding $200,000
with respect to all machinery and equipment and (y) in all events, the Lien
encumbering the equipment or machinery so acquired and improvements and
accretions thereto does not encumber any other asset of the Borrower or any
of its Subsidiaries;
(ix) Liens arising from precautionary UCC-1 financing statement
filings regarding operating leases entered into by the Borrower or any of
its Subsidiaries in the ordinary course of business;
(x) inchoate Liens (where there has been no execution or levy and no
pledge or delivery of collateral) arising from and out of judgments or
decrees in existence at such time not constituting an Event of Default; and
(xi) a lien in favor of the landlord with respect to the assets of
Vantas Walnut, Inc., located at 70 Walnut Street, Wellesley, Massachusetts.
8.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The Borrower
will not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time) all or any part of its property or assets, or
enter into any partnerships, joint ventures or sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets (other than purchases or other acquisitions by
the Borrower or any of its Subsidiaries of inventory, materials and equipment in
the ordinary course of business) of any Person, except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries shall be
permitted to the extent not in violation of Section 8.08;
(ii) each of the Borrower and its Subsidiaries may lease (as lessee)
real or personal property to the extent permitted by Section 8.08 and to
the extent such lease is not a Capital Lease, the Borrower and its
Subsidiaries shall enter into such leases in the ordinary course of
business;
(iii) investments may be made to the extent permitted by Section 8.06;
(iv) the Transaction shall be permitted as contemplated by the Credit
Documents;
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(v) the Borrower may effect Permitted Acquisitions in accordance with
the requirements of Section 7.15;
(vi) the Borrower may cause any Subsidiary to be dissolved if no
Permitted Business is operated in connection with such Subsidiary and such
dissolution could not reasonably be expected to have a material adverse
effect on the performance, business, assets, nature of assets, liabilities,
properties, operations, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole; and
(vii) the Borrower may sell assets so long as the aggregate amount of
Net Cash Proceeds received from such sales does not exceed $100,000 in the
aggregate for all such asset sales in any fiscal year.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale of any Collateral (to the extent the Required Banks are
permitted to waive such provisions in accordance with Section 12.12), or any
Collateral is sold as permitted by this Section 8.02, such Collateral shall be
sold free and clear of the Liens created by the Security Documents, and the
Agent and Collateral Agent shall be authorized to take any actions deemed
appropriate in order to effect the foregoing.
8.03 Dividends. The Borrower will not, nor will the Borrower permit any of
its Subsidiaries to, declare or pay any Dividends with respect to the Borrower
or any of its Subsidiaries, except that (i) any Subsidiary of the Borrower may
pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower and
(ii) the Borrower may redeem outstanding shares of Convertible Preferred Stock
in accordance with the terms thereof so long as the redemption price therefor is
paid in Borrower Common Stock.
8.04 Concentration Account. The Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, open, maintain or otherwise have
any checking, savings or other deposit accounts at any bank or other financial
institution where cash or Cash Equivalents is or may be deposited or maintained
with any Person, other than (i) the bank deposit accounts listed on Schedule V
hereto and (ii) the Concentration Account.
8.05 Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness of the Borrower under any Interest Rate Protection
or Other Hedging Agreement or under any similar type of agreement to the
extent such is entered into to satisfy the requirements of Section 7.11;
(iii) Indebtedness of the Borrower and its Subsidiaries evidenced by
Capitalized Lease Obligations to the extent permitted pursuant to Section
8.08; provided that the aggregate amount of Indebtedness evidenced by
Capitalized Lease Obligations under all Capital Leases outstanding under
this clause (iii) at any one time shall not exceed [$5,000,000] (so long as
the amount of Capitalized Lease Obligations incurred in
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any one fiscal year does not exceed the amount of Capital Expenditures
(other than Permitted Acquisitions) the Borrower is permitted to incur
during such fiscal year in accordance with Section 8.08);
(iv) Existing Indebtedness of the Borrower listed on Schedule X but
without giving effect to any refinancings, renewals or increases in the
principal amount thereof, except for refinancings, renewals and extensions
thereof which do not increase the principal amount of Indebtedness being
refinanced, renewed and/or extended;
(v) Indebtedness in amounts, and subject to Liens, permitted under
Section 8.01(viii);
(vi) Indebtedness of the Borrower evidenced by Permitted Seller Notes
or constituting Permitted Earn-Out Debt issued in accordance with the
requirements of Section 7.15 so long as the amount incurred on or after the
Original Effective Date shall not exceed $2,000,000 and Capitalized Lease
Obligations of Subsidiaries of the Borrower assumed in connection with
Permitted Acquisitions and incurred in accordance with Section 7.15 so long
as such Capitalized Lease Obligations were not incurred in anticipation or
contemplation of such Permitted Acquisitions and the Capitalized Lease
Obligations are obligations solely of the entity acquired in such Permitted
Acquisition or formed by the Borrower to effect such Permitted Acquisition;
and
(vii) guaranties by the Borrower or any of its Subsidiaries of leases
entered into in the ordinary course of business by any Subsidiary of the
Borrower.
8.06 Advances, Investments and Loans. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly lend money or credit
or make advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any other Person, or purchase or own a futures contract or otherwise become
liable for the purchase or sale of currency or other commodities at a future
date in the nature of a futures contract, or hold any cash or Cash Equivalents,
except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold receivables
owing to any of them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary terms;
(ii) the Borrower and its Subsidiaries may acquire and hold cash and
Cash Equivalents; provided that all cash or Cash Equivalents of the
Borrower and its Subsidiaries shall be held in the Concentration Account in
accordance with the terms of the Concentration Account Consent Letter;
provided, however, Subsidiaries of the Borrower may acquire and hold cash
and Cash Equivalents not in the Concentration Account so long as no later
than the close of business on the last Business Day of each week such funds
are swept by the Borrower or the applicable Subsidiary into the
Concentration Account; provided further, that at any time that any
Revolving Loans are outstanding, the aggregate amount of cash and Cash
Equivalents permitted to be held by the Borrower and its Subsidiaries
(whether held in the Concentration Account or
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otherwise) shall not exceed the product of (x) $25,000 and (y) the number
of business centers operated by the Borrower and its Subsidiaries at the
time of determination; provided, further, that notwithstanding anything to
the contrary contained in this Section 8.06(ii), the Borrower may retain
the proceeds from the Permitted Stock Issuances;
(iii) the Borrower may enter into interest rate protection agreements
to the extent such is entered into to satisfy the requirements of Section
7.11;
(iv) the Borrower and its Subsidiaries may make Capital Expenditures
to the extent permitted by Section 8.08;
(v) the Transaction shall be permitted in accordance with the
provisions of Section 4;
(vi) the Borrower and its Subsidiaries may endorse negotiable
instruments for collection in the ordinary course of business;
(vii) the Borrower and its Subsidiaries may make loans and advances in
the ordinary course of business consistent with past practices to their
respective employees for moving, travel and emergency expenses and other
similar expenses, so long as the aggregate principal amount thereof at any
one time outstanding (determined without regard to any write-downs or
write-offs of such loans and advances) shall not exceed $200,000;
(viii) the Borrower may maintain the loan of $950,000 made by the
Borrower to David W. Beale and used for the purchase by him of 200,000
shares of Series B Convertible Preferred Stock; and
(ix) the Start-Up Costs shall be permitted in accordance with the
provisions of Section 7.15(xi).
8.07 Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower or any Affiliate of the Borrower's Subsidiaries,
other than transactions by the Borrower or any of its Subsidiaries in the
ordinary course of business unless such transaction or series of related
transactions is in writing and on terms that are no less favorable to the
Borrower or such Subsidiary, as the case may be, than those that would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party; except that (i) the Borrower and its Subsidiaries may effect the
Transaction, (ii) loans and advances made in accordance with Section 8.06(vii)
shall be permitted, (iii) the Borrower may pay customary fees to non-officer
directors of the Borrower, and (iv) the entering into, and performing of, the
Intercompany Agreement by the Borrower and any of its Subsidiaries party thereto
(including without limitation entering into any Product Agreement) shall be
permitted. In no event may any management or similar fees be paid or payable by
the Borrower or any of its Subsidiaries to any Person other than an Affiliate of
the Borrower.
8.08 Capital Expenditures. (a) The Borrower will not and will not permit
any of its Subsidiaries to, make any expenditure for fixed or capital assets
(including, without
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limitation, expenditures for maintenance and repairs which should be capitalized
in accordance with generally accepted accounting principles and including
Capitalized Lease Obligations (collectively, "Capital Expenditures"), except
that the Borrower and its Subsidiaries may make Capital Expenditures (other than
in connection with Permitted Acquisitions) so long as the aggregate amount
thereof does not exceed during any period of four consecutive fiscal quarters
ended on December 31 of any year commencing with the fiscal year ending December
31, 1999, the product of (I) $37,000 (as such amount may be increased on each
January 1 (commencing with January 1, 2000) by three percent of the previous
year's amount) and (II) the number of executive office suite center locations of
the Borrower and its Subsidiaries on the applicable December 31 and provided
that the Borrower may make up to an additional $19 million of Capital
Expenditures during the period beginning on January 1, 1999, and ending on
December 31, 1999 (with approximately $14,400,000 of such amount to be allocated
in connection with Year 2000 reprogramming), to improve the Borrower's
headquarters, to effect necessary technology expansion and computer compliance
pursuant to Sections 6.29 and 7.13, for furniture replacement and for
incremental development costs associated with executive office centers of the
Borrower on the Restatement Effective Date.
(b) In addition to the Capital Expenditures permitted above, the Borrower
and its Subsidiaries may make Permitted Acquisitions in accordance with Section
7.15 in an amount not to exceed the amounts permitted thereby.
8.09 Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio for any fiscal quarter to be less than 1.00 to 1.00.
8.10 Interest Coverage Ratio. The Borrower will not permit the ratio of its
Consolidated EBITDA to its Consolidated Interest Expense for any fiscal quarter
ending on a date set forth below to be less than the ratio set forth opposite
such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
- -------------------- -----
<S> <C>
September 30, 1999 3.15:1.00
December 31, 1999 3.15:1.00
March 31, 2000 3.15:1.00
June 30, 2000 3.15:1.00
September 30, 2000 3.15:1.00
December 31, 2000 3.20:1.00
March 31, 2001 3.25:1.00
June 30, 2001 3.35:1.00
September 30, 2001 3.40:1.00
December 31, 2001 3.60:1.00
March 31, 2002 3.80:1.00
June 30, 2002 4.10:1.00
September 30, 2002 4.40:1.00
December 31, 2002 5.00:1.00
March 31, 2003 5.50:1.00
June 30, 2003 6.00:1.00
</TABLE>
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<TABLE>
<S> <C>
September 30, 2003 6.00:1.00
December 31, 2003 6.00:1.00
March 31, 2004 6.00:1.00
June 30, 2004 6.00:1.00
September 30, 2004 6.00:1.00
December 31, 2004 6.00:1.00
March 31, 2005 6.00:1.00
June 30, 2005 6.00:1.00
September 30, 2005 6.00:1.00
</TABLE>
8.11 Consolidated Indebtedness to Consolidated EBITDA. The Borrower will
not permit the ratio of Consolidated Indebtedness as at the end of any fiscal
quarter ended on a date set forth below to Consolidated EBITDA for any fiscal
quarter ending on a date set forth below to be greater than the ratio set forth
opposite such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
- -------------------- -----
<S> <C>
September 30, 1999 2.95:1.00
December 31, 1999 2.95:1.00
March 31, 2000 2.95:1.00
June 30, 2000 2.95:1.00
September 30, 2000 2.95:1.00
December 31, 2000 2.90:1.00
March 31, 2001 2.85:1.00
June 30, 2001 2.75:1.00
September 30, 2001 2.60:1.00
December 31, 2001 2.45:1.00
March 31, 2002 2.30:1.00
June 30, 2002 2.10:1.00
September 30, 2002 1.90:1.00
December 31, 2002 1.70:1.00
March 31, 2003 1.50:1.00
June 30, 2003 1.30:1.00
September 30, 2003 1.05:1.00
December 31, 2003 0.95:1.00
March 31, 2004 0.85:1.00
June 30, 2004 0.70:1.00
September 30, 2004 0.60:1.00
December 31, 2004 0.60:1.00
March 31, 2005 0.60:1.00
June 30, 2005 0.60:1.00
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
September 30, 2005 0.60:1.00
</TABLE>
8.12 Minimum EBITDA. The Borrower will not permit its Consolidated EBITDA
for any fiscal quarter ending on a date set forth below to be less than an
amount equal to (A) the amount set forth opposite such date set forth below plus
(B) the product of (i) 85% and (ii) the amount of Consolidated EBITDA for the
four fiscal quarters immediately preceding the date of the Permitted Acquisition
of any Person, business, division or product line acquired after June 30, 1999
and prior to the respective fiscal quarter pursuant to a Permitted Acquisition;
provided, however, to the extent such twelve month Consolidated EBITDA is not
audited, the Agent must be satisfied with the amount of Consolidated EBITDA
being included for purposes of setting the levels for this covenant (provided
that if the Agent has not notified the Borrower prior to the consummation of the
Permitted Acquisition that the Agent is not satisfied with the amount of such
Consolidated EBITDA the Agent shall be deemed satisfied for purposes of this
clause) and all calculations and procedures must be in accordance with the
definition of "Pro Forma Basis" and, in any event, the amount of Consolidated
EBITDA of any Person, business decision or product line acquired pursuant to a
Permitted Acquisition to be used for the purposes of clause (ii) above shall be
set forth in an officer's certificate provided by the Borrower and delivered to
the Agent and to each of the Banks in connection with the Permitted Acquisition:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
- -------------------- ------
<S> <C>
September 30, 1999 14,840,000
December 31, 1999 14,960,000
March 31, 2000 15,080,000
June 30, 2000 15,200,000
September 30, 2000 15,320,000
December 31, 2000 15,440,000
March 31, 2001 15,560,000
June 30, 2001 15,680,000
September 30, 2001 15,800,000
December 31, 2001 15,920,000
March 31, 2002 16,040,000
June 30, 2002 16,160,000
September 30, 2002 16,280,000
December 31, 2002 16,400,000
March 31, 2003 16,520,000
June 30, 2003 16,640,000
September 30, 2003 16,760,000
December 31, 2003 16,880,000
March 31, 2004 17,000,000
June 30, 2004 17,120,000
September 30, 2004 17,240,000
December 31, 2004 17,360,000
March 31, 2005 17,480,000
June 30, 2005 17,600,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended Amount
- -------------------- ------
<S> <C>
September 30, 2005 17,720,000
</TABLE>
8.13 Limitation on Voluntary Payments and Modification of Existing
Indebtedness; Limitation on Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc. The Borrower will not, and will not
permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption (including pursuant to any change of
control provision) or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto
money or securities before due for the purpose of paying when due), any
Existing Indebtedness (other than up to $1 million to prepay Capitalized
Lease Obligations);
(ii) amend or modify, or permit the amendment or modification of, any
provision of the Existing Indebtedness or of any agreement relating to any
of the foregoing except for such amendments or modifications which, in the
aggregate or individually, could not reasonably be likely to be adverse to
any Bank in its capacity as such;
(iii) materially amend, modify or change its Certificate of
Incorporation (including, without limitation, by the filing or modification
of any certificate of designation), By-Laws or limited liability company
agreement, in a manner adverse to the Banks; provided, that the Borrower
and its Subsidiaries may amend their respective Certificates of
Incorporation to change their names to the names set forth on Schedule XV
on the Restatement Effective Date, in the case of the Subsidiaries of the
Borrower, and on July 23, 1999, in the case of the Borrower;
(iv) amend, modify or change, terminate, or enter into any new
Shareholders' Agreement or any other agreement with respect to its equity
interests, except for such amendments, modifications or changes which, in
the aggregate or individually could not reasonably be likely to be adverse
to any Bank in its capacity as such;
(v) amend, modify or change, terminate or enter into any new Tax
Sharing Agreement;
(vi) amend, modify or change, or enter into any new Management
Agreement, Employee Benefit Plan, Employment Agreement or Material Contract
except if the aggregate cost to the Borrower and its Subsidiaries as a
result of such amendments, modifications, changes to such plans, agreements
and contracts and new plans, agreements and contracts are not reasonably
likely to have a material adverse effect on the performance, business,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole; or
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<PAGE>
(vii) amend, modify, change or terminate the Intercompany Agreement,
except for such amendments, modifications or changes which, in the
aggregate or individually could not reasonably be likely to be adverse to
any Bank in its capacity as such.
8.14 Limitation on Certain Restrictions on Subsidiaries. The Borrower will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Subsidiary of the Borrower to (i) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (ii) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (iii) transfer any of its properties or assets to the
Borrower, except for such encumbrances or restrictions existing under or by
reason of (w) applicable law, (x) this Agreement and the other Credit Documents
and (y) customary provisions restricting subletting or assignments of any lease
governing a leasehold interest of the Borrower or a Subsidiary of the Borrower.
8.15 Limitation on Issuance of Capital Stock. (a) The Borrower will not
permit any of its Subsidiaries to issue any capital stock or other equity
interests (including, without limitation, limited liability company interests)
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, capital stock, except (i) for
transfers and replacements of then outstanding shares, (ii) for stock splits,
stock dividends and similar issuances which do not decrease the percentage
ownership of any person in any class of the capital stock of the Borrower or
such Subsidiary and (iii) upon the formation of any new Subsidiaries as
permitted by Section 8.17. Any stock issued as permitted by this Section 8.15,
if owned by the Borrower or any of the Borrower's Subsidiaries, shall be
immediately pledged as Collateral and delivered pursuant to the applicable
Pledge Agreement.
(b) The Borrower will not issue any capital stock or any options or
warrants to purchase, or securities convertible into, capital stock, except (i)
for issuances of Acceptable Capital Stock or warrants exercisable into
Acceptable Capital Stock where, after giving effect to such issuance, the
proceeds therefrom are applied in accordance with Section 3.02(A)(e) and (ii)
the Permitted Stock Issuances; provided, however, that with respect to clauses
(i) and (ii) no Default or Event of Default will exist under Section 9.10 (or,
in the case of issuance of options, warrants, or convertible securities, no
Default or Event of Default would exist under Section 9.10 if such options,
warrants or convertible securities were to be exercised or converted).
8.16 Business. The Borrower, will not, and will not permit any of its
Subsidiaries, to engage (directly or indirectly) in any business other than a
Permitted Business.
8.17 Limitation on Creation of Subsidiaries. The Borrower will not, and
will not permit any of its Subsidiaries to, establish, create or acquire any new
Subsidiary, except the Borrower may acquire or form Subsidiaries in connection
with Permitted Acquisitions to the extent otherwise permitted by this Agreement
and may form new Subsidiaries in connection with brokerage or similar operations
or the opening of new executive office suite business centers, so long as (x)
such new Subsidiaries are Wholly-Owned Subsidiaries, (y) such new Subsidiaries
execute and deliver pledge agreements, security agreements and guaranties in
form and substance satisfactory to the Agent and all capital stock of such
Subsidiary is pledged to the Collateral
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<PAGE>
Agent for the benefit of the Secured Creditors pursuant to a pledge agreement
reasonably satisfactory to the Agent.
8.18 Lease Agreements. The Borrower will use its reasonable best efforts to
cause each lease entered into by the Borrower or any of its Subsidiaries to
provide that the Landlord thereunder waives all statutory landlord liens and
does not provide for any contractual landlord liens.
Section 9. Events of Default. Subject to Section 12.16, upon the occurrence
of any of the following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or any Note or Unpaid Drawing or (ii) default, and
such default shall continue unremedied for two or more Business Days, in the
payment when due of any interest on any Loan or Note or Unpaid Drawing, or any
Fees or any other amounts owing by it hereunder or thereunder; or
9.02 Representations, etc. Any representation, warranty or statement made
by any Credit Party herein or in any other Credit Document or in any certificate
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
9.03 Covenants. Any Credit Party shall (i) default in the due performance
or observance by it of any term, covenant or agreement contained in Section
7.01(g)(i), 7.08, 7.11, 7.15, 7.17 or 8 or (ii) default in the due performance
or observance by it of any other term, covenant or agreement contained in any
Credit Document and such default shall continue unremedied for a period of 30
days after written notice to the Borrower by the Agent or any Bank; or
9.04 Default Under Other Agreements. The Borrower or any of its
Subsidiaries shall (i) default in any payment of any Indebtedness (other than
the Indebtedness referred to in Section 9.01) beyond the period of grace (not to
exceed 10 days), if any, provided in the instrument or agreement under which
such Indebtedness was created, (ii) default in the observance or performance of
any agreement or condition relating to any Indebtedness (other than the
Indebtedness referred to in Section 9.01) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required), such Indebtedness to become
due prior to its stated maturity and such default shall not have been cured or
waived, or (iii) any Indebtedness (other than the Indebtedness referred to in
Section 9.01) of the Borrower or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; provided that it
shall not constitute an Event of Default pursuant to this Section 9.04 unless
the aggregate amount of all Indebtedness referred to in the preceding clauses
(i) through (iii) above exceeds $100,000 at any one time; or
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<PAGE>
9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed or discharged, within 60 days, after commencement
of the case; or a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the property of the
Borrower or any of its Subsidiaries, or the Borrower or any of its Subsidiaries
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Borrower or any of its Subsidiaries, or there is commenced against the Borrower
or any of its Subsidiaries any such proceeding which remains undismissed or
undischarged for a period of 60 days, or the Borrower or any of its Subsidiaries
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or the Borrower or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by the
Borrower or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof under Section 412 of the Code or
Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation 4043 shall be reasonably expected to occur with
respect to such Plan within the following 30 days, any Plan which is subject to
Title IV of ERISA shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan or Multiemployer Plan which is subject to Title
IV of ERISA is, shall have been or is likely to be terminated or to be the
subject of termination proceedings under ERISA, any Plan shall have an Unfunded
Current Liability, a contribution required to be made with respect to a Plan,
Multiemployer Plan or Foreign Pension Plan has not been timely made, the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate has incurred
or is likely to incur any liability to or on account of a Plan or Multiemployer
Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account
of a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any
Subsidiary of the Borrower has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans or Foreign
Pension Plans, a "default," within the meaning of Section 4219(c)(5) of ERISA,
shall occur with respect to any Multiemployer Plan; any applicable law, rule or
regulation is adopted, changed or interpreted, or the interpretation or
administration thereof is changed, in each case after the date hereof, by any
governmental authority or agency or by any court (a "Change in Law"), or, as a
result of a Change in Law, an event occurs following a
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<PAGE>
Change in Law, with respect to or otherwise affecting any Plan or Multiemployer
Plan; (b) there shall result from any such event or events the imposition of a
lien, the granting of a security interest, or a liability or a material risk of
incurring a liability; and (c) such lien, security interest or liability,
individually, and/or in the aggregate, in the opinion of the Required Banks, has
had, or could reasonably be expected to have, a material adverse effect upon the
business, operations, condition (financial or otherwise) or prospects of the
Borrower or any Subsidiary of the Borrower; or
9.07 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect or shall cease to give the Collateral Agent for the benefit of the
Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral), in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section 6.11), and subject to no other Liens (except as permitted by Section
6.11), or any Credit Party shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any of the Security Documents and such default shall continue beyond any
grace period specifically applicable thereto pursuant to the terms of such
Security Document; or
9.08 Guaranties. At any time after the execution and delivery thereof, any
Guaranty or any provision thereof shall cease to be in full force or effect as
to any Guarantor, or any Guarantor or any Person acting by or on behalf of any
Guarantor shall deny or disaffirm such Guarantor's obligations under the
respective Guaranty, or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to the respective Guaranty and such default shall continue
beyond any grace period specifically applicable thereto; or
9.09 Judgments. One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate for the
Borrower and its Subsidiaries a liability (not paid or fully covered by a
reputable insurance company) of $100,000 or more and all such judgments or
decrees shall not be satisfied, vacated, discharged or stayed or bonded pending
appeal for any period of 30 consecutive days; or
9.10 Change in Control. There shall be a Change in Control; then, and in
any such event, and at any time thereafter, if any Event of Default shall then
be continuing, the Agent, upon the written request of the Required Banks, shall
by written notice to the Borrower, take any or all of the following actions,
without prejudice to the rights of the Agent, any Bank or the holder of any Note
to enforce its claims against any Credit Party (provided that, if an Event of
Default specified in Section 9.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Agent to the
Borrower as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment
terminated, whereupon all Commitments of each Bank shall forthwith terminate
immediately and any Fees shall forthwith become due and payable without any
other notice of any kind; (ii) declare the principal of and any accrued interest
in respect of all Loans and the Notes and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment,
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<PAGE>
demand, protest or other notice of any kind, all of which are hereby waived by
each Credit Party; (iii) exercise any rights or remedies under any of the
Guaranties; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; (v) direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an Event of
Default specified in Section 9.05, it will pay) to the Collateral Agent at the
Payment Office such additional amount of cash, to be held as security by the
Collateral Agent for the benefit of the Banks in a cash collateral account
established and maintained by the Collateral Agent pursuant to a cash collateral
agreement in form and substance satisfactory to the Collateral Agent, as is
equal to the aggregate Stated Amount of all Letters of Credit then outstanding;
and (vi) enforce, as Collateral Agent, all of the Liens and security interests
created pursuant to the Security Documents.
Section 10. Definitions and Accounting Terms.
10.01 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"A Term Loan" shall have the meaning provided in Section 1.01(a).
"A Term Loan Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name in Schedule I to this Agreement directly
below the column entitled "A Term Loan Commitment," as the same may have been
(x) reduced or terminated pursuant to Section 2.03, 3.02 and/or 9 or (y)
adjusted from time to time as a result of assignments to or from such Bank
pursuant to Section 1.12 or 12.04.
"A Term Loan Facility" shall mean the facility evidenced by Total A Term
Loan Commitment.
"A Term Loan Maturity Date" shall mean June 30, 2002.
"A Term Note" shall have the meaning provided in Section 1.05(a)(i).
"A TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage), the numerator of which is equal to the aggregate principal amount
of all A Term Loans outstanding at such time, and the denominator of which is
equal to the aggregate principal amount of all Term Loans outstanding at such
time and, after the Acquisition Loan Termination Date, the aggregate principal
amount of all Acquisition Loans outstanding at such time.
"Acceptable Capital Stock" shall mean Borrower Common Stock or preferred
stock so long as, in the case of such preferred stock, the preferred stock is
perpetual preferred stock with no mandatory redemption, sinking fund, put rights
or similar requirements, has no requirements to pay cash dividends and has no
covenants or voting rights (other than voting rights or covenants equivalent to
those granted to holders of Convertible Preferred Stock) and, in the case of
Borrower Common Stock, in connection with such issuance of Borrower Common Stock
the holders thereof are not granted any rights other than rights held by all
holders of Borrower Common Stock on the Restatement Effective Date.
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<PAGE>
"Acquisition Commitment Percentage" shall mean at any time a fraction
(expressed as a percentage) the numerator of which is the Acquisition Loan
Commitment of such Bank at such time and the denominator of which is the Total
Acquisition Loan Commitment at such time.
"Acquisition Loan" shall have the meaning provided in Section 1.01(c).
"Acquisition Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly below
the column entitled "Acquisition Loan Commitment," as the same may be (x)
reduced or terminated from time to time pursuant to Section 2.02, 2.03, 3.02
and/or 9 or (y) adjusted from time to time as a result of assignments to or from
such Bank pursuant to Section 1.12 or 12.04.
"Acquisition Loan Facility" shall mean the facility evidenced by the Total
Acquisition Loan Commitment.
"Acquisition Loan Maturity Date" shall mean November 6, 2003.
"Acquisition Loan Termination Date" shall mean November 6, 2000 or such
earlier date on which the Total Acquisition Loan Commitment has been permanently
reduced to zero pursuant to Section 2.02 or Section 9.
"Acquisition Note" shall have the meaning provided in Section 1.05(a)(iii).
"Acquisition TL Percentage" shall mean, after the Acquisition Loan
Termination Date, a fraction (expressed as a percentage), the numerator of which
is equal to the aggregate principal amount of all Acquisition Loans outstanding
at such time and the denominator of which is equal to the aggregate principal
amount of all Term Loans and Acquisition Loans outstanding at such time.
"Additional Collateral" shall mean all property (whether real or personal)
in which security interests are granted (or purported to be granted) (and
continue to be in effect at the time of determination) pursuant to Section 7.15
or 7.17.
"Additional Security Documents" shall mean all mortgages, pledge
agreements, security agreements and other security documents entered into
pursuant to Section 7.15 or 7.17 with respect to Additional Collateral.
"Adjusted Consolidated Net Income" for any period shall mean Consolidated
Net Income for such period plus the sum of the amount of all net non-cash
charges (including, without limitation, depreciation, amortization, deferred tax
expense, non-cash interest expense and other non-cash charges) included in
arriving at Consolidated Net Income for such period less the sum of the amount
of all net non-cash gains or losses (exclusive of items reflected in Adjusted
Working Capital) and gains or losses from sales of assets included in arriving
at Consolidated Net Income for such period.
"Adjusted Working Capital" shall mean Consolidated Current Assets
(excluding cash and Cash Equivalents) minus Consolidated Current Liabilities.
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<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that for purposes of Section 8.07,
an Affiliate of the Borrower shall include any Person that directly or
indirectly (including through limited partner or general partner interests) owns
more than 5% of any class of the capital stock of the Borrower and for all
purposes of this Agreement, neither the Agent, the Collateral Agent, any Bank or
any of their respective Affiliates, shall be considered an Affiliate of the
Borrower or any of its Subsidiaries. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Affiliate Contracts" shall have the meaning provided in Section 4.05.
"Agent" shall mean Paribas in its capacity as Agent for the Banks
hereunder, and shall include any successor to the Agent appointed pursuant to
Section 11.09.
"Aggregate Unutilized Commitment" with respect to any Bank at any time
shall mean the sum of (i) such Bank's Unutilized Revolving Loan Commitment at
such time, plus (ii) such Bank's Unutilized Acquisition Loan Commitment at such
time.
"Agreement" shall mean this Amended and Restated Credit Agreement, as
modified, supplemented or amended from time to time.
"Applicable Margin" shall mean (A)(i) in the case of A Term Loans,
Acquisition Loans and Revolving Loans which are maintained as Base Rate Loans,
2.00%, and (ii) in the case of B Term Loans which are maintained as Base Rate
Loans, 2.75%, and (B)(i) in the case of A Term Loans, Acquisition Loans and
Revolving Loans which are maintained as Eurodollar Loans, 3.00%, and (ii) in the
case of B Term Loans which are maintained as Eurodollar Loans, 3.75%.
"Assignment of Leases and Rents" shall have the meaning provided in Section
4.06.
"B Banks" shall have the meaning provided in Section 3.02(C).
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Loan Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name in Schedule I to this Agreement directly
below the column entitled "B Term Loan Commitment," as the same may have been
(x) reduced or terminated pursuant to Section 2.03, 3.02 and/or 9 or (y)
adjusted from time to time as a result of assignments to or from such Bank
pursuant to Section 1.12 or 12.04.
"B Term Loan Facility" shall mean the facility evidenced by the Total B
Term Loan Commitment.
"B Term Loan Maturity Date" shall mean November 6, 2005.
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<PAGE>
"B Term Note" shall have the meaning provided in Section 1.05(a)(ii).
"B TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage), the numerator of which is equal to the aggregate principal amount
of all B Term Loans outstanding at such time and the denominator of which is
equal to the aggregate principal amount of all Term Loans outstanding at such
time and, after the Acquisition Loan Termination Date, the aggregate principal
amount of all Acquisition Loans outstanding at such time.
"Bank" shall mean each financial institution listed on Schedule I, as well
as any institution which becomes a "Bank" hereunder pursuant to Section 12.04 or
Section 12.16.
"Bank Default" shall mean (i) the refusal (which has not been retracted) of
a Bank to make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 1A.04(c) or (ii) a Bank having notified
in writing to the Borrower and/or the Agent that it does not intend to comply
with its obligations under Section 1.01, including in either case as a result of
any takeover of such Bank by any regulatory authority or agency.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess of the Federal
Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean any Loan designated or deemed designated as
such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Borrower" shall have the meaning provided in the first paragraph of this
Agreement.
"Borrower Common Stock" shall have the meaning provided in Section 6.14.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Banks having Commitments with respect to such Tranche on a
pro rata basis on a given date (or resulting from a conversion or conversions on
such date) having in the case of Eurodollar Loans the same Interest Period;
provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of the related Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day except Saturday, Sunday and any day which shall be in
New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.
"Calculation Period" shall have the meaning provided in Section
7.15(a)(vii).
"Capital Expenditures" shall have the meaning provided in Section 8.08.
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"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with generally accepted accounting principles, is accounted for as a
capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations under Capital Leases, in each case taken at the amount thereof
accounted for as Indebtedness in accordance with generally accepted accounting
principles.
"Cash Collateral" shall mean all "Collateral" as defined in the Cash
Collateral Agreement.
"Cash Collateral Account" shall mean a cash collateral account maintained
with Paribas, as Collateral Agent for the benefit of Secured Creditors, pursuant
to the Cash Collateral Agreement.
"Cash Collateral Agreement" shall mean a Cash Collateral Agreement in the
form of Exhibit K to this Agreement.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank organized under the laws of the United States,
any State thereof or the District of Columbia having, or which is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States, any State thereof, or the District of Columbia having, capital,
surplus and undivided profits aggregating in excess of $200,000,000 and having a
long-term unsecured debt rating of at least "A" or the equivalent thereof from
Standard & Poor's Corporation ("S&P") or "A2" or the equivalent thereof from
Moody's Investors Service, Inc. ("Moody's"), with maturities of not more than
six months from the date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
and in each case maturing not more than six months after the date of acquisition
by such Person, (v) investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as the same may be amended from time to time, 42
U.S.C. ss. 9601 et seq.
"Change in Control" means the occurrence of one or more of the following:
(i) the Investor Group, their Affiliates and David W. Beale shall cease to have
the power to elect a majority of the Board of Directors of the Borrower, (ii)
the Investor Group, their Affiliates and David W. Beale shall cease to have
record and beneficial ownership of more than 50% of the
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voting stock of the Borrower on a fully diluted basis, [(iii) either Cahill,
Warnock Strategic Partners Fund, L.P. and its Affiliates or David W. Beale shall
cease to have record and beneficial ownership of at least 75% of the number of
shares of Borrower Common Stock owned by such Persons on the Restatement
Effective Date, (iv) except for Interoffice Superholding LLC, Reckson Office
Centers LLC, RSI or any of its Affiliates (so long as there shall not otherwise
exist a Change in Control under clause (vii)) (a) if any Person, entity or
"group" (within the meaning of Section 13(d) and 14(d) of the Securities
Exchange Act) shall become the "beneficial owner" (as defined in Rules 13(d) and
13(d)-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of 20% or more of any outstanding class of capital stock of the
Borrower having ordinary voting power in the election of directors of the
Borrower or (b) the directors of the Borrower shall cease to consist of
Continuing Directors, (v) the Borrower shall cease to own 100% of the
outstanding capital stock of each Subsidiary; (vi) David W. Beale shall cease to
serve as President and Chief Executive Officer of the Borrower or (vii) (a) if
at any time while RSI and its Affiliates shall be the "beneficial owner" of 20%
or more of the aggregate voting power of all classes of capital stock of the
Borrower having ordinary voting power in the election of directors of the
Borrower, any Person, entity or "group" (other than Reckson Associates Realty
Corp., any if its Subsidiaries or any of its officers or directors on December
30, 1998 or any of their Affiliates) shall become the "beneficial owner" of 20%
or more of the aggregate voting power of all classes of capital stock of RSI
having ordinary voting power in the election of directors of RSI or (b) the
directors of RSI shall cease to consist of Continuing Directors; provided,
however, for purposes of clauses (i) and (ii) above, the initial public offering
of Borrower Common Stock shall not constitute a Change in Control so long as
following such initial public offering (i) the Investor Group, their Affiliates,
David W. Beale and the Persons who are members of the Board of Directors of the
Borrower as of the Restatement Effective Date (A) continue to have record and
beneficial ownership of more than 50% of voting stock of the Borrower on a fully
diluted basis, and (B) shall continue to have the power to elect a majority of
the Board of Directors of the Borrower, and (ii) the Investor Group, their
Affiliates and David W. Beale continue to have record and beneficial ownership
of more than 45% of the voting stock of the Borrower on a fully diluted basis.
"Change in Law" shall have the meaning provided in Section 9.06.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement, and to any subsequent provision of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purport to be
granted) pursuant to any Security Document, including, without limitation, all
Pledge Agreement Collateral, all Security Agreement Collateral, all Additional
Collateral, all Cash Collateral and all cash and Cash Equivalents delivered as
collateral pursuant to this Agreement or any other Credit Document.
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"Collateral Agent" shall mean the Agent acting as collateral agent for the
Secured Creditors pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 4.05.
"Commitment" shall mean, with respect to each Bank, such Bank's Term Loan
Commitment, Acquisition Loan Commitment and Revolving Loan Commitment, if any.
"Commitment Commission" shall have the meaning provided in Section 2.01(a).
"Concentration Account" shall mean a separate account established and
maintained with the Concentration Account Bank for the benefit of the Secured
Creditors by the Borrower and each of its Subsidiaries and in which the
Collateral Agent has a security interest pursuant to the Concentration Account
Consent Letter.
"Concentration Account Bank" shall mean The Chase Manhattan Bank or such
other bank that may become a Concentration Account Bank in accordance with the
provisions of the Security Agreement.
"Concentration Account Consent Letter" shall have the meaning provided in
Section 7.18.
"Consolidated Current Assets" shall mean the consolidated current assets of
the Borrower and its Subsidiaries.
"Consolidated Current Liabilities" shall mean the consolidated current
liabilities of the Borrower and its Subsidiaries, but excluding the current
portion of any long-term Indebtedness which would otherwise be included therein.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net Income
before interest income, Consolidated Interest Expense and provision for taxes
and without giving effect to any extraordinary gains or losses or gains or
losses from sales of assets.
"Consolidated EBITDA" for any period shall mean Consolidated EBIT, adjusted
by adding thereto the amount of all amortization of intangibles and depreciation
that were deducted in arriving at Consolidated Net Income for such period, and
adjusted further for any increase or decrease in accrued rent liabilities;
provided, however, that for purposes of determining compliance with Sections
8.09 and 8.10 all calculations of Consolidated EBITDA shall be based on the
reported Consolidated EBITDA for the fiscal quarter, including contributions
from Permitted Acquisitions made following the first day of the respective
fiscal quarter; provided, however, for purposes of determining compliance with
Section 8.11 all calculations of Consolidated EBITDA shall be based on the
reported Consolidated EBITDA for the fiscal quarter, excluding contributions
from Permitted Acquisitions made following the first day of the respective
fiscal quarter, multiplied by a fraction, the numerator of which is 365 and the
denominator of which is the number of days elapsed during the fiscal quarter;
provided, however, for purposes of determining compliance with Section 8.12 all
calculations of Consolidated EBITDA shall be based on the reported Consolidated
EBITDA for the fiscal
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quarter, excluding contributions from Permitted Acquisitions made following the
first day of the respective fiscal quarter, multiplied by a fraction, the
numerator of which is 365 and the denominator of which is the number of days
elapsed during the fiscal quarter; provided, however, (I) for purposes of
determining compliance with Section 8.12 all calculations of Consolidated EBITDA
acquired as a result of any Permitted Acquisition shall be made in accordance
with clause (ii) of the definition of "Pro Forma Basis" and as long as such
calculations are made in accordance with such clause (ii) then the Consolidated
EBITDA of such Person, business, division or product line for the four fiscal
quarters being tested by such covenants or definition shall be included as
Consolidated EBITDA of the Borrower even though such Person, business, division
or product line was acquired during such four fiscal quarter period, (II) for
all purposes Consolidated EBITDA relating to the Borrower or any Subsidiary of
the Borrower (a) all or any part of whose assets are subject to a perfected
security interest permissible under Section 8.01 in favor of a Person other than
the Secured Creditors or (b) all or any part of whose assets the Secured
Creditors do not have a first perfected security interest because such
Subsidiary is a foreign Subsidiary shall not be included in Consolidated EBITDA
to the extent that the amount of such Consolidated EBITDA exceeds 5% of the
Consolidated EBITDA of the Borrower and its Subsidiaries; provided, however, to
the extent that at the end of any period for which compliance with covenants is
being determined neither clause (a) or (b) is applicable, then the Consolidated
EBITDA of such Borrower or such Subsidiary shall be included for the entire
period and (III) for all purposes all calculations of Consolidated EBITDA shall
exclude Consolidated EBITDA of the Borrower or any Subsidiary of the Borrower
relating to International Locations to the extent that the amount of such
Consolidated EBITDA exceeds 10% of the Consolidated EBITDA of the Borrower and
its Subsidiaries.
"Consolidated Indebtedness" shall mean, at any time, all Indebtedness of
the Borrower and its Subsidiaries determined on a consolidated basis (excluding
all Indebtedness of the type described in clause (vii) of the definition
thereof, except to the extent amounts are owing with respect thereto upon the
termination of the respective agreement constituting such Indebtedness) plus any
original issue discount attributable to such Indebtedness.
"Consolidated Interest Expense" shall mean, for any period, the total
consolidated interest expense of the Borrower and its Subsidiaries for such
period (calculated without regard to any limitations on the payment thereof)
payable during such period in respect of all Indebtedness of the Borrower and
its Subsidiaries, on a consolidated basis, for such period (including, without
duplication, that portion of Capitalized Lease Obligations of the Borrower and
its Subsidiaries representing the interest factor for such period).
"Consolidated Net Income" shall mean, for any period, net income of the
Borrower and its Subsidiaries for such period determined on a consolidated basis
(after provision for taxes); provided, however, the net income of any Subsidiary
of the Borrower, which is not a Wholly-Owned Subsidiary, shall have its net
income included in the Consolidated Net Income of the Borrower and its
Subsidiaries only (i) to the extent of the amount of cash available for
dividends or distributions corresponding to the Borrower's ownership percentage
interest in such Subsidiary and (ii) if there are no restrictions or limitation
whether by law, contractual or otherwise to pay the dividends or distributions
under the preceding clause (i) hereto to the Borrower.
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"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation should not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Director" at any date, shall mean an individual who was a
member of the Board of Directors of RSI or the Borrower, as the case may be, on
the Restatement Effective Date or who shall have become a member thereof
subsequent to such date after having been nominated or otherwise approved in
writing by at least a majority of the Continuing Directors then members of the
Board of Directors of RSI or the Borrower, as the case may be.
"Convertible Preferred Stock" shall have the meaning provided in Section
6.14.
"Corporate Pledge Agreement" shall have the meaning provided in Section
4.07.
"Credit Documents" shall mean this Agreement, each Note, each Notice of
Borrowing, each Notice of Conversion, each Letter of Credit, each Letter of
Credit Request, the Subsidiaries Guaranty, each Security Document and any letter
agreements or other documents executed in connection with any of the above.
"Credit Event" shall mean the making of any Loan or the issuance of any
Letter of Credit.
"Credit Party" shall mean the Borrower and each of its Subsidiaries party
to a Subsidiaries Guaranty.
"Debt Agreements" shall have the meaning provided in Section 4.05.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank Default
is then in effect.
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"Dividend" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
(including, without limitation, its preferred stockholders) or authorized or
made any other distribution, payment or delivery of property (other than common
stock of such Person) or cash to its stockholders in their capacity as
stockholders, or redeemed, retired, purchased or otherwise acquired, directly or
indirectly, for a consideration any shares of any class of its capital stock
outstanding on or after the Restatement Effective Date (or any options or
warrants issued by such Person with respect to its capital stock), or set aside
any funds for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock of such Person outstanding on or after the
Restatement Effective Date (or any options or warrants issued by such Person
with respect to its capital stock). Without limiting the foregoing, "Dividends"
with respect to any Person shall also include all cash payments made or required
to be made by such Person with respect to any stock appreciation rights, equity
incentive plans or any similar plans or setting aside of any funds for the
foregoing purposes.
"Dollars" and the sign "$" shall each mean freely transferable lawful money
of the United States.
"Drawing" shall have the meaning provided in Section 1A.05(b).
"Eligible Transferee" shall mean and include a commercial bank, financial
institution, collaterized loan investment vehicle, fund, insurance company or
other "accredited investor" (as defined in Regulation D of the Securities Act)
other than individuals, or a "qualified institutional buyer" as defined in Rule
144A of the Securities Act.
"Employee Benefit Plans" shall have the meaning provided in Section 4.05.
"Employee Stock Proceeds" shall have the meaning provided in Section
3.02(A)(e).
"Employee Stock Proceeds Payment Period" shall have the meaning provided in
Section 3.02(A)(e).
"Employment Agreements" shall have the meaning provided in Section 4.05.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any violation of, or liability under, any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law (hereafter,
"Claims"), including, without limitation, (a) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials arising from alleged injury or threat of injury to health,
safety or the environment.
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"Environmental Law" shall mean any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, policy and rule of common law
now or hereafter in effect (including, without limitation, the EPA guidance on
asbestos abatement and removal) and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 7401 et seq.; the Clean Air Act, 42 U.S.C.
ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss. 3803 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. ss. 651 et seq.; and any applicable state and local or
foreign counterparts or equivalents.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower would be
deemed to be a "single employer" (i) within the meaning of Section 414(b), (c),
(m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of
the Borrower being or having been a general partner of such person.
"Eurodollar Loan" shall mean each Loan designated as such by a Borrower at
the time of the incurrence thereof or conversion thereto.
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period, the remainder of (i) the sum
of (a) Adjusted Consolidated Net Income for such period, and (b) the decrease,
if any, in Adjusted Working Capital from the first day to the last day of such
period, minus (ii) the sum of (a) the amount of cash Capital Expenditures (to
the extent not financed with Indebtedness but not in excess of the amounts
permitted pursuant to Section 8.08) made by the Borrower and its Subsidiaries on
a consolidated basis during such period, (b) the amount of permanent principal
payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries
(other than repayments of Loans); provided that repayments of Loans shall be
deducted in determining Excess Cash Flow if such repayments were applied to
Scheduled Repayments required to be made during such period, were made as a
voluntary prepayment with internally generated funds (but in the case of a
voluntary prepayment of Revolving Loans or a voluntary prepayment of Acquisition
Loans prior to the Acquisition Loan Termination Date, only to the extent
accompanied by a voluntary reduction to the Total Revolving Loan Commitment or
to the Total Acquisition Loan Commitment, as the case may be) during such
period, (c) the amount of cash expended in respect of Permitted Acquisitions
during such period (to the extent not financed with Indebtedness) and (d) the
increase, if any, in Adjusted Working Capital from the first day to the last day
of such period. In making the foregoing determinations under clause (i)(b) or
(ii)(d) of the immediately preceding sentence, the amount of the Adjusted
Working Capital acquired as a
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result of each Permitted Acquisition which occurred during the respective period
for which Excess Cash Flow is being determined shall have been deemed to have
been acquired on the first day of such period.
"Excess Cash Flow Payment Period" shall mean (a) the period commencing on
the Acquisition Loan Termination Date and ending on the last day of the fiscal
year in which the Acquisition Loan Termination Date occurs and (b) each fiscal
year thereafter.
"Existing Credit Agreement" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Existing Indebtedness" shall have the meaning provided in Section 6.22.
"Existing Letters of Credit" shall have the meaning provided in Section
1A.01.
"Existing Effective Date" shall mean November 6, 1998.
"Facing Fee" shall have the meaning provided in Section 3.01(b).
"Federal Funds Rate" shall mean for any period, a fluctuating interest rate
equal for each day during such period to the weighted average of the rates on
overnight Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in Section
2.01.
"Fixed Charge Coverage Ratio" for any period shall mean the ratio of (x)
Consolidated EBITDA less the amount of all cash Capital Expenditures (other than
Capital Expenditures (i) permitted pursuant to the proviso in Section 8.08(a),
(ii) in connection with Permitted Acquisitions and (iii) included within the use
of proceeds from the Permitted Stock Issuances and financed therefrom) made in
cash by the Borrower or any of its Subsidiaries for such period to (y) Fixed
Charges for such period.
"Fixed Charges" for any period shall mean the sum of (i) Consolidated
Interest Expense for such period, (ii) the aggregate principal amount of all
repayments and, without duplication, scheduled repayments of Indebtedness
(including the principal portion of rentals under Capitalized Lease Obligations
but excluding repayment of Revolving Loans not accompanied by a permanent
reduction to the Total Revolving Loan Commitment and excluding repayments of
Acquisition Loans prior to the Acquisition Loan Termination Date not accompanied
by a permanent reduction to the Total Acquisition Loan Commitment) and (iii)
taxes paid by the Borrower and its Subsidiaries for such period (including taxes
paid during such period by the Person or business, division or product line
acquired by the Borrower or any of its Subsidiaries pursuant to a Permitted
Acquisition during such period; provided, however, the amount of such taxes
shall be audited or otherwise acceptable to the Agent and provided further that
if the Agent has not notified the Borrower on or prior to the fifth day prior to
the
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consummation of the Permitted Acquisition that the Agent is not satisfied with
the amount of such taxes, the Agent shall be deemed to be so satisfied).
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America or any territory thereof by the
Borrower or any one or more of its Subsidiaries primarily for the benefit of
employees of the Borrower or such Subsidiaries residing outside the United
States of America, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.
"Guaranties" shall mean and include each of the Subsidiary Guaranties
executed by the Subsidiaries of the Borrower.
"Guarantor" shall mean each Subsidiary of the Borrower.
"Hazardous Materials" means (a) petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain,
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar meaning and regulatory effect, under any applicable Environmental Law;
and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated under applicable Environmental Laws.
"Indebtedness" shall mean, as to any Person, without duplication, (i) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money or for the deferred purchase price of property or services
other than trade payables, (ii) the maximum amount available to be drawn under
all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such letters of credit, (iii) all Indebtedness of the
types described in clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this
definition secured by any Lien on any property owned by such Person, whether or
not such Indebtedness has been assumed by such Person, (iv) all Capitalized
Lease Obligations of such Person, (v) all obligations of such Person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection or Other Hedging Agreement or under any similar type of agreement
entered into with a Person not a Bank; provided, however, that the Cash
Collateral Account and Cash Collateral held thereunder and all tenant security
deposits shall not be considered Indebtedness.
"Indemnified Matters" shall have the meaning provided in Section 12.01.
"Indemnitees" shall have the meaning provided in Section 12.01.
"Initial Eurodollar Loan Borrowing Date" shall mean a date occurring at
least three Business Days following the Restatement Effective Date and no more
than seven days
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following the Restatement Effective Date on which a Borrowing of Eurodollar
Loans occurs or on which a conversion of Base Rate Loans into Eurodollar Loans
occurs; provided, however, there may only be one Initial Eurodollar Loan
Borrowing Date.
"Intellectual Property" shall have the meaning provided in Section 6.21.
"Intercompany Agreement" shall mean the Intercompany Agreement, dated as of
December 31, 1998 by and between Alliance National Incorporated and Reckson
Service Industries, Inc.
"Interest Determination Date" shall mean, with respect to any Eurodollar
Loan, the second Business Day prior to the commencement of any Interest Period
relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection or Other Hedging Agreements" shall have the
meaning provided in the Security Documents.
"International Locations" shall mean the office locations outside the
United States and Permitted Acquisitions made outside the United States of the
Borrower and its Subsidiaries.
"Investor Group" shall mean Cahill, Warnock Strategic Partners Fund, L.P.
and Northwood Ventures, Northwood Capital Partners, LLC, Kuhn, Loeb & Co., Henry
T. Wilson, Interoffice Superholdings LLC, Reckson Office Centers LLC and RSI and
its Affiliates.
"IPO" shall have the meaning provided in Section 3.02(A)(e).
"Issuing Bank" shall mean Paribas and any Bank which at the request of the
Borrower agrees, in such Bank's sole discretion, to become an Issuing Bank for
the purpose of issuing Letters of Credit pursuant to Section 1A. The sole
Issuing Bank on the Restatement Effective Date is Paribas.
"L/C Supportable Indebtedness" shall mean (i) obligations of the Borrower
or any of its Subsidiaries incurred in the ordinary course of business with
respect to workers compensation, surety bonds and other similar statutory
obligations and security deposits for landlords and (ii) such other obligations
of the Borrower or any of its Subsidiaries as are reasonably acceptable to the
Issuing Bank and otherwise permitted to exist pursuant to the terms of this
Agreement.
"Leaseholds" of any Person means all the right, title and interest of such
Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 1A.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section 3.01(c).
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"Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the
aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount
of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
1A.03(a).
"Leverage Ratio" shall mean the ratio of Consolidated Indebtedness as at
the date of measure to Consolidated EBITDA for the four consecutive fiscal
quarters ending nearest to the date of measure.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"LLC Pledge Agreement" shall have the meaning provided in Section 4.07.
"Loan" shall mean each Term Loan, each Revolving Loan and each Acquisition
Loan.
"Management Agreements" shall have the meaning provided in Section 4.05.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Contracts" shall have the meaning provided in Section 4.05.
"Maturity Date" with respect to a Tranche shall mean either the A Term Loan
Maturity Date, B Term Loan Maturity Date, the Acquisition Loan Maturity Date or
the Revolving Loan Maturity Date, as the case may be.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans, $500,000,
and (ii) for Eurodollar Loans, $1,000,000.
"Multiemployer Plan" shall mean any multiemployer plan as defined in
Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to
which there is an obligation to contribute of) the Borrower or a Subsidiary of
the Borrower or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from such sale, net of reasonable transaction costs (including, without
limitation, attorneys' fees), the amount of such gross cash proceeds required to
be used to permanently repay any Indebtedness which is secured
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by the respective assets which were sold, and the estimated marginal increase in
income taxes which will be payable by the Borrower's consolidated group as a
result of such sale.
"Note" shall mean each A Term Note, each B Term Note, each Acquisition Note
and each Revolving Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in Section 1.06.
"Notice Office" shall mean the office of the Agent located at 787 Seventh
Avenue, New York, New York 10019, Attention: Michael P. Gebauer, or such other
office as the Agent may hereafter designate in writing as such to the other
parties hereto.
"Obligations" shall mean all amounts owing to the Agent, the Collateral
Agent or any Bank pursuant to the terms of this Agreement or any other Credit
Document.
"Original Effective Date" shall mean January 16, 1997.
"Original Credit Agreement" shall mean the Credit Agreement, dated as of
January 16, 1997, among the Borrower, the Banks party thereto and the Agent.
"Paribas" shall mean Paribas (formerly known as Banque Paribas), a French
banking organization acting through its New York Branch.
"Participant" shall have the meaning provided in Section 1A.04(a).
"Payment Office" shall mean the office of the Agent located at 787 Seventh
Avenue, New York, New York 10019, Attention: Robyn Gewanter, or such other
office as the Agent may hereafter designate in writing as such to the other
parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction (expressed as a
percentage) the numerator of which is the Revolving Loan Commitment of such Bank
at such time and the denominator of which is the Total Revolving Loan Commitment
at such time; provided that if the Percentage of any Bank is to be determined
after the Total Revolving Loan Commitment has been terminated, then the
Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.
"Permitted Acquisition" shall mean (I) the acquisition by the Borrower or
any of its Subsidiaries of assets (but not Real Property other than Leaseholds)
constituting all or substantially all of a business, business unit, division or
product line of any Person not already a Subsidiary of the Borrower or 100% of
the capital stock of any such Person, although any such acquisition shall only
be a Permitted Acquisition so long as (A) the consideration therefor consists
solely of funds in the Cash Collateral Account, Acquisition Loans, issuances of
Borrower Common Stock, Seller Preferred Stock, Permitted Seller Notes, Permitted
Earn-Out
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Debt and the assumption of Capitalized Lease Obligations and tenant security
deposits; (B) the assets acquired, or the business of the Person whose stock is
acquired, shall be in a Permitted Business; (C) those acquisitions that are
structured as asset acquisitions shall be consummated through a new Subsidiary
formed by the Borrower, which shall be a Wholly-Owned Subsidiary of the
Borrower, to effect such acquisition and (D) those acquisitions that are
structured as stock acquisitions shall be effected through a purchase of 100% of
the capital stock of such Person by the Borrower or a newly formed Wholly-Owned
Subsidiary or through a merger between such Person and a newly-formed direct
Wholly-Owned Subsidiary of the Borrower, as the case may be, so that after
giving effect to such merger 100% of the capital stock of the surviving
corporation of such merger is owned by the Borrower and (II) Start-Up Costs.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, an acquisition shall be a Permitted Acquisition only if all
requirements of Section 7.15 with respect to Permitted Acquisitions are met with
respect thereto.
"Permitted Acquisition Notice" shall have the meaning provided in Section
7.15(a)(ii).
"Permitted Business" shall mean the business of operating executive office
suite centers, which shall include the outsourcing of office operations both on
an on-site and off-site basis and the outsourcing of business support services
for customers or clients of the Borrower or its Subsidiaries.
"Permitted Earn-Out Debt" shall mean Indebtedness of the Borrower incurred
in connection with a Permitted Acquisition and in accordance with Section 7.15,
which Indebtedness is not secured by any assets of the Borrower or any of its
Subsidiaries (including, without limitation, the assets so acquired) and is only
payable by the Borrower upon the passage of time (e.g. non-compete payments) or
in the event certain future performance goals are achieved with respect to the
assets acquired; provided that such Indebtedness shall only constitute Permitted
Earn-Out Debt to the extent the terms of such Indebtedness expressly limit the
maximum potential liability of the Borrower with respect thereto and all such
other terms shall be in form and substance satisfactory to the Agent.
"Permitted Equity Issuances" shall mean issuances of Borrower Common Stock
or Seller Preferred Stock by the Borrower as consideration in Permitted
Acquisitions, but only to the extent permitted pursuant to Section 7.15.
"Permitted Liens" shall have the meaning provided in Section 8.01.
"Permitted Seller Notes" shall mean notes in an aggregate principal amount
of $2,000,000 issued by the Borrower to sellers of stock or assets in a
Permitted Acquisition and issued in accordance with Section 7.15, which notes
may be senior but shall be unsecured and unguaranteed, and shall otherwise be in
form and substance satisfactory to the Agent.
"Permitted Stock Issuances" shall mean the sale by the Borrower of up to
$30,000,000 of its Convertible Preferred Stock, which includes the Required
Equity Issuance, on terms and conditions and pursuant to documentation
satisfactory to the Agent and the Required Banks, the proceeds of which will be
used for general corporate and working capital purposes
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and to effect Permitted Acquisitions and which is sold within 60 days of the
Restatement Effective Date.
"Person" shall mean any individual, limited liability company, partnership,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" shall mean any pension plan, as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an obligation to
contribute of) the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate,
and each such plan for the five year period immediately following the latest
date on which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreements" shall mean and include the Corporate Pledge Agreement
and the LLC Pledge Agreement.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined in the
Pledge Agreements.
"Pledged Limited Liability Company Interests" shall have the meaning
assigned to that term in the LLC Pledge Agreement.
"Pledged Securities" shall have the meaning assigned that term in the
Corporate Pledge Agreement.
"Prime Lending Rate" shall mean the rate which The Chase Manhattan Bank
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer by Banque Paribas or The Chase Manhattan Bank,
who may make commercial loans or other loans at rates of interest at, above or
below the Prime Lending Rate.
"Product Agreements" shall have the meaning provided in the Intercompany
Agreement.
"Pro Forma Basis" shall mean, with respect to any Permitted Acquisition,
the calculation of the consolidated results of the Borrower and its Subsidiaries
otherwise determined in accordance with this Agreement as if the respective
Permitted Acquisition (and all other Permitted Acquisitions consummated during
the respective Calculation Period or thereafter and prior to the date of
determination pursuant to Section 7.15 or other applicable provision of this
Agreement) had been effected on the first day of the respective Calculation
Period; provided that all calculations shall take into account the following
assumptions:
(i) if any Indebtedness is incurred pursuant to the respective
Permitted Acquisition (or was incurred in any other Permitted Acquisition
which occurred during the relevant Calculation Period or thereafter and
prior to the date of determination) then all such Indebtedness shall be
deemed to have been outstanding from the first day of the
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respective Calculation Period (and the interest expense associated with
such Indebtedness, shall be determined at the actual rates applicable
thereto or which would have been applicable had such debt been outstanding
for the whole such period and shall be included in determining Consolidated
Interest Expense on such Pro Forma Basis) and all Indebtedness that was
outstanding during the Calculation Period or thereafter and prior to the
date of the Permitted Acquisition but not outstanding on the date of the
Permitted Acquisition shall be deemed to have been repaid in full on the
first day of the Calculation Period; and
(ii) (a) all calculations of Consolidated EBITDA (and the other
components of the definition of Consolidated EBITDA included therein) shall
include only the Consolidated EBITDA of the Borrower and its Subsidiaries
(and the other components of the definition of Consolidated EBITDA included
therein) during the relevant Calculation Period and shall not include any
Consolidated EBITDA (or other components) of the Person or business,
division or product line being acquired pursuant to the Permitted
Acquisition unless either (x) such Consolidated EBITDA of the Person or
business, division or product line being acquired has been audited for the
entire Calculation Period by any of the "big five" or (y) in the case of
calculations based on unaudited financial statements, (i) adjustments to
Consolidated EBITDA with respect to each Permitted Acquisition shall only
include (A) immediate cost reductions associated with overhead eliminations
and (B) adjustments to reflect the Borrower's contractual rates for
services (rather than the former owners' rates) whether additive or
deductive to Consolidated EBITDA and (ii) the Agent shall be reasonably
satisfied with the amounts of Consolidated EBITDA (and the other
components) of such Person or business, division or product line being
acquired pursuant to the respective Permitted Acquisition; provided,
however, that so long as the Borrower has furnished the Agent all relevant
information with respect to the amount of Consolidated EBITDA of such
Person or business, division or product line being acquired pursuant to the
respective Permitted Acquisition, if the Agent has not notified the
Borrower on or prior to the fifth day prior to the consummation of the
Permitted Acquisition that the Agent is not satisfied with the amount of
Consolidated EBITDA, the Agent shall be deemed for purposes of this clause
(ii) to be so satisfied.
"Projections" shall have the meaning provided in Section 4.15.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December of each calendar year.
"Quoted Rate" shall mean (a) the offered quotation to first-class
banks in the New York interbank Eurodollar market by the Agent for U.S.
dollar deposits of amounts in immediately available funds comparable to the
outstanding principal amount of the Eurodollar Loan of the Agent for which
an interest rate is then being determined with maturities comparable to the
Interest Period applicable to such Eurodollar Loan determined as of 10:00
a.m. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period, divided (and rounded upward to the
next whole multiple of 1/16 of 1%) by (b) a percentage equal to 100% minus
the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable to any
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member bank of the Federal Reserve System in respect of Eurocurrency funding or
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"RCRA" shall mean the Resource Conservation and Recovery Act, as the same
may be amended from time to time, 42 U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all the right, title and interest
of such Person in and to land, improvements and fixtures, including Leaseholds.
"Reckson Loan" shall mean the loan by Reckson Service Industries, Inc. to
the Borrower as evidenced by a Subordinated Promissory Note, dated May 21, 1999,
in favor of Reckson Service Industries, Inc. in the amount of $6,000,000.
"Reckson Mergers" shall mean the mergers pursuant to (i) the Agreement and Plan
of Merger, by and among Alliance National Incorporated, Alliance Holdings, Inc.,
Interoffice Superholdings Corporation and Interoffice Superholdings LLC and (ii)
the Agreement and Plan of Merger by and among Alliance National Incorporated,
ANI Holdings, Inc., Reckson Executive Centers, Inc. And Reckson Office Centers,
LLC.
"Recovery Event" shall mean the receipt by the Borrower or any Subsidiary
of the Borrower of any cash insurance proceeds from key-man life insurance or
liability insurance or insurance payable by reason of theft, physical
destruction or damage or any other similar event with respect to any properties
or assets of the Borrower or any Subsidiary of the Borrower (including, without
limitation, business interruption insurance).
"Register" shall have its meaning provided in Section 7.16.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Related Fund" shall mean, with respect to any Bank that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor as such Bank or by an Affiliate of such investment
advisor.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
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"Replaced Bank" shall have the meaning provided in Section 1.12.
"Replacement Bank" shall have the meaning provided in Section 1.12.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27, or .28 of PBGC Regulation Section 4043.
"Required A Facility Banks" shall mean Banks the sum of whose outstanding A
Term Loans represent an amount greater than 50% of all outstanding A Term Loans.
"Required Acquisition Facility Banks" shall mean Banks the sum of whose
Acquisition Loan Commitments (or after the termination thereof, the sum of whose
Acquisition Loans) represent an amount greater than 50% of the Total Acquisition
Loan Commitment (or, after the Acquisition Loan Termination Date, the Banks the
sum of whose outstanding Acquisition Loans represent an amount greater that 50%
of all outstanding Acquisition Loans made by all Banks).
"Required B Facility Banks" shall mean Banks the sum of whose outstanding B
Term Loans represent an amount greater than 50% of the sum of all outstanding B
Term Loans made by all Banks.
"Required Banks" shall mean Banks the sum of whose outstanding A Term
Loans, B Term Loans, Acquisition Loan Commitments (or after the termination
thereof, the sum of outstanding Acquisition Loans), Revolving Loan Commitments
(or after the termination thereof, the sum of outstanding Revolving Loans and
Letter of Credit Outstandings), represent an amount greater than 50% of the sum
of all outstanding A Term Loans, B Term Loans, the Total Acquisition Loan
Commitment (or after the termination thereof, the sum of the then total
outstanding Acquisition Loans) and the Total Revolving Loan Commitment (or after
the termination thereof, the sum of the then total outstanding Revolving Loans
and Letter of Credit Outstandings).
"Required Equity Issuance" shall have the meaning provided in Section 4.18.
"Restatement Effective Date" shall have the meaning provided in Section
12.10.
"Returns" shall have the meaning provided in Section 6.09.
"Revolving Loan Commitment" shall mean, for each Bank, the amount set forth
opposite such Bank's name on Schedule I hereto directly below the column
entitled "Revolving Loan Commitment," as same may be (x) reduced or terminated
from time to time pursuant to Sections 2.02, 3.02 and/or 9 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.12 or 12.04.
"Revolving Loan Maturity Date" shall mean November 6, 2003.
"Revolving Loans" shall have the meaning provided in Section 1.01(d).
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"Revolving Note" shall have the meaning provided in Section 1.05(a)(iv).
"RSI" shall mean Reckson Service Industries, Inc.
"Scheduled Acquisition Loan Repayment" shall have the meaning provided in
Section 3.02(A)(d).
"Scheduled Repayment" shall have the meaning provided in Section
3.02(A)(d).
"Scheduled A Term Loan Repayment" shall have the meaning provided in
Section 3.02(A)(b).
"Scheduled B Term Loan Repayment" shall have the meaning provided in
Section 3.02(A)(c).
"SEC" shall have the meaning provided in Section 7.01(h).
"Section 3.04(b)(ii) Certificate" shall have the meaning provided in
Section 3.04(b)(ii).
"Secured Creditors" shall mean (x) the Banks, the Agent, the Collateral
Agent and (y) any Bank or any Affiliate of a Bank which on the date hereof is,
or subsequently becomes, party to any Interest Rate Protection or Other Hedging
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section 4.08.
"Security Agreement Collateral" shall mean all "Collateral" as defined in
the Security Agreement.
"Security Documents" shall mean the Pledge Agreements, the Security
Agreement, the Concentration Account Consent Letter, each Additional Security
Document, the Cash Collateral Agreement and each Assignment of Leases and Rents.
"Seller Preferred Stock" shall mean perpetual preferred stock issued by the
Borrower which preferred stock has no mandatory redemption, sinking fund or
similar requirements, pays no cash dividends, has no covenants or voting rights
other than voting rights or covenants equivalent to that of the Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock and is
otherwise acceptable in all respects to the Agent.
"Series A Convertible Preferred Stock" shall have the meaning provided in
Section 6.14(a).
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"Series B Convertible Preferred Stock" shall have the meaning provided in
Section 6.14(a).
"Series C Convertible Preferred Stock" shall have the meaning provided in
Section 6.14.
"Series D Convertible Preferred Stock" shall have the meaning provided in
Section 6.14.
"Series E Convertible Preferred Stock" shall have the meaning provided in
Section 6.14.
"Shareholders' Agreements" shall have the meaning provided in Section 4.05.
"Start-Up Costs" shall mean expenditures incurred by the Borrower or any of
its Subsidiaries for fixturing, security deposits to landlords and working
capital in connection with the opening of new executive office suite centers.
"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder at such time (in each case
determined without regard to whether any conditions to drawing could then be
met).
"Subsidiaries Guaranty" shall have the meaning provided in Section 4.09.
"Subsidiary" shall mean, as to any Person, (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person, (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time and (iii) any partnership or limited liability company in which such
Person is the general partner or manager.
"Syndication Termination Date" shall mean the earlier of (x) 120 days after
the Restatement Effective Date or (y) the date on which the Agent, in its sole
discretion, determines (and notifies the Borrower) that the primary syndication
(and the resultant addition of institutions as Banks pursuant to Section 12.04)
has been completed.
"Tax Sharing Agreements" shall have the meaning provided in Section 4.05.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Term Loan Commitment" shall mean each A Term Loan Commitment and each B
Term Loan Commitment, with the Term Loan Commitment of any Bank at any time to
equal the sum of its A Term Loan Commitment and B Term Loan Commitment as then
in effect.
"Term Loans" shall mean the A Term Loans and the B Term Loans.
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"Total A Term Loan Commitment" shall mean, at any time, the sum of A Term
Loan Commitment of each of the Banks.
"Total Acquisition Loan Commitment" shall mean, at any time, the sum of the
Acquisition Loan Commitments of each of the Banks.
"Total B Term Loan Commitment" shall mean, at any time, the sum of the B
Term Loan Commitments of each of the Banks.
"Total Commitment" shall mean, at any time, the sum of the Commitments of
each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Unutilized Acquisition Loan Commitment" shall mean, at any time, an
amount equal to the remainder of (x) the then Total Acquisition Loan Commitment
less (y) the aggregate principal amount of Acquisition Loans then outstanding.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time, an
amount equal to the remainder of (x) the then Total Revolving Loan Commitment,
less the sum of (y) the aggregate principal amount of Revolving Loans then
outstanding and (z) the then aggregate amount of Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments utilized in
making Loans hereunder, with there being four separate Tranches, i.e., whether A
Term Loans, B Term Loans, Acquisition Loans or Revolving Loans.
"Transaction" shall mean collectively, (i) the incurrence of Loans
hereunder on the Restatement Effective Date, (ii) the occurrence of the
Restatement Effective Date, (iii) the occurrence of the Permitted Stock
Issuances and (iv) the payment of the Transaction Fees and Expenses in
connection therewith.
"Transaction Fees and Expenses" shall mean all fees and expenses incurred
in connection with and arising out of the Transaction and the transactions
contemplated thereby and hereby; provided, however, that the aggregate amount of
such fees and expenses shall not exceed $2,000,000 in the aggregate.
"Type" shall mean the type of Loan determined with regard to the interest
option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if any, by
which value of the accumulated plan benefits under the Plan determined on a plan
termination basis in accordance with actuarial assumptions at such time
consistent with those prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds the fair market value of all plan assets
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allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions).
"United States" and "U.S." shall each mean the United States of America.
"Unpaid Drawing" shall have the meaning provided for in Section 1A.05(a).
"Unutilized Acquisition Loan Commitment" for any Bank, at any time, shall
mean the Acquisition Loan Commitment of such Bank at such time less the
aggregate principal amount of Acquisition Loans made by such Bank and then
outstanding.
"Unutilized Revolving Loan Commitment" for any Bank, at any time, shall
mean the Revolving Loan Commitment of such Bank at such time less the sum of (i)
the aggregate principal amount of Revolving Loans made by such Bank and then
outstanding and (ii) such Bank's Percentage of the Letter of Credit
Outstandings.
"Waivable Mandatory Repayment" shall have the meaning provided in Section
3.02(C).
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation
100% of whose capital stock is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, limited
liability company, association, joint venture or other entity in which such
Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100%
equity interest at such time.
Section 11. The Agent.
11.01 Appointment. The Banks hereby designate Paribas as Agent (for
purposes of this Section 11, the term "Agent" shall include Paribas in its
capacity as Collateral Agent pursuant to the Security Documents) to act as
specified herein and in the other Credit Documents. Each Bank hereby irrevocably
authorizes, and each holder of any Note by the acceptance of such Note shall be
deemed irrevocably to authorize, the Agent to take such action on its behalf
under the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its officers, directors, agents or employees.
11.02 Nature of Duties. The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Security Documents.
Neither the Agent nor any of its officers, directors, agents or employees shall
be liable for any action taken or omitted by it or them hereunder or under any
other Credit Document or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have by
reason of this Agreement or any other Credit Document a fiduciary relationship
in respect of any Bank or the holder of any Note; and nothing in this Agreement
or any other Credit Document, expressed
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or implied, is intended to or shall be so construed as to impose upon the Agent
any obligations in respect of this Agreement or any other Credit Document except
as expressly set forth herein.
11.03 Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Bank and the holder of each Note, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower and its
Subsidiaries in connection with the making and the continuance of the Loans and
the participation in Letters of Credit and the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of the Borrower and its Subsidiaries and, except as expressly provided in this
Agreement, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank or the holder of any Note with any
credit or other information with respect thereto, whether coming into its
possession before the making of the Loans, the participation in the Letters of
Credit or at any time or times thereafter. The Agent shall not be responsible to
any Bank or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, priority or sufficiency of
this Agreement or any other Credit Document or the financial condition of the
Borrower or its Subsidiaries or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Credit Document, or the financial
condition of the Borrower or its Subsidiaries or the existence or possible
existence of any Default or Event of Default.
11.04 Certain Rights of the Agent. If the Agent shall request instructions
from the Required Banks with respect to any act or action (including failure to
act) in connection with this Agreement or any other Credit Document, the Agent
shall be entitled to refrain from such act or taking such action unless and
until the Agent shall have received instructions from the Required Banks; and
the Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Bank or the holder of any Note shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
11.05 Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or facsimile message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by any Person that
the Agent believed to be the proper Person, and, with respect to all legal
matters pertaining to this Agreement and any other Credit Document and its
duties hereunder and thereunder, upon advice of counsel selected by it.
11.06 Indemnification. (a) To the extent the Agent is not reimbursed and
indemnified by the Borrower, the Banks will reimburse and indemnify the Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by the Agent in performing its duties hereunder or under any
other Credit Document, in any way relating to or arising out of this Agreement
or any other Credit Document; provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
(b) The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Credit Document (except actions expressly
required to be taken by it hereunder or under the Credit Documents) unless it
shall first be indemnified to its satisfaction by the Banks pro rata against any
and all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
11.07 The Agent in Its Individual Capacity. With respect to its obligation
to make Loans under this Agreement, the Agent shall have the rights and powers
specified herein for a "Bank" and may exercise the same rights and powers as
though it were not performing the duties specified herein; and the term "Banks,"
"Required Banks," "holders of Notes" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with any Credit Party or
any Affiliate of any Credit Party as if it were not performing the duties
specified herein, and may accept fees and other consideration from the Borrower
or any other Credit Party for services in connection with this Agreement and may
purchase and hold equity interests in the Borrower or any other Credit Party
without having to account for the same to the Banks and otherwise without having
to account for the same to the Banks.
11.08 Holders. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
11.09 Resignation by the Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice to
the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall appoint a
successor Agent hereunder or thereunder who shall be a commercial bank or trust
company reasonably acceptable to the Borrower (it being understood and agreed
that any Bank is deemed to be acceptable to the Borrower).
(c) If a successor Agent shall not have been so appointed within such 15
Business Day period, the Agent, with the consent of the Borrower, shall then
appoint a successor Agent who shall serve as Agent hereunder or thereunder until
such time, if any, as the Banks appoint a successor Agent as provided above.
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(d) If no successor Agent has been appointed pursuant to clause (b) or (c)
above by the 30th Business Day after the date such notice of resignation was
given by the Agent, the Agent's resignation shall become effective and the Banks
shall thereafter perform all the duties of the Agent hereunder and/or under any
other Credit Document until such time, if any, as the Banks appoint a successor
Agent as provided above.
Section 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower, agrees to: (i) whether or not
the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without limitation,
the reasonable fees and disbursements of White & Case LLP and local counsel) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments referred to herein
and therein and any amendment, waiver or consent relating hereto or thereto, of
the Agent in connection with its syndication efforts with respect to this
Agreement (including, without limitation, the reasonable fees and disbursements
of White & Case LLP) and of the Agent and each of the Banks in connection with
the enforcement of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent and
for each of the Banks); (ii) pay and hold each of the Banks harmless from and
against any and all present and future stamp, excise and other similar taxes
with respect to the foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such Bank) to pay such
taxes; and (iii) defend, protect, indemnify and hold harmless the Agent and each
Bank, and each of their respective officers, directors, employees,
representatives, attorneys and agents (collectively called the "Indemnitees")
from and against any and all liabilities, obligations (including removal or
remedial actions), losses, damages (including foreseeable and unforeseeable
consequential damages and punitive damages), penalties, claims, actions,
judgments, suits, costs, expenses and disbursements (including reasonable
attorneys' and consultants fees and disbursements) of any kind or nature
whatsoever that may at any time be incurred by, imposed on or assessed against
the Indemnitees directly or indirectly based on, or arising or resulting from,
or in any way related to, or by reason of (a) any investigation, litigation or
other proceeding (whether or not the Agent, the Collateral Agent or any Bank is
a party thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Bank, the
Borrower or any third person or otherwise) related to the entering into and/or
performance of this Agreement or any other Credit Document or the use of any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated herein (including, without limitation, the
Transaction) or in any other Credit Document or the exercise of any of their
rights or remedies provided herein or in the other Credit Documents; or, (b) the
actual or alleged generation, presence or Release of Hazardous Materials on or
from, or the transportation of Hazardous Materials to or from, any Real Property
owned or at any time operated by the Borrower or any of its Subsidiaries or; (c)
any Environmental Claim relating to the Borrower or any of its Subsidiaries or
any Real Property owned or at any time operated by the Borrower or any of its
Subsidiaries or; (d) the exercise of the rights of the Agent and of any Bank
under any of the provisions of this Agreement or any other Credit Document or
any Letter of Credit or any Loans hereunder; or (e) the consummation of any
transaction contemplated herein (including,
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without limitation, the Transaction) or in any other Credit Document (the
"Indemnified Matters") regardless of when such Indemnified Matter arises, but
excluding any such Indemnified Matter based the gross negligence or willful
misconduct of any Indemnitee.
12.02 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default,
each Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to any Credit Party or
to any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by such Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of each Credit Party against and on account of the
Obligations and liabilities of such Credit Party to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank pursuant to
Section 12.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Bank shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
12.03 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrower, at its address
specified opposite its signature below; if to any Bank, at its address specified
opposite its name below; and if to the Agent, at its Notice Office; or, as to
any Credit Party or the Agent, at such other address as shall be designated by
such party in a written notice to the other parties hereto and, as to each Bank,
at such other address as shall be designated by such Bank in a written notice to
the Borrower and the Agent. All such notices and communications shall, when
mailed, telegraphed, telexed, facsimiled, or cabled or sent by overnight
courier, be effective 3 Business Days after deposited in the mails, certified,
return receipt requested, when delivered to the telegraph company, cable company
or one day following delivery to an overnight courier, as the case may be, or
sent by telex or facsimile device, except that notices and communications to the
Agent shall not be effective until received by the Agent.
12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Banks; and provided
further, that although any Bank may transfer, assign or grant participations in
its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments or Loans
hereunder except as provided in Section 12.04(b)) and the transferee, assignee
or participant, as the case may be, shall not constitute a "Bank" hereunder; and
provided further, that no Bank shall transfer or grant any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the
Revolving Loan Maturity Date) in which
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such participant is participating, or reduce the rate or extend the time of
payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the
principal amount thereof, or increase the Commitments in which such participant
is participating over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default or of a mandatory reduction in
the Total Commitment shall not constitute a change in the terms of any
Commitment, and that an increase in any Commitment shall be permitted without
the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
any Credit Party of any of its rights and obligations under this Agreement or
(iii) release all or substantially all of the Collateral under all of the
Security Documents (except as expressly provided in the Credit Documents)
supporting the Loans hereunder in which such participant is participating. In
the case of any such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the participant's
rights against such Bank in respect of such participation to be those set forth
in the agreement executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder shall be determined
as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together with one
or more other Banks) may (x) (A) pledge its Loans and/or Notes hereunder to a
Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank, (B) at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Bank, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, (or in the case of a Lender that is an investment fund, to the
trustee under the indenture to which such fund is a party) and this Section
shall not apply to any such pledge or assignment of a security interest;
provided that no such pledge or assignment of a security interest shall release
a Bank from any of its obligations hereunder or substitute any such pledgee or
assignee for such Bank as a party hereto, or (C) assign all or a portion of its
Loans or Commitments and related outstanding Obligations hereunder to its parent
company, principal office and/or any Affiliate of such Bank or one or more other
Banks or to a Related Fund or (y) assign all or a portion equal to at least
$2,500,000 (or lesser amount if the Bank is pledging or assigning to a Related
Fund), of such Loans or Commitments and related outstanding Obligations
hereunder to one or more Eligible Transferees each of which assignees shall
become a party to this Agreement as a Bank by execution of an assignment and
assumption agreement substantially in the form of Exhibit L (appropriately
completed); provided that: (i) at such time Schedule I shall be deemed modified
to reflect the Commitments of such new Bank and of the existing Banks; (ii) new
Notes will be issued to such new Bank and to the assigning Bank upon the request
of such new Bank or assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 to the extent needed to reflect the revised
Commitments; (iii) the consent of the Agent shall be required in connection with
any assignment (provided, however, that no such consent by the Agent shall be
required in the case of any assignment to another Bank's Related Fund); (iv) the
consent of the Borrower shall be required in connection with any assignment
(which consent shall not be unreasonably withheld); provided, however, no such
consent by the Borrower shall be required in connection with any assignment
pursuant to clause (x) above and no such consent shall be required if a Default
or Event of Default has occurred and (v) the Agent shall receive at the time of
each such assignment, from the assigning Bank, the payment of a non-refundable
assignment fee of $3,000 (provided, however, that any fee shall be waived upon a
pledge or assignment to a Related Fund). To the extent of any assignment
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pursuant to this Section 12.04(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Commitments. No transfer or
assignment under this Section 12.04(b) will be effective until recorded by the
Agent on the Register pursuant to Section 7.16. At the time of each assignment
pursuant to this Section 12.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide to the Borrower, and the Agent the appropriate
Internal Revenue Service Forms (and, if applicable, a Section 3.04(b)(ii)
Certificate) required by Section 3.04(b). In connection with any assignment
prior to the Syndication Termination Date, the Borrower agrees to pay all
amounts to the assignee Bank which the Borrower would be obligated to pay in
accordance with Section 1.11 if such assignment was instead a repayment of Loans
by the Borrower on other than the last day of an Interest Period.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Agent or any Bank or any holder of any Note in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between a Borrower or any other Credit Party and the Agent or any Bank
or the holder of any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which the Agent or any Bank or the holder of any Note would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agent or any Bank or the holder of
any Note to any other or further action in any circumstances without notice or
demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly after its
receipt of each payment from or on behalf of the Borrower in respect of any
Obligations hereunder, it shall distribute such payment to the Banks pro rata
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Except in accordance with Section 3.02(C), each of the Banks agrees
that, if it should receive any amount hereunder (whether by voluntary payment,
by realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise), which is applicable to the payment of the
principal of, or interest on, the Loans, Unpaid Drawings or Fees, of a sum which
with respect to the related sum or sums received by other Banks is in a greater
proportion than the total of such Obligation then owed and due to such Bank
bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving such excess payment
shall purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in such
amount as shall result in a proportional participation by all the Banks in such
amount; provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
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12.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with generally accepted accounting principles in the United States consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Banks;
provided that, except as otherwise specifically provided herein, all
computations of Excess Cash Flow and all computations determining compliance
with Sections 8.04 and 8.08 through 8.12, inclusive, including the definitions
used therein, shall utilize accounting principles and policies in conformity
with those used to prepare the historical financial statements for the fiscal
year ended December 31, 1998 delivered to the Banks pursuant to Section 4.15.
(b) All computations of interest and Fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or Fees are payable.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF EXCEPT AS OTHERWISE SPECIFIED
IN SUCH DOCUMENTS. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CORPORATION
SERVICE COMPANY WITH OFFICES ON THE DATE HEREOF AT 500 CENTRAL AVENUE, ALBANY,
NEW YORK 12206-2290 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND
ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, AND THE BORROWER AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT ON THE TERMS AND FOR THE PURPOSES
OF THIS PROVISION SATISFACTORY TO THE AGENT UNDER THIS AGREEMENT. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS
ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT
UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF
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ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
12.10 Effectiveness. This Agreement shall become effective on the date (the
"Restatement Effective Date") on which the Borrower and each of the Banks shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Agent at its Notice Office or, in the case of the
Banks, shall have given to the Agent telephonic (confirmed in writing), written
or facsimile transmission notice (actually received) in accordance with Section
12.03 at such office that the same has been signed and mailed to it. To the
extent any Banks under and as defined in the Existing Credit Agreement shall
have any rights thereunder with respect to matters occurring prior to the
Restatement Effective Date (including without limitation as to obligations with
respect to loans outstanding thereunder, interest or fees owing thereunder or
any costs under Sections 1.10, 1.11, 1A.06 or 3.04 of the Existing Credit
Agreement), neither the Restatement Effective Date or the repayment of any
amounts owing to such Banks shall limit or otherwise affect any of such Banks'
rights under the Existing Credit Agreement and such Banks' rights shall remain
in full force and effect as if the Restatement Effective Date has not occurred
with respect to matters occurring prior to the Restatement Effective Date.
12.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
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12.12 Amendment or Waiver. (a) Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the respective Credit Parties party thereto and the Required Banks;
provided that no such change, waiver, discharge or termination shall, without
the consent of each Bank (with Obligations of the respective types being
directly affected thereby): (i) extend the final scheduled maturity of any Loan
or Note beyond the applicable Maturity Date or extend the stated maturity of any
Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or
extend the time of payment of interest or Fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates),
or reduce the principal amount thereof, or increase the Commitments of any Bank
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment
or a mandatory prepayment shall not constitute an increase of the Commitment of
any Bank, and that an increase in the available portion of any Commitment of any
Bank shall not constitute an increase in the Commitment of such Bank); (ii)
release all or substantially all of the Collateral (except as expressly provided
in the respective Credit Document); (iii) amend, modify or waive any provision
of this Section 12.12; (iv) reduce the percentage specified in, or otherwise
modify, the definition of Required Banks (it being understood that, with the
consent of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Required Banks on
substantially the same basis as the extensions of A Term Loans, B Term Loans,
Acquisition Loans, Acquisition Loan Commitments and Revolving Loan Commitments
are included on the Restatement Effective Date); or (v) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement; provided further, that no such change, waiver, discharge
or termination shall: (t) increase the Commitments of any Bank over the amount
thereof then in effect (it being understood that a waiver of any conditions
precedent, covenants, Defaults or Events of Default or of a mandatory reduction
in the Total Commitment or of a mandatory prepayment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank) without the consent of such Bank; or (u) without the
consent of any Issuing Bank effected thereby, amend, modify or waive any
provision of Section 1A or alter its rights or obligations with respect to
Letters of Credit; or (v) without the consent of the Agent, amend, modify or
waive any provision of Section 11 or any other provision relating to the rights
or obligations of the Agent; or (w) without the consent of the Collateral Agent,
amend, modify or waive any provision of Section 11 or any other provision
relating to the rights or obligations of the Collateral Agent; or (x) without
the consent of the Required A Facility Banks (A) amend, modify or waive (I)
Sections 3.01(v), 3.01(vi), 3.02(B)(a)(i) or the definitions of A TL Percentage,
B TL Percentage, Acquisition TL Percentage or Required A Facility Banks to the
extent that, in any such case, such amendment, modification or waiver would
alter the application of prepayments or repayments as between A Term Loans, B
Term Loans and Acquisition Loans in a manner adverse to the A Term Loans or (II)
Section 3.02(A)(b) or (y) without the consent of the Required B Facility Banks
(A) amend, modify or waive Sections 3.01(v), 3.01(vi), 3.02(B)(a)(i) or the
definitions of A TL Percentage, B TL Percentage, Acquisition TL Percentage or
Required B Facility Banks to the extent that, in any such case, such amendment,
modification or waiver would alter the application of prepayments or repayments
as between A Term Loans, B Term Loans and Acquisition Loans in a manner adverse
to the B Term Loans or (II) Section 3.02(A)(c)
107
<PAGE>
or (z) without the consent of the Required Acquisition Facility Banks (A) amend,
modify or waive (I) Section 3.01(v), 3.01(vi), 3.02(B)(a)(i) or the definitions
of A TL Percentage, B TL Percentage, Acquisition TL Percentage or Required
Acquisition Facility Banks to the extent that, in any such case, such amendment,
modification or waiver would alter the application of prepayments or repayments
as between A Term Loans, B Term Loans and Acquisition Loans in a manner adverse
to the Acquisition Loans or (II) Section 3.02(A)(d) or the definition of
Acquisition Loan Termination Date.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of such
other Banks whose consent is required is not obtained, then the Borrower shall
have the right to replace each such non-consenting Bank or Banks (so long as all
non-consenting Banks are so replaced) with one or more Replacement Banks
pursuant to Section 1.12 so long as at the time of such replacement, each such
Replacement Bank consents to the proposed change, waiver, discharge or
termination, provided that such Borrower shall not have the right to replace a
Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to clauses (t)-(z) of
the second proviso to Section 12.12(a).
(c) Notwithstanding anything to the contrary contained above in this
Section 12.12, the Collateral Agent may (i) enter into amendments to the
Subsidiaries Guaranty and the Security Documents for the purpose of adding
additional Subsidiaries of the Borrower (or other Credit Parties) as parties
thereto and (ii) enter into security documents to satisfy the requirements of
Sections 7.15 and 7.17, in each case without the consent of the Required Banks.
12.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 1A.06, 3.04, 11.06 and 12.01 shall survive
the execution and delivery of this Agreement and the Notes and the making and
repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to
or for the account of any office, Subsidiary or Affiliate of such Bank.
12.15 Post-Closing Obligations. The Borrower hereby acknowledges that in
connection with certain assignments hereof, the Agent or any of the Banks may be
required to obtain a rating of the Obligations and Commitments hereunder of the
Borrower hereby consents to such Agent or Bank providing to the respective
rating agency such information regarding the Obligations and creditworthiness of
the Borrower as is customary practice of such rating agency.
12.16 Default Exception. Notwithstanding anything to the contrary contained
in this Agreement, the lack of a first perfected security interest being
provided to the Banks by the Borrower or any Subsidiary of the Borrower in
connection with and as described under part (II)(b) of the fourth proviso under
the definition of Consolidated EBITDA, and the failure of any such person to
execute and deliver a Guarantee or any Security Document shall not constitute a
Default or Event of Default.
108
<PAGE>
12.17 Permitted Stock Issuance Adjustment. Notwithstanding anything to the
contrary in this Agreement, the Borrower may use the proceeds from Permitted
Stock Issuances for the purposes set forth on Schedule XVI hereto; provided,
however, to the extent the amount of proceeds received from Permitted Stock
Issuances is less than $30 million, the Borrower may not make expenditures set
forth on such Schedule XVI in an amount equal to such shortfall; provided,
further, however, if at the time of such Permitted Stock Issuances or at any
time thereafter prior to the permitted use of such proceeds, there shall exist a
Default or Event of Default, all such equity proceeds shall be applied in
accordance with Section 3.02(A)(e)(i).
109
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
Address:
90 Park Avenue VANTAS INCORPORATED
Suite 3100 (formerly known as Alliance
New York, New York 10016 National Incorporated)
Attention: Alan Langer
Telephone: (212) 907-6402
Facsimile: (212) 907-6522 By: /s/ Alan Langer
---------------------------------
Title: Chief Financial Officer
787 Seventh Avenue PARIBAS,
New York, New York 10019 Individually and as Agent
Attention: Michael P. Gebauer
Telephone: (212) 841-2000
Facsimile: (212) 841-2363 By: /s/ Michael Gebauer
---------------------------------
Title: Vice President
By: /s/ Walter Bellingham
---------------------------------
Title: Associate
2850 West Gold Road FIRST SOURCE FINANCIAL LLP
Suite 520
Rolling Meadows, Illinois 60008 By: First Source Financial, Inc.,
Attention: Robert Coseo its Agent/Manager
Telephone: (847) 734-2071
Facsimile: (847) 734-7910
By: /s/ David Wagner
---------------------------------
Title: Vice President
One State Street IBJ WHITEHALL BANK & TRUST
New York, New York 10004 COMPANY (formerly, IBJ Schroder
Attention: Patricia McCormack Bank & Trust Company)
Telephone: (212) 858-2641
Facsimile: (212) 858-2768
By: /s/ Patricia McCormack
---------------------------------
Title: Director
<PAGE>
Two Renaissance Square PILGRIM PRIME RATE TRUST
40 North Central Avenue
Suite 1200 By: Pilgrim Investments, Inc.,
Phoenix, Arizona 85004-3444 as its investment manager
Attention: Jeffrey A. Bakalar
Telephone: (602) 417-8252
Facsimile: (602) 417-8327 By: /s/ Jeffrey A. Bakalar
---------------------------------
Title: Vice President
787 Seventh Avenue PARIBAS CAPITAL FUNDING LLC
New York, New York 10019
Attention: Michael Weinberg
Telephone: (212) 841-2000 By: /s/ Michael Weinberg
Facsimile: (212) 841-2363 ---------------------------------
Title: Director
335 Madison Avenue EUROPEAN AMERICAN BANK
17th Floor
New York, New York 10022
Attention: Anthony Tomich By: /s/ Anthony Tomich
Telephone: (212) 503-2687 ---------------------------------
Facsimile: (212) 503-2667 Title: Assistant Vice President
590 Madison Avenue BHF (USA) CAPITAL CORPORATION
30th Floor
New York, New York 10022
Attention: Hans J. Scholz By: /s/ Hans J. Scholz
Telephone: (212) 756-5533 ---------------------------------
Facsimile: (212) 756-5536 Title: Vice President
By: /s/ Anthony Heyman
---------------------------------
Title: Assistant Vice President
Two Greenwich Plaza BANK AUSTRIA CREDITANSTALT
4th Floor CORPORATE FINANCE INC.
Greenwich, Connecticut 06830
Attention: David E. Yewer By: /s/ David Yewer
Telephone: (203) 861-1499 ---------------------------------
Facsimile: (203) 861-1475 Title: Vice President
By: /s/ C. MacDonald
---------------------------------
Title: Vice President
<PAGE>
500 West Monroe Street HELLER-FINANCIAL, INC.
Chicago, Illinois 60661
Attention: Linda Wolf
Telephone: (312) 441-7894 By: /s/ Sheila Weimer
Facsimile: (312) 441-7357 ---------------------------------
Title: Vice President
590 Madison Avenue BALANCED HIGH-YIELD FUND II LIMITED
30th Floor
New York, New York 10022 By: BHF (USA) Capital Corporation,
Attention: Hans J. Scholz as attorney-in-fact
Telephone: (212) 756-5533
Facsimile: (212) 756-5536 By: /s/ Hans J. Scholz
---------------------------------
Title: Vice President
By: /s/ Anthony Heyman
---------------------------------
Title: Assistant Vice President
One South Wacker Drive SRF TRADING, INC.
33rd Floor
Chicago, Illinois 60603
Attention: James R. Fellows By: /s/ Kelly C. Walker
Telephone: (312) 368-5641 ---------------------------------
Facsimile: (312) 368-7857 Title: Vice President
Attention: Virginia Conway KZH ING-2 LLC
450 West 33rd Street - 15th Floor
New York, NY 10001
Telephone: (212) 946-7575 By: /s/ Peter Chin
Facsimile: (212) 946-7776 ---------------------------------
Title: Authorized Agent
<PAGE>
Attention: Michael Hatley THE ING CAPITAL SENIOR SECURED HIGH
333 S. Grand Avenue INCOME FUND, L.P.
Suite 4250
Los Angeles, CA 90071 By: ING Capital Advisors LLC
Telephone: (213) 346-3972 as Investment Advisor
Facsimile: (213) 346-3995
By: /s/ Michael Hatley
---------------------------------
Title: Managing Director
<PAGE>
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Acquisition Revolving
A Term Loan B Term Loan Loan Loan
Bank Commitment Commitment Commitment Commitment Total
---- ---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Paribas $ 10,558,250 $ 20,000,000 $ 1,892,858 $ 6,472,142 $ 38,923,250
First Source Financial LLP $ 3,500,000 $ 7,350,000 $ 0 $ 3,850,000 $ 14,700,000
IBJ Whitehall Bank & Trust
Company $ 6,012,500 $ 2,987,500 $ 0 $ 1,000,000 $ 10,000,000
Pilgrim America
Prime Rate Trust $ 0 $ 7,500,000 $ 0 $ 0 $ 7,500,000
Paribas Capital Funding LLC $ 0 $ 14,937,500 $ 0 $ 0 $ 14,937,500
European American Bank $ 5,429,250 $ 0 $ 1,607,142 $ 2,677,858 $ 9,714,250
BHF (USA) Capital Corporation $ 5,000,000 $ 0 $ 500,000 $ 4,500,000 $ 10,000,000
Bank Austria Creditanstalt
Corporate Finance, Inc. $ 7,500,000 $ 0 $ 1,000,000 $ 6,500,000 $ 15,000,000
Heller Financial $ 0 $ 15,000,000 $ 0 $ 0 $ 15,000,000
SRF Trading, Inc. $ 0 $ 5,000,000 $ 0 $ 0 $ 5,000,000
KZH ING-2 LLC $ 0 $ 5,000,000 $ 0 $ 0 $ 5,000,000
ING Capital Senior Secured
High Income Fund $ 0 $ 2,100,000 $ 0 $ 0 $ 2,100,000
Balanced High Yield Fund II
Ltd. $ 0 $ 10,000,000 $ 0 $ 0 $ 10,000,000
------------ ------------ ------------ ------------ ------------
Totals: $ 38,000,000 $ 89,875,000 $ 5,000,000 $ 25,000,000 $157,875,000
</TABLE>
Exhibit 10.40
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this 7th day of
December, 1999, by and among Reckson Service Industries, Inc., a Delaware
corporation ("RSI"), Elliot S. Cooperstone ("Cooperstone"), and H. Thach Pham
("Pham"; together with Cooperstone, the "Founders").
RECITALS
WHEREAS, each of Cooperstone and Pham is a Founder of eSourceOne, Inc.
("eSourceOne"), a Delaware corporation, and each owns 6,666,667 shares of common
stock, par value $.01 per share, of eSourceOne ("Founder Common Stock");
WHEREAS, RSI, through its wholly-owned subsidiary RSI ESO, Inc., a Delaware
corporation ("RSI ESO"), owns 15,000,000 shares of Series A Preferred Stock of
eSourceOne (the "Series A Preferred Stock"), each such share being convertible
into common stock of eSourceOne ;
WHEREAS, (A) RSI desires to grant to each of the Founders, and each of the
Founders desire to obtain from RSI, a warrant (each a "Warrant"; collectively
the "Warrants") to purchase 100,000 shares (collectively, the "Warrant Shares")
of common stock, par value $.01 per share, of RSI (the "RSI Common Stock"), and
(B) each of the Founders desires to grant to RSI, and RSI desires to obtain from
each Founder, an option (each an "Option"; together, the "Options") to purchase
394,737 shares (collectively, the "Option Shares") of Founder Common Stock; and
WHEREAS, the terms and conditions of this Agreement, the Options and the
Warrants have been negotiated at arm's length and the fair market value of the
Options are intended by the parties to be approximately equal to the fair market
value of the Warrants for which they are being exchanged in accordance with this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the receipt and sufficiency of which is hereby
acknowledged, and subject to the terms and conditions set forth herein, the
parties hereto agree as follows:
1. DEFINITIONS
Certain defined terms used in this Agreement have the following meanings:
Affiliate. The term "affiliate" shall mean (i) in the case of a corporation
or other entity, any corporation or other entity in which the subject person
(A)(1) owns or controls the voting rights of 50% or more of the capital stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or entity or (2) has the right to nominate and/or elect at least
one-half of the members of the board of directors of such corporation or entity
or (3) at least one-half of the then current members of the board of directors
of such corporation or entity were nominated or designated for election as
directors of such corporation by the subject person and (B) for financial
reporting purposes, the financial statements of the subject person includes on a
consolidated basis the financial statements of such corporation or other entity,
and (ii) in the case of an individual, the individual's spouse, siblings, lineal
descendants, ancestors, or a trustee of a trust which is maintained solely for
the benefit of such individual.
Agreement. The "Agreement" shall mean this Agreement, as the same may be
amended or restated from time to time hereafter.
<PAGE>
Board. As to any corporation, the "Board" shall mean the Board of Directors
of that corporation as the same may be constituted from time to time hereafter
pursuant to applicable law, the charter and by-laws of such corporation, and
applicable agreements.
Change-in-Control Transaction. A "Change-in-Control Transaction" shall
mean:
(i) with respect to RSI, any merger or consolidation of RSI into or with
another corporation, sale, transfer or other disposition of all or substantially
all of the assets or capital stock of RSI, or any reorganization,
recapitalization or like transaction or series of transactions having
substantially equivalent effect and purpose, at the conclusion of which such
merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
RSI immediately prior to such transaction or series of transactions own less
than a majority of the voting capital stock of the acquiring entity or entity
surviving or resulting from such transaction or series of transactions
immediately thereafter; and
(ii) with respect to eSourceOne, any merger or consolidation of eSourceOne
into or with another corporation, sale, transfer or other disposition of all or
substantially all of the assets or capital stock of eSourceOne, or any
reorganization, recapitalization or like transaction or series of transactions
having substantially equivalent effect and purpose, at the conclusion of which
such merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
eSourceOne immediately prior to such transaction or series of transactions own
less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter; provided, however, that Change-in-Control Transaction
shall not include any acquisition or series of related acquisitions of more than
50% of the outstanding capital stock of eSourceOne by RSI or RSI's Affiliates.
Encumbrances. "Encumbrances" shall mean any mortgages, judgments, claims,
liens, security interests, pledges, escrows, charges or other encumbrances of
any kind or character whatsoever.
Fair Market Value. "Fair Market Value" shall mean with respect to any
asset, property or security of or issued by a corporation the fair market value
thereof as determined in good faith by the Board of that corporation, provided,
however, that in the event any such determination by such Board is disputed by
an interested stockholder, then the corporation, at shared expense, shall engage
an independent appraiser mutually acceptable to the corporation and such
stockholder, and the fair market value of such asset, property or security for
the purposes hereof shall be determined by such independent appraiser; and
provided further, however, that in the event that the parties are not able to
promptly agree upon an independent appraiser, then the party entitled to receive
such asset, property or security shall be entitled to select as an independent
appraiser any of the independent accounting firms generally regarded as
comprising the "Big Five" independent accounting firms and which is not then
providing services to such party.
Founder Common Stock. "Founder Common Stock" shall have the meaning
ascribed to that term in the Recitals.
Founders. The "Founders" shall mean Elliot S. Cooperstone and H. Thach
Pham.
Option(s). Each "Option", and together, the "Options", shall have the
meaning ascribed to that term in the Recitals.
Option Shares. The Option Shares shall have the meaning ascribed to that
term in the Recitals.
2
<PAGE>
Person. A "Person" shall mean any entity, corporation, company,
association, joint venture, joint stock company, partnership, limited liability
company, trust, organization, individual (including personal representatives,
executors and heirs of a deceased individual), nation, state, government
(including agencies, departments, bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator.
Qualified IPO. A "Qualified IPO" shall mean a firm underwritten public
offering of common stock of eSourceOne by a nationally recognized underwriter
which offering results in the receipt of aggregate gross proceeds by eSourceOne
of at least $30,000,000 and reflects a market value of eSourceOne of at least
$150,000,000 immediately prior to such public offering.
Registration Rights Agreement. "Registration Rights Agreement" shall mean
that certain Registration Rights Agreement, dated August 10, 1999, by and among
eSourceOne, RSI, RSI ESO and each of the Founders.
RSI Common Stock. "RSI Common Stock" shall have the meaning ascribed to
that term in the Recitals.
RSI ESO. "RSI ESO" shall have the meaning ascribed to that term in the
Recitals.
Securities Act. The "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations thereunder.
Stockholders' Agreement. The "Stockholders' Agreement" shall mean that
certain Stockholders' Agreement, dated August 10, 1999, by and among RSI, RSI
ESO, the Founders and eSourceOne.
Transfer. A "Transfer" of shares of common stock or any interest of a
stockholder therein shall mean any sale, assignment, transfer, disposition,
pledge, hypothecation or encumbrance, whether direct or indirect, voluntary,
involuntary or by operation of law, and whether or not for value, of such shares
or such interest of a stockholder therein, including, without limitation, any
direct or indirect Transfer of a controlling interest in any stockholder, other
than transfers of capital stock of RSI.
Warrant. "Warrant" shall have the meaning ascribed to that term in the
Recitals.
Warrant Shares. "Warrant Shares" shall have the meaning ascribed to that
term in the Recitals.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF RSI. RSI represents and
warrants to the Founders as of the date hereof, and agrees with the Founders, as
follows:
(a) ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY. RSI (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and (ii) has all requisite corporate power and
authority to enter into and carry out the transactions and perform the
obligations contemplated by this Agreement and the Warrant.
(b) AUTHORIZATION OF AGREEMENT AND WARRANTS; ENFORCEABILITY. The execution,
delivery and performance by RSI of each of this Agreement and the Warrants has
been duly authorized by all requisite corporate action on the part of RSI, and
no other corporate action on the part of RSI is necessary to authorize the
execution, delivery and performance of this Agreement and the Warrants. Each of
this Agreement and the Warrants constitutes a legal, valid and binding
obligation of RSI enforceable against
3
<PAGE>
RSI in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and equitable principles
generally.
(c) AUTHORIZATION AND ISSUANCE OF THE WARRANT SHARES. The authorization,
reservation, issuance, sale and delivery of the Warrant Shares have been duly
authorized by all requisite corporate action on the part of RSI, and the Warrant
Shares, when issued, sold and delivered in accordance with the Warrant, will be
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, free of any Encumbrances and not
subject to preemptive or similar rights of the stockholders of RSI or other
rights, in each case created by RSI.
(d) CONSENTS. No permit, authorization, registration, qualification,
decree, consent or approval of or by, or any notification of or filing with, any
person (governmental or private) is required of RSI in connection with the
execution, delivery and performance by RSI of this Agreement or the Warrants or
any documentation relating thereto, or the issuance, sale or delivery of the
Warrant Shares by RSI to each Founder (other than such notifications or filings
required under the General Corporation Law of the State of Delaware and
applicable federal and state securities laws, if any, which shall be made on a
timely basis) except where the absence of such permit, authorization, consent,
approval, notification or filing would not result in a material adverse change
in the business, operations, properties, assets or financial condition, or in
the earnings, business affairs or business prospects of RSI (a "Material Adverse
Effect") or would prohibit, impair, hinder or delay the consummation of the
transactions contemplated by this Agreement or the performance of RSI's
obligations under this Agreement or the Warrants.
(e) NO CONFLICT. The execution, delivery and performance by RSI of this
Agreement and the Warrants, the consummation by RSI of the transactions
contemplated thereby, and the issuance, sale and delivery of the Warrant Shares
by RSI will not (i) materially violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to RSI or any
of the properties or assets of RSI, (ii) materially conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute (with
due notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any Encumbrance upon any of the properties or assets of RSI under, any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, license,
lease or other agreement or instrument to which RSI is a party or by which RSI
may be bound, or to which any of the property or assets of RSI is subject, or
any applicable treaty, law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over RSI or any of RSI's properties, or (iii)
violate the certificate of incorporation or the by-laws of RSI.
2.2 REPRESENTATIONS, WARRANTIES AND COVENANTS BY FOUNDERS. Each of the
Founders represents and warrants to
RSI as of the date hereof, and agrees with RSI, as follows:
(a) POWER AND AUTHORITY. Such Founder has all right, requisite power and
authority to enter into and carry out the transactions and perform the
obligations contemplated by this Agreement and the Option to be granted to RSI
by such Founder.
(b) ENFORCEABILITY. Each of this Agreement and the Option to be granted to
RSI by such Founder constitutes a legal, valid and binding obligation of such
Founder enforceable against such Founder in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and equitable principles generally.
4
<PAGE>
(c) OPTION SHARES. The Option Shares purchasable upon exercise of the
Option to be granted to RSI by such Founder are validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching to the
ownership thereof, free of any Encumbrances and, except as provided in the
Stockholders' Agreement, not subject to preemptive or similar rights of the
stockholders of eSourceOne or other rights, in each case created by such
Founder.
(d) CONSENTS. No permit, authorization, order, registration, qualification,
decree, consent or approval of or by, or any notification of or filing with, any
person (governmental or private) is required of such Founder in connection with
the execution, delivery and performance by such Founder of this Agreement or the
Option to be granted to RSI by such Founder or any documentation relating
thereto, or the sale or delivery of the Option Shares by such Founder to RSI
(other than such notifications or filings required under the General Corporation
Law of the State of Delaware and applicable federal and state securities laws,
if any, which shall be made on a timely basis) except where the absence of such
permit, authorization, consent, approval, notification or filing would prevent
such sale and delivery of such Option Shares by such Founder to RSI.
(e) NO CONFLICT. The execution, delivery and performance by such Founder of
this Agreement and the Option to be delivered to RSI by such Founder, the
consummation by such Founder of the transactions contemplated thereby, and the
sale and delivery of the Option Shares upon exercise of such Option will not (i)
materially violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court, administrative
agency or other governmental body applicable to the Founder or any of the
properties or assets of the Founder, or (ii) materially conflict with or result
in any breach of, any of the terms, conditions or provisions of, or constitute
(with due notice or lapse of time, or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, or result in the creation
of any Encumbrance upon any of the Option Shares owned by or properties or
assets of the Founder under any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, license, lease or other agreement or instrument
to which such Founder is a party or by which such Founder may be bound, or to
which any of the property or assets of such Founder is subject, or any
applicable treaty, law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over such Founder or any of such Founder's
properties.
(f) GOOD AND MARKETABLE TITLE. Such Founder has and will at the time of
exercise of the Option granted by such Founder have good and valid title to the
Option Shares to be sold by such Founder under such Option, free and clear of
any Encumbrances created by such Founder or imposed by applicable federal and
state securities laws, other than pursuant to this Agreement and such Option;
and upon delivery of such Option Shares and payment of the purchase price
therefor as contemplated in such Option, RSI will receive good and marketable
title to such Option Shares purchased by it from such Founder, free and clear of
any Encumbrances.
3. DELIVERY OF WARRANTS IN EXCHANGE FOR OPTIONS; REGISTRATION RIGHTS AND
TRANSFERABILITY.
3.1 EXCHANGE OF WARRANTS FOR OPTIONS. On the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, RSI agrees to deliver to each Founder the Warrant in the form
attached to this Agreement as Exhibit I, and each Founder agrees to deliver to
RSI the Option in the form attached to this Agreement as Exhibit II, in each
case at the Closing (as defined below).
3.2 CLOSING. The exchange and delivery of the Warrants and Options shall be
made at the offices of Brown & Wood LLP, One World Trade Center, New York, New
York 10048, or at such other place as
5
<PAGE>
shall be agreed upon by RSI and the Founders, and shall be made at the time and
date of execution of this Agreement (such exchange and delivery being herein
called the "Closing").
3.3 EXEMPTION FROM STOCKHOLDERS' AGREEMENT. The parties hereby agree that
the delivery of the Options and the delivery of any Option Shares upon exercise
of the Options shall not give rise to any right of first offer, co-sale right,
right to compel participation in certain transfers or restrictions on transfer
under Sections 3 and 4 of the Stockholders' Agreement.
3.4 REGISTRATION RIGHTS. The parties agree that the registration rights of
each Founder under the Registration Rights Agreement with respect to the Option
Shares held by such Founder, upon and in connection with any purchase of such
Option Shares pursuant to any exercise of the Option covering such Option
Shares, are deemed hereby to be assigned to RSI without any further act or deed
by any party. RSI hereby agrees to provide registration rights to the Founders
in respect of the Warrant Shares as set forth in the form of the Warrant
Registration Rights Agreement attached hereto.
3.5 TRANSFERABILITY. RSI may not transfer the Options except to an
Affiliate or employee of RSI and neither Founder may transfer his Warrants
except to an Affiliate of such Founder for a period (the "Restricted Period")
commencing on the date of this Agreement and ending on:
(i) with respect to each Founder, the first to occur of (a) two (2) years
from the date of this Agreement and (b) a Change-in-Control Transaction; and
(ii) with respect to RSI, the first to occur of (a) two (2) years from the
date of this Agreement, (b) a Qualified IPO and (c) a Change-in-Control
Transaction.
Neither the Option Shares nor the Warrant Shares may be transferred during
the Restricted Period, except to an Affiliate of RSI or the Founders, as the
case may be.
4. NON-DISCLOSURE; PUBLIC ANNOUNCEMENTS.
4.1 NON-DISCLOSURE. The terms of this Agreement shall not be disclosed to
any third party without the consent of the other parties to this Agreement;
provided that from and after the Closing, RSI or either Founder may disclose the
terms of this Agreement, the Warrants or the Options, as the case may be, and
copies of the documents relating thereto, solely, to employees, investors,
investment bankers, lenders, accountants, legal counsel, business partners, and
bona fide prospective investors, lenders and business partners of RSI, such
Founder or eSourceOne, as the case may be, in each case only where such persons
or entities have been advised of the confidential nature of such information and
the receiving party's obligation with respect thereto.
4.2 PUBLIC ANNOUNCEMENTS. The parties may at any time make public
announcements or filings regarding the parties' relationship which are required
by applicable law, regulatory bodies, or stock exchange or stock association
rules, so long as the party so required to make the public announcement or
filing, promptly upon learning of such requirement, notifies the other affected
party of such requirement and in the case of public filings, including, without
limitation, periodic and other reports filed under the Securities Exchange Act
of 1934, as amended, seeks confidential treatment for information reasonably
determined by the parties as appropriate for such treatment.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE DELIVERY.
5.1 All representations, warranties and covenants contained in this
Agreement shall remain operative and in full force and effect indefinitely,
regardless of any investigation made by or on behalf of any party
6
<PAGE>
or person controlling such party, and shall survive delivery of the Warrants and
the Options under this Agreement.
6. LEGENDS ON WARRANTS AND OPTIONS
6.1 LEGEND ON WARRANTS AND OPTIONS. The Warrants and the securities issued
upon exercise of same shall bear the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR
SUCH TRANSFER. IN NO EVENT MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN
THE FIRST TO OCCUR OF (A) DECEMBER 7, 2001 AND (B) A CHANGE-IN-CONTROL
TRANSACTION (AS DEFINED HEREIN).
The Options and the securities issued upon exercise of same shall bear the
following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR
SUCH TRANSFER. IN NO EVENT MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN
THE FIRST TO OCCUR OF (A) DECEMBER 7, 2001, (B) A QUALIFIED IPO (AS DEFINED
IN THAT CERTAIN EXCHANGE AGREEMENT DATED DECEMBER 7, 1999 BY AND AMONG
RECKSON SERVICE INDUSTRIES, INC., ELLIOT S. COOPERSTONE AND H. THACH PHAM)
AND (C) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
7. GENERAL PROVISIONS
7.1 NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested, with a copy sent by ordinary
mail on the same day), telex, telecopier with confirmation and followed promptly
by hard copy in accordance with this provision, or courier guaranteeing
reasonably prompt delivery and recognized for high quality service:
(i) if to RSI at:
Reckson Service Industries, Inc.
10 East 50th Street - 27th Floor
New York, NY 10103
Tel: 212-931-8000
Fax: 212-931-8001
Attn: Jeffrey D. Neumann and Stephen M. Rathkopf
7
<PAGE>
with copies to:
Jason Barnett, Esq.
General Counsel
RSI Service Industries, Inc.
10 East 50th Street - 27th Floor
New York, NY 10103
Tel: 212-931-8000
Fax: 212-931-8001
Brown & Wood LLP
One World Trade Center
New York, NY 10048
Attention: J. Gerard Cummins, Esq.
Tel: 212-839-5300
Fax: 212-839-5599
(ii) if to Cooperstone, at
Elliot S. Cooperstone
36 New England Drive
Stamford, CT 06903
Tel: 203-968-1113
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Martin H. Levenglick, Esq.
Tel: 212-506-5325
Fax: 212-506-5151
(iii) if to Pham, at
H. Thach Pham
53 Fayette Road
Scarsdale, NY 10583
Tel: 914-725-8693
Fax: 914-722-1419
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Martin H. Levenglick, Esq.
Tel: 212-506-5325
Fax: 212-506-5151
or, in any case, at such other address or addresses as shall have been furnished
in writing by one party to the other parties in accordance with the provisions
of this Section 9.1.
8
<PAGE>
All such notices and communications shall be deemed to have been duly
given: at the time delivered, if delivered by hand, telex or by courier; five
(5) business days after being deposited in the mail, if mailed; and when receipt
acknowledged, if telecopied.
7.2 WAIVER. No waiver of any provision of this Agreement in any instance
shall be, or for any purpose be deemed to be, a waiver of the right of any party
hereto to enforce strict compliance with the provisions hereof in any subsequent
instance.
7.3 AGREEMENT TO PERFORM NECESSARY ACTS. Each party hereto and the heirs,
executors or administrators of the Stockholders shall perform any further acts
and execute and deliver any documents or procure any court orders which may
reasonably be necessary or appropriate to carry out the provisions of this
Agreement.
7.4 MODIFICATION. Except as otherwise provided herein, this Agreement may
not be modified or amended except by a writing signed by each of the Founders
and by an officer duly authorized to act on behalf of RSI.
7.5 SUBMISSION TO JURISDICTION. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States of America, in
each case located in the County of New York, for any action, proceeding or
investigation in any court or before any governmental authority ("Litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any Litigation relating thereto except in
such courts). Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any Litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America, in each case located in the
County of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such Litigation
brought in any such court has been brought in an inconvenient forum.
7.6 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law rules thereof, applicable to contract made and to be performed
within that State.
7.7 EFFECT OF HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
7.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In proving this Agreement
it shall not be necessary to produce or account for more than one such
counterpart executed by the party against whom enforcement is sought.
7.9 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement unless the effect thereof would be to alter materially the effect of
this Agreement, and this Agreement (if not so altered) shall be carried out as
if any such illegal, invalid or unenforceable provision were not contained
herein.
7.10 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy on the part of any party upon any breach or
default of any party to this Agreement shall impair
9
<PAGE>
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein, or of 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. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any party of any breach or default under
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies either under this
Agreement, or by law otherwise afforded to any party, shall be cumulative and
not alternative.
7.11 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. To the extent that this Agreement refers to
any defined term or provision in any other agreement between and among the
parties hereto, such reference or use thereof in this Agreement shall not be
deemed to supercede such defined term or provision in such other agreement. This
Agreement is intended to be for the sole and exclusive benefit of the
signatories hereto and their permitted successors and assigns, and for the
benefit of no other Person.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RECKSON SERVICE INDUSTRIES, INC.
By: ________________________________
Jeffrey D. Neumann
Executive Vice President
ELLIOT S. COOPERSTONE
_________________________________________
H. THACH PHAM
_________________________________________
<PAGE>
EXHIBIT I
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER __, 2001 AND (B) A CHANGE-IN-CONTROL TRANSACTION (AS DEFINED HEREIN).
WARRANT TO PURCHASE UP TO 100,000 SHARES
OF COMMON STOCK OF
RECKSON SERVICE INDUSTRIES, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
W-1
This certifies that [NAME OF HOLDER] or its permitted assigns (the
"Holder"), for value received, is entitled to purchase from Reckson Service
Industries, Inc., a Delaware corporation (the "Company"), having a place of
business at 10 East 50th Street - 27th Floor, New York, New York, a maximum of
100,000 fully paid and nonassessable shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock") for cash at a price of $15.00 per
share (as may be adjusted from time to time in accordance with Section 3, the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (New York time), on the first to occur of (i) a Change-in-Control
Transaction (as defined below), and (ii) December __, 2009 (the first of such
dates in clauses (i) and (ii) being referred to herein as the "Expiration
Date"). Holder may purchase the shares hereunder upon surrender to the Company
at its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Warrant is exercisable at any time prior to the
Expiration Date with respect to all or any part of the shares of Common Stock
set forth in the first paragraph of this Warrant. Any unexercised portion of
this Warrant shall terminate on the Expiration Date. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Common Stock as may be requested by the Holder hereof and shall be registered in
the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
<PAGE>
For purposes of the above calculation, fair market value of one share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any successor thereto or the primary exchange on which the
Common Stock is then quoted, or, if the Common Stock is not then quoted on any
automated quotation system or exchange, the price determined by the Company's
Board of Directors in good faith.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights evidenced by this Warrant may be
exercised, the Company will at all times during such period have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights evidenced by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the securities of the Company may be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities laws with respect to such exercise except as
otherwise provided by that certain Warrant Registration Rights Agreement, of
even date herewith, by and among the Company, Elliot S. Cooperstone and H. Thach
Pham.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment in accordance with this Section 3 and
from time to time upon the occurrence of certain events described in this
Section 3. Upon each adjustment of the Stock Purchase Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor,
<PAGE>
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action, (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Warrant, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had the Holder
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then, as a condition of
such Organic Change, lawful and adequate provisions shall be made by the Company
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby. In the event of any Organic Change, the Company
shall make appropriate provision with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holders
of a majority of the warrants to purchase Common Stock then outstanding,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase. The Company shall notify the Holder of this Warrant of any proposed
Organic Change or Change-in-Control Transaction reasonably prior to the
consummation of such Organic Change or Change-in-Control Transaction so as to
provide such Holder with a reasonable opportunity prior to such consummation to
exercise this Warrant in accordance with the terms and conditions hereof;
provided, however, that in the case of a transaction which requires notice be
given to the holders
<PAGE>
of Common Stock of the Company, the Holder of this Warrant shall be provided the
same notice given to the holders of Common Stock of the Company.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant and of the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 10
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at least 30
business days prior to the date on which an Organic Change shall take place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon
the exercise of any portion of this Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of any portion of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof the
right to vote or to consent or to receive notice as a stockholder of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall
<PAGE>
give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Warrant, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Warrant, shall be transferable, in whole or in part,
except to the Holder's estate, heirs, administrators or executors and, whether
by gift or otherwise, from the Holder to the Holder's spouse, siblings, lineal
descendants or ancestors (or to a trustee of a trust which upon such transfer
and at all times thereafter is maintained solely for the benefit of such
persons). Commencing at the end of the Restricted Period and thereafter, subject
to compliance with applicable federal and state securities laws, this Warrant
and all rights hereunder shall be transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed.
For purposes of this Warrant, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter.
For purposes of this Warrant, the "Restricted Period" shall mean the period
commencing on the date of this Warrant and ending on the first to occur of (a)
two (2) years from the date of this Warrant and (b) a Change-in-Control
Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and
<PAGE>
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the State of New York, without regard to
its rules concerning conflicts of law.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer thereunto duly authorized.
Dated: As of December __, 1999 Reckson Service Industries, Inc.,
a Delaware corporation
By__________________________________________
Name: Scott H. Rechler
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
|_| The undersigned hereby elects to exercise the warrant issued to it by
Reckson Service Industries, Inc. (the "Company") and dated December __,
1999 Warrant No. W-1 (the "Warrant") and to purchase thereunder ___________
shares of the Common Stock, par value $.01 per share, of the Company (the
"Shares") at a purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the "Purchase
Price").
|_| The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1.1 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
By:
Title:
9
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO RECKSON SERVICE
INDUSTRIES, INC., ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANT DATED DECEMBER __, 1999, WILL BE ISSUED.
- ------------, ----
Reckson Service Industries, Inc.
225 Broadhollow Road
Melville, New York 11747
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock") of
Reckson Service Industries, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
<PAGE>
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
By:
Title:
11
<PAGE>
EXHIBIT II
FORM OF OPTION
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED UNLESS EITHER (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR (B) THE CORPORATION HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER. IN NO EVENT
MAY THESE SECURITIES BE TRANSFERRED EARLIER THAN THE FIRST TO OCCUR OF (A)
DECEMBER __, 2001, (B) A QUALIFIED IPO (AS DEFINED IN THAT CERTAIN EXCHANGE
AGREEMENT DATED DECEMBER __, 1999 BY AND AMONG RECKSON SERVICE INDUSTRIES, INC.,
ELLIOT S. COOPERSTONE AND H. THACH PHAM) AND (C) A CHANGE-IN-CONTROL TRANSACTION
(AS DEFINED HEREIN).
OPTION TO PURCHASE UP TO 394,737 SHARES
OF COMMON STOCK OF
ESOURCEONE, INC.
(VOID AFTER THE EXPIRATION DATE SET FORTH HEREIN)
O-1
This certifies that RECKSON SERVICE INDUSTRIES, INC., a Delaware
corporation, or its permitted assigns (the "Holder"), for value received, is
entitled to purchase from [Name of Party Granting the Option] (the "Optionor"),
an individual residing at ____________________, a maximum of 394,737 fully paid
and nonassessable shares of the Common Stock, $.01 par value per share (the
"Common Stock"), of eSourceOne, Inc., a Delaware corporation (the "Company") for
cash at a price of $3.80 per share (as may be adjusted from time to time in
accordance with Section 3, the "Stock Purchase Price") at any time or from time
to time up to and including 5:00 p.m. (New York time), on the first to occur of
(i) a Change-in-Control Transaction (as defined below), and (ii) December __,
2009 (the first of such dates in clauses (i) and (ii) being referred to herein
as the "Expiration Date"). The shares purchasable hereunder are referred to as
the "Purchasable Shares". Holder may purchase all or any part of the Purchasable
Shares upon surrender to the Optionor at the address of Optionor set forth above
(or at such other location as the Optionor may advise the Holder in writing) of
this Option properly endorsed with the Form of Exercise Notice attached hereto
duly completed and signed and against payment in cash or by check of the
aggregate Stock Purchase Price for the number of Purchasable Shares for which
this Option is being exercised determined in accordance with the
<PAGE>
provisions hereof. The Stock Purchase Price and the number of Purchasable Shares
are subject to adjustment as provided in Section 3 of this Option.
This Option is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 EXERCISE. This Option is exercisable at any time prior to the
Expiration Date with respect to all or any part of the Purchasable Shares. Any
unexercised portion of this Option shall terminate on the Expiration Date.
Certificates for all or any portion of the Purchasable Shares for which this
Option is exercised, properly endorsed, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Optionor at the Optionor's expense within
a reasonable time after this Option has been so exercised and payment of the
purchase price for such Purchasable Shares has been received by the Optionor. In
the case of an election to purchase less than all of the Purchasable Shares, the
Optionor shall cancel this Option and execute and deliver a new Option or
Options of like tenor for the unexercised portion of the Purchasable Shares
within a reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof, and the
Optionor shall execute any such documents as may be requested by the Company to
register on the Company's stock ledger the ownership of the Purchasable Shares
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value per share of the Common Stock is greater than
the Stock Purchase Price (at the date of calculation as set forth below), in
lieu of exercising this Option for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Option (or the portion thereof
being canceled) by surrender of this Option at the address of the Holder
together with the properly endorsed Form of Exercise Notice and notice of such
election in which event the Optionor shall transfer to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
----
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of Purchasable Shares or, if only a portion of this
Option is being exercised, the portion of this Option being
exercised (at the date of such calculation)
A = the fair market value per share of Common Stock (at the date of
such calculation)
B = the Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value per share of Common
Stock shall be equal to the closing sales price for the Common Stock as quoted
on the NASDAQ or any
<PAGE>
successor thereto or the primary exchange on which the Common Stock is then
quoted, or, if the Common Stock is not then quoted on any automated quotation
system or exchange, the price determined by the Company's Board of Directors in
good faith.
2. SHARES TO BE UNENCUMBERED. The Optionor covenants and agrees that all of
the Purchasable Shares have been duly authorized, validly issued, fully paid and
nonassessable and are free from all preemptive rights of any stockholder and
free of all taxes, encumbrances, liens, charges and the like (each an
"Encumbrance") with respect to the issue thereof, including, without limitation,
any Encumbrance under that certain Stockholders' Agreement, dated August 11,
1999, by and among certain stockholders of the Company, including, among others,
the Optionor and the Holder. The Optionor further covenants and agrees that,
during the period within which the rights evidenced by this Option may be
exercised, the Optionor will maintain ownership of the Purchasable Shares and
any additional stock or other securities or property (including cash) by way of
spin-off, split-up, reclassification, or combination thereof or similar
corporate action free and clear of any Encumbrances. The Optionor will not take
any action in his individual capacity which would cause, or omit to take any
action within the reasonable control of Optionor which would prevent, the
purchase of any of the Purchasable Shares by the Holder as provided herein to
be, or from being, as the case may be, a violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the securities of the Company may be listed; provided, however, that the
foregoing sentence shall not apply in any case where it requires the Optionor to
act or omit to act in a manner that is contrary to any fiduciary duty that the
Optionor has to the Company in the Optionor's capacity as an officer or director
of the Company.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Option shall be subject to adjustment in accordance with this Section 3 and from
time to time upon the occurrence of certain events described in this Section 3.
Upon each adjustment of the Stock Purchase Price, the Holder of this Option
shall thereafter be entitled to purchase, at the Stock Purchase Price resulting
from such adjustment, the number of shares obtained by multiplying the Stock
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, PROPERTY, RECLASSIFICATION. If at any
time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Option) shall
have received or become entitled to receive, without payment therefor,
<PAGE>
(a) Common Stock or any shares of stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for any other
shares of stock or other securities, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate action (other than shares of Common Stock issued as
a stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of any portion of this Option, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in this clause
(b)) which such Holder would hold on the date of such exercise had he been the
holder of record of such Common Stock as of the date on which holders of Common
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
recapitalization, reclassification or reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all of its assets or other transaction shall
be effected, in each case in such a way that does not constitute a
Change-in-Control Transaction (an "Organic Change"), then the Holder hereof
shall thereafter have the right to purchase and receive (in lieu of the shares
of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of Purchasable Shares of immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In the event of any Organic Change, the Optionor shall make appropriate
provision with respect to the rights and interests of the Holder of this Option
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of shares
purchasable and receivable upon the exercise of this Option) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Optionor shall notify the Holder of
any proposed Organic Change or Change-in-Control Transaction reasonably prior to
the consummation of such Organic Change or Change-in-Control Transaction so as
to provide Holder with a reasonable opportunity prior to such consummation to
exercise this Option in accordance with the terms and conditions hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Common Stock or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder in accordance with such provisions, then the
Optionor shall make an adjustment in the number and class of shares available
under the Option, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of this Option upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as the
Holder would have owned had this Option been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.
<PAGE>
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Option and of the Stock Purchase Price, the Optionor shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(b) The Optionor shall give written notice to the Holder at least ten (10)
business days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions.
(c) The Optionor shall also give written notice to the Holder at least
thirty (30) business days prior to the date on which an Organic Change shall
take place.
4. TRANSFER AND ISSUE TAXES. The transfer of and issuance of certificates
for shares of Common Stock upon the exercise of any portion of this Option shall
be made without charge to the Holder of this Option for any transfer or issue
tax (other than any applicable income taxes) in respect thereof; provided,
however, that neither Optionor nor the Company shall be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of this
Option being exercised.
5. CLOSING OF BOOKS. The Optionor shall not cause the Company to close at
any time the Company's transfer books against the transfer of any shares of
Common Stock transferable upon the exercise of this Option in any manner which
interferes with the timely exercise of any portion of this Option; provided,
however, that the foregoing sentence shall not apply in any case where it
requires the Optionor to act or omit to act in a manner that is contrary to any
fiduciary duty that the Optionor has to the Company in the Optionor's capacity
as an officer or director of the Company.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Option shall be construed as conferring upon the Holder hereof the right
to vote or to consent or to receive notice as a stockholder of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Option or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Option shall have been exercised. No provisions
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the Stock Purchase
Price or as a stockholder of the Company, whether such liability is asserted by
the Optionor, the Company or by its creditors.
7. TRANSFER. Until the end of the Restricted Period (as defined below),
neither this Option, the rights hereunder nor the shares of Common Stock issued
upon exercise of this Option, shall be transferable, in whole or in part, except
to Affiliates or employees of the Holder. Commencing at the end of the
Restricted Period and thereafter, subject to compliance with applicable federal
and state securities laws, this Option and all rights hereunder shall be
<PAGE>
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of the Option properly enclosed.
For purposes of this Option, the term "Affiliate" shall mean shall mean any
corporation or other entity in which the subject person (A)(1) owns or controls
the voting rights of 50% or more of the capital stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or entity or (2)
has the right to nominate and/or elect at least one-half of the members of the
board of directors of such corporation or entity or (3) at least one-half of the
then current members of the board of directors of such corporation or entity
were nominated or designated for election as directors of such corporation by
the subject person and (B) for financial reporting purposes, the financial
statements of the subject person includes on a consolidated basis the financial
statements of such corporation or other entity.
For purposes of this Option, a "Change-in-Control Transaction" shall mean
any merger or consolidation of the Company into or with another corporation,
sale, transfer or other disposition of all or substantially all of the assets or
capital stock of the Company, or any reorganization, recapitalization or like
transaction or series of transactions having substantially equivalent effect and
purpose, at the conclusion of which such merger, consolidation, sale, transfer,
disposition, reorganization, recapitalization or like transaction the holders of
the voting capital stock of the Company immediately prior to such transaction or
series of transactions own less than a majority of the voting capital stock of
the acquiring entity or entity surviving or resulting from such transaction or
series of transactions immediately thereafter; provided, however, that
Change-in-Control Transaction shall not include any acquisition or series of
related acquisitions of more than 50% of the outstanding capital stock of the
Company by Reckson Service Industries, Inc. or its Affiliates.
For purposes of this Option, a "Qualified IPO" shall mean a firm
underwritten public offering of common stock of eSourceOne by a nationally
recognized underwriter which offering results in the receipt of aggregate gross
proceeds by eSourceOne of at least $30,000,000 and reflects a market value of
eSourceOne of at least $150,000,000 immediately prior to such public offering.
For purposes of this Option, the "Restricted Period" shall mean the period
commencing on the date of this Option and ending on the first to occur of (a)
two (2) years from the date of this Option, (b) a Qualified IPO and (c) a
Change-in-Control Transaction.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF OPTION. The rights and
obligations of the Company, of the Holder of this Option and of the holder of
shares of Common Stock issued upon exercise of this Option referred to in
Section 7 shall survive the exercise of this Option.
9. MODIFICATION AND WAIVER. This Option and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
<PAGE>
10. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder hereof or the Optionor shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at the Holder's
address as set forth in the first paragraph of this Option, to the Optionor at
the Optionor's address as set forth in the first paragraph of this Option, or,
in each case, such other address as either may from time to time be provided by
one party to the other.
11. BINDING EFFECT ON SUCCESSORS. This Option shall be binding upon any
successor in interest to the Optionor. All of the obligations of the Optionor
relating to the transfer of the Common Stock upon the exercise of this Option
shall survive the exercise and termination of this Option. All of the covenants
and agreements of the Optionor shall inure to the benefit of the successors and
assigns of the Holder.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Option are inserted for convenience only
and do not constitute a part of this Option. This Option shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the internal laws of the State of New York, without regard to its rules
concerning conflicts of law.
13. LOST OPTION. The Optionor represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Optionor of the
loss, theft, destruction, or mutilation of this Option and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Optionor, or in the case of any such mutilation upon
surrender and cancellation of this Option, the Company, at its expense, will
make and deliver a new Option, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Option.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Option. The Company shall pay to the Holder, in lieu of issuing any
fractional share, a sum in cash equal to such fraction multiplied by the then
effective Stock Purchase Price.
<PAGE>
IN WITNESS WHEREOF, the Option has caused this Option to be duly executed
by its officer thereunto duly authorized.
Dated: As of December __, 1999 [NAME OF OPTIONOR]
-----
By_____________________________
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, _____
[NAME OF OPTIONOR]
[STREET ADDRESS]
[CITY, STATE ZIPCODE]
Dear __________:
|_| The undersigned hereby elects to exercise the option issued to it by [Name
of Optionor] (the "Optionor"), dated December __, 1999 (the "Option"), and
to purchase thereunder ___________ shares (the "Shares") of the Common
Stock, par value $.01 per share, of eSourceOne, Inc., a Delaware
corporation, at a purchase price of $___ per Share or an aggregate purchase
price of ______________________ Dollars ($__________) (the "Purchase
Price").
|_| The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Option pursuant to the provisions of Section
1.1 of the Option.
Pursuant to the terms of the Option the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Option.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: ________________________________
Name:
Title:
9
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO THE OPTIONOR, ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
OPTION, DATED DECEMBER __, 1999, WILL BE ISSUED.
------------, ----
[NAME OF OPTIONOR]
[STREET ADDRESS]
[CITY, STATE ZIPCODE]
Dear ____________:
The undersigned, ________________ ("Purchaser"), intends to acquire up to ______
shares of the Common Stock, $0.01 par value per share (the "Common Stock"), of
eSourceOne, Inc. (the "Company") from you ("Optionor") pursuant to the exercise
of that certain Option, dated December __, 1999, granted by Optionor to
Purchaser. The Common Stock will be sold to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by Optionor and the Company,
Purchaser represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by Optionor and the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
10
<PAGE>
Purchaser agrees that the shares of Common Stock to be purchased by Purchaser
upon exercise of the Option shall in the hands of Purchaser continue to be
subject to the terms and conditions of that certain Stockholders Agreement by
and among the Company and certain stockholders of the Company, including, among
others, Optionor and Purchaser, or any replacement stockholders agreement (the
"Stockholders Agreement"), and to execute a counterpart of the Stockholders
Agreement upon request by Optionor or the Company for the purpose of evidencing
such agreement by Purchaser.
Purchaser also understands and agrees that, in addition to any legends required
by the Stockholders Agreement, there will be placed on the certificate(s) for
the Common Stock or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to
the Company that registration is not required and that an applicable
exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
RECKSON SERVICE INDUSTRIES, INC.
By: _______________________________
Name:
Title:
11
Exhibit 10.41
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of December 7, 1999 between RECKSON SERVICE INDUSTRIES, INC., a Delaware
corporation (the "Company") and Elliott S. Cooperstone ("Cooperstone") and H.
Thach Pham ("Pham"; together with Cooperstone, the "Sellers").
RECITALS
WHEREAS, the Company and each of the Sellers have executed and delivered
that certain Agreement, dated December 7, 1999 (the "Exchange Agreement"),
pursuant to which the Company has agreed to execute and deliver to each Seller a
Warrant (each a "Warrant"; together the "Warrants") to purchase a specified
number of shares of common stock, par value $0.01 per share, of the Company (the
"Warrant Shares"), in exchange for execution and delivery to the Company by each
Seller an Option to purchase from such Seller a specified number of shares of
the common stock, par value $0.01 per share, of eSourceOne, Inc., a Delaware
corporation ("eSourceOne");
WHEREAS, as an inducement to the Sellers to consummate such exchange, the
Company desires to grant to each Seller the registration rights set forth in
this Agreement, subject to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the receipt and sufficiency of which is hereby
acknowledged, and subject to the terms and conditions set forth herein, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of Section
3 hereof.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in The City of New York are authorized or required by
law, executive order or regulation to remain closed.
"Change-in-Control Transaction" means any merger or consolidation of the
Company into or with another corporation, sale, transfer or other disposition of
all or substantially all of the assets or capital stock of the Company, or any
reorganization, recapitalization or like transaction or series of transactions
having substantially equivalent effect and purpose, at the conclusion of which
such merger, consolidation, sale, transfer, disposition, reorganization,
recapitalization or like transaction the holders of the voting capital stock of
the Company immediately prior to such transaction or series of transactions own
less than a majority of the voting capital stock of the acquiring entity or
entity surviving or resulting from such transaction or series of transactions
immediately thereafter.
<PAGE>
"Company" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"Effectiveness Period" shall have the meaning set forth in Section 2(a)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Exchange Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Holder" shall mean each of the Sellers, for so long as any of them own any
Registrable Securities, and each of their respective successors, assigns and
direct and indirect transferees who become holders of record of Registrable
Securities.
"Inspectors" shall have the meaning set forth in Section 3(m) hereof.
"Issue Date" shall mean the date of original issuance of the Warrant Shares
pursuant to the Exchange Agreement.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability corporation, or a government or
agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Shelf Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and, in each case, including all documents incorporated by reference
therein.
"Records" shall have the meaning set forth in Section 3(k) hereof.
"Registrable Securities" shall mean the Warrant Shares; provided, however,
that Warrant Shares shall cease to be Registrable Securities when the earlier of
the following occurs (i) a Shelf Registration Statement with respect to such
Warrant Shares for the resale thereof shall have been declared effective under
the Securities Act and such Warrant Shares shall have been disposed of pursuant
to such Shelf Registration Statement, (ii) such Warrant Shares shall have been
sold to the public pursuant to Rule 144(k) (or any similar provision then in
force, but not Rule 144A) under the Securities Act or are eligible to be sold
without restriction as contemplated by Rule 144(k) or (iii) such Warrant Shares
shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue sky laws
(including reasonable fees and disbursements of one counsel for all underwriters
or Holders as a group in connection with blue sky qualification of any of the
Registrable Securities), (iii) all
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expenses of any Persons in preparing or assisting in preparing, word processing,
printing and distributing any Shelf Registration Statement, any Prospectus and
any amendments or supplements thereto, (iv) all fees and expenses incurred in
connection with the listing, if any, of the Registrable Securities on any
securities exchange or quoted on NASDAQ, (v) all fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of any "cold comfort" letters required by or incident to such
performance and compliance.
"Restricted Period" shall mean the period of commencing on the date of the
Exchange Agreement and ending on the first to occur of (a) two (2) years from
the date of the Exchange Agreement and (b) a Change-in-Control Transaction.
"Rule 144(k) Period" shall mean the period of two years (or such shorter
period as may hereafter be referred to in Rule 144(k) under the Securities Act
(or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shelf Registration" shall mean a registration effected pursuant to Section
2(a) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2(a) hereof which covers
all of the Registrable Securities on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated by reference
therein.
"Warrant Shares" shall have the meaning set forth in the recitals hereto.
2. Registration Under the Securities Act.
a. Shelf Registration. At any time following (i) the exercise of a Warrant
for a number of Warrant Shares having a value of at least $1 million (determined
on the price per share to be offered to the public) and (ii) the end of the
Restricted Period, upon the request of the Holders of such Warrant Shares, the
Company shall file or cause to be filed, within 90 days after such request, a
Shelf Registration Statement providing for the sale by the Holders of all of the
Registrable Securities and shall use its reasonable best efforts to have such
Shelf Registration Statement declared effective by the SEC. No Holder of
Registrable Securities shall be entitled to include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and until
such Holder agrees in writing to be bound by all of the provisions of this
Agreement applicable to such Holder and furnishes to the Company in writing,
within 10 Business Days after receipt of a request therefor, such information as
the Company may, after conferring with counsel with regard to information
relating to Holders that would be required by the SEC to be included in such
Shelf Registration Statement or Prospectus included therein, reasonably request
for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected agrees
to furnish to the
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Company all information with respect to such Holder necessary to make the
information previously furnished to the Company by such Holder not materially
misleading.
The Company agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective and the Prospectus usable for
resales during the Rule 144(k) Period (subject to extension pursuant to the
provisions of this paragraph), or for such shorter period which will terminate
when all of the Warrant Shares covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement or cease to be
Registrable Securities (the "Effectiveness Period"); provided, however, that for
120 days or less (whether or not consecutive) in any twelve-month period, the
Company shall be permitted to suspend sales of Warrant Shares: (i) if the Shelf
Registration Statement is no longer effective or the Prospectus usable for
resales due to circumstances relating to pending developments, public filings
with the SEC and similar events, (ii) because the Prospectus includes an untrue
statement of a material fact or omits to state a material fact necessary in
order to make statements therein, in the light of the circumstances under which
they were made, not misleading or (iii) if the Company is engaged in or has
completed an underwritten public offering and the underwriters' lock-up period
with respect to sales of common stock (or securities convertible into common
stock) has not expired. Each Holder agrees that it shall give the Company notice
of not less than five (5) Business Days prior to disposing of any Registered
Securities under the Shelf Registration Statement so that the Company may make
any determination to suspend sales of Warrant Shares as contemplated in the
preceding sentence. Each Holder further agrees that it shall not dispose of
Registrable Securities under the Shelf Registration Statement in any single
transaction of less than $1 million determined on the price per share offered to
the public; provided however, a Holder may dispose of Registrable Securities in
a transaction of less than $1 million if such Holder is disposing of all of its
Registrable Securities in such transaction. In addition, each Holder agrees that
it shall not dispose of Registrable Securities under the Shelf Registration
Statement in any underwritten offering by one or more Holders of less than an
aggregate of $5 million of Registrable Securities determined on the price per
share offered to the public. The Company will, in the event a Shelf Registration
Statement is declared effective, provide to each Holder a reasonable number of
copies of the Prospectus which is a part of the Shelf Registration Statement,
and, at that time, notify each such Holder that the Shelf Registration Statement
has become effective and take such other actions as are required to permit
unrestricted resales of the Registrable Securities. The Company further agrees
to supplement or amend the Shelf Registration Statement if and as required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration Statement or by the Securities Act or
by any other rules and regulations thereunder for shelf registrations, and the
Company agrees to furnish to the Holders of Registrable Securities copies of any
supplement or amendment to the Prospectus promptly after its being used or filed
with the SEC.
b. Expenses. The Company, as issuer of the Warrant Shares, shall pay all
Registration Expenses in connection with any Shelf Registration Statement filed
pursuant to Section 2(a) hereof and will reimburse any single counsel designated
in writing by the Holders of a majority of the Registrable Securities to act as
counsel for the Holders of the Registrable Securities in connection with a Shelf
Registration Statement, which other counsel shall be reasonably satisfactory to
the Company; provided however, that such reimbursement shall in no event exceed
an aggregate of $10,000. Except as provided herein, each Holder shall pay all
expenses of its counsel, underwriting discounts and commissions and transfer
taxes, if any,
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<PAGE>
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(c) Effective Shelf Registration Statement. A Shelf Registration Statement
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to such Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Shelf Registration Statement will be deemed not to have been effective during
the period of such interference, until the offering of Registrable Securities
pursuant to such Shelf Registration Statement may legally resume. The Company
will be deemed not to have used its reasonable best efforts to cause a Shelf
Registration Statement to become, or to remain, effective during the requisite
period if it voluntarily takes any action that would result in any such Shelf
Registration Statement not being declared effective or that would result in the
Holders of Registrable Securities covered thereby not being able to offer and
sell such Registrable Securities during that period, unless such action is
required by applicable law.
(d) Specific Enforcement. Without limiting the remedies available to the
Holders, the Company acknowledges that any failure by it to comply with its
obligations under Section 2(a) hereof may result in material irreparable injury
to the Holders for which there is no adequate remedy at law, that it would not
be possible to measure damages for such injuries precisely and that, in the
event of any such failure, any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Section 2(a) hereof.
3. Registration Procedures. In connection with the obligations of the
Company with respect to the Shelf Registration Statement pursuant to Section
2(a) hereof, the Company shall use its reasonable best efforts to:
(a) prepare and file with the SEC a Shelf Registration Statement as
prescribed by Section 2(a) hereof within the relevant time period specified
in Section 2(a) hereof on the appropriate form under the Securities Act,
which form shall (i) be selected by the Company, (ii) be available for the
sale of the Registrable Securities by the selling Holders thereof, and
(iii) comply as to form in all material respects with the requirements of
the applicable form and include all financial statements required by the
SEC to be filed therewith; the Company shall use its efforts to cause such
Shelf Registration Statement to become effective and remain effective and
the Prospectus usable for resales in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep
such Shelf Registration Statement effective for the Effectiveness Period,
subject to the proviso contained in the second paragraph in Section 2(a),
and cause each Prospectus to be supplemented, if so determined by the
Company or requested by the SEC, by any required prospectus supplement and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provision then in force) under the Securities Act, and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder applicable to it with respect to the
disposition of all securities
5
<PAGE>
covered by a Shelf Registration Statement during the Effectiveness Period
in accordance with the intended method or methods of distribution by the
selling Holders thereof described in this Agreement;
(c) register or qualify the Registrable Securities under all
applicable state securities or "blue sky" laws of such jurisdictions by the
time the applicable Shelf Registration Statement is declared effective by
the SEC as any Holder of Registrable Securities covered by a Shelf
Registration Statement and each underwriter of an underwritten offering of
Registrable Securities shall reasonably request in writing in advance of
such date of effectiveness, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such Holder and
underwriter to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that the
Company shall not be required to (i) qualify as a foreign corporation or as
a dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(c), (ii) file any general
consent to service of process in any jurisdiction where it would not
otherwise be subject to such service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not then so subject;
(d) promptly notify each Holder of Registrable Securities, their
counsel and the managing underwriters, if any, and promptly confirm such
notice in writing (i) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Shelf
Registration Statement or the qualification of the Registrable Securities
in any jurisdiction described in Section 3(c) hereof or the initiation of
any proceedings for that purpose, (ii) if, between the effective date of a
Shelf Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any purchase agreement, securities sales agreement or
other similar agreement cease to be true and correct in all material
respects, and (iii) of the happening of any event or the failure of any
event to occur or the discovery of any facts, during the Effectiveness
Period, which makes any statement made in a Shelf Registration Statement or
the related Prospectus untrue in any material respect or which causes such
Shelf Registration Statement or Prospectus to omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(e) obtain the withdrawal of any order suspending the effectiveness of
the Shelf Registration Statement at the earliest possible moment;
(f) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends
and registered in such names as the selling Holders or the underwriters may
reasonably request at least two Business Days prior to the closing of any
sale of Registrable Securities pursuant to the Shelf Registration
Statement;
(g) promptly after the occurrence of any event specified in Section
3(d)(i) or 3(d)(iii) (subject to a 120 day grace period within any
twelve-month period) hereof,
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<PAGE>
prepare a supplement or post-effective amendment to the Shelf
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and the Company shall notify
each Holder to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission;
(h) if requested by the Holders of Registrable Securities in
connection with a firm commitment underwritten offering of at least
$10 million in initial public offering price of Registrable
Securities: (i) enter into such agreements (including underwriting
agreements) as are customary in underwritten offerings and make such
representations and warranties to the underwriters (if any), with
respect to the business of the Company and its subsidiaries as then
conducted and with respect to the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings, and confirm
the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which may be in the form of a reliance
letter) in form and substance reasonably satisfactory to the managing
underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters (it being agreed that the
matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (iii) obtain "cold comfort"
accountants' letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested
by such underwriters in accordance with Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and
procedures;
(i) if requested by Holders of Registrable Securities in
connection with a firm commitment underwritten offering of at least
$15 million in public offering price of Registrable Securities make
reasonably available for inspection by any selling Holder of
Registrable Securities who certifies to the Company that it has a
current intention to sell Registrable Securities pursuant to the Shelf
Registration, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, accountant or other
agent retained by any such selling Holder or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during the Company's normal business hours, all financial and other
records, pertinent organizational and operational documents and
properties of the Company and its subsidiaries (collectively, the
"Records") as shall
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<PAGE>
be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, trustees and
employees of the Company and its subsidiaries to supply all relevant
information in each case reasonably requested by any such Inspector in
connection with such Shelf Registration Statement; records and
information which the Company, in good faith, to be confidential and
any Records and information which it notifies the Inspectors are
confidential shall not be disclosed to any Inspector except where (i)
the disclosure of such Records or information is necessary to avoid or
correct a material misstatement or omission in such Shelf Registration
Statement, (ii) the release of such Records or information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or
proceeding or (iii) such Records or information previously has been
made generally available to the public; each selling Holder of such
Registrable Securities will be required to agree in writing that
Records and information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the basis
for any market transactions in the securities of the Company unless
and until such is made generally available to the public through no
fault of an Inspector or a selling Holder; and each selling Holder of
such Registrable Securities will be required to further agree in
writing that it will, upon learning that disclosure of such Records or
information is sought in a court of competent jurisdiction, or in
connection with any action, suit or proceeding, give notice to the
Company and allow the Company at its expense to undertake appropriate
action to prevent disclosure of the Records and information deemed
confidential;
(j) comply with all applicable rules and regulations of the SEC
so long as any provision of this Agreement shall be applicable and
make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any
twelve-month period (or 90 days after the end of any twelve-month
period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Shelf Registration Statement, which
statements shall cover said twelve-month periods, provided that the
obligations under this Section 3(j) shall be satisfied by the timely
filing of quarterly and annual reports on Forms 10-Q and 10-K under
the Exchange Act;
(k) cooperate with each seller of Registrable Securities covered
by a Shelf Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD; and
(l) take all other steps necessary to effect the registration of
the Registrable Securities covered by a Shelf Registration Statement
contemplated hereby.
Each Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event specified in Section 3(d)(i) or 3(d)(iii)
hereof, such Holder will
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<PAGE>
forthwith discontinue disposition of Registrable Securities pursuant to a Shelf
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(g) hereof or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice. If the Company shall give any such notice to
suspend the disposition of Registrable Securities pursuant to a Shelf
Registration Statement, the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable after the resolution
of the related matters an amendment or supplement to the Shelf Registration
Statement and related Prospectus.
4. Indemnification and Contribution. (a) The Company hereby agrees to
indemnify and hold harmless each Holder, each underwriter who participates in an
offering of the Registrable Securities, each Person, if any, who controls any of
such parties within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act and each of their respective directors, officers,
employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in a Shelf Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact required to be stated therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that (subject to Section
4(d) hereof) such settlement is effected with the prior written consent of
the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by such Holder),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished in writing to the Company by such
Holder or underwriter for use in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
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(b) Each Holder or underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its trustees and officers (including
each officer of the Company who signed the Shelf Registration Statement), and
each Person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 4(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Shelf Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
such Shelf Registration Statement (or any amendment thereto) or such Prospectus
(or any amendment or supplement thereto); provided, however, that no Holder
shall be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have under this Section 4 to the extent that it is not materially
prejudiced by such failure as a result thereof, and in any event shall not
relieve it from liability which it may have otherwise on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 4(a)
or (b) above, counsel to the indemnified parties shall be selected by such
parties. An indemnifying party may participate at its own expense in the defense
of such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for the
fees and expenses of more than one counsel (in addition to local counsel),
separate from their own counsel, for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 4 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional written release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have validly requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
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(e) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement set forth in this Section 4 is
for any reason held to be unenforceable by an indemnified party although
applicable in accordance with its terms, the Company, on the one hand, and the
Holders, on the other hand, shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by the Company and the Holders, as incurred;
provided, however, that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any Person that was not guilty of such fraudulent misrepresentation. As
between the Company, on the one hand, and the Holders, on the other hand, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company,
on the one hand, and the Holders, on the other hand, with respect to the
statements or omissions which resulted in such loss, liability, claim, damage or
expense, or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by or on behalf of the Holders, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Holders of the Registrable Securities agree that it would not be just
and equitable if contribution pursuant to this Section 4 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the relevant equitable considerations. For purposes of this Section
4, each Affiliate of a Holder, and each director, officer and employee and
Person, if any, who controls a Holder or such Affiliate within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
such Holder, and each trustee and officer of the Company and each Person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Company.
5. Participation in an Underwritten Registration. No Holder may participate
in an underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Registrable Securities on the basis provided in the underwriting
arrangement approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities covered
by the Shelf Registration Statement who desire to do so may sell the Securities
covered by such Shelf Registration in an underwritten offering, subject to the
provisions of Section 3(h) hereof. In any such underwritten offering, the
underwriter or underwriters and manager or managers that will administer the
offering will be selected by the Holders; provided, however, that such
underwriters and managers must be reasonably satisfactory to the Company.
11
<PAGE>
7. Miscellaneous.
(a) Rule 144. For so long as the Company is subject to the reporting
requirements of Section 13 or 15 of the Exchange Act and any Registrable
Securities or Warrant Shares which are no longer Registrable Securities solely
as a result of their issuance pursuant to a Net Issue Exercise as provided by
Section 1.2 of the Warrant (collectively, "Eligible Securities") remain
outstanding, the Company will file the reports required to be filed by it under
the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the SEC thereunder; provided, however, that if the
Company ceases to be so required to file such reports, it will, upon the request
of any Holder of Eligible Securities (a) make publicly available such
information as is necessary to permit sales of its securities pursuant to Rule
144 under the Securities Act and (b) take such further action that is reasonable
in the circumstances, in each case, to the extent required from time to time to
enable such Holder to sell its Eligible Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such rule may be amended from time to time, or any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Eligible Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into, and will
not enter into, any agreement which is inconsistent with the rights granted to
the Holders of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof. The rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any such
agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of a majority of
the outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or departure; provided that no amendment, modification or
supplement or waiver or consent to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder of Registrable
Securities. Notwithstanding the foregoing sentence, (i) this Agreement may be
amended, without the consent of any Holder of Registrable Securities, by written
agreement signed by the Company and the Sellers or their successors and assigns
to cure any ambiguity, correct or supplement any provision of this Agreement
that may be inconsistent with any other provision of this Agreement or to make
any other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with other provisions of this
Agreement, (ii) this Agreement may be amended, modified or supplemented, and
waivers and consents to departures from the provisions hereof may be given, by
written agreement signed by the Company and the Sellers or their successors and
assigns to the extent that any such amendment, modification, supplement, waiver
or consent is, in their reasonable judgment, necessary or appropriate to comply
with applicable law (including any interpretation of the Staff of the SEC) or
any change therein and (iii) to the extent any provision of this Agreement
relates to the Sellers, such provision may be amended,
12
<PAGE>
modified or supplemented, and waivers or consents to departures from such
provisions may be given, by written agreement signed by the Sellers and the
Company.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 7(d),
which address initially is, with respect to the Sellers, the address set forth
in the Exchange Agreement; and (ii) if to the Company, initially at the
Company's address set forth in the Exchange Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an overnight courier, including
Federal Express or similar courier utilizing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the Sellers,
including, without limitation and without the need for an express assignment,
subsequent Holders; provided, however, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Exchange Agreement provided, further, that the
rights of the Sellers hereunder shall not be assignable to any competitor of the
Company unless such assignment is in connection with the sale by the Sellers of
a majority of the Restricted Stock held by the Sellers and notice of such
assignment and the identity of such transferee is provided to the Company. If
any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiaries. Each Holder shall be a third party
beneficiary of the agreements made hereunder among the Company and the Sellers,
and the Sellers shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights or
the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
13
<PAGE>
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to any
provisions relating to conflicts of laws.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
RECKSON SERVICE INDUSTRIES, INC.
By: ___________________________________
Name: Jeffrey D. Neumann
Title: Executive Vice President
THE SELLERS
___________________________________
Elliot S. Cooperstone
___________________________________
H. Thach Pham
15
Exhibit 12.1
FRONTLINE CAPITAL GROUP
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the period shown:
<TABLE>
<S> <C> <C>
FOR THE YEAR ENDED DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 JULY 15, 1997
- ------------------------------ ------------------------------ TO
1999 1998 DECEMBER 31, 1997
- ------------------------------ ------------------------------ ---------------------
($58,637,000)(1) ($8,079,858)(1) ($257,887)(1)
</TABLE>
(1) Represents the excess of fixed charges over earnings.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income from
continuing operations before minority interest and fixed charges. Fixed
charges consist of interest expense, rent expense, and the amortization of
organization costs.
IV-38
Exhibit 21.1
FRONTLINE CAPITAL GROUP
STATEMENT OF SUBSIDIARIES
NAME STATE OF ORGANIZATION
- ---- ---------------------
CommerceInc. Corporation Indiana
EmployeeMatters, Inc. Delaware
OneXstream.com, Inc. Delaware
OnSite Access, Inc. Delaware
Reckson Office Centers, LLC Delaware
Reckson Strategic Venture Partners, LLC Delaware
RSI CIC, Inc. Delaware
RSI ESO, Inc. Delaware
RSI Fund Management, LLC Delaware
RSI I/O Holdings, Inc. Delaware
RSI-OnSite Holdings, LLC Delaware
RSI-OSA Holdings, Inc. Delaware
RSI RITS, Inc. Delaware
RSVP Holdings, LLC Delaware
VANTAS, Incorporated Nevada
IV-39
Exhibit 23.0
Consent of Independent Accountants
We consent to the incorporation by reference in Amendment No.1 to the
Registration Statement (Form S-3 No. 333-84353), and the Registration Statements
(Form S-8 No. 333-85827, No. 333-84013, and No. 333-77427) pertaining to the
Stock Option Plans and in the related Prospectus, of Reckson Service Industries,
Inc. (the "Company") of our report dated February 22, 2000, with respect to the
consolidated financial statements of the Company and Subsidiaries for the years
ended December 31, 1999 and 1998, and for the period July 15, 1997 (commencement
of operations) to December 31, 1997, included in this Annual Report Form 10-K
for the year ended December 31, 1999.
Ernst & Young LLP
New York, New York
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001052743
<NAME> FRONTLINE CAPITAL GROUP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 54,312
<SECURITIES> 0
<RECEIVABLES> 8,426
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 78,746
<PP&E> 94,448
<DEPRECIATION> (14,023)
<TOTAL-ASSETS> 541,983
<CURRENT-LIABILITIES> 67,187
<BONDS> 325,349
0
0
<COMMON> 307
<OTHER-SE> 113,802
<TOTAL-LIABILITY-AND-EQUITY> 541,983
<SALES> 0
<TOTAL-REVENUES> 215,376
<CGS> 0
<TOTAL-COSTS> 187,449
<OTHER-EXPENSES> 60,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,432
<INCOME-PRETAX> (50,879)
<INCOME-TAX> 2,841
<INCOME-CONTINUING> (39,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,847)
<EPS-BASIC> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
