UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
|_| 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 0-18274
VANTAS Incorporated (f/k/a Executive Office Group, Inc.)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 13-3353508
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
90 Park Avenue, Suite 3100, New York, New York 10016
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(Address of principal executive offices - Zip code)
(212) 907-6400
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Registrant's telephone number, including area code
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
As of November 15, 1999, 4,901,868 shares of the registrant's Class A Common
Stock, par value $ .01 per share, were outstanding.
1
<PAGE>
VANTAS INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998 (audited)............................................ 3
Consolidated Statements of Operations for the three months and nine
months ended September 30, 1999 and 1998 (unaudited)................... 4
Consolidated Statements of Cash Flows for the nine months ended September
30, 1999 and 1998 (unaudited).......................................... 5
Notes to the Consolidated Financial Statements (unaudited)............... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds........................ 19
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders............... 19
Item 5. Other Information................................................. 20
Item 6. Exhibits and Reports on Form 8-K.................................. 21
SIGNATURES
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VANTAS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS: 1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,695,314 $ 3,615,087
Restricted cash 32,752,583 10,000,000
Accounts receivable, net of allowance for doubtful accounts
of $795,000 at September 30, 1999 and $401,000 at December 31, 1998 9,195,182 3,821,175
Prepaid expenses and other current assets 8,074,037 5,145,682
Deferred income taxes 1,146,816 174,000
Deferred financing costs 902,956 466,727
------------- -------------
Total current assets 53,766,888 23,222,671
Intangibles, net 187,813,495 81,605,181
Property and equipment, net 62,912,816 23,124,702
Deferred financing costs, net 4,709,596 2,584,418
Security deposits 4,324,762 2,110,952
Other assets, net 7,730,493 1,426,526
------------- -------------
Total assets $ 321,258,050 $ 134,074,450
============= =============
LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Accounts payable and accrued expenses $ 16,864,959 $ 9,578,807
Capital lease obligations 1,288,499 731,510
Deferred rent payable 1,865,568 727,619
Notes payable - bank 13,000,000 7,875,000
------------- -------------
Total current liabilities 33,019,026 18,912,936
Notes payable - bank 111,250,000 65,125,000
Acquisitions payable 7,353,378 --
Tenants' security deposits 18,689,123 8,592,948
Deferred rent payable 19,012,798 6,607,771
Deferred income taxes 3,956,016 1,514,000
Capital lease obligations 645,589 602,153
Other liabilities 809,702 --
------------- -------------
Total liabilities 194,735,632 101,354,808
------------- -------------
Redeemable Preferred stock, authorized 30,000,000 shares:
Series A Convertible, $.01 par value, issued and outstanding
7,574,711 shares (liquidation preference $12,900,000) 15,525,883 14,407,957
Series B Convertible, $.01 par value, issued and outstanding
3,222,851 shares (liquidation preference $15,309,000) 16,728,438 15,700,638
Series C Convertible, $.01 par value, issued and outstanding
13,325,424 shares (liquidation preference $63,296,000) 67,093,512 --
Series D Convertible, $.01 par value, issued and outstanding
5,109,873 shares (liquidation preference $26,827,000) 26,923,664 --
Series E Convertible, $.01 par value, issued and outstanding
604,413 shares (liquidation preference $3,173,000) 3,173,061 --
------------- -------------
Total redeemable preferred stock 129,444,558 30,108,595
------------- -------------
Stockholders' equity (deficit):
Class A Common stock, $.01 par value, authorized 41,000,000 shares,
issued and outstanding 4,901,868 shares 49,019 49,019
Class B Common stock, $.01 par value, authorized 20,000,000 shares -- --
Additional paid-in capital 3,133,608 3,133,608
Retained earnings (deficit) (5,154,767) 378,420
------------- -------------
(1,972,140) 3,561,047
Note receivable from issuance of stock (950,000) (950,000)
------------- -------------
Total stockholders' equity (deficit) (2,922,140) 2,611,047
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 321,258,050 $ 134,074,450
============= =============
</TABLE>
3
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VANTAS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Business Center Operations:
Revenues:
Office rentals $ 33,702,534 $ 14,689,145 $ 91,339,391 $ 37,888,990
Support services 24,151,543 9,745,192 65,441,289 25,903,746
------------- ------------- ------------- -------------
57,854,077 24,434,337 156,780,680 63,792,736
------------- ------------- ------------- -------------
Expenses:
Rent 22,644,701 8,438,141 60,119,132 21,338,674
Support services 8,430,709 3,493,422 22,824,340 8,525,704
Center general and administrative 16,309,554 7,265,777 44,124,501 18,238,221
------------- ------------- ------------- -------------
47,384,964 19,197,340 127,067,973 48,102,599
------------- ------------- ------------- -------------
Contribution from operation of business centers 10,469,113 5,236,997 29,712,707 15,690,137
------------- ------------- ------------- -------------
Other (Expenses) Income:
Corporate general and administrative (3,091,233) (1,734,738) (8,280,051) (4,478,604)
Merger and integration charges (219,126) -- (1,604,107) --
Depreciation and amortization (4,068,277) (1,206,141) (10,321,950) (3,383,565)
Interest expense, net (2,887,939) (1,226,311) (7,133,228) (3,319,753)
Managed center income 226,611 186,599 628,392 527,780
Other income (29,172) 5,059 5,512 81,254
------------- ------------- ------------- -------------
(10,069,136) (3,975,532) (26,705,432) (10,572,888)
------------- ------------- ------------- -------------
Income before minority interest and
income taxes 399,977 1,261,465 3,007,275 5,117,249
Minority interest in net income of consolidated partnerships -- -- -- (331,087)
------------- ------------- ------------- -------------
Income before provision for income taxes 399,977 1,261,465 3,007,275 4,786,162
Provision for income taxes (864,000) (465,000) (2,195,000) (1,860,000)
------------- ------------- ------------- -------------
Net (loss) income ($ 464,023) $ 796,465 $ 812,275 $ 2,926,162
------------- ------------- ------------- -------------
Accretion of preferred stock (2,392,337) (629,014) (6,345,464) (1,518,003)
------------- ------------- ------------- -------------
Net (loss) income applicable to common stock ($ 2,856,360) $ 167,451 ($ 5,533,189) $ 1,408,159
============= ============= ============= =============
Share information:
Basic earnings:
Net (loss) income per common share ($ 0.58) $ 0.03 ($ 1.13) $ 0.28
============= ============= ============= =============
Weighted average number of common
shares outstanding 4,901,868 4,951,868 4,901,868 5,027,024
============= ============= ============= =============
Diluted earnings:
Net (loss) income per common share ($ 0.58) $ 0.03 ($ 1.13) $ 0.17
============= ============= ============= =============
Weighted average number of common
shares outstanding 4,901,868 6,439,939 4,901,868 14,062,553
============= ============= ============= =============
</TABLE>
4
<PAGE>
VANTAS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 812,275 $ 2,926,162
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,321,950 3,383,565
Amortization of deferred financing costs 492,197 283,304
Deferred income taxes -- 1,389,100
Provision for doubtful accounts 749,376 378,399
Minority interest in net income of consolidated partnerships -- 331,087
Deferred rent payable 4,107,676 659,641
Deferred credits (71,170) (222,235)
Non-cash interest expense -- 118,133
Changes in operating assets and liabilities:
Accounts receivable (2,763,938) (921,285)
Prepaid expenses and other current assets (1,988,400) (2,023,964)
Security deposits and other assets (1,941,873) (241,840)
Accounts payable and accrued expenses 104,462 4,153,892
Income taxes payable 196,873 (1,052,755)
Tenants' security deposits 2,491,223 1,478,155
Other liabilities 120,980 --
------------ ------------
Net cash provided by operating activities 12,631,631 10,639,359
------------ ------------
Cash flows from investing activities:
Acquisition of net assets of business centers (50,428,992) (30,600,000)
Proceeds from acquisitions 8,400,000 --
Purchases of property and equipment (26,643,689) (6,452,402)
Restricted cash (21,799,212) --
------------ ------------
Net cash used in investing activities (90,471,893) (37,052,402)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings 65,400,000 29,554,000
Payments on borrowings (14,150,000) (6,676,099)
Deferred financing costs (3,053,604) (593,306)
Payments of capital leases (1,970,643) (716,190)
Distributions to minority partners -- (745,980)
Proceeds from exercise of common stock options -- 210,000
Purchase and retirement of common and preferred stock -- (415,917)
Proceeds from issuance of preferred stock,
net of issuance costs 29,694,736 7,874,400
------------ ------------
Net cash provided by financing activities 75,920,489 28,490,908
------------ ------------
Net (decrease) increase in cash (1,919,773) 2,077,865
Cash at beginning of period 3,615,087 2,206,483
------------ ------------
Cash at end of period $ 1,695,314 $ 4,284,348
============ ============
</TABLE>
5
<PAGE>
VANTAS Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements for the three and nine month periods
ended September 30, 1999 and 1998 have been prepared by VANTAS Incorporated and
Subsidiaries (the "Company") (formerly ALLIANCE NATIONAL Incorporated, and,
prior to that, Executive Office Group, Inc.) and, in the opinion of management,
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position, operating results
and cash flows for each period presented. The December 31, 1998 consolidated
balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1998 Transition Report. Results for interim periods are not necessarily
indicative of results for a full year.
Certain prior period amounts have been reclassified to conform to the
current year presentation.
2. Acquisitions
Effective January 1, 1999, two newly formed subsidiaries of the Company
were merged (the "Mergers") with and into InterOffice Superholding Corporation
("InterOffice") and Reckson Executive Centers, Inc. ("REC"), respectively.
InterOffice and REC collectively owned 39 business centers. As a result of the
Mergers, InterOffice and REC became wholly-owned subsidiaries of the Company and
the former shareholders of such entities received 13,325,424 shares of the
Company's Series C Preferred Stock Convertible Preferred Stock ("Series C
Preferred Stock"), and the Company received $8.4 million in cash.
In connection with the Mergers, the Company authorized 15,000,000 shares
of Series C Preferred Stock, which ranks on parity with the Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock ("Series A Preferred
Stock" and "Series B Preferred Stock", respectively). In connection with the
issuance of the Series C Preferred Stock, the terms of the Series A Preferred
Stock and Series B Preferred Stock were modified in certain respects, including
with respect to the elimination of redemption rights. Except for certain class
voting rights and except for the conversion feature described below, the Series
C Preferred Stock has substantially identical terms as the Series A Preferred
Stock and Series B Preferred Stock. If the original holders of the Series C
Preferred Stock or certain of their permitted transferees are the holders of the
Series C Preferred Stock at the time of conversion thereof, the Series C
Preferred Stock will be converted into Class B Common Stock ("Class B Common
Stock") which will have
6
<PAGE>
identical terms and conditions as the Company's Class A Common Stock ("Class A
Common Stock") (formerly the Common Stock), except that such Class B Common
Stock will carry the right to elect a specified number of directors, not to
exceed four, following an initial public offering.
On July 19, 1999, the Company increased the authorized shares of its
common stock from 45 million to 61 million, of which 41 million and 20 million
are designated Class A Common Stock and Class B Common Stock, respectively.
The Company incurred merger and integration costs of approximately $ .2
million and $1.6 million during the three and nine months ended September 30,
1999, respectively, in connection with the Mergers. Such charges consist
primarily of severance payments and other transaction related costs.
The Company's effective tax rate (which is the provision for income taxes
as a percentage of pre-tax income) for the three and nine months ended September
30, 1999 has increased as compared to the comparable periods of the prior year,
primarily due to the effect of non-deductible goodwill amortization associated
with the Mergers and certain of the Company's other acquisitions during 1999.
In addition to the Mergers described above, the Company acquired 50
business centers, in 12 acquisitions, for an aggregate purchase price of $53.3
million during the nine months ended September 30, 1999.
The pro forma financial information set forth below is based upon the
Company's historical consolidated statements of operations for the nine months
ended September 30, 1999 and 1998, adjusted to give effect to the Mergers and
the acquisitions noted above as of January 1, 1998.
The pro forma financial information is presented for informational
purposes only and may not be indicative of what actual results of operations
would have been had the acquisitions occurred on January 1, 1998, nor does it
purport to represent the results of operations for future periods.
Nine months ended September 30,
1999 1998
------------- -------------
Revenues $ 164,600,000 $ 137,945,000
Net income 1,424,000 6,474,000
Net (loss) income applicable to common stock (4,921,000) 1,158,000
Basic (loss) income per common share (1.00) .23
Diluted (loss) income per common share (1.00) .16
7
<PAGE>
3. Earnings Per Share
The following table sets forth the computation of basic and diluted (loss)
income per common share for the periods ended September 30:
<TABLE>
<CAPTION>
Three Months Nine Months
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net (loss) income $ (464,023) $ 796,465 $ 812,275 $ 2,926,162
Accretion of preferred stock (2,392,337) (629,014) (6,345,464) (1,518,003)
------------ ------------ ------------ ------------
Numerator for basic (loss) income
per share-(loss) income applicable
to common stock $ (2,856,360) $ 167,451 $ (5,533,189) $ 1,408,159
Effect of dilutive securities:
Accretion of preferred stock -- -- -- 1,051,012
------------ ------------ ------------ ------------
Numerator for diluted (loss) income
per share-(loss) income applicable
to common stock after assumed
conversions $ (2,856,360) $ 167,451 $ (5,533,189) $ 2,459,171
Denominator:
Denominator for basic income (loss)
per share-weighted average shares 4,901,868 4,951,868 4,901,868 5,027,024
Effect of dilutive securities:
Stock options -- 879,711 -- 672,057
Warrants -- 608,360 -- 788,761
Convertible preferred stock -- -- -- 7,574,711
------------ ------------ ------------ ------------
Dilutive potential common shares -- 1,488,071 -- 9,035,529
Denominator for dilutive income (loss)
per share-adjusted weighted average
shares and assumed conversions 4,901,868 6,439,939 4,901,868 14,062,553
============ ============ ============ ============
</TABLE>
Options and warrants to purchase 6,211,706 and 287,130 shares of common
stock were outstanding for the three months ended September 30, 1999 and 1998,
respectively, and 6,211,706 and 337,130 for the nine months ended September 30,
1999 and 1998, respectively, but were not included in the computation of diluted
earnings per share in 1999 because their effect would have been anti-dilutive.
Additionally, 29,837,272 and 2,747,915 shares of Convertible Preferred Stock
were outstanding for the three and nine months ended September 30, 1999 and
1998, respectively.
8
<PAGE>
4. Redeemable Preferred Stock
During the nine months ended September 30, 1999, the Company authorized
5,200,000 shares and issued 5,109,873 shares of Series D Convertible Preferred
Stock ("Series D Preferred Stock") for net proceeds of approximately $26.8
million. The Series D Preferred Stock was issued at $5.25 per share, subject to
adjustment up to $6.25 per share based upon the Company's cumulative third and
fourth quarter EBITDA, as adjusted. The Series D Preferred Stock has a
liquidation preference of $5.25 per share, which is also subject to adjustments
based on the Company's cumulative third and fourth quarter EBITDA, as adjusted.
The Series D Preferred Stock ranks pari passu with the Company's Series E
Convertible Preferred Stock ("Series E Preferred Stock"), and senior to the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
with respect to liquidation. The Series D Preferred Stock is convertible into
the Company's Class B Common Stock on a one-for-one basis, or at the election of
the shareholder into the Company's Class A Common Stock, subject to the EBITDA
adjustment described above.
During the nine months ended September 30, 1999, the Company authorized
1,000,000 shares and issued 604,413 shares of Series E Preferred Stock for net
proceeds of approximately $3.1 million. The Series E Preferred Stock was issued
at $5.25 per share, subject to adjustment up to $6.25 per share based upon the
Company's cumulative third and fourth quarter EBITDA, as adjusted. The Series E
Preferred Stock has a liquidation preference of $5.25 per share, and is also
subject to adjustments based on the Company's cumulative third and fourth
quarter EBITDA, as adjusted. The Series E Preferred Stock ranks pari passu with
the Company's Series D Preferred Stock , and senior to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, with respect to
liquidation. The Series E Preferred Stock is convertible into the Company's
Class A Common Stock on a one-for-one basis, subject to the EBITDA adjustment
described above.
5. Notes Payable
Effective August 3, 1999, the Company increased its $100 million credit
facility (the "Credit Facility") with various lending institutions to
approximately $158 million. The Credit Facility provides for a $5 million
acquisition loan commitment, $128 million in term loans, and a $25 million
revolving loan commitment, including a sub-limit of $15 million for letters of
credit. Interest on each commitment ranges from LIBOR plus 3.0% to LIBOR plus
3.75% for one, three or six month periods at the election of the Company. The
Credit Facility provides for a commitment fee of 1/2 of 1.0% per annum on the
unused portion thereof.
In June 1999, the Company entered into a $6.0 million Subordinated
Promissory Note payable to Reckson Services Industries, Inc. ("RSI"), a related
party. Such note bore interest at the rate of 15.0% per annum and was fully
satisfied from proceeds raised by the issuance of the Series D Preferred Stock.
6. Subsequent Events
As of November 15, 1999, the Company has executed letters of intent and
definitive agreements to acquire 2 business centers for an aggregate purchase
price of approximately $1.5 million. These transactions will be accounted for
under the purchase method of accounting.
RSI, a holder of approximately 35.0% of the Company's outstanding capital
stock, has entered into agreements with certain shareholders of the Company,
including members of the
9
<PAGE>
Company's senior management and former members of the Company's Board of
Directors, relating to the purchase of all or part of such shareholders' capital
stock in the Company, including capital stock related to the exercise of vested
stock options. Under the terms of the agreements, the Company is obligated to
provide payments to certain members of senior management, to offset the tax
effects to the individuals of the sales of shares, subject to certain
qualifications relating to those individuals remaining in the employ of the
Company. In addition, the Company will incur non-cash compensation expense based
on the difference between the closing price of RSI's common stock at the closing
date and the exercise price of the options exercised by senior management. Based
on the closing price of RSI's common stock on November 12, 1999, the charge for
the tax gross-up and the non-cash compensation will approximate $8.8 million and
$10.2 million, respectively. These charges will be included in merger and
integration expense during the fourth quarter of 1999, and are subject to
adjustment based on the actual closing price of RSI's common stock at the
closing date. Upon consummation of the purchases contemplated by these
agreements, which is currently expected to occur between November, 1999 and
February, 2000, RSI is expected to own between 67% and 87% of the Company's
outstanding capital stock.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
accompanying Consolidated Financial Statements and Notes thereto.
As of September 30, 1999, the Company owns and operates 203 business
centers in 27 states, the District of Columbia, France and Mexico. This includes
11 business centers which are currently under development and 6 business centers
which have been open for nine months or less (collectively "Developing
Centers"). Additionally, the Company manages 5 business centers for unrelated
third parties. The Company provides a complete outsourced office solution
through furnished and equipped individual offices and multi-office suites
available on short notice with flexible contracts. The Company also provides
business support and information services including: telecommunications;
broadband internet access; mail room and reception services; high-speed copying,
faxing and printing services; secretarial, desktop publishing and IT support
services and various size conference facilities, with multi-media presentation
and, in certain cases, video teleconferencing capabilities. The Company also
provides similar services for those businesses and individuals that do not
require offices on a full-time basis.
The Company has grown through an aggressive acquisition strategy beginning
in 1996, whereby it has acquired or merged with 37 entities, which were
comprised of 183 business centers with a total cost of approximately $205.7
million. During the three months ended September 30, 1999 and 1998, the Company
acquired 11 and 4 business centers with a cost of approximately $8.5 million and
$5.0 million, respectively. During the nine months ended September 30, 1999 and
1998, the Company acquired 89 and 36 centers with a cost of approximately $116.6
million and $34.3 million, respectively.
In the early stages of development of a Developing Center, expenses are
incurred with minimal corresponding revenues. Once a Developing Center reaches
occupancy levels above 70%, generally within nine to twelve months of its
initial start, it is expected to have a positive impact on the results of the
Company. For the three and nine months ended September 30, 1999, there were 17
Developing Centers as compared to 3 for the same periods in 1998.
These activities have had a material impact on the results of operations
and financial position of the Company and significantly affect the comparability
of the respective prior periods.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES. Total business center revenues for the three months ended September
30, 1999 were $57.9 million, an increase of $33.4 million or 136.8% from the
corresponding period in 1998.
Business centers that were acquired after July 1, 1998 ("Acquired
Centers") had revenues for the three months ended September 30, 1999 and 1998 of
$32.8 million and $ .5 million, respectively, representing an increase of $32.3
million from the corresponding period in 1998.
11
<PAGE>
This increase in revenues resulted primarily from an increase in the number of
business centers acquired as compared to those acquired in the comparable period
of the prior year.
Business centers, excluding Acquired and Developing Centers, that were
operating for the entire comparable period of the prior year ("Same Centers")
had revenues for the three months ended September 30, 1999 of $24.7 million, an
increase of $1.4 million, or 6.0% from the corresponding period in 1998. While
office occupancy levels remained relatively stable at approximately 89% for the
comparable periods, the increase in office rental revenue of $ .3 million, or
2.1%, was due to more favorable office pricing. The increase in support service
revenues of $1.1 million, or 11.8% from 1998 is partially attributable to an
increase in broadband internet access, information technology support services
and administrative support services.
Developing Center revenues were $ .4 million for the three months ended
September 30, 1999, a decrease of $ .3 million from the corresponding period in
1998. For the three months ended September 30, 1999 and 1998 there were 6 and 3
Developing Centers that were open, respectively.
EXPENSES. Total business center expenses for the three months ended September
30, 1999 were $47.4 million, representing an increase of $28.2 million or 146.8%
from the corresponding period in 1998.
Acquired Center expenses for the three months ended September 30, 1999 and
1998 were $27.1 million and $ .4 million respectively, representing an increase
of $26.7 million from the corresponding period in 1998. This increase resulted
primarily from an increase in the number of business centers acquired as
compared to those acquired in the comparable period of the prior year.
Same Center expenses for the three months ended September 30, 1999 were
$18.9 million, an increase of $ .8 million or 4.4% from the corresponding period
in 1998. This increase is primarily attributable to higher rent expense
resulting from inflation adjusted rental increases and support service expenses
associated with increased greater support service revenues.
Developing Center expenses for the three months ended September 30, 1999
were $1.4 million, an increase of $ .7 million from the corresponding period in
1998. This increase is due to the fact that there were 17 Developing Centers
during the three months ended September 30, 1999 compared to only 3 Developing
Centers during the three months ended September 30, 1998.
CONTRIBUTION FROM OPERATION OF BUSINESS CENTERS ("COBC"). For the three months
ended September 30, 1999, COBC was $10.5 million as compared to $5.3 million for
the same period in 1998. The COBC as a percentage of total revenues ("COBC
Margin") was 18.1% for the three months ended September 30, 1999 as compared to
21.4% for the corresponding period in 1998. The decrease in overall business
center COBC Margin of 3.3% from 1998, is primarily attributable to the
significant increase in Acquired Center revenue and its associated lower COBC
Margin. COBC Margin from Acquired Centers was 17.4% as compared to Same Center
COBC Margin of 23.5%.
Acquired Center COBC was $5.7 million for the three months ended September
30, 1999, an increase of $5.6 million from the corresponding period 1998. The
COBC Margin from Acquired Centers for the three months ended September 30, 1999
was 17.4%. There were minimal acquisitions completed during the three months
ended September 30, 1998, and, as a result, the COBC Margin from Acquired
Centers during this period had no material impact on COBC.
12
<PAGE>
Same Center COBC was $5.8 million for the three months ended September 30,
1999 as compared to $5.2 million for the corresponding period in 1998. The COBC
Margin from Same Centers for the three months ended September 30, 1999 was 23.5%
as compared to 22.3% for the corresponding period in 1998. The increase in Same
Centers COBC Margin is primarily attributable to greater support service
revenues, which traditionally have a higher margin than rental revenues,
partially offset by higher rent expense.
In general, COBC Margins from Acquired Centers are initially lower than
Same Centers. It may take several months for the Company to integrate these
Acquired Centers into its existing operations and apply the Company's management
philosophy, policies and procedures, maximize the Company's concentrated
marketing efforts which should produce greater occupancy and support services
revenue.
Developing Centers generated a loss from operations for the three months
ended September 30, 1999 of $1.0 million, an increase of $1.0 million from the
corresponding period in 1998. This increase reflects greater Developing Center
activity than in the prior year. Losses are generally incurred from Developing
Centers during their first nine to twelve months of operation.
OTHER EXPENSES, NET. For the three months ended September 30, 1999, other
expenses, net, were $10.1 million, representing an increase of $6.1 million or
153.3% from the corresponding period in 1998. This increase is primarily
attributable to greater corporate general and administrative expenses,
depreciation and amortization and interest expense of $1.4 million, $2.9 million
and $1.7 million or 78.2%, 237.3% and 135.5%, respectively.
The increase in corporate general and administrative expenses was attributable
to increases in corporate office personnel and associated travel, related office
expansion, and consulting fees associated with the Company's growth. The
increase in depreciation and amortization relates to fixed assets acquired and
goodwill associated with the Mergers and the Company's other acquisitions. It is
also attributable to an increase in capital expenditures associated with
technology infrastructure additions and leasehold improvements for Developing
and Same Centers. Interest expense is primarily related to the Company's Credit
Facility. This increase resulted from interest expense on borrowings related to
the Company's acquisitions.
INCOME TAXES. The Company's effective income tax rate was adjusted to 73% for
the nine months ended September 30, 1999, based upon the revised projected
income before provision for income taxes for fiscal 1999, as compared to the
previous estimate as of June 30, 1999. As a result of this change in estimate,
the effective income tax rate for the three months ended September 30, 1999 was
216.0% as compared to 36.9% for the three months ended September 30, 1998. The
Company's effective income tax rate for the three and nine months ended
September 30, 1999 is greater than the federal and state statutory rates,
primarily due to the effect of non-deductible goodwill amortization associated
with the Mergers and certain of the Company's other acquisitions during 1999.
Net (Loss) Income. The Company incurred a net loss for the three months ended
September 30, 1999 of $( .5) million compared to net income of $ .8 million for
the same period in 1998.
Accretion of the stated return on investment on the Company's redeemable
preferred stock for the three months ended September 30, 1999 was $2.4 million,
representing an increase of $1.8 million or 280.3% from the corresponding period
in 1998. This increase is primarily the result of the Company's issuance of
Series C, D and E Convertible Preferred Stock in 1999. This activity coupled
with the compounded growth of previous issuances of preferred stock accounted
for the total increase over the comparable period in 1998.
13
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NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES. Total business center revenues for the nine months ended September 30,
1999 were $156.8 million, representing an increase of $93.0 million or 145.8%
from the corresponding period in 1998.
Acquired Centers revenue for the nine months ended September 30, 1999 and
1998 were $106.9 million and $16.2 million, respectively, representing an
increase of $90.7 million from the corresponding period in 1998. This increase
in revenues resulted primarily from an increase in the number of business
centers acquired as compared to those acquired in the comparable period of the
prior year.
Same Centers revenues for the nine months ended September 30, 1999 were
$49.4 million, an increase of $3.2 million or 6.9% from the corresponding period
in 1998. While office occupancy levels remained relatively stable at
approximately 89% for the comparable periods, the increase in office rental
revenue of $1.6 million or 5.9% is due to more favorable office pricing. The
increase in support service revenues of $1.6 million or 8.4% from 1998 is
partially attributable to an increase in broadband internet access, information
technology support services and administrative support services.
Developing Center revenues were $ .5 million for the nine months ended
September 30, 1999, a decrease of $ .9 million from the corresponding period in
1998. At September 30, 1999 and 1998 there were 6 and 3 Developing Centers that
were open, respectively.
EXPENSES. Total business center expenses for the nine months ended September 30,
1999 were $127.1 million, representing an increase of $79.0 million or 164.2%
from the corresponding period in 1998.
Acquired Center expenses for the nine months ended September 30, 1999 and
1998 were $89.6 million and $13.4 million respectively, an increase of $76.2
million or 568.6% from the corresponding period in 1998. This increase resulted
primarily from an increase in the number of business centers acquired as
compared to those acquired in the comparable period.
Same Center expenses for the nine months ended September 30, 1999 were
$35.2 million, an increase of $2.0 million or 6.0% from the corresponding period
in 1998. This increase is primarily attributable to higher rent expense
resulting from inflation adjusted rental increases and support service expenses
associated with increased support service revenues.
Developing Center expenses for the nine months ended September 30, 1999
were $2.3 million, an increase of $ .8 million from the corresponding period in
1998. This increase is due to the fact that there were 17 Development Centers
during the nine months ended September 30, 1999 compared to only 3 Development
Centers during the nine months ended September 30, 1998.
CONTRIBUTION FROM OPERATION OF BUSINESS CENTERS ("COBC"). For the nine months
ended September 30, 1999, COBC was $29.7 million as compared to $15.7 million
for the same period in 1998. The COBC as a percentage of total revenues ("COBC
Margin") was 19.0% for the nine months ended September 30, 1999 as compared to
24.6% for 1998. The decrease in overall business center COBC Margin of 5.6% from
1998, is primarily attributable to the significant increase in Acquired Center
revenue and its associated lower COBC Margin. COBC Margin from the Acquired
Centers was 16.3% as compared to Same Center COBC Margin of 28.7%.
14
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Acquired Center COBC was $17.3 million for the nine months ended September
30, 1999, an increase of $14.5 million from $2.8 million in the corresponding
period in 1998. The COBC Margin from Acquired Centers for the nine months ended
September 30, 1999 was 16.3% as compared to 17.3% in the corresponding period in
1998. This decrease of 1.0% in COBC Margin is primarily attributable to lower
occupancy levels associated with the greater number of recently developed
centers acquired during the nine months ended September 30, 1999 as compared to
the same period in the corresponding period in 1998.
Same Center COBC was $14.2 million for the nine months ended September 30,
1999 as compared to $13.0 million, an increase of $1.2 million, or 9.2% from the
corresponding period in 1998. The COBC Margin from Same Centers for the nine
months ended September 30, 1999 remained relatively consistent at 28.7% as
compared to 28.1% for 1998.
In general, COBC Margins from Acquired Centers are initially lower than
Same Centers. It may take several months for the Company to integrate these
Acquired Centers into its existing operations and apply the Company's management
philosophy, policies and procedures, maximize the Company's concentrated
marketing efforts which should produce greater occupancy and support services
revenue.
Developing Centers generated a loss from operations for the nine months
ended September 30, 1999 of $1.8 million, an increase of $1.7 million from the
corresponding period in 1998. This increase reflects greater Developing Center
activity than in the prior year. Losses are generally incurred from Developing
Centers during their first nine to twelve months of operation.
OTHER EXPENSES, NET. For the nine months ended September 30, 1999, other
expenses, net, were $26.7 million, representing an increase of $16.1 million or
152.6% from the corresponding period in 1998. The increase is primarily
attributable to an increase in corporate general and administrative expenses,
depreciation and amortization and interest expense of $3.8 million, $6.9 million
and $3.8 million or 84.9%, 205.1% and 114.9%, respectively. Additionally, the
Company incurred merger and integration charges of $1.6 million related to
one-time costs associated with the Mergers during the nine months ending
September 30, 1999.
The increase in corporate general and administrative expenses was related
to the increase in corporate office staff and related office space associated
with the Company's growth. The increase in depreciation and amortization relates
to fixed assets acquired and goodwill associated with acquisitions in addition
to an increase in capital expenditures associated with technology infrastructure
additions and leasehold improvements to Developing and Same Centers. Interest
expense is primarily related to borrowings under the Company's Credit Facility.
This increase resulted from interest expense incurred as the Company continued
to fund its acquisitions.
MINORITY INTEREST. Prior to July 1, 1998, the Company acted as general partner
and manager for seven partnerships that collectively owned nine business
centers. Effective July 1, 1998, the Company acquired the remaining interest in
such partnerships. Prior to this acquisition, the Company consolidated the
partnerships' results of operations and recorded minority interest net income.
Minority interest in the net income of the consolidated partnerships for the
nine months ended September 30, 1998 was $ .3 million.
INCOME TAXES. The Company's effective income tax rate was 73.0% at September 30,
1999 as compared to 38.9% at September 30, 1998. This increase is attributable
to the effect of non-deductible goodwill amortization associated with the
Mergers and certain of the Company's other acquisitions during 1999.
15
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Net Income. Net income for the nine months ended September 30, 1999 was $ .8
million as compared to $2.9 million for the same period in 1998.
Accretion of the stated return on investment on the Company's redeemable
preferred stock for the nine months ended September 30, 1999 was $6.3 million,
representing an increase of $4.8 million or 318.0%. This increase is primarily
the result of the Company's issuance of Series C, D and E Convertible Preferred
Stock in 1999. This activity coupled with the compounded growth of previous
issuances of preferred stock accounts for the increase over the comparable
period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has primarily relied upon cash flows generated
from operations, borrowings from its lenders and sales of its securities to
satisfy its liquidity and capital requirements. Principal liquidity needs have
included the acquisition and development of new business centers, debt service
requirements and other capital expenditures necessary to maintain existing
business centers and upgrade and build the corporate infrastructure to manage
the Company's operations effectively.
On August 3, 1999, the Company completed a transaction which increased its
$100.0 million credit facility (the amended and restated "Credit Facility") to
$157.9 million. Borrowings under the Credit Facility bear interest ranging from
LIBOR plus 3.0% (8.4375% at November 15, 1999) to LIBOR plus 3.75% (9.1875% at
November 15, 1999) for a one, three or nine month period at the election of the
Company. The Company pays a commitment fee of 1/2 of 1.0% per annum on the
unused portion of the Credit Facility. Borrowings under the Credit Facility are
formula based and available up to the maximum amount of the Credit Facility. As
of September 30, 1999, there were $124.3 million in borrowings and $8.7 million
in standby letters of credit outstanding under the Credit Facility. As of
September 30, 1999, the Company had $16.3 million and $5.0 million available
from its revolving and acquisition loan portion of the Credit Facility,
respectively. The Credit Facility also contains certain financial covenants, one
of which requires the Company not to exceed a maximum ratio of consolidated
indebtedness to consolidated earnings before interest, income taxes,
depreciation and amortization. In addition, there are also other covenants
pertaining to additional financial ratios and limitations on capital
expenditures. At September 30, 1999, the Company was in compliance with all of
its financial covenants.
The Company had working capital of $20.7 million at September 30, 1999 as
compared to working capital of $4.3 million at December 31, 1998. This increase
in working capital arose principally from the increase in restricted cash
recorded as a result of the closing of the Credit Facility. Restricted cash may
only be utilized to fund permitted acquisitions in accordance with the Credit
Facility. The Company intends to utilize the aforementioned restricted cash to
fund permitted acquisitions over the next year. This increase is partially
offset by a $5.1 million increase in current maturities of notes payable.
Cash flows generated from operating activities for the nine months ended
September 30, 1999 were $12.6 million, representing an increase of $2.0 million
from the corresponding period in 1998. This increase is attributable the
Company's growth through acquisitions during the period.
Cash used in investing activities for the nine months ended September 30,
1999 was $90.5 million, an increase of $53.4 million from the corresponding
period in 1998. The increase is attributable to the Company's acquisition and
development, and the deployment of resources to
16
<PAGE>
expand the technology base at its business centers and its corporate offices. In
addition, as noted above, the Company was required to deposit the funded portion
of its Credit Facility into a restricted cash account.
Cash provided by financing activities for the nine months ended September
30, 1999 was $75.9 million, representing an increase of $47.4 million from the
corresponding period in 1998. During the three months ended September 30, 1999,
the Company completed various equity transactions whereby it raised $29.7
million in net proceeds by selling shares of the Company's convertible preferred
stock to accredited investors. Net proceeds from borrowings and repayments of
borrowings amounted to $51.3 million.
The Company anticipates that cash flows from operations will continue to
provide adequate capital to fund its operating and administrative expenses and
regular debt service obligations. In addition, the Company anticipates that cash
on hand, availability under its Credit Facility, issuance of equity, as well as
other debt alternatives, will provide the necessary capital required by the
Company to continue its growth strategy, through the acquisition and development
of business centers.
IMPACT OF YEAR 2000
The Year 2000 issue concerns the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000.
The following information is as of November 15, 1999. The Company has
completed the inventory, assessment and, except as described below, necessary
modifications or replacements of all of its informational systems (such as
accounting, billing and payroll) and operational systems (such as telephone and
voicemail systems, personal computers, copiers and fax machines located at the
Company's business centers) for the purpose of ensuring that such systems are
Year 2000 compliant. Except as described below, the Company has completed
testing on all of its informational systems and substantially all of its
operational systems. As a result of these efforts, the Company believes that
such systems are Year 2000 compliant. The Company is in the process of modifying
or replacing, as necessary, and testing of certain of its operational systems
relating to its international operations. The completion of the remaining items
of the Company's Year 2000 project is expected to occur in December, 1999, which
is prior to any anticipated impact on the Company's operational systems.
The Company has sought assurances from its third party suppliers and
vendors (e.g., landlords where business centers are located) that the
informational and operational systems of such third parties are also Year 2000
compliant. During the course of November 1999, the Company will have further
communications with those third parties who have not responded or who responded
that they were not yet Year 2000 compliant. However, the Company cannot
guarantee that such third parties' systems will be Year 2000 compliant.
As of September 30, 1999, total costs related to the Year 2000 issue were
approximately $3.3 million. The Company estimates that it will incur
approximately $ .4 million in additional costs in the final quarter of 1999.
In a "worst case" scenario, the Company believes that failure of
operational systems, such as building management and mechanical systems, would
result in inconveniences to the Company's clients which might include no
elevator service, lighting, entry or egress and the generating of invoices. This
may be alleviated in certain cases by manual overrides of such systems by
building management. Further, the failure of telephony service provided by third
parties could result in
17
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disruption to the client's ability to transact business. Lastly, if any of the
Company's information systems were to become temporarily disabled, the Company
would be required to process transactions manually until the systems were fixed.
The Company has developed contingency plans designed to identify possible
alternatives which could be used in the event of a disruption in the delivery of
essential services and to minimize the effect of such a disruption.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the nine months ended September 30,
1999, together with other statements and information publicly disseminated by
the Company contain certain "forward-looking" statements, as that statement is
defined in the Private Securities Litigation Reform Act of 1995. The Company
cautions investors that there can be no assurance that the actual results or
business conditions will not differ materially from those projected or suggested
in such forward-looking statements as a result of various factors. These factors
are subject to risks and uncertainties, many of which are outside the control of
the Company, including but not limited to, (i) general economic conditions, (ii)
financing risks, such as the inability to obtain equity or debt financing on
favorable terms, (iii) changes in governmental laws and regulations, (iv) the
level and volatility of interest rates, (v) the availability of suitable
acquisition and development opportunities and the effective integration of those
business centers within the overall operations of the Company and (vi) increases
in operating costs. Accordingly, there is no assurance that the Company's
expectations will be realized.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
The primary market risk facing the Company is interest rate risk on its
Credit Facility. As of September 30, 1999, the Company hedged interest rate risk
using financial instruments for a limited amount of its outstanding debt. The
Credit Facility 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 the Company. The rate of
interest on the Credit Facility will be influenced by changes in short term
rates 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 under the Credit Facility.
Based on variable rate debt levels, a 10% change in market interest rates
(54 basis points on a weighted average) would have an approximate 6% impact on
the Company's interest expense, net.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of September 30,
1999, the Company had no other material exposure to market risk.
18
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PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) On July 23, 1999, the Company increased the authorized shares of
its common stock from 45 million to 61 million, of which 41 million and 20
million are designated Class A Common Stock and Class B Common Stock,
respectively.
(b) None.
(c) On July 29, 1999, the Company issued and sold 3,347,961 shares
of Series D Convertible Preferred Stock (the "Series D Preferred Stock"), at a
price of $5.25 per share, for an aggregate cash purchase price of approximately
$17.6 million. On August 4, 1999, the Company issued and sold 1,486,921 shares
of Series D Preferred Stock and 352,380 shares of Series E Convertible Preferred
Stock (the "Series E Preferred Stock "), in each case at a price of $5.25 per
share, for an aggregate cash purchase price of approximately $9.7 million. On
September 14, 1999, the Company issued and sold 274,991 shares of Series D
Preferred Stock and 252,033 shares of Series E Preferred Stock, in each case at
a price of $5.25 per share, for an aggregate cash purchase price of
approximately $2.8 million. The Company issued and sold these securities
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Act"),
and Rule 506 promulgated thereunder. The offering was made to a limited number
of offerees, all of whom were accredited investors (as defined in Rule 501
promulgated under the Act). The terms of the Series D Preferred Stock and Series
E Preferred Stock provide for (1) automatic conversion into shares of the
Company's Class A Common Stock ("Class A Common Stock") or, in certain cases the
Company's Class B Common Stock ("Class B Common Stock"), in the event of an
initial public offering of the Company's capital stock and (2) conversion at the
option of the holder, in whole or in part, at any time into Class A Common Stock
or, in certain cases, Class B Common Stock. The conversion rate is currently one
to one, but such rate is subject to adjustment in the event of certain dilutive
events.
(d) None.
Item 4. Submission of Matters to a Vote of Security Holders
On August 19, 1999, an action by written consent was executed by holders
of 23,041,524 shares of the Company's outstanding voting capital stock,
representing 67.3% of such outstanding voting capital stock, pursuant to which
Jason Barnett and Jeffrey Neumann were appointed as directors of the Company in
lieu of two directors who had resigned. Following this consent, David W. Beale,
Arnold Cohen, Dan DiSano, Jon Halpern, Louis Perlman, Stephen Rathkopf, Scott
Rechler and Henry Wilson comprised the other members of the Board of Directors.
On July 29, 1999, an action by written consent was executed by holders of
28,261,332 shares of the Company's outstanding voting capital stock,
representing 87.3% of such outstanding voting capital stock, pursuant to which
Stephen Rathkopf was appointed as a director of the Company in lieu of a
director who had resigned. Following this consent, David Beale, G. Lee Bohs,
Arnold Cohen, Dan DiSano, Jon Halpern, Louis Perlman, Scott Rechler, David
Warnock and Henry Wilson comprised the other members of the Board of Directors.
19
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On July 22, 1999, an action by written consent was executed by holders of
23,863,442 shares of the Company's outstanding voting capital stock,
representing 82.2% of such outstanding voting capital stock, pursuant to which
the Company's 1999 Stock Option Plan was approved and adopted.
On July 19, 1999, an action by written consent was executed by holders of
23,863,442 shares of the Company's outstanding voting capital stock,
representing 82.5% of such outstanding voting capital stock, pursuant to which
the Company's Amended and Restated Articles of Incorporation were approved and
adopted. The Amendment and Restatement related to (1) the change of the
Company's name to VANTAS Incorporated, and (2) and increase in the Company's
authorized capital stock and the creation of the Series D Preferred Stock and
the Series E Preferred Stock.
Item 5. Other Information
Effective January 1, 1999, two newly formed subsidiaries of the Company
were merged (the "Mergers") with and into InterOffice Superholding Corporation
("InterOffice") and Reckson Executive Centers, Inc. ("REC"), respectively.
InterOffice and REC collectively owned 39 business centers. As a result of the
Mergers, InterOffice and REC became wholly-owned subsidiaries of the Company and
the former shareholders of such entities received 13,325,424 shares of the
Company's Series C Preferred Stock ("Series C Preferred Stock"), and the Company
received $8.4 million in cash.
Prior to the Mergers, REC and InterOffice were majority-owned subsidiaries
of Reckson Service Industries, Inc. ("RSI"). Pursuant to the terms of the
Mergers, RSI received an approximately 24% equity interest in the Company in the
form of Series C Preferred Stock of the Company, which it holds through two
limited liability companies ( the "LLC's"). Pursuant to the Mergers and the
issuance of securities described in Item 2, RSI currently owns directly or
indirectly approximately 35% of the capital stock of the Company.
The Company and RSI also entered into an intercompany agreement pursuant
to which RSI has the opportunity to be the exclusive provider of certain
business services to the Company, provided certain third party and "most-favored
nation" conditions are satisfied.
In connection with the Mergers, the stockholders of the Company, including
the LLC's, entered into a stockholders' agreement (the "Stockholders'
Agreement") pursuant to which holders of Series C Preferred Stock have the right
to nominate four of the ten members of the board of directors of the Company
(the "Board"), including the Chairman of the Board. A significant number of
items presented to the Board will require the separate approval of a majority of
the representatives of the Series C Preferred Stock on the Board, including
significant acquisitions, sale or leasing of assets, approval of the Company's
annual operating budget, certain borrowings and capital expenditures by the
Company, the hiring or termination of certain executives and other matters. The
holders of Series C Preferred Stock also have the right to appoint half of the
members of the executive and audit committees of the Board. The preferred
stockholders of the Company (including the holders of the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock) were
granted super-majority voting rights with respect to certain corporate actions,
including the issuance of equity securities, mergers, changes to the charter
documents of the Company and other matters. In addition, the Stockholder's
Agreement contains non-competition provisions applicable to RSI, as well as
provisions limiting the rights of the Series C Preferred Stock in the event RSI
is acquired by certain competitors of the Company.
20
<PAGE>
RSI has entered into agreements with certain shareholders of the Company,
including members of the Company's senior management and former members of the
Company's Board of Directors, relating to the purchase of all or part of such
shareholders' capital stock in the Company, including capital stock realted to
the exercise of vested stock options. Under the terms of the agreements, the
Company is obligated to provide payments to certain members of senior
management, to offset the tax effects to the individuals of the sales of shares,
subject to certain qualifications relating to those individuals remaining in the
employ of the Company. In addition, the Company will incur non-cash compensation
expense based on the difference between the closing price of RSI's common stock
at the closing date and the exercise price of the options exercised by senior
management. Based on the closing price of RSI's common stock on November 12,
1999, the charge for the tax gross-up and the non-cash compensation will
approximate $8.8 million and $10.2 million, respectively. These charges will be
included in merger and integration expense during the fourth quarter of 1999,
and are subject to adjustment based on the actual closing price of RSI's common
stock at the closing date. Upon consummation of the purchases contemplated by
these agreements, which is currently expected to occur between November, 1999
and February, 2000, RSI is expected to own between 67% and 87% of the Company's
outstanding capital stock.
As of November 15, 1999, the Board was comprised of David Beale, Scott
Rechler, Dan DiSano, Chris George, Jon Halpern, Jeffrey Neumann and Stephen
Rathkopf. Messrs. Rechler, DiSano, George, Neumann and Rathkopf are officers of
RSI.
The consummation of the purchases by RSI of other shareholders' capital
stock of the Company described above will result in the vesting of the
outstanding stock options issued under the Company's 1996 stock option plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
3.1 Amended and Restated Articles of Incorporation
3.2 Fifth Amended and Restated Certificate of Designation of
Series A Convertible Preferred Stock
3.3 Second Amended and Restated Certificate of Designation
of Series B Convertible Preferred Stock
3.4 Amended and Restated Certificate of Designation of
Series C Convertible Preferred Stock
3.5 Certificate of Designation of Series D Convertible
Preferred Stock
3.6 Amended and Restated Certificate of Designation of
Series E Convertible Preferred Stock
3.7 By-laws and Amendments
4.1 Fifth Amended and Restated Stockholders Agreement
10.1 Amended and Restated Credit Agreement by and among the
Company, Various Banks and Paribas
10.2 Employment Agreement with David Beale
10.3 Employment Agreement with Alan Langer
10.4 Employment Agreement with T.J. Tison
10.5 Employment Agreement with Stephen Fowler
10.6 Agreement, dated as of October 29, 1999, by and among
David Beale, Reckson Service Industries, Inc. and the
Company
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10.7 Agreement, dated as of October 29, 1999, by and among
Alan Langer, Reckson Service Industries, Inc. and the
Company
10.8 Agreement, dated as of October 29, 1999, by and among
Mitchell Knecht, Reckson Service Industries, Inc. and
the Company
10.9 Promissory Note of David Beale
10.10 1999 Stock Option Plan
10.11 1996 Stock Option Plan
27 Financial Data Schedules
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VANTAS Incorporated
11/15/99 /s/ David W. Beale
------------- ----------------------------------------
Date David W. Beale
President, Chief Executive Officer
11/15/99 /s/ Alan Langer
-------------- ----------------------------------------
Date Alan Langer
Executive Vice President, Chief Financial
Officer and Principal Accounting Officer
22
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ALLIANCE NATIONAL INCORPORATED
Pursuant to Chapter 78 of the Nevada Revised Statutes, ALLIANCE National
Incorporated, a Nevada corporation (the "Corporation"), does hereby certify as
follows:
1. The name of the Corporation is ALLIANCE National Incorporated.
2. The following resolutions (which set forth amendments to, and provide
for the amendment and restatement of, the Amended and Restated Articles of
Incorporation of the Corporation filed May 27, 1988, as amended by Certificate
filed July 31, 1991, as further amended by Certificate of Amendment filed April
24, 1996, as further amended by Articles of Amendment filed November 15, 1996,
as further amended by Articles of Amendment filed November 15, 1996, and as
further amended and restated by Amended and Restated Articles of Incorporation
filed January 8, 1999),were duly adopted by the Board of Directors of the
Corporation as of July 19, 1999:
RESOLVED, that subject to the approval of the holders of a majority
of the issued and outstanding shares of common and preferred stock of the
Corporation, the Articles of Incorporation be amended as set forth as
Exhibit A to this resolution (the "Amended and Restated Articles of
Incorporation") (i) to increase the authorized capital of the Corporation
(as set forth in Article IV, Paragraph 1 of the Amended and Restated
Articles of Incorporation), (ii) to change the name of the Corporation to
VANTAS Incorporated (as set forth in Article I of the Amended and Restated
Articles of Incorporation), (iii) to make reference to the Certificate of
Designation of the Corporation's Series D Convertible Preferred Stock, to
be filed immediately after the Amended and Restated Articles of
Incorporation (as set forth in Article IV, Paragraph 2(a) of the Amended
and Restated Articles of Incorporation), and (iv) otherwise to amend and
restate in its entirety the Articles of Incorporation of the Corporation;
and be it further
RESOLVED, that the Amended and Restated Articles of Incorporation be
submitted to the stockholders of the Corporation for approval, and upon
the receipt of the approval of the holders of a majority of the issued and
outstanding shares of common and preferred stock of the Corporation, the
officers of this Corporation be, and they hereby are, authorized and
empowered to execute and file with the Secretary of State of Nevada, the
Amended and Restated Articles of Incorporation.
3. The number of shares of common stock outstanding at the time of the
adoption of these Amended and Restated Articles of Incorporation was 4,901,868
shares. The total number of shares of common stock entitled to vote thereon was
4,901,868 shares. The number of shares of preferred stock outstanding at the
time of the adoption of these Amended and Restated Articles of
<PAGE>
Incorporation was 24,122,986 shares. The total number of shares of preferred
stock entitled to vote thereon was 24,122,986 shares.
4. The number of shares of common stock voting for the adoption of these
Amended and Restated Articles of Incorporation 2,593,191 was shares and voting
against was zero shares. The number of shares of preferred stock voting for the
adoption of these Amended and Restated Articles of Incorporation was 21,339,479
shares and voting against was zero shares. Accordingly, the written consent to
the adoption of the Amended and Restated Articles of Incorporation of the
stockholders of the Corporation holding a majority of the voting power has been
obtained in accordance with the provisions of NRS Section 78.320.
We, the undersigned President and Senior Vice President, respectively, of
the Corporation, for the purpose of amending and restating the Articles of
Incorporation of a corporation formed under the laws of the State of Nevada, do
hereby make, file and record these Amended and Restated Articles of
Incorporation, and do hereby certify that the facts herein stated are true and
we have accordingly hereunto set our hands this 20th day of July, 1999.
/s/ David W. Beale
--------------------------------------
David W. Beale
President and Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- -----------------------------------------
Steven M. Cooperman
Senior Vice President and General Counsel
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 20th day of July, 1999, personally appeared before me David
W. Beale, the President and Chief Executive Officer of the Corporation, and
Steven M. Cooperman, the Senior Vice President and General Counsel of the
Corporation, and who acknowledged that they executed these Amended and Restated
Articles of Incorporation.
/s/ Barbara DiMartino
--------------------------------------
Barbara DiMartino
Notary Public
2
<PAGE>
Exhibit A
ARTICLE I: The name of the Corporation is VANTAS Incorporated.
ARTICLE II: The principal office of the Corporation within the State of
Nevada is located at c/o The Prentice Hall Corporation System, Inc., 502 East
John Street, Carson City, Nevada, 89201.
ARTICLE III: The purposes for which the Corporation is organized are to
engage in any activity or business not in conflict with the laws of the State of
Nevada or of the United States of America, and without limiting the generality
of the foregoing, specifically:
1. To engage generally in the real estate business as principal,
agent, broker, and in any lawful capacity, and generally to take, lease,
purchase, or otherwise acquire, and own, use, hold, sell, convey, exchange,
lease, mortgage, work, clear, improve, develop, divide and otherwise handle,
manage, operate, deal in and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings and other works and any interest
or right therein; to take, lease, purchase or otherwise acquire, and to own,
use, hold, sell, convey, exchange, hire, lease, pledge, mortgage, and otherwise
handle and deal in and dispose of, as principal, agent, broker, and in any
lawful capacity, such personal property, chattels, chattels real, rights,
easements, privileges, choses in action, notes, bonds, mortgages, and securities
as may lawfully be acquired, held, or disposed of; and to acquire, purchase,
sell, assign, transfer, dispose of, and generally deal in and with, as
principal, agent, broker, and in any lawful capacity, mortgages and other
interests in real, personal, and mixed properties; to carry on a general
construction, contracting, building and realty management business as principal,
agent, representative, contractor, subcontractor, and in any other lawful
capacity.
2. To have and to exercise all the powers now or hereafter conferred
by the laws of the State of Nevada upon corporations organized pursuant to the
laws under which the Corporation is organized and any and all acts amendatory
thereof and supplemental thereto.
3. To discount and negotiate promissory notes, drafts, bill of
exchange and other evidence of debts, and to collect for others money due them
on notes, checks, drafts, bill of exchange, commercial paper and other evidence
of indebtedness.
4. To purchase or otherwise acquire, own, hold, lease, sell,
exchange, assign, transfer, mortgage, pledge or otherwise dispose of, to
guaranty, to invest, trade and deal in and with personal property of every class
and description.
5. To enter into any kind of contract or agreement, cooperative or
profit sharing plan with its officers or employees that the Corporation may deem
advantageous or expedient or otherwise to reward or pay such persons for their
services as the directors may deem fit.
6. To purchase, lease, or otherwise acquire, in whole or in part,
the business, the good will, rights, franchises and property of every kind, and
to undertake the whole or any part of
3
<PAGE>
the assets or liabilities, of any person, firm, association, non-profit or
profit corporation, or own property necessary or suitable for its purposes, and
to pay the same in cash, in the stocks or bonds of this company or otherwise, to
hold or in any manner dispose of the whole or any part of the business or
property so acquired and to exercise all of the powers necessary or incidental
to the conduct of such business.
7. To lend or borrow money and to negotiate and make loans, either
on its own account or as agent, or broker for others.
8. To enter into, make, perform and carry out contracts of every
kind and for any lawful purpose, without limit as to amount with any person,
firm, association, cooperative profit or non-profit corporation, municipality,
state or government or any subdivision, district or department thereof.
9. To buy, sell, exchange, negotiate, or otherwise deal in, or
hypothecate securities, stocks, bonds, debentures, mortgages, notes or other
collaterals or securities, created or issued by any corporation wherever
organized including this Corporation, within such limits as may be provided by
law, and while owner of any such stocks or other collaterals to exercise all
rights, powers and privileges of ownership, including the right to vote the
same; to subscribe for stock of any corporation to be organized, other than to
promote the organization thereof.
10. To purchase or otherwise acquire, own, hold, lease, sell,
exchange, assign, transfer, mortgage, pledge, license, or otherwise dispose of
any letters, patents, copyrights, or trademarks of every class and description.
11. To do any and all other such acts, things, business or
businesses in any manner connected with or necessary, incidental, convenient or
auxiliary to do any of these objects, hereinbefore enumerated, or calculated,
directly or indirectly to promote the interest of the Corporation; and in
carrying on its purposes, or for the purpose of obtaining or furthering any of
its business, to do any and all acts and things, and to exercise any and all
other powers which a co-partner or natural person could do or exercise, and
which now or hereafter may be authorized by law, here and in any other part of
the world.
12. The several clauses contained in this statement of powers shall
be construed as both purposes and powers. And the statements contained in each
of these clauses shall be in no way limited or restricted, by reference to or
inference from, the terms of any other clauses, but shall be regarded as
independent purposes and powers; and no recitations, expression or declaration
of specific or special powers or purposes herein enumerated shall be deemed to
be exclusive; but is hereby expressly declared that all other lawful powers not
inconsistent herewith, are hereby included.
ARTICLE IV: 1. The total number of shares of all classes of capital stock
which the Corporation is authorized to issue is 92,000,000, of which 61,000,000
shares shall be Common Stock with a par value of $.01 per share and 31,000,000
shares shall be Preferred Stock with a par value of $.01 per share.
4
<PAGE>
2. A description of the different classes of capital stock of the
Corporation, a statement of the relative rights of the holders of stock of such
classes, and a statement of the voting powers and the designations, preferences,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof, of the various classes of stock are as
follows:
(a) The authorized common stock shall be divided into two classes,
Class A Common Stock of which there shall be 41,000,000 shares authorized, and
Class B Common Stock of which there shall be 20,000,000 shares authorized. All
of the shares of common stock issued and outstanding on the date of the filing
of these Amended and Restated Articles of Incorporation shall be designated as
Class A Common Stock. All shares of Class A Common Stock and Class B Common
Stock shall be identical in all respects, and each outstanding share of common
stock shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders, provided, that prior to issuance of any shares of Class
B Common Stock, the Board of Directors shall, in a resolution or resolutions
providing for the issuance of such shares of Class B Common Stock adopted by the
Board of Directors, grant such special rights of the Class B Common Stock to
vote for Directors and to provide for conversion into Class A Common Stock upon
certain events as set forth in the Appendix which is attached to the Amended and
Restated Certificate of Designation of the Corporation's Series C Convertible
Preferred Stock, dated as of July 20, 1999, and to the Certificate of
Designation of the Corporation's Series D Convertible Preferred Stock, dated as
of July 20, 1999, and to be filed immediately after the filing hereof.
(b) Subject to the provisions of the Nevada Revised Statutes, the
Preferred Stock may be issued from time to time in one or more series, each of
such series to have such designation, preferences and relative, participating,
optional, voting or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
hereinafter provided.
(c) Authority is hereby expressly granted to the Board of Directors,
subject to the provisions of this Article IV and subject, further, to the
provisions of the Nevada Revised Statutes (but without restricting the Board of
Directors from taking any action described in Section 78.195(6) of the Nevada
Revised Statutes), to authorize one or more series of Preferred Stock and, with
respect to each series, to fix by resolution or resolutions providing for the
issue of such series:
(i) the number of shares to constitute such series and the
distinctive designation thereof;
(ii) the dividend rate on the shares of such series;
(iii) whether or not dividends on the shares of such series
shall be cumulative, and, if cumulative, the date or dates from
which dividends shall accumulate;
(iv) whether or not the shares of such series shall be
redeemable, and, if redeemable, the premium, if any, over and above
the par value thereof and any
5
<PAGE>
dividends accrued thereon which the shares of such series shall be
entitled to receive upon the redemption thereof;
(v) whether or not the shares of such series shall be subject
to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement and, if such
retirement or sinking fund or funds be established, the annual
amount thereof and the terms and provisions relative to the
operation thereof;
(vi) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the Corporation and the conversion price or
prices or the rate or rates at which such exchange may be made, with
such adjustments, if any, as shall be stated and expressed or
provided in such resolution or resolutions;
(vii) the amount of premium, if any, over and above the par
value thereof and any dividends accrued thereon, which the shares of
such series shall be entitled to receive upon the voluntary
liquidation, dissolution or winding up of the Corporation;
(viii) the voting power of the shares of such series;
(ix) the rights of the shares of such series in the event of
any liquidation, dissolution or winding up of the Corporation; and
(x) such other special rights and protective provisions as to
the Board of Directors may deem advisable.
(d) Cumulative voting in elections of Directors and all other
matters brought before stockholders meetings, whether they be annual or special,
shall not be permitted.
(e) Except as set forth in any resolution of the Directors or in any
Certificate of Designation for a series of Preferred Stock adopted pursuant to
Article IV of these Articles of Incorporation, no holder of shares of the
Corporation of any class, now or hereafter authorized, shall have any
preferential or preemptive right arising by reason of Chapter 78 of the Nevada
Revised Statutes to subscribe for, purchase, or receive any shares of the
Corporation of any class, now or hereafter authorized, or any options or
warrants for such shares, or any rights to subscribe to or purchase such shares,
or any securities convertible into or exchangeable for such shares, which may at
any time be issued, sold or offered for sale by the Corporation.
(f) Notwithstanding any other provision of these Amended and
Restated Articles of Incorporation, any Change of Control Transaction shall
require approval by the affirmative vote of the holders of at least 66-2/3% of
the outstanding voting securities of the Corporation (voting together as a
single class, and with each holder of securities convertible into or
exchangeable for
6
<PAGE>
shares of common stock being entitled to that number of votes as is equal to the
number of shares of common stock into which such convertible securities are
convertible on the record date of such vote or for which such exchangeable
securities are exchangeable on the record date of such vote). For purposes
hereof, a Change of Control Transaction shall mean any issuance of securities of
the Corporation, or any merger, consolidation or similar transaction involving
the Corporation, whether in a single transaction or a series of related
transactions, as a result of which the holders of the outstanding voting
securities of the Corporation immediately prior to the occurrence of such
issuance, merger, consolidation or similar transaction beneficially own or
control less than a majority of the outstanding voting securities of the
continuing or surviving entity immediately following the occurrence of such
issuance, merger, consolidation or similar transaction (the number of
outstanding voting securities held by any person for this purpose shall be
determined by assuming that immediately prior to the occurrence of such
issuance, merger, consolidation or similar transaction, all securities
convertible into or exchangeable for shares of common stock have been converted
into or exchanged for the number of shares of common stock into which such
convertible securities are then convertible or for which such exchangeable
securities are then exchangeable).
ARTICLE V: The period of duration of the Corporation shall be perpetual.
ARTICLE VI: The holders of a majority of the outstanding shares of stock
which have voting power shall constitute a quorum at a meeting of stockholders
for the transaction of any business unless the action to be taken at the meeting
shall require a greater proportion.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to fix the amount to be reserved
as stated capital over and above its paid-in capital stock, and to authorize and
cause to be executed, mortgages and liens upon the real and personal property of
the Corporation.
ARTICLE VII: The personal liability of the officers and directors of the
Corporation is hereby eliminated to the fullest extent permitted by Chapter 78
of the Nevada Revised Statutes, as the same may be amended and supplemented.
ARTICLE VIII: The Corporation shall, to the fullest extent permitted by
Chapter 78 of the Nevada Revised Statutes, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under Chapter 78 of the Nevada Revised Statutes from and against any
and all of the expenses, liabilities, or other matters referred to in or covered
by Chapter 78 of the Nevada Revised Statutes and the indemnification provided
for herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action to another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
ARTICLE IX: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Amended and Restated Articles of
Incorporation in the manner now or
7
<PAGE>
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
8
Exhibit 3.2
FIFTH AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
VANTAS INCORPORATED
Series A Convertible Preferred Stock
Pursuant to Chapter 78 of the Nevada Revised Statutes, VANTAS
Incorporated, a Nevada corporation (the "Corporation"), does hereby certify as
follows:
1. The following resolutions were duly adopted by the Board of Directors
of the Corporation as of July 19, 1999:
RESOLVED, that pursuant to Article IV of the Amended and Restated
Articles of Incorporation of this Corporation dated July 20, 1999, the
Corporation hereby amends and restates in its entirety the Fourth Amended
and Restated Certificate of Designation for the Corporation's Series A
Convertible Preferred Stock, dated December 29, 1998, and filed with the
Nevada Secretary of State on January 8, 1999, as set forth on Exhibit A to
this resolution (the "Fifth Amended and Restated Series A Certificate of
Designation"), to (i) make conforming changes in various provisions of the
Amended and Restated Series A Certificate of Designation to reflect the
designation of the Corporation's Series D convertible preferred stock and
Series E convertible preferred stock, and (ii) otherwise make
miscellaneous changes in and amend and restate in its entirety the Fourth
Amended and Restated Certificate of Designation of the Corporation's
Series A Convertible Preferred Stock; and be it further
RESOLVED, that the officers of this Corporation be, and they hereby
are, authorized and empowered to execute and file with the Secretary of
State of Nevada, the Fifth Amended and Restated Series A Certificate of
Designation.
2. The original designation of the Series A Convertible Preferred Stock
has not been changed and shall remain designated as the Series A Convertible
Preferred Stock.
3. The approval of the stockholders holding at least a majority of the
voting power of the Series A Convertible Preferred Stock issued and outstanding
has been obtained as required.
4. The Fifth Amended and Restated Series A Certificate of Designation is
set forth as Exhibit A annexed hereto and is a true and correct copy of the
rights, preferences, privileges and restrictions of the holders of the Series A
Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, ALLIANCE National Incorporated has caused this
Certificate to be signed by its President and its Senior Vice President as of
this 20th day of July, 1999.
By: /s/ David W. Beale
-----------------------------
David W. Beale, President and
Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- -----------------------------------------
Steven M. Cooperman
Senior Vice President and General Counsel
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 20th day of July, 1999, personally appeared before me David
W. Beale, the President and Chief Executive Officer of the Corporation, and
Steven M. Cooperman, the Senior Vice President and General Counsel of the
Corporation, and who acknowledged that they executed the above Certificate.
/s/ Barbara DiMartino
--------------------------------
Barbara DiMartino
Notary Public
2
<PAGE>
Exhibit A
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series A Convertible
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
Seven Million Five Hundred Seventy Four Thousand Seven Hundred Eleven
(7,574,711) shares of Preferred Stock, par value $.01 per share, created by the
Board of Directors of the Corporation pursuant to the authority granted to it by
the Articles of Incorporation of the Corporation is "Series A Convertible
Preferred Stock," which is hereinafter referred to as the "Series A Preferred
Stock." In the event that the Corporation does not issue the maximum number of
shares of Series A Preferred Stock, the Corporation may, from time to time, by
resolution of the Board of Directors, reduce the number of shares of Series A
Preferred Stock authorized, provided, that no such reduction shall reduce the
number of authorized shares to a number which is less than the number of shares
of Series A Preferred Stock then issued or reserved for issuance. The number of
shares by which the Series A Preferred Stock is reduced shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors. The Series A Preferred Stock, the
Corporation's Series B convertible preferred stock, par value $.01 per share
(the "Series B Preferred Stock"), the Corporation's Series C convertible
preferred stock, par value $.01 per share (the "Series C Preferred Stock"), the
Corporation's Series D convertible preferred stock, par value $.01 per share
(the "Series D Preferred Stock), and the Corporation's Series E convertible
preferred stock, par value $.01 per share (the "Series E Preferred Stock" and,
together with the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, the "Preferred
Stock"), shall be pari passu, and without distinction as to class or series,
except as otherwise set forth herein or as the context otherwise requires, and
with respect to dividend rights and rights on liquidation, dissolution, or
winding up, shall rank senior to the Corporation's Class A common stock, par
value $.01 per share (the "Class A Common Stock"), and the Corporation's Class B
common stock, par value $.01 per share (the "Class A Common Stock" and, together
with the Class B Common Stock, the "Common Stock").
2. Dividend Rights.
(1) Holders of shares of Series A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds of this
Corporation legally available therefor, non-cumulative cash dividends in an
amount equal to the equivalent per share cash dividend (based on the number of
whole shares of Common Stock issuable upon the conversion of a share of Series A
Preferred Stock as of the record date for such dividend) declared on the Common
Stock, when and as declared by the Board of Directors.
(2) No dividends shall be declared or paid or set aside for payment
on the Common Stock, the Series B Preferred Stock, the Series C Preferred Stock,
the Series D Preferred Stock or the Series E Preferred Stock unless dividends at
an equivalent rate (based on the number of shares of outstanding Common Stock
and the number of shares of Common Stock issuable upon
3
<PAGE>
the conversion of the Preferred Stock, in each case, as of the record date for
such dividend) have been or contemporaneously are declared and paid or declared
and a sum sufficient for payment thereof is set aside for such payment on the
Series A Preferred Stock.
(3) In the event that any holder of Series A Preferred Stock shall
surrender shares for conversion pursuant to the provisions of Section 4 of this
Certificate of Designation, the holder shall be entitled to dividends as
provided for in this Section 2 of this Certificate of Designation (to the extent
such dividends have been declared prior to the close of business on the
Conversion Date (as defined below) but are unpaid at such time).
3. Voting Rights.
(1) Holders of shares of Series A Preferred Stock shall have no
voting rights in respect thereof except as provided by law and except as
provided in this Section 3 of this Certificate of Designation.
(2) Except as to the matters as to which the holders of Series A
Preferred Stock are granted voting rights as a class as set forth in the
Appendix annexed hereto, the holders of Series A Preferred Stock shall vote as
one class with the holders of Common Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, and
shall have the right to that number of votes equal to the number of whole shares
of Common Stock issuable upon the conversion of shares of Series A Preferred
Stock as of the date which is the record date for the meeting of shareholders at
which such vote shall be taken (or if such vote shall be taken by written
consent, the date of the written consent of shareholders of the Corporation), as
may be adjusted pursuant to Section 5 hereof.
4. Conversion Rights.
(1) (i) At any time, each of the holders of the Series A Preferred
Stock shall have the right to convert the Series A Preferred Stock, in whole or
in part (provided that, if conversion is to be effected in part, it shall be
effected in increments of 25% of the number of shares then held by each holder
as may be adjusted pursuant to this Certificate of Designation), into shares of
Class A Common Stock at the "Conversion Rate." The Conversion Rate shall mean
the number of shares of Common Stock issuable upon conversion of one (1) share
of Series A Preferred Stock. The Conversion Rate shall be determined by dividing
(x) the "Stated Value" by (y) the "Conversion Price" (as such terms are
hereinafter defined).
(1) For purposes of this Certificate of Designation, the term
"Stated Value" shall initially mean $1.7041, as adjusted for events described in
Section 5(e) and for any subdivisions (by stock split, stock dividend or
otherwise) or any combinations of the Series A Preferred Stock having occurred
prior to the Conversion Date of the shares of Series A Preferred Stock in
question. (1)
(2) For purposes of this Certificate of Designation, the term
"Conversion Price" shall initially mean $1.7041, as adjusted pursuant to Section
5 hereof.
4
<PAGE>
(2) Conversion of the Series A Preferred Stock shall be effected by
surrender of the certificates representing the shares of Series A Preferred
Stock being converted to the transfer agent for the Series A Preferred Stock, or
if none shall have been appointed, to the Corporation, together with the form of
notice of election to convert as may be provided from time to time by the
Corporation.
(3) Shares of Series A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day ("Conversion
Date") of the surrender for conversion of the certificate therefor, together
with the form of notice of election provided by the Corporation duly signed by
the holder thereof, and the person or persons entitled to receive shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Class A Common Stock as of such
time. As promptly as practicable on or after the Conversion Date, the
Corporation or its transfer agent shall issue and shall deliver a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
such conversion, together with a cash payment (determined in accordance with
Section 5(i) hereof) in lieu of any fraction of any share of Class A Common
Stock, to the person or persons entitled to receive the same. Notwithstanding
the foregoing provisions of this Section 4(c), if at the Conversion Date, there
shall be declared but unpaid dividends on the Common Stock of the Corporation,
other than any dividend payable with respect to a record date subsequent to the
Conversion Date of such conversion and other than any dividend as to which there
shall have been paid dividends at an equivalent rate on the Series A Preferred
Stock, the Corporation shall, at the time of such conversion, pay to the
converting holder of Series A Preferred Stock the amount of such unpaid
dividends.
(4) Each share of Series A Preferred Stock shall be automatically
converted into shares of Class A Common Stock, at the then applicable Conversion
Rate, upon the consummation of an Initial Public Offering (as defined in the
Appendix annexed hereto).
(5) The Class A Common Stock issuable upon conversion of the Series
A Preferred Stock shall, when so issued, be duly and validly authorized and
issued, fully paid and nonassessable.
5. Adjustments.
(1) Except as provided in this Section 5(a) or in Sections 5(b) and
5(c) hereof, if and whenever the Corporation issues or sells, or in accordance
with the provisions of this Section 5 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the Stated
Value in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Conversion Price shall be reduced to the
Conversion Price determined by dividing (1) the sum of (x) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale by the Fully Diluted Capitalization (as hereinafter defined) immediately
prior to such issue or sale, plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, by (2) the Fully Diluted Capitalization
immediately after such issue or sale. As used herein, the term "Fully Diluted
Capitalization" shall mean the number of
5
<PAGE>
shares of issued and outstanding Common Stock assuming full conversion, exchange
and exercise of all then outstanding Options and Convertible Securities (each as
defined below).
(2) For purposes of determining the adjusted Conversion Price under
Section 5(a) above, the following shall be applicable:
(1) If the Corporation in any manner grants or sells any
options for the purchase of Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such options or other securities being
called "Options", and such convertible or exchangeable securities being called
"Convertible Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Stated Value in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 5(b)(i), the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options (it being understood that any
consideration to be received at a date later than the date of such grant or sale
shall be valued at the fair market value of such consideration on the date of
such grant or sale, as determined by the Board of Directors of the Corporation
in its good faith discretion), plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the Stated Value in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 5(b)(ii), the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (it being understood that any consideration to be received at a date
later than the date of such issue or sale shall be valued at the fair market
value of such consideration on the date of such issue or sale, as determined by
the Board of Directors of the Corporation in its good faith discretion), plus
the minimum aggregate
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amount of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 5(b), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(3) If the purchase price provided for in any Options referred
to in Section 5(b)(i) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in Sections
5(b)(i) or 5(b)(ii) hereof, or the rate at which any Convertible Securities
referred to in Sections 5(b)(i) or 5(b)(ii) hereof are convertible into or
exchangeable for Common Stock, changes at any time (whether increases or
decreases), the Conversion Price in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
(4) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(5) If any Common Stock, Option or Convertible Security is
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price (as hereinafter defined)
thereof as of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity in connection with
any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined by
the Board of Directors of the Corporation using its good faith discretion.
(6) In case any Option is issued in connection with the issue
or sale of other securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option shall be deemed to have been issued
for an aggregate consideration of $1.00.
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(7) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(8) If the Corporation takes a record of the holders of Common
Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities, or (2)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may be.
(9) As used in this Certificate of Designation, the term
"Market Price" shall mean, at the date of determination for any security
(including, without limitation, Common Stock), the average of the closing prices
for such security's sales on all securities exchanges on which such security may
at the time be listed or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors of the Corporation, in its good faith discretion. Notwithstanding the
foregoing, in the event the Series A Preferred Stock is converted in connection
with the first public offering of Common Stock after the date of the adoption of
this Certificate of Designation, the Market Price per share of Common Stock
shall be equal to the per share offering price to the public of the Common Stock
issued in such public offering.
(3) Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Conversion Price in
connection with the issuance of any of the following securities or the issuance
of any Common Stock upon exercise or conversion of any of the following
securities: (i) any option issued by the Corporation on or prior to December 31,
1998, (ii) any warrant issued by the Corporation on or prior to December 31,
1998, (iii) any shares of Series A Preferred Stock issued and outstanding as of
December 31, 1998, (iv) any shares of Series B Preferred Stock issued and
outstanding as of December 31, 1998, (v) any shares of Series C Preferred Stock
issued pursuant to the Merger Agreements (as such term is defined in the
Appendix annexed hereto), (vi) any shares of Series D Preferred Stock or Series
E Preferred Stock issued pursuant to the Series D Stock Purchase Agreement or
the Series D and E Stock Purchase Agreement (as such terms are defined in the
Appendix annexed hereto), or (vii) the Options to be granted under any Option
Plan (as defined in the Appendix annexed hereto). Notwithstanding the foregoing,
the Corporation shall make all necessary adjustments (including successive
adjustments
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if required) to the Conversion Price in accordance with this Section 5 to the
extent that any anti-dilution adjustments which may be made under the terms of
any outstanding securities of the Corporation would, in the absence of this
Section 5(c), require such adjustments to be made in the Conversion Price.
(4) In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(5) If any capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of Series A Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon conversion of
the Series A Preferred Stock, such shares of stock, securities or assets 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 Common Stock
immediately theretofore receivable upon conversion of the Series A Preferred
Stock had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the holder of the Series A Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Stated Value and Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon conversion of the Series A Preferred
Stock.
(6) No adjustment of the Conversion Rate pursuant to this Section 5
shall be required unless such adjustment results in an increase or decrease of
the Conversion Rate of at least one percent (1%); provided, however, that any
adjustments which by reason of this Section (5)(f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 5 shall be rounded to the one-hundredth
(1/100) of a share and to the next higher or lower one cent ($.01), as the case
may be.
(7) The Corporation may retain a firm of independent certified
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Section 5 of this Certificate of Designation, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(8) In case at any time:
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(1) the Corporation shall declare any dividend payable in
stock upon Common Stock or make any distribution (other than cash dividends
which are not in a greater amount per share than the most recent cash dividend)
to the holders of the Common Stock;
(2) the Corporation shall propose to make an offer for
subscription pro rata to the holders of its Common Stock of any additional
shares of stock of any class or other rights;
(3) there shall be proposed any other transaction of a type
referred to in this Section 5; or
(4) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give written
notice to the holders of the Series A Preferred Stock of the date on which (x)
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution, subscription rights, or other transaction, and (y) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for, or receive in
respect of their Common Stock, securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation, or winding up, as the case may be. Such written
notice shall be given not less than ten (10) days prior to the taking of the
action in question.
(9) No fractional shares or script representing fractional shares
shall be issued upon the conversion of shares of Series A Preferred Stock. If,
upon conversion of any shares of Series A Preferred Stock as an entirety, the
holder would, except for the provisions of this Section 5(i), be entitled to
receive a fractional share of Common Stock, then an amount equal to such
fractional share, multiplied by the Market Price per share of the Corporation's
Common Stock on the last business day prior to the Conversion Date, shall be
paid by the Corporation in cash to such holder.
(10) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock for
the purpose of effecting the conversion of the shares of Series A Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A Preferred Stock then outstanding.
6. Liquidation Rights.
(1) In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of the Series A
Preferred Stock shall be entitled to receive out of the assets of the
Corporation before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series A Preferred Stock as to such payment or distribution, and after all
such payments or distributions have
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been made on any series or class of capital stock ranking senior to the Series A
Preferred Stock as to such payment or distribution, an amount per share equal to
the greater of (i) the "Adjusted Purchase Price" (as hereinafter defined), plus
all declared but unpaid cash dividends, if any (the "Liquidation Amount"), (ii)
the Adjusted Value, or (iii) that which the holders would have received if they
had converted the Series A Preferred Stock immediately prior to such transaction
(without giving effect to the liquidation preference of or any dividends on any
other capital stock ranking prior to the Common Stock). The "Adjusted Purchase
Price" shall be $1.7041, as same may be proportionately adjusted for any
subdivisions (by stock split, stock dividend or otherwise) or any combinations
of the Series A Preferred Stock having occurred up to the effective date of the
event of liquidation, dissolution or winding up of the Corporation. The
"Adjusted Value" shall be an amount per share equal to the Adjusted Purchase
Price plus a cumulative accretion computed on the Adjusted Purchase Price at the
rate of 8% per annum (compounded annually) from the date of issuance of the
shares of Series A Preferred Stock up to the effective date of the event of
liquidation, dissolution or winding-up of the Corporation, reduced by an amount
equal to the aggregate of all declared and paid cash dividends, if any.
(2) A merger or consolidation of the Corporation (in the event that
the Corporation is not the surviving corporation), or the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and assets of the
Corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for purposes of this Section 6. In the event that
the Corporation undertakes any of the transactions referred to in this Section
6(b), the holders of Series A Preferred Stock shall be entitled to receive the
greater of (x) the Liquidation Amount, (y) the Adjusted Value, or (z) that which
the holders would have received if they had converted the Series A Preferred
Stock immediately prior to such transaction (without giving effect to the
liquidation preference of or any dividends on any other capital stock ranking
prior to the Common Stock).
(3) After the payment in cash to the holders of Series A Preferred
Stock of the full preferential amounts in the amounts which have been fixed
hereby for the shares of Series A Preferred Stock, such holders as such shall
have no right or claim to any of the remaining assets of the Corporation.
(4) In respect of liquidation, dissolution or winding up of the
Corporation, (i) the shares of Series D Preferred Stock and the shares of Series
E Preferred Stock rank prior to the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock and the shares of Series C Preferred Stock,
and (ii) the shares of Series A Preferred Stock, the shares of Series B
Preferred Stock and the shares of Series C Preferred Stock rank on a parity with
each other. Accordingly, if the assets of the Corporation available for
distribution on liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which the holders of Series A Preferred Stock are entitled pursuant
to Section 6(a) of this Certificate of Designation and all amounts to which the
holders of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are entitled upon liquidation,
dissolution or winding up pursuant to the certificates of designation of the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock, respectively, then after payment of the
full distributable amounts which the holders of Series D
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Preferred Stock and Series E Preferred Stock would be entitled to receive if the
assets of the Corporation were sufficient to pay the full distributable amounts
of Series D Preferred Stock and Series E Preferred Stock, proportionate
distributable amounts shall be paid on account of the shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, ratably,
in proportion to the full distributable amounts which the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock would be
entitled to receive if the assets of the Corporation were sufficient to pay such
full distributable amounts.
7. Rank of Series. For purposes of the Certificate of Designation, any
stock of any series or class of the Corporation shall be deemed to rank:
(1) prior to the shares of Series A Preferred Stock, as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if the
holders of such class or classes shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series A Preferred Stock;
(2) on a parity with shares of Series A Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series A Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series A Preferred Stock;
(3) junior to shares of Series A Preferred Stock as to dividends or
upon liquidation, dissolution or winding up, as the case may be, if such class
shall be Common Stock or if the holders of shares of Series A Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
8. Additional Rights. The holders of the Series A Preferred Stock shall
also have such other rights, and subject to the terms, conditions and
limitations, set forth in the Appendix annexed hereto to the extent that, under
the provisions of such Appendix, such rights are exercisable by (without giving
effect to any specified minimum percentages of ownership of shares of Series A
Preferred Stock that must consent or act in order to exercise such rights), and
are for the benefit of, all holders of Series A Preferred Stock.
9. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance and transfer of the Series A Preferred
Stock and for the payment of dividends to the holders of the Series A Preferred
Stock.
10. Construction. This Fifth Amended and Restated Certificate of
Designation for the Corporation's Series A Convertible Preferred stock amends,
supersedes and restates in its entirety
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the Fourth Amended and Restated Certificate of Designation of Series A
Convertible Preferred Stock dated December 29, 1998.
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APPENDIX TO CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
VANTAS INCORPORATED
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms are defined as follows:
(a) "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.
(b) "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, and (iii) when used with
respect to an individual, shall include the Family Group Members of such
individual.
(c) "Annual Budget" shall mean the budget for the Company and its
Subsidiaries in respect of each fiscal year of the Company which shall include,
without limitation, a cash flow projection, an operating budget, a capital
expenditures budget and an acquisition budget.
(d) "Beale Employment Agreement" shall mean that certain Employment
Agreement, dated as of November 15, 1996, between the Company and David W.
Beale.
(e) "Beneficially Own" shall have the meaning given such term under
Rule 13d-3 promulgated under the Exchange Act. The term "Beneficial Ownership"
shall have the correlative meaning. The foregoing terms shall exclude any record
or Beneficial Ownership in any securities issued by RSI or any interest in JAH
Realties L.P.
(f) "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
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consummation of the Qualified Public Offering, (ii) the consummation of a
secondary offering of the Common Stock in which (X) the gross proceeds of such
offering equal or exceed 30% of the gross proceeds of the Qualified Public
Offering, and (Y) the offering price per share of Common Stock is at least 10%
higher than the offering price per share of Common Stock in the Qualified Public
Offering (as adjusted to reflect stock dividends, stock splits, stock
combinations or any other similar transaction occurring after the Qualified
Public Offering), and (iii) the presentation by any Securityholder that is
subject to restrictions on resale during the Blackout Period of evidence
reasonably satisfactory to a majority of the other Securityholders that are also
subject to such restrictions that the Company is capable of consummating an
offering of the type described in clause (ii) hereof. The parties agree that the
opinion of a bulge bracket underwriter to the foregoing effect based on the then
current market price of the Common Stock, earnings multiples and any other
relevant factors shall automatically be satisfactory evidence.
(g) "Board" shall mean the Board of Directors of the Company.
(h) "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.
(i) "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.
(j) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(k) "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.
(l) "Common Stock Equivalent" shall mean, with respect to any
Securityholder, the number of shares of Common Stock owned by such
Securityholder, plus the number of shares of Conversion Stock, the number of
Warrant Shares, and the number of Option Shares which such Securityholder has
the right to acquire (or would upon the full vesting of all Options have the
right to acquire) by conversion or exercise as of the date of determination
thereof.
(m) "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.
(n) "Conversion Stock" shall mean Common Stock issuable upon the
conversion of the Preferred Stock.
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(o) "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.
(p) "Director" shall mean any member of the Board.
(q) "Encumbrances" shall mean any and all liens, pledges, claims,
charges, security interests, options or other legal or equitable encumbrances
and restrictions.
(r) "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.
(s) "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.
(t) "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.
(u) "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.
(v) "GAAP" shall mean generally accepted accounting principles.
(w) "Incapacity" with respect to an individual, shall mean that a
committee or conservator shall have been appointed for such individual or his
property.
(x) "Initial Public Offering" shall mean the consummation of either
(i) a public offering that has received Super-Majority Approval, or (ii) a
Qualified Public Offering.
(y) "Intercompany Agreement" means that certain Intercompany
Agreement, dated as of January 8, 1999, by and between the Company and the RSI
Holder.
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(z) "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.
(aa) "Majority of the Shares of Series A, B and E Preferred Stock"
shall mean at least 662/3% 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.
(bb) "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.
(cc) "OnSite" shall mean OnSite Ventures, L.L.C.
(dd) "OnSite Agreement" means the agreement to be entered into
between the Company and OnSite with respect to the provision of Internet and
telecommunications services to the Company by OnSite.
(ee) "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.
(ff) "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.
(gg) "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.
(hh) "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.
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(ii) "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.
(jj) "Prime Rate" shall mean the prime rate publicly announced by
The Chase Manhattan Bank, N.A. from time to time.
(kk) "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.
(ll) "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 9.1 by any of the Persons subject to
the restrictions in Section 9.1.
(mm) "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 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
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to be consummated and (v) such other factors as any investment banking firm
described above might consider in valuing the Company.
(nn) "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.
(oo) "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.
(pp) "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.
(qq) "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.
(rr) "RSI" shall mean Reckson Service Industries, Inc.
(ss) "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.
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(tt) "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.
(uu) "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.
(vv) "Series A, B and E Holders" shall collectively mean Series A
Holders, Series B Holders and Series E Holders.
(ww) "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).
(xx) "Series A, B and E Preferred Stock" shall collectively mean the
Series A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock.
(yy) "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.
(zz) "Series A Holders" shall mean the holders of the Series A
Preferred Stock issued and outstanding at any time.
(aaa) "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.
(bbb) "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.
(ccc) "Series B Holders" shall mean the holders of the Series B
Preferred Stock issued and outstanding at any time.
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(ddd) "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.
(eee) "Series C and D Adjusted Fully Diluted Capitalization" shall
mean the Adjusted Fully Diluted Capitalization,
(i) decreased by the number of Common Stock Equivalents (A)
issued upon the exercise of options to purchase Shares granted to directors or
employees of, or consultants to, the Company pursuant to the Company's 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
(ii) increased in the event there is an issuance of New
Securities (as defined in Section 7.1(a)) or Additional Securities (as defined
in Section 7.1(b)) by the number of Unused Backlog CSE's (as hereinafter
defined) as to which the RSI Beneficial Holders or any of the Series C 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
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
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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.
(fff) "Series C and D Holders" shall mean the holders of the Series
C and D Preferred Stock.
(ggg) "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).
(hhh) "Series C and D Preferred Stock" shall mean the Series C
Preferred Stock and Series D Preferred Stock.
(iii) 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.
(jjj) "Series C Holders" shall mean the holders of the Series C
Preferred Stock issued and outstanding at any time.
(kkk) "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.
(lll) "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.
(mmm) "Series D Holders" shall mean the holders of the Series D
Preferred Stock issued and outstanding at any time.
(nnn) "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.
(ooo) "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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(ppp) "Series E Holders" shall mean the holders of the Series E
Preferred Stock issued and outstanding at any time.
(qqq) "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.
(rrr) "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.
(sss) "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.
(ttt) "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), at least two Series A, B and E Preferred
Directors).
(uuu) "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).
(vvv) "Warrant Shares" shall mean the shares of Common Stock of the
Company issuable upon the exercise of the Warrants.
(www) "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
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acquired by a 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.
1.2 Additional Defined Terms. The following terms are defined as follows:
(a) "Agreement" shall mean this Appendix.
(b) "Cahill Holders" shall mean Cahill, Warnock Strategic Partners
Fund, L.P., Strategic Associates, L.P., and David L. Warnock.
(c) "Company" shall mean ALLIANCE National Incorporated, a Nevada
corporation.
(d) "Credit Agreement" shall mean that certain Amended and Restated
Credit Agreement, dated as of November 6, 1998 (as such agreement may be
amended, supplemented, refinanced, modified or replaced), among the Company,
certain financial institutions party thereto from time to time, and Paribas, as
Agent, or any other successor Agent thereto.
(e) "First Series A Stock Purchase Agreement" shall mean that
certain Series A Convertible Preferred Stock Purchase Agreement, dated as of
November 15, 1996, among the Company and certain of its Securityholders
identified therein.
(f) "Merger Agreements" shall mean each of the Merger Agreement,
dated as of November 9, 1998, by and among the Company, Alliance Holding, Inc.,
Interoffice Superholdings Corporation, and Interoffice Superholdings LLC, and
the Merger Agreement, dated as of November 9, 1998, by and among the
Corporation, ANI Holding, Inc., Reckson Executive Centers, Inc., and REC, LLC.
(g) "Merger Date" shall mean January 8, 1999.
(h) "Northwood Holders" shall mean Northwood Ventures LLC, Northwood
Capital Partners LLC, Kuhn, Loeb & Co., and Henry T. Wilson.
(i) "Other Holders" shall mean the Persons designated as such in the
Stockholders' Agreement.
(j) "Paribas Holder" shall mean Paribas, acting through its Cayman
Islands branch.
(k) "PNA Holder" shall mean Paribas North America.
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(l) "Second Series A Stock Purchase Agreement" shall mean that
certain Series A Convertible Preferred Stock Purchase Agreement, dated as of
December 31, 1996, among the Company and certain of its Securityholders
identified therein.
(m) "Securityholders" shall mean the Cahill Holders, the Northwood
Holders, the Paribas Holder, the PNA Holder, the Unit Holders, the Series C
Holders, and the Other Holders.
(n) "Series B Stock Purchase Agreement" shall mean that certain
Series B Convertible Preferred Stock Purchase Agreement, dated as of April 29,
1998, among the Company and certain of its Securityholders identified therein.
(o) "Series C Holders" shall mean ISC L.L.C. and REC L.L.C..
(p) "Series D and E Stock Purchase Agreement" shall mean that
certain Series D and E Convertible Preferred Stock Purchase Agreement,
anticipated to be entered into among the Company and certain of its
Securityholders identified therein.
(q) "Series D Stock Purchase Agreement" shall mean that certain
Series D Convertible Preferred Stock Purchase Agreement, anticipated to be
entered into among the Company and certain of its Securityholders identified
therein.
(r) "Stockholders' Agreement" shall mean the Fifth Amended and
Restated Stockholders' Agreement, dated as of July [___], 1999, by and among the
Company and the holders of its securities identified therein, as it may be
amended or restated from time to time.
(s) "Unit Holders" shall mean the Persons designated as such in the
Stockholders' Agreement.
ARTICLE II
BOARD; COMMITTEES
2.1 Board of Directors.
(a) 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
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Stock (which nominees shall initially be Scott Rechler, Jon Halpern, Daniel
DiSano and Stephen 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.
(b) On July [__], 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 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.
(c) 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
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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)).
(d) 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 Company. William E. Phillips
shall have the rights set forth herein to be a non-voting board observer until
December 31, 2000.
(e) The Company shall give the PNA Holder notice of (in the same
manner as notice is given to Directors), and permit one Person designated by the
PNA Holder to attend as a non-voting observer, all meetings of the Board and
shall provide to such observer the same information concerning the Company, and
access thereto, provided to members of the Board. Such observer shall keep all
such information confidential and shall not directly or indirectly use such
information for any purpose other than evaluating the PNA Holder's continued
investment in the Series B Preferred Stock 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
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meeting of the Board if the Board determines in its good faith discretion that
there are confidential matters to be discussed relating to the Company's debt
financing.
(f) Election of Nominees. On the date hereof, and at each annual
meeting of stockholders of the Company or any special meeting called for the
purpose of electing Directors of the Company (or by consent of stockholders in
lieu of any such meeting) or at such other time or times as the Securityholders
may agree, the Securityholders shall vote all of their respective Shares
entitled to vote in favor of the election of all of the Persons so nominated in
accordance with Section 2.1(a) and Section 2.1(b) and no other Person.
(g) Term. Each of the Series A, 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).
2.3 Committees.
(a) 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
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non-annual (project level) budget approvals, commitment of capital, incurrence
of debt and significant contractual relations. The Executive Committee shall
maintain minutes of its meetings and report to the Board on all of its
proceedings.
(b) The Audit Committee of the Board shall consist of four
Directors: (i) two Directors nominated by the Series A, 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.
(c) 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, consultant, Director or
officer of the Company shall require approval of a majority of the members of
the Compensation Committee.
(d) The Board shall establish a Strategic Steering Committee, which
shall be a management committee. The Strategic Steering Committee shall consist
of 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
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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.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 Approval of Certain Board Action. None of the following actions shall
be taken by the Company or any of its Controlled Affiliates without
Super-Majority Approval (provided that if at the time of the proposed action (i)
the Qualifying Series C 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):
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(a) any sale, exchange, lease or other disposition (whether in a
single transaction or a series of related transactions), of any asset, group of
assets, division or Subsidiary of the Company, which would have the effect of
(i) disposing of assets which produce gross revenues constituting 4% or more of
the Company's consolidated gross revenues (determined in each case as of the
date of the last regularly prepared quarterly financial statements of the
Company but giving effect to all acquisitions made by the Company and its
Subsidiaries on or after the beginning of the measurement period), (ii)
disposing of the Company's operations in a "metropolitan statistical area" as
such term is defined by the Bureau of the Census (with respect to domestic
operations) or a country (with respect to international operations), or (iii)
terminating or substantially terminating any material product line (e.g.,
executive office suites, Internet services, telecommunications service, etc.);
(b) (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);
(c) incurring any direct or indirect Indebtedness (as such term is
defined in the Credit Agreement as it exists as of the date hereof) for borrowed
money, loaning any money, guaranteeing the payment of any money or indebtedness
for borrowed money of another Person, guaranteeing the performance of any other
obligation of another Person (other than a wholly owned subsidiary), or
indemnifying another Person against any losses, damages or costs, provided that
the foregoing shall not include (i) any borrowing by the Company under its
Credit Agreement for acquisitions which have been approved by the Board or the
Executive Committee, working capital, letters of credit in connection with
leases of real property by the Company or any Subsidiary, or any other purpose
which is within the then current Annual Budget, (ii) any Capital Lease permitted
under Section 3.1(d), (iii) any trade debt of the Company or any Subsidiary
incurred in the ordinary course of business, or (iv) any indemnity which the
Company or any Subsidiary may give to a seller or related entities in connection
with an acquisition that has received the requisite Board approval, in respect
of the liabilities or obligations which are being assumed by the Company or a
Subsidiary in connection with such acquisition;
(d) making capital expenditures, including Capital Leases, in an
aggregate amount as capitalized on a balance sheet under GAAP, in any fiscal
year which exceeds by more than $500,000 the amount approved in the Annual
Budget for such year;
(e) entering into any business other than the Core Business;
(f) entering into any material transaction with any Affiliate of the
Company, except any transaction pursuant to the OnSite Agreement, the
Intercompany Agreement or any Product Agreement entered into pursuant thereto;
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(g) any change in the name of the Company;
(h) any voluntary liquidation or dissolution of the Company or
filing of a voluntary petition of the Company under Chapter 7 or Chapter 11 of
the Bankruptcy Act or a determination to not contest an involuntary petition of
bankruptcy or otherwise institute insolvency proceedings or otherwise seek any
relief under laws relating to the relief from debts or the protections of
debtors generally; seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for such
entity or all or any portion of such entity's properties; make any assignment
for the benefit of such entity's creditors; take any action that would cause the
Company to become insolvent as defined by the Bankruptcy Act; or take any action
which consents to a case in a bankruptcy or other insolvency proceedings against
the Company or waives or releases any right or claims of the Company in any such
case or proceeding;
(i) any merger, consolidation or reorganization of the Company with
another Person which is not a Subsidiary of the Company, except if such merger,
consolidation or reorganization is an acquisition transaction that would not
require Super-Majority Approval under Section 3.1(n); provided, however, that
such exception shall not apply to mergers, consolidations, or reorganizations
(i) pursuant to which the Company is not the surviving corporation and the
shares of the Company's capital stock are converted or exchanged, or (ii) which
would materially and adversely affect the relative rights or preferences of the
Series C 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);
(j) (A) any issuance or sale of equity securities (including
pursuant to the Series D or 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 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);
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(k) creating, granting, or consenting to any Encumbrances which
secure, individually or in the aggregate, an amount in excess of $100,000 and
which are not otherwise required or permitted under the terms of the Credit
Agreement, provided that if the Credit Agreement is not then in effect, under
the terms of the Credit Agreement as such Credit Agreement exists as of the date
hereof;
(l) any change in the accounting principles used by the Company or
the adoption of any change to the Company's financial reporting practices,
procedures or standards which would as a normal matter require the approval of
the Board, except for any such changes which are required by GAAP or the
Securities and Exchange Commission;
(m) retaining any accounting firm other than PricewaterhouseCoopers,
LLP or another "Big Five" accounting firm which is "independent" as such term is
used in Rule 2-01 of Regulation S-X under the Securities Act and under GAAP;
(n) any acquisition (in any transaction or series of related
transactions) of all or substantially all of the assets of, or of a controlling
interest in, any other Person, where such transaction (or related transactions)
would have the effect, on a pro forma basis, assuming such transaction or
related transactions were consummated, of increasing the consolidated gross
revenues of the Company by 10% or more (in the case of international
acquisitions) or 20% or more, (in the case of domestic acquisitions) over the
existing consolidated gross revenues of the Company, determined for the
immediately preceding twelve month period ending as of the date of the most
recent quarterly financial statements of the Company. For this purpose
consolidated gross revenues shall be calculated giving effect to all other
acquisitions made by the Company and its Subsidiaries on or after the beginning
of the measurement period;
(o) entering into any agreement, other than any agreement that may
be entered into under the terms of the Intercompany Agreement (including the
OnSite Agreement), (i) with a real estate investment trust other than Reckson
Associates Realty Corp., except for leases of real property and related
agreements for services ancillary to a lease of real property, or (ii) which is
a material agreement with any Person (other than RSI, OnSite or their respective
Affiliates) which directly competes with RSI as a broad based provider of
multiple outsourced business services (i.e. this clause (ii) shall not apply to
an agreement with a provider of individual business services which RSI, OnSite
or their respective Affiliates may offer; provided, that each such agreement is
not otherwise violative of the terms and conditions of the Intercompany
Agreement);
(p) any amendment to the Articles of Incorporation (including the
Certificates of Designation) or Bylaws of the Company, or any change in the
number of members of the Board, any Committee thereof or the Strategic Steering
Committee;
(q) the hiring or termination of employment of any of the Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer of the
Company, or of any other officer of the Company with a compensation package
equal to or greater than the compensation package of the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer or the approval of
any
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renewal, extension or termination of any employment agreement with any such
individual or the waiver by or on behalf of the Company or any of its Controlled
Affiliates of any of the Company's rights thereunder;
(r) the adoption or amendment of the Annual Budget;
(s) the settlement of any action or proceeding before a federal
regulatory agency, or the commencement or settlement of any litigation by or
against the Company or any Subsidiary in which the amount at issue involves at
least $500,000;
(t) redemption or other purchase of outstanding Shares, Warrants or
Options except pursuant to the provisions of this Agreement, the Certificates of
Designation or the terms of the applicable Option Plan; or
(u) any amendment, modification or waiver of any provision of this
Agreement.
3.2 Approval of Certain Stockholders. The Company agrees it shall
not, without the approval of a Majority of the Shares of Series A, B and E
Preferred Stock and a Majority of the Shares of the Series C and D Preferred
Stock:
(a) 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;
(b) enter into any agreement or arrangement of any kind that would
restrict the Company's ability to perform its obligations under (i) this
Agreement, (ii) the First Series A Stock Purchase Agreement, the Second Series A
Stock Purchase Agreement, 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));
(c) amend the Articles of Incorporation (including the Certificates
of Designation) or the By-laws of the Company in any manner;
(d) merge or consolidate with any other entity or sell all or
substantially all of its assets or issue any voting securities to a Person or
entity not then a holder of Shares which would result in such Person or entity
acquiring control of the Company; or
(e) liquidate or dissolve.
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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 3 and, thereafter, the
employment of such executive officers shall be governed by the terms of such
agreements as the Company may enter into with such persons.
3.5 Resolution of Certain Tie Votes of the Board. Except for matters for
which SuperMajority 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.
ARTICLE IV
TRANSFER OF SHARES
4.1 Restrictions on Transfer. So long as this Agreement is in effect, no
Securityholder shall sell, assign, transfer, give, encumber, pledge, hypothecate
or in any other way dispose of any Shares, Warrants or Options (any of which
being a "Transfer") except as provided in this Agreement. For purposes of
Section 4.1, Section 4.2, Section 4.3 and Section 4.6 of this Agreement, a
Transfer shall be deemed to include any Transfer by any Person who Beneficially
Owns any shares of Series C 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
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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):
(a) subject to Section 4.6 and 9.6 hereof, a Transfer in accordance
with the provisions of Section 4.3, 4.5, 4.7 or 4.8 or Article 5 hereof,
pursuant to the redemption provisions applicable to the Preferred Stock as in
effect from time to time, or through a sale in a registered offering in
accordance with Article 6 hereof;
(b) subject to Section 4.6 and 9.6 hereof, a Transfer (i) upon the
death of a Securityholder or of a Beneficial Owner of shares of Series C 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);
(c) subject to Section 4.6 and 9.6 hereof, a Transfer to (x) an
Affiliate or (y) to members, partners, limited partners, or stockholders of a
Securityholder in the event of a liquidation or other distribution of or by such
Securityholder, or (z) made for nominal consideration or as a gift to any of the
Securityholder's Family Group Members; and
(d) subject to Section 4.6 and 9.6 hereof, any Transfer by any of
the Series C 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 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");
(e) anything herein to the contrary notwithstanding, in the event
that any Securityholder or any of its Affiliates shall deliver to the Company an
opinion of counsel to such Securityholder or such Affiliate, as the case may be,
to the effect that if such Securityholder or such Affiliate, as the case may be,
shall continue to hold some or all of the Warrants or Shares held by it, there
is a material risk that such ownership will result in the violation of any
statute, regulation or rule of any governmental authority (including, without
limitation, Regulation Y promulgated under the Bank Holding Company Act of 1956,
as amended (the "BHCA")), such Securityholder or such Affiliate (a "Regulated
Holder"), as the case may be, may exchange its Shares or Warrants, as herein
provided. The Company shall cooperate with such Securityholder or such Affiliate
as the case may be, in exchanging all or any 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
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to such voting Shares, except that they shall be non-voting and shall be
convertible or exercisable into voting securities on such conditions as are
requested by such Securityholder in light of the regulatory considerations
prevailing). Without limiting the forgoing, at the request of such
Securityholder or such Affiliate, as the case may be, the Company shall use
commercially reasonable efforts to amend this Agreement, the Articles of
Incorporation of the Company, the By-laws of the Company, and any related
agreements and instruments and shall take such additional actions in order to
effectuate the authorization of the issuance of nonvoting securities and the
exchange of such Securityholder's voting securities into such nonvoting
securities. The provisions of this Section 4.2(e) shall inure solely to the
benefit of the Securityholders and their Affiliates which are subject to the
provisions of the BHCA or the Small Business Investment Act of 1958, as amended
(the "SBIA"); and
(f) any pledge of a Series C 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.
(a) Each Securityholder agrees that, subject to the restrictions on
Transfers contained in Sections 4.3(i), 4.4 and 4.6, if any Securityholder (a
"Transferring Securityholder") proposes to Transfer any or all of the Shares or
Warrants then owned by such Transferring Securityholder pursuant to a bona fide
offer from a third party (who (x) is not an Affiliate of such Securityholder and
(y) reasonably has the ability to consummate such offer in accordance with its
terms), other than as provided in Section 4.2, 4.5, 4.7 or 4.8 or Article 5
hereof or pursuant to the redemption provisions in the Certificates of
Designation or through a sale in a registered offering in accordance with
Article 6 hereof (a "Section 4.3 Transfer"), then such Transferring
Securityholder shall first give a written notice (the "Transfer Notice") to the
Company and each of the other Securityholders (the "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
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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.
(b) 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 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.
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(c) The Company shall have the right to accept the Transfer Offer as
to all or a portion of the Initial Remaining Transfer Shares. Within 15 Business
Days after the end of the 15 Business Day period provided to the Series C 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).
(d) The Securityholder Offerees shall have the right to accept the
Transfer Offer as to the Final Remaining Transfer Shares. Within 15 Business
Days after the end of the 15 Business Day period provided to the Company in
Section 4.3(c), each Securityholder Offeree who wishes to purchase any of the
Final Remaining Transfer Shares shall give an Acceptance Notice to the Company
and the Transferring Securityholder, which shall specify the number of Final
Remaining Transfer Shares (up to such Securityholder Offeree's Pro Rata Share of
the Final Remaining Transfer Shares, which for the RSI Beneficial Holders shall
be calculated including any Transfer Shares to be acquired by them or by the
Series C 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 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.
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(e) 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.
(f) If any Transfer Shares allocated to a Securityholder Offeree are
not purchased by such Securityholder Offeree, such Transfer Shares may be
purchased by the Company promptly following any such default. Nothing contained
herein shall prejudice any Person's right to maintain any cause of action or
pursue any other remedies available to it as a result of such default.
(g) If, at the end of the 15 Business Day period set forth in
Section 4.3(d), timely Acceptance Notices have not been given covering all of
the Transfer Shares and the Transfer Notice contained an All or Nothing
Condition, then the Transferring Securityholder shall have 90 days in which to
complete the sale of all, but not less than all, of the Transfer Shares. If, at
the end of the 15 Business Day period set forth in Section 4.3(d), timely
Acceptance Notices have not been given covering all of the Transfer Shares and
the Transfer Notice did not contain an All or Nothing Condition, then the
Transferring Securityholder shall have 90 days in which to complete the sale of
any or all of the Transfer Shares as to which timely Acceptance Notices have not
been given. Any such sale of Transfer Shares shall be to a third party for a
consideration not less than the consideration, and on terms no more favorable to
the transferee, than those contained in the Transfer Notice. No such Transfer
may be made to any third party unless and until such third party delivers to the
Company an executed consent to be bound by the provisions of this Agreement in
form and substance reasonably satisfactory to the Company. Promptly after any
Transfer pursuant to this Section 4.3, the Transferring Securityholder shall
notify the Company of the consummation thereof and shall furnish such evidence
of the completion and time of completion of such Transfer and of the terms
thereof as the Company may request. If, at the end of such 90 day period, the
Transferring Securityholder has not completed the Transfer of all of the
Transfer Shares, the Transferring Securityholder shall no longer be permitted to
Transfer such Shares pursuant to this Section 4.3(g) without again complying
with this Section 4.3 in its entirety. If the Transferring Securityholder
determines at any time within such 90 day period that the Transfer of all or any
part of such Transfer Shares for a consideration not less than and on terms no
more favorable to the transferee than those contained in the Transfer Notice is
impractical, the Transferring Securityholder may terminate all attempts to
Transfer such Transfer Shares and recommence the procedures of this Section 4.3
in their entirety without waiting for the expiration of such 90 day period by
delivering written notice of such decision to the Company.
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(h) If any Regulated Holder has the right to purchase any Transfer
Shares but is prohibited from exercising such right under the BHCA or SBIA or
the regulations promulgated thereunder, such Regulated Holder may assign such
right to the Company and upon such assignment the Company shall, subject to any
legal or contractual restrictions and at no cost or expense to the Company,
purchase such Transfer Shares and concurrently sell to such Regulated Holder
such Transfer Shares, or if requested by such Regulated Holder, securities that
do not have voting rights but otherwise have the same terms as such Transfer
Shares, for the purchase price upon which such Transfer Shares were purchased by
the Company. The Company's obligations under this Section 4.3(h) are solely as
an accommodation to such Regulated Holder and the Company shall be under no
obligation to advance any funds or to obtain any financing to acquire such
Transfer Shares.
(i) No Transfer of Options may be made in a Section 4.3 Transfer.
(j) Any time periods contained in this Section 4.3 shall be extended
to the extent reasonably necessary to allow any Securityholder to obtain any
requisite approvals under the 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 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
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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 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,
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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 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.
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(a) 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 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.
(b) 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.
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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).
(c) 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.
(d) 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 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
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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.
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.
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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).
ARTICLE V
PUT
5.1 Ability to Put. (a) If (A) the Company has not, prior to November 15,
2001, either made an Initial Public Offering, or merged into a public company
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
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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 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 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,
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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 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,
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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 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.
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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, 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
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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.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Public Offering Shares.
(a) Demand Registration Rights. (i) Subject to Section 6.1(a)(ii),
at any time and from time to time following the one year anniversary of an
Initial Public Offering, if the Company receives written notice from either (A)
holders of Class A Common Stock (as defined in Section 8.1(e)) who, immediately
prior to the Initial Public Offering, constituted the holders of a majority of
the Shares of the Series A, 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
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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 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
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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.
(b) "Piggyback" Registration Rights. Subject to applicable stock
exchange rules and securities regulations, at least 30 days prior to the filing
of any registration statement for any public offering of any of its Common Stock
for the account of the Company or any other Person, (other than 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
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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).
(c) Terms and Conditions of Registration or Qualification. In
connection with any registration statement filed pursuant to Section 6.1(a) or
6.1(b) hereof, the following provisions shall apply:
(i) Each selling Securityholder shall, if requested by the
managing underwriter, agree not to sell any Shares held by such selling
Securityholder (other than the Shares so registered) for such period of time
following the effective date of the registration statement relating to such
offering, but in no event in excess of three (3) months in the case of a
secondary offering, or such other longer period as the managing underwriter may
require and the Company shall agree.
(ii) If the managing underwriter advises in writing that the
inclusion in such registration or qualification of some or all of the Shares
sought to be registered exceeds the number (the "Saleable Number") that can be
sold in an orderly fashion within a price range acceptable to the Company, if
such registration is being effected at the Company's determination, or holders
of a Majority of the Shares of the Series A, 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
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
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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.
(iii) The selling Securityholders will promptly provide the
Company with such information concerning the selling Securityholder, its
ownership of Shares and its intended methods of distribution as the Company
shall reasonably request in order to prepare such registration statement and,
upon the Company's request, each selling Securityholder shall provide such
information in writing and signed by such Securityholder and stated to be
specifically for inclusion in the registration statement. If the distribution of
the Shares covered by the registration statement shall be effected by means of
an underwriting, the right of any selling Securityholder to include its Shares
in such registration shall be conditioned on such Securityholder's execution and
delivery of a customary underwriting agreement with respect thereto; provided,
however, that except with respect to information concerning such Securityholder
and its ownership of Shares to be included in such registration and such
Securityholder's intended manner of distribution of the Shares, no selling
Securityholder shall be required to make any representations or warranties in
such agreement as a condition to the inclusion of its Shares in such
registration.
(iv) The Company shall bear all expenses in connection with
the preparation of any registration statement filed pursuant to Section 6.1(a),
including the fees and disbursements of one counsel for the selling
Securityholders, except for the underwriting discounts or commissions with
respect to Shares of the selling Securityholders which shall be borne by the
selling Securityholders.
(v) The Company shall bear all expenses in connection with the
preparation of any registration statement filed pursuant to Section 6.1(b),
including the fees and disbursement of one counsel to the selling
Securityholders, except for the underwriting discounts or commissions with
respect to Shares of the selling Securityholders, which shall be borne by the
selling Securityholders.
(vi) Following the effective date of such registration
statement, the Company shall, upon the request of the selling Securityholders,
forthwith supply such number of prospectuses (including preliminary prospectuses
and amendments and supplements thereto) meeting the requirements of the
Securities Act or such other securities laws where the registration statement or
prospectus has been filed and such other documents as are referred to in the
registration statement as shall be requested by the selling Securityholders to
permit such Securityholders to make a public distribution of their Shares,
provided that the selling Securityholders furnish the Company with such
appropriate information relating to such Securityholders' intentions in
connection therewith as the Company shall reasonably request in writing.
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(vii) The Company shall prepare and file such amendments and
supplements to such registration statement as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act or such other securities laws where the registration statement
has been filed with the respect to the offer and sale or other disposition of
the Shares covered by such registration statement during the period required for
distribution of the Shares, which period shall not be in excess of six (6)
months from the effective date of such registration statement or such longer
period specified in the demand for registration.
(viii) The Company shall use its best efforts to register or
qualify the Shares of the selling Securityholders covered by any such
registration statement under such securities or Blue Sky laws in such
jurisdictions as the Securityholders may request; provided, however, that the
Company shall not be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any jurisdiction where
it is not so qualified in order to comply with such request.
(ix) The Company will as expeditiously as possible:
(A) cause the Shares covered by such registration
statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company to enable the selling Securityholders to consummate the disposition
of such Shares;
(B) notify each selling Securityholder at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(C) cause all Shares covered by the registration
statement to be listed on each securities exchange or designated for quotation
on NASDAQ on which similar securities issued by the Company are then so listed
or designated and, unless the same already exists, provide a transfer agent,
registrar and CUSIP number for all such Shares not later than the effective date
of the registration statement;
(D) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
holders of a majority of the voting power of the Shares being sold or the
underwriters retained by such holders, if any, reasonably request in order to
expedite or facilitate the disposition of such Shares;
(E) make available for inspection by any selling
Securityholder, any underwriter participating in any disposition pursuant to
such registration statement, and any
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attorney, accountant or other agent retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company as shall be necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information requested
by any such Inspector in connection with such registration statement;
(F) obtain "cold comfort" letters and updates thereof
from the Company's independent public accountants and an opinion from the
Company's counsel, in each case addressed to the selling Securityholders, in
customary form and covering such matters of the type customarily covered by
"cold comfort" letters and opinion of counsel, respectively, as the holders of a
majority of the voting power of the Shares of the selling Securityholders shall
request;
(G) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its Securityholders, as
soon as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(H) cause its officers to use their reasonable best
efforts to support the marketing of the Shares covered by the registration
statement (including, without limitation, the participation in "road shows," at
the request of the managing underwriter) taking into account the Company's
business needs.
(x) Each selling Securityholder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 6.1(c)(ix)(B), such Securityholder will forthwith discontinue
disposition of its Shares pursuant to the registration statement covering such
Shares until such Securityholder's receipt of the copies of the supplemented or
amended prospectus contemplated by such Section 6.1(c)(ix)(B) and, if so
directed by the Company, such Securityholder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Securityholder's possession, of the prospectus covering such its Shares current
at the time of receipt of such notice.
(d) Transfer Restrictions. The transfer restrictions contained in
Article 4, including, without limitation, those set forth in Section 4.3, of
this Agreement shall not apply to any offering of Shares pursuant to this
Section 6.1.
(e) Indemnification.
(i) In the event of the registration or qualification of any
Shares of the Securityholders under the Securities Act or any other applicable
securities laws pursuant to the provisions of this Section 6.1, the Company
agrees to indemnify and hold harmless each Securityholder thereby offering such
Shares for sale (a "Seller") and each of their officers, directors, partners,
members or agents, the underwriter, broker or dealer, if any, of such Shares,
and each other Person, if any, who controls any such Seller, underwriter, broker
or dealer within the meaning of the
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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.
(ii) In the event of the registration or qualification of any
Shares of the Securityholders under the Securities Act or any other applicable
securities laws for sale pursuant to the provisions of this Section 6.1, each
selling Securityholder, each underwriter, broker and dealer, if any, of such
Shares, and each other Person, if any, who controls any such selling
Securityholder, underwriter, broker or dealer within the meaning of the
Securities Act, agrees severally, and not jointly, to indemnify and hold
harmless the Company, each Person who controls the Company within the meaning of
the Securities Act, and each officer and director of the Company from and
against any and all losses, claims, damages or liabilities (or actions in
respect thereof), joint or several, to which the Company, such controlling
Person or any such officer or director may become subject under the Securities
Act or any other applicable securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of any material fact contained in any
registration statement under which such Shares were registered or qualified
under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon an untrue
statement or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
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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.
(iii) Promptly after receipt by a Person entitled to
indemnification under this Section 6.1(e) (an "Indemnified Party") of notice of
the commencement of any action or claim relating to any registration statement
filed under Section 6.1(a) or 6.1(b) or as to which indemnity may be sought
hereunder, such indemnified party will, if a claim for indemnification hereunder
in respect thereof is to be made against any other party hereto (an
"Indemnifying Party"), give written notice to such Indemnifying Party of the
commencement of such action or claim, but the omission to so notify the
Indemnifying Party will not relieve the Indemnifying Party from any liability
that it may have to any Indemnified Party otherwise than pursuant to the
provisions of this Section 6.1(e) and shall also not relieve the Indemnifying
Party of its obligations under this Section 6.1(e) except to the extent that the
Indemnifying Party is actually prejudiced thereby. In case any such action is
brought against an Indemnified Party, and it notifies an Indemnifying Party of
the commencement thereof, the Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense, with counsel
reasonably satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable cost of investigation;
provided, however, that no Indemnifying Party shall enter into any settlement
agreement without the prior written consent of the Indemnified Party unless such
Indemnified Party is fully released and discharged from any such liability.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (A) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such suit, action, claim or
proceeding, (B) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of the defense
of such action, suit, claim or proceeding, or (C) such Indemnified Party shall
have reasonably concluded, based upon the advice of counsel, that there may be
defenses available to it that are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the reasonable fees and expenses of one
counsel or firm of counsel selected by a majority in interest of the Indemnified
Parties (and reasonably acceptable to the Indemnifying Party) shall be borne by
the Indemnifying Party. If, in any such case, the Indemnified
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Party employs separate counsel, the Indemnifying Party shall not have the right
to direct the defense of such action, suit, claim or proceeding on behalf of the
Indemnified Party and the Indemnified Party shall assume such defense and/or
settle such action; provided, however, that an Indemnifying Party shall not be
liable for the settlement of any action, suit, claim or proceeding effected
without its prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE VII
PREEMPTIVE RIGHTS
7.1 Preemptive Rights.
(a) Prior to an Initial Public Offering. If, after the date hereof
and prior to an Initial Public Offering, the Company shall propose to issue or
sell New Securities (as hereinafter defined) or enter into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any New Securities, then subject to the immediately
following paragraph, each Securityholder shall have the right to purchase that
number of New Securities, at the same price and on the same terms proposed to be
issued or sold by the Company, so that each such Securityholder would, after the
issuance or sale of all such New Securities (and after giving effect to the
preference given to the Series C 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.
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
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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 be issued, the price per share (only for that number of New
Securities as are purchasable under this
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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.
(b) Initial Public Offering and Following an Initial Public
Offering. If, in connection with an Initial Public Offering or thereafter, the
Company shall propose to issue or sell Additional Securities or enter into any
contracts, commitments, agreements, understandings or arrangements of any kind
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 VIII
TERMINATION
8.1 Termination. This Agreement shall terminate automatically upon the
consummation of (i) an Initial Public Offering, or (ii) a Sale of the Company;
provided, however, that, notwithstanding the foregoing:
(a) the provisions of Section 4.5 shall survive an Initial Public
Offering and shall terminate upon the third anniversary thereof;
(b) the provisions of Section 4.10 shall survive in accordance with
the terms thereof;
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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,
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that if any such Person shall not have executed such a consent for any reason,
such Person shall nonetheless be deemed bound by the obligation set forth herein
to convert Shares of Series C 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 9.1(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 9.1 shall survive in accordance with
their terms.
ARTICLE IX
MISCELLANEOUS
9.1 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 9.1, 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
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Business, the factors to be considered shall include, without limitation, the
respective customer base and distribution channels of such Person and the
Prohibited Business with respect to the specific products and services which
compete with each other. Notwithstanding the foregoing, a Person shall not be
deemed to Compete with the Company if it offers for sale one or more products or
services which are part of the Prohibited Business so long as the provision of
any such products or services taken in the aggregate are not materially
competitive with the Prohibited Business. In the event that the Company believes
that any proposed investment or the conduct of any business by any Non-Competing
Party would violate such restrictions, it shall so notify such Non-Competing
Party within six months after receipt of written notice from the Non-Competing
Party of such investment or business. The failure of the Company to so notify
such Non-Competing Party within such six-month period shall constitute an
irrevocable waiver of the Company's right to contest such investment or
business.
(b) Notwithstanding the foregoing, each of the Non-Competing Parties
shall be permitted to make an investment in any Person whose business Competes
with the Company, provided that within 9 months after the consummation of such
investment, such Person ceases to engage in the business which Competes with the
Company provided, that if there is a dispute with respect to whether an
investment Competes, then any required divestiture shall not be required until
nine (9) months after the date of final determination of such Dispute adverse to
the Non-Competing Party. If such Person ceases to engage in the business which
Competes with the Company through the divestiture of the competing business
lines (including any divestiture following a final determination described
above), the Non-Competing Party shall use and cause each of its Affiliates
Controlled by it to use its reasonable good faith efforts to offer the Company
the first opportunity to acquire such business lines which such Person is
divesting.
(c) Nothing in this Section 9.1 shall limit the right of (i) the RSI
Beneficial Holders to provide products and services under the terms of the
Intercompany Agreement, or (ii) any Non-Competing Party to own not more than
4.9% of the outstanding shares of a corporation or other entity whose shares or
other equity or debt interests are listed on any United States national or
regional securities exchange or reported by NASDAQ or any successor thereto. In
the event of a final determination by a court of competent jurisdiction that any
Non-Competing Party has breached the covenants in this Section 9.1, then, except
as set forth in Section 9.1(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 9.1 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 9.1 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 9.1, then, without
duplication or limitation of any rights and remedies that may be available
55
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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 9.1(d)), to the RSI Beneficial Holders and
their Affiliates (in the case of a breach of this Section 9.1 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders and their Affiliates (in the
case of a breach of this Section 9.1 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 9.1 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 9.1 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 9.1(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 9.1(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 9.1 by any of the RSI
Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach of
this Section 9.1 by any of the JAH Beneficial Holders) in accordance with the
provisions of Section 9.1(e) and the rights granted to the Series C and D
Holders pursuant to this Agreement shall terminate to the extent provided in
Section 9.1(e), or (y) after an Initial Public Offering: (1) all of the shares
of Class B Common Stock shall automatically, and without any action on the part
of any Person, convert into an equal number of shares of Class A Common Stock;
provided, however, that if only the JAH Beneficial Holders are the parties that
have been determined to breach the provisions of this Section 9.1, 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 9.1, 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 9.1(e)
(assuming for the purpose of applying said Section 9.1(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 9.1 by any of the RSI Beneficial
Holders) or the JAH Beneficial Holders (in the case of a breach of this Section
9.1 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
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<PAGE>
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 9.1(d), the RSI
Beneficial Holders (in the case of a breach of this Section 9.1 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.1 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 9.1 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
9.1(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 9.1 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.1 by any of the JAH
Beneficial Holders) within 30 days after the final determination referred to in
the first sentence of Section 9.1(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 9.1 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.1 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 9.1 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.1 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
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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 9.1 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.1 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 9.1) (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 9.1(e). At the
Call Closing Date, each of the RSI Beneficial Holders (in the case of a breach
of this Section 9.1 by any of the RSI Beneficial Holders) or the JAH Beneficial
Holders (in the case of a breach of this Section 9.1 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 9.1 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.1 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 9.1(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 9.1 by any of the
RSI Beneficial Holders) or the JAH Beneficial Holders (in the case of a breach
of this Section 9.1 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 9.1 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
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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 9.1
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 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 9.1 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 9.1 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 9.1 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.
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60
Exhibit 3.3
SECOND AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
VANTAS INCORPORATED
Series B Convertible Preferred Stock
Pursuant to Chapter 78 of the Nevada Revised Statutes, VANTAS
Incorporated, a Nevada corporation (the "Corporation"), does hereby certify as
follows:
1. The following resolutions were duly adopted by the Board of Directors
of the Corporation as of July 19, 1999:
RESOLVED, that pursuant to Article IV of the Amended and Restated Articles
of Incorporation of this Corporation dated July 20, 1999, the Corporation hereby
amends and restates in its entirety the Amended and Restated Certificate of
Designation for the Corporation's Series B Convertible Preferred Stock, dated
December 29, 1998, and filed with the Nevada Secretary of State on January 8,
1999, as set forth on Exhibit A to this resolution (the "Second Amended and
Restated Series B Certificate of Designation"), to (i) make conforming changes
in various provisions of the Amended and Restated Series B Certificate of
Designation to reflect the designation of the Corporation's Series D convertible
preferred stock and Series E convertible preferred stock, and (ii) otherwise
make miscellaneous changes in and amend and restate in its entirety the Amended
and Restated Certificate of Designation of the Corporation's Series B
Convertible Preferred Stock; and be it further
RESOLVED, that the officers of this Corporation be, and they hereby
are, authorized and empowered to execute and file with the Secretary of
State of Nevada, the Second Amended and Restated Series B Certificate of
Designation.
2. The original designation of the Series B Convertible Preferred Stock
has not been changed and shall remain designated as the Series B Convertible
Preferred Stock.
3. The approval of the stockholders holding at least a majority of the
voting power of the Series B Convertible Preferred Stock issued and outstanding
has been obtained as required.
4. The Second Amended and Restated Series B Certificate of Designation is
set forth as Exhibit A annexed hereto and is a true and correct copy of the
rights, preferences, privileges and restrictions of the holders of the Series B
Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, ALLIANCE National Incorporated has caused this
Certificate to be signed by its President and its Senior Vice President as of
this 20th day of July, 1999.
By: /s/ David W. Beale
-----------------------------
David W. Beale, President and
Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- -----------------------------------------
Steven M. Cooperman
Senior Vice President and General Counsel
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 20th day of July, 1999, personally appeared before me David
W. Beale, the President and Chief Executive Officer of the Corporation, and
Steven M. Cooperman, the Senior Vice President and General Counsel of the
Corporation, and who acknowledged that they executed the above Certificate.
/s/ Barabara DiMartino
--------------------------------
Barbara DiMartino
Notary Public
2
<PAGE>
Exhibit A
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series B Convertible
Preferred Stock are as follows:
5. Designation and Number of Shares. The designation of this series of
Three Million Two Hundred Twenty-Two Thousand Eight Hundred Fifty-One
(3,222,851) shares of Preferred Stock, par value $.01 per share, created by the
Board of Directors of the Corporation pursuant to the authority granted to it by
the Articles of Incorporation of the Corporation is "Series B Convertible
Preferred Stock," which is hereinafter referred to as the "Series B Preferred
Stock." In the event that the Corporation does not issue the maximum number of
shares of Series B Preferred Stock, the Corporation may, from time to time, by
resolution of the Board of Directors, reduce the number of shares of Series B
Preferred Stock authorized, provided, that no such reduction shall reduce the
number of authorized shares to a number which is less than the number of shares
of Series B Preferred Stock then issued or reserved for issuance. The number of
shares by which the Series B Preferred Stock is reduced shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors. The Series B Preferred Stock, the
Corporation's Series A convertible preferred stock, par value $.01 per share
(the "Series A Preferred Stock"), the Corporation's Series C convertible
preferred stock, par value $.01 per share (the "Series C Preferred Stock"), the
Corporation's Series D convertible preferred stock, par value $.01 per share
(the "Series D Preferred Stock"), and the Corporation's Series E convertible
preferred stock, par value $.01 per share (the "Series E Preferred Stock" and,
together with the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, the "Preferred
Stock"), shall be pari passu, and without distinction as to class or series,
except as otherwise set forth herein or as the context otherwise requires, and
with respect to dividend rights and rights on liquidation, dissolution, or
winding up, shall rank senior to the Corporation's Class A common stock, par
value $.01 per share (the "Class A Common Stock"), and the Corporation's Class B
common stock, par value $.01 per share (the "Class B Common Stock" and, together
with the Class A Common Stock, the "Common Stock").
6. Dividend Rights.
(1) Holders of shares of Series B Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds of this
Corporation legally available therefor, non-cumulative cash dividends in an
amount equal to the equivalent per share cash dividend (based on the number of
whole shares of Common Stock issuable upon the conversion of a share of Series B
Preferred Stock as of the record date for such dividend) declared on the Common
Stock, when and as declared by the Board of Directors.
(2) No dividends shall be declared or paid or set aside for payment
on the Common Stock, the Series A Preferred Stock, the Series C Preferred Stock,
the Series D Preferred Stock or the Series E Preferred Stock unless dividends at
an equivalent rate (based on the number of shares of outstanding Common Stock
and the number of shares of Common Stock issuable upon
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the conversion of the Preferred Stock, in each case, as of the record date for
such dividend) have been or contemporaneously are declared and paid or declared
and a sum sufficient for payment thereof is set aside for such payment on the
Series B Preferred Stock.
(3) In the event that any holder of Series B Preferred Stock shall
surrender shares for conversion pursuant to the provisions of Section 4 of this
Certificate of Designation, the holder shall be entitled to dividends as
provided for in this Section 2 of this Certificate of Designation (to the extent
such dividends have been declared prior to the close of business on the
Conversion Date (as defined below) but are unpaid at such time).
7. Voting Rights.
(1) Holders of shares of Series B Preferred Stock shall have no
voting rights in respect thereof except as provided by law and except as
provided in this Section 3 of this Certificate of Designation.
(2) Except as to the matters as to which the holders of Series B
Preferred Stock are granted voting rights as a class as set forth in the
Appendix annexed hereto, the holders of Series B Preferred Stock shall vote as
one class with the holders of Common Stock, Series A Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, and
shall have the right to that number of votes equal to the number of whole shares
of Common Stock issuable upon the conversion of shares of Series B Preferred
Stock as of the date which is the record date for the meeting of shareholders at
which such vote shall be taken (or if such vote shall be taken by written
consent, the date of the written consent of shareholders of the Corporation), as
may be adjusted pursuant to Section 5 hereof.
8. Conversion Rights.
(1) (i) At any time, each of the holders of the Series B Preferred
Stock shall have the right to convert the Series B Preferred Stock, in whole or
in part (provided that, if conversion is to be effected in part, it shall be
effected in increments of 25% of the number of shares then held by each holder
as may be adjusted pursuant to this Certificate of Designation), into shares of
Class A Common Stock at the "Conversion Rate." The Conversion Rate shall mean
the number of shares of Common Stock issuable upon conversion of one (1) share
of Series B Preferred Stock. The Conversion Rate shall be determined by dividing
(x) the "Stated Value" by (y) the "Conversion Price" (as such terms are
hereinafter defined).
(1) For purposes of this Certificate of Designation, the term
"Stated Value" shall initially mean $4.75, as adjusted for events described in
Section 5(e) and for any subdivisions (by stock split, stock dividend or
otherwise) or any combinations of the Series B Preferred Stock having occurred
prior to the Conversion Date of the shares of Series B Preferred Stock in
question.
(2) For purposes of this Certificate of Designation, the term
"Conversion Price" shall initially mean $4.75, as adjusted pursuant to Section 5
hereof.
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(2) Conversion of the Series B Preferred Stock shall be effected by
surrender of the certificates representing the shares of Series B Preferred
Stock being converted to the transfer agent for the Series B Preferred Stock, or
if none shall have been appointed, to the Corporation, together with the form of
notice of election to convert as may be provided from time to time by the
Corporation.
(3) Shares of Series B Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day ("Conversion
Date") of the surrender for conversion of the certificate therefor, together
with the form of notice of election provided by the Corporation duly signed by
the holder thereof, and the person or persons entitled to receive shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Class A Common Stock as of such
time. As promptly as practicable on or after the Conversion Date, the
Corporation or its transfer agent shall issue and shall deliver a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
such conversion, together with a cash payment (determined in accordance with
Section 5(i) hereof) in lieu of any fraction of any share of Class A Common
Stock, to the person or persons entitled to receive the same. Notwithstanding
the foregoing provisions of this Section 4(c), if at the Conversion Date, there
shall be declared but unpaid dividends on the Common Stock of the Corporation,
other than any dividend payable with respect to a record date subsequent to the
Conversion Date of such conversion and other than any dividend as to which there
shall have been paid dividends at an equivalent rate on the Series B Preferred
Stock, the Corporation shall, at the time of such conversion, pay to the
converting holder of Series B Preferred Stock the amount of such unpaid
dividends.
(4) Each share of Series B Preferred Stock shall be automatically
converted into shares of Class A Common Stock, at the then applicable Conversion
Rate, upon the consummation of an Initial Public Offering (as defined in the
Appendix annexed hereto).
(5) The Class A Common Stock issuable upon conversion of the Series
B Preferred Stock shall, when so issued, be duly and validly authorized and
issued, fully paid and nonassessable.
9. Adjustments.
(1) Except as provided in this Section 5(a) or in Sections 5(b) and
5(c) hereof, if and whenever the Corporation issues or sells, or in accordance
with the provisions of this Section 5 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the Stated
Value in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Conversion Price shall be reduced to the
Conversion Price determined by dividing (1) the sum of (x) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale by the Fully Diluted Capitalization (as hereinafter defined) immediately
prior to such issue or sale, plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, by (2) the Fully Diluted Capitalization
immediately after such issue or sale. As used herein, the term "Fully Diluted
Capitalization" shall mean the number of
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shares of issued and outstanding Common Stock assuming full conversion, exchange
and exercise of all then outstanding Options and Convertible Securities (each as
defined below).
(2) For purposes of determining the adjusted Conversion Price under
Section 5(a) above, the following shall be applicable:
(1) If the Corporation in any manner grants or sells any
options for the purchase of Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such options or other securities being
called "Options", and such convertible or exchangeable securities being called
"Convertible Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Stated Value in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 5(b)(i), the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options (it being understood that any
consideration to be received at a date later than the date of such grant or sale
shall be valued at the fair market value of such consideration on the date of
such grant or sale, as determined by the Board of Directors of the Corporation
in its good faith discretion), plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the Stated Value in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 5(b)(ii), the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (it being understood that any consideration to be received at a date
later than the date of such issue or sale shall be valued at the fair market
value of such consideration on the date of such issue or sale, as determined by
the Board of Directors of the Corporation in its good faith discretion), plus
the minimum aggregate
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amount of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 5(b), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(3) If the purchase price provided for in any Options referred
to in Section 5(b)(i) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in Sections
5(b)(i) or 5(b)(ii) hereof, or the rate at which any Convertible Securities
referred to in Sections 5(b)(i) or 5(b)(ii) hereof are convertible into or
exchangeable for Common Stock, changes at any time (whether increases or
decreases), the Conversion Price in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
(4) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(5) If any Common Stock, Option or Convertible Security is
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price (as hereinafter defined)
thereof as of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity in connection with
any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined by
the Board of Directors of the Corporation using its good faith discretion.
(6) In case any Option is issued in connection with the issue
or sale of other securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option shall be deemed to have been issued
for an aggregate consideration of $1.00.
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(7) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(8) If the Corporation takes a record of the holders of Common
Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities, or (2)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may be.
(9) As used in this Certificate of Designation, the term
"Market Price" shall mean, at the date of determination for any security
(including, without limitation, Common Stock), the average of the closing prices
for such security's sales on all securities exchanges on which such security may
at the time be listed or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors of the Corporation, in its good faith discretion. Notwithstanding the
foregoing, in the event the Series B Preferred Stock is converted in connection
with the first public offering of Common Stock after the date of the adoption of
this Certificate of Designation, the Market Price per share of Common Stock
shall be equal to the per share offering price to the public of the Common Stock
issued in such public offering.
(3) Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Conversion Price in
connection with the issuance of any of the following securities or the issuance
of any Common Stock upon exercise or conversion of any of the following
securities: (i) any option issued by the Corporation on or prior to December 31,
1998, (ii) any warrant issued by the Corporation on or prior to December 31,
1998, (iii) any shares of Series A Preferred Stock issued and outstanding as of
December 31, 1998, (iv) any shares of Series B Preferred Stock issued and
outstanding as of December 31, 1998, (v) any shares of Series C Preferred Stock
issued pursuant to the Merger Agreements (as such term is defined in the
Appendix annexed hereto), (vi) any shares of Series D Preferred Stock or Series
E Preferred Stock issued pursuant to the Series D Stock Purchase Agreement or
the Series D and E Stock Purchase Agreement (as such terms are defined in the
Appendix annexed hereto); or (vii) the Options to be granted under any Option
Plan (as defined in the Appendix annexed hereto). Notwithstanding the foregoing,
the Corporation shall make all necessary adjustments (including successive
adjustments
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if required) to the Conversion Price in accordance with this Section 5 to the
extent that any anti-dilution adjustments which may be made under the terms of
any outstanding securities of the Corporation would, in the absence of this
Section 5(c), require such adjustments to be made in the Conversion Price.
(4) In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(5) If any capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of Series B Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon conversion of
the Series B Preferred Stock, such shares of stock, securities or assets 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 Common Stock
immediately theretofore receivable upon conversion of the Series B Preferred
Stock had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the holder of the Series B Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Stated Value and Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon conversion of the Series B Preferred
Stock.
(6) No adjustment of the Conversion Rate pursuant to this Section 5
shall be required unless such adjustment results in an increase or decrease of
the Conversion Rate of at least one percent (1%); provided, however, that any
adjustments which by reason of this Section (5)(f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 5 shall be rounded to the one-hundredth
(1/100) of a share and to the next higher or lower one cent ($.01), as the case
may be.
(7) The Corporation may retain a firm of independent certified
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Section 5 of this Certificate of Designation, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(8) In case at any time:
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(1) the Corporation shall declare any dividend payable in
stock upon Common Stock or make any distribution (other than cash dividends
which are not in a greater amount per share than the most recent cash dividend)
to the holders of the Common Stock;
(2) the Corporation shall propose to make an offer for
subscription pro rata to the holders of its Common Stock of any additional
shares of stock of any class or other rights;
(3) there shall be proposed any other transaction of a type
referred to in this Section 5; or
(4) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give written
notice to the holders of the Series B Preferred Stock of the date on which (x)
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution, subscription rights, or other transaction, and (y) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for, or receive in
respect of their Common Stock, securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation, or winding up, as the case may be. Such written
notice shall be given not less than ten (10) days prior to the taking of the
action in question.
(9) No fractional shares or script representing fractional shares
shall be issued upon the conversion of shares of Series B Preferred Stock. If,
upon conversion of any shares of Series B Preferred Stock as an entirety, the
holder would, except for the provisions of this Section 5(i), be entitled to
receive a fractional share of Common Stock, then an amount equal to such
fractional share, multiplied by the Market Price per share of the Corporation's
Common Stock on the last business day prior to the Conversion Date, shall be
paid by the Corporation in cash to such holder.
(10) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock for
the purpose of effecting the conversion of the shares of Series B Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series B Preferred Stock then outstanding.
10. Liquidation Rights.
(1) In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of the Series B
Preferred Stock shall be entitled to receive out of the assets of the
Corporation before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series B Preferred Stock as to such payment or distribution, and after all
such payments or distributions have
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been made on any series or class of capital stock ranking senior to the Series B
Preferred Stock as to such payment or distribution, an amount per share equal to
the greater of (i) the "Adjusted Purchase Price" (as hereinafter defined), plus
all declared but unpaid cash dividends, if any (the "Liquidation Amount"), (ii)
the Adjusted Value, or (iii) that which the holders would have received if they
had converted the Series B Preferred Stock immediately prior to such transaction
(without giving effect to the liquidation preference of or any dividends on any
other capital stock ranking prior to the Common Stock). The "Adjusted Purchase
Price" shall be $4.75, as same may be proportionately adjusted for any
subdivisions (by stock split, stock dividend or otherwise) or any combinations
of the Series B Preferred Stock having occurred up to the effective date of the
event of liquidation, dissolution or winding up of the Corporation. The
"Adjusted Value" shall be an amount per share equal to the Adjusted Purchase
Price plus a cumulative accretion computed on the Adjusted Purchase Price at the
rate of 8% per annum (compounded annually) from the date of issuance of the
shares of Series B Preferred Stock up to the effective date of the event of
liquidation, dissolution or winding-up of the Corporation, reduced by an amount
equal to the aggregate of all declared and paid cash dividends, if any.
(2) A merger or consolidation of the Corporation (in the event that
the Corporation is not the surviving corporation), or the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and assets of the
Corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for purposes of this Section 6. In the event that
the Corporation undertakes any of the transactions referred to in this Section
6(b), the holders of Series B Preferred Stock shall be entitled to receive the
greater of (x) the Liquidation Amount, (y) the Adjusted Value, or (z) that which
the holders would have received if they had converted the Series B Preferred
Stock immediately prior to such transaction (without giving effect to the
liquidation preference of or any dividends on any other capital stock ranking
prior to the Common Stock).
(3) After the payment in cash to the holders of Series B Preferred
Stock of the full preferential amounts in the amounts which have been fixed
hereby for the shares of Series B Preferred Stock, such holders as such shall
have no right or claim to any of the remaining assets of the Corporation.
(4) In respect of liquidation, dissolution or winding up of the
Corporation, (i) the shares of Series D Preferred Stock and the shares of Series
E Preferred Stock rank prior to the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock and the shares of Series C Preferred Stock,
and (ii) the shares of Series A Preferred Stock, the shares of Series B
Preferred Stock and the shares of Series C Preferred Stock rank on a parity with
each other. Accordingly, if the assets of the Corporation available for
distribution on liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which the holders of Series B Preferred Stock are entitled pursuant
to Section 6(a) of this Certificate of Designation and all amounts to which the
holders of Series A Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are entitled upon liquidation,
dissolution or winding up pursuant to the certificates of designation of the
Series A Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock, respectively, then after payment of the
full distributable amounts which the holders of Series D
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Preferred Stock and Series E Preferred Stock would be entitled to receive if the
assets of the Corporation were sufficient to pay the full distributable amounts
of Series D Preferred Stock and Series E Preferred Stock, proportionate
distributable amounts shall be paid on account of the shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, ratably,
in proportion to the full distributable amounts which the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock would be
entitled to receive if the assets of the Corporation were sufficient to pay such
full distributable amounts.
11. Rank of Series. For purposes of the Certificate of Designation, any
stock of any series or class of the Corporation shall be deemed to rank:
(1) prior to the shares of Series B Preferred Stock, as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if the
holders of such class or classes shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series B Preferred Stock;
(2) on a parity with shares of Series B Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series B Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series B Preferred Stock;
(3) junior to shares of Series B Preferred Stock as to dividends or
upon liquidation, dissolution or winding up, as the case may be, if such class
shall be Common Stock or if the holders of shares of Series B Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
12. Additional Rights. The holders of the Series B Preferred Stock shall
also have such other rights, and subject to the terms, conditions and
limitations, set forth in the Appendix annexed hereto to the extent that, under
the provisions of such Appendix, such rights are exercisable by (without giving
effect to any specified minimum percentages of ownership of shares of Series B
Preferred Stock that must consent or act in order to exercise such rights), and
are for the benefit of, all holders of Series B Preferred Stock.
13. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance and transfer of the Series B Preferred
Stock and for the payment of dividends to the holders of the Series B Preferred
Stock.
14. Construction. This Second Amended and Restated Certificate of
Designation for the Corporation's Series B Convertible Preferred stock amends,
supersedes and restates in its entirety
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the Amended and Restated Certificate of Designation of Series B Convertible
Preferred Stock dated December 29, 1998.
Appendix to Second Amended and Restated Certificate of Designation of Series B
Convertible Preferred Stock is hereby incorporated by reference from Exhibit 3.2
Appendix to the Fifth Amended and Restated Certificate of Designation of Series
A Convertible Preferred Stock.
13
Exhibit 3.4
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
VANTAS INCORPORATED
Series C Convertible Preferred Stock
Pursuant to Chapter 78 of the Nevada Revised Statutes, VANTAS
Incorporated, a Nevada corporation (the "Corporation"), does hereby certify as
follows:
1. The following resolutions were duly adopted by the Board of Directors
of the Corporation as of July 19, 1999:
RESOLVED, that pursuant to Article IV of the Amended and Restated
Articles of Incorporation of this Corporation dated July 20, 1999, the
Corporation hereby amends and restates in its entirety the Certificate of
Designation for the Corporation's Series C Convertible Preferred Stock,
dated December 29, 1998, and filed with the Nevada Secretary of State on
January 8, 1999, as set forth on Exhibit A to this resolution (the
"Amended and Restated Series C Certificate of Designation"), to (i) reduce
the number of shares designated as Series C Convertible Preferred Stock
(as set forth in Section 1 of the Amended and Restated Series C
Certificate of Designation), (ii) make conforming changes in various
provisions of the Series C Certificate of Designation to reflect the
designation of the Corporation's Series D convertible preferred stock and
Series E convertible preferred stock, and (iii) otherwise make
miscellaneous changes in and amend and restate in its entirety the
Certificate of Designation of the Corporation's Series C Convertible
Preferred Stock; and be it further
RESOLVED, that the officers of this Corporation be, and they hereby
are, authorized and empowered to execute and file with the Secretary of
State of Nevada, the Amended and Restated Series C Certificate of
Designation.
2. The original designation of the Series C Convertible Preferred Stock
has not been changed and shall remain designated as the Series C Convertible
Preferred Stock.
3. The approval of the stockholders holding at least a majority of the
voting power of the Series C Convertible Preferred Stock issued and outstanding
has been obtained as required.
4. The Amended and Restated Series C Certificate of Designation is set
forth as Exhibit
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A annexed hereto and is a true and correct copy of the rights, preferences,
privileges and restrictions of the holders of the Series C Preferred Stock.
IN WITNESS WHEREOF, ALLIANCE National Incorporated has caused this
Certificate to be signed by its President and its Senior Vice President as of
this 20th day of July, 1999.
By: /s/ David W. Beale
--------------------------------
David W. Beale, President
Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- -----------------------------------------
Steven M. Cooperman
Senior Vice President and General Counsel
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 20th day of July, 1999, personally appeared before me David
W. Beale, the President and Chief Executive Officer of the Corporation, and
Steven M. Cooperman, the Senior Vice President and General Counsel of the
Corporation, and who acknowledged that they executed the above Certificate.
/s/ Barbara DiMartino
-----------------------------------
Barbara DiMartino
Notary Public
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Exhibit A
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series C Convertible
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
Thirteen Million Three Hundred Twenty-Five Thousand Four Hundred Twenty-Four
(13,325,424) shares of Preferred Stock, par value $.01 per share, created by the
Board of Directors of the Corporation pursuant to the authority granted to it by
the Articles of Incorporation of the Corporation is "Series C Convertible
Preferred Stock," which is hereinafter referred to as the "Series C Preferred
Stock." In the event that the Corporation does not issue the maximum number of
shares of Series C Preferred Stock, the Corporation may, from time to time, by
resolution of the Board of Directors, reduce the number of shares of Series C
Preferred Stock authorized, provided, that no such reduction shall reduce the
number of authorized shares to a number which is less than the number of shares
of Series C Preferred Stock then issued or reserved for issuance. The number of
shares by which the Series C Preferred Stock is reduced shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors. The Series C Preferred Stock, the
Corporation's Series A convertible preferred stock, par value $.01 per share
(the "Series A Preferred Stock"), the Corporation's Series B convertible
preferred stock, par value $.01 per share (the "Series B Preferred Stock"), the
Corporation's Series D convertible preferred stock, par value $.01 per share
(the "Series D Preferred Stock"), and the Corporation's Series E convertible
preferred stock, par value $.01 per share (the "Series E Preferred Stock" and,
together with the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, the "Preferred
Stock"), shall be pari passu, and without distinction as to class or series,
except as otherwise set forth herein or as the context otherwise requires, and
with respect to dividend rights and rights on liquidation, dissolution, or
winding up, shall rank senior to the Corporation's Class A common stock, par
value $.01 per share (the "Class A Common Stock"), and the Corporation's Class B
common stock, par value $.01 per share (the "Class B Common Stock" and, together
with the Class A Common Stock, the "Common Stock").
2. Dividend Rights.
(a) Holders of shares of Series C Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds of this
Corporation legally available therefor, non-cumulative cash dividends in an
amount equal to the equivalent per share cash dividend (based on the number of
whole shares of Common Stock issuable upon the conversion of a share of Series C
Preferred Stock as of the record date for such dividend) declared on the Common
Stock, when and as declared by the Board of Directors.
(b) No dividends shall be declared or paid or set aside for payment
on the Common Stock, the Series A Preferred Stock, the Series B Preferred Stock,
the Series D Preferred Stock or the Series E Preferred Stock unless dividends at
an equivalent rate (based on the number of shares of outstanding Common Stock
and the number of shares of Common Stock issuable upon the conversion of the
Preferred Stock, in each case, as of the record date for such dividend) have
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been or contemporaneously are declared and paid or declared and a sum sufficient
for payment thereof is set aside for such payment on the Series C Preferred
Stock.
(c) In the event that any holder of Series C Preferred Stock shall
surrender shares for conversion pursuant to the provisions of Section 4 of this
Certificate of Designation, the holder shall be entitled to dividends as
provided for in this Section 2 of this Certificate of Designation (to the extent
such dividends have been declared prior to the close of business on the
Conversion Date (as defined below) but are unpaid at such time).
3. Voting Rights.
(a) Holders of shares of Series C Preferred Stock shall have no
voting rights in respect thereof except as provided by law and except as
provided in this Section 3 of this Certificate of Designation.
(b) Except as to the matters as to which the holders of Series C
Preferred Stock are granted voting rights as a class as set forth in the
Appendix annexed hereto, the holders of Series C Preferred Stock shall vote as
one class with the holders of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, and
shall have the right to that number of votes equal to the number of whole shares
of Common Stock issuable upon the conversion of shares of Series C Preferred
Stock as of the date which is the record date for the meeting of shareholders at
which such vote shall be taken (or if such vote shall be taken by written
consent, the date of the written consent of shareholders of the Corporation), as
may be adjusted pursuant to Section 5 hereof.
4. Conversion Rights.
(a) (i) At any time, each of the holders of the Series C Preferred
Stock shall have the right to convert the Series C Preferred Stock, in whole or
in part (provided that, if conversion is to be effected in part, it shall be
effected in increments of 25% of the number of shares then held by each holder
as may be adjusted pursuant to this Certificate of Designation), into shares of
either Class A Common Stock or Class B Common Stock, at such holder's election,
at the "Conversion Rate." The Conversion Rate shall mean the number of shares of
Common Stock issuable upon conversion of one (1) share of Series C Preferred
Stock. The Conversion Rate shall be determined by dividing (x) the "Stated
Value" by (y) the "Conversion Price" (as such terms are hereinafter defined).
(ii) For purposes of this Certificate of Designation, the term
"Stated Value" shall initially mean $4.75, as adjusted for events described in
Section 5(e) and for any subdivisions (by stock split, stock dividend or
otherwise) or any combinations of the Series C Preferred Stock having occurred
prior to the Conversion Date of the shares of Series C Preferred Stock in
question.
(iii) For purposes of this Certificate of Designation, the
term "Conversion Price" shall initially mean $4.75, as adjusted pursuant to
Section 5 hereof.
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(b) Conversion of the Series C Preferred Stock shall be effected by
surrender of the certificates representing the shares of Series C Preferred
Stock being converted to the transfer agent for the Series C Preferred Stock, or
if none shall have been appointed, to the Corporation, together with the form of
notice of election to convert as may be provided from time to time by the
Corporation.
(c) Shares of Series C Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day ("Conversion
Date") of the surrender for conversion of the certificate therefor, together
with the form of notice of election provided by the Corporation duly signed by
the holder thereof, and the person or persons entitled to receive shares of
Class A Common Stock or Class B Common Stock, as the case may be, issuable upon
such conversion shall be treated for all purposes as the record holder of such
shares of Class A Common Stock or Class B Common Stock, as the case may be, as
of such time. As promptly as practicable on or after the Conversion Date, the
Corporation or its transfer agent shall issue and shall deliver a certificate or
certificates for the number of full shares of Class A Common Stock or Class B
Common Stock, as the case may be, issuable upon such conversion, together with a
cash payment (determined in accordance with Section 5(i) hereof) in lieu of any
fraction of any share of Class A Common Stock or Class B Common Stock, as the
case may be, to the person or persons entitled to receive the same.
Notwithstanding the foregoing provisions of this Section 4(c), if at the
Conversion Date, there shall be declared but unpaid dividends on the Common
Stock of the Corporation, other than any dividend payable with respect to a
record date subsequent to the Conversion Date of such conversion and other than
any dividend as to which there shall have been paid dividends at an equivalent
rate on the Series C Preferred Stock, the Corporation shall, at the time of such
conversion, pay to the converting holder of Series C Preferred Stock the amount
of such unpaid dividends.
(d) Each share of Series C Preferred Stock shall be automatically
converted into shares of Class A Common Stock or Class B Common Stock, as
determined by the election of each holder of shares of Series C Preferred Stock,
at the then applicable Conversion Rate, upon the consummation of an Initial
Public Offering (as defined in the Appendix annexed hereto). At least 30 days
prior to the consummation of an Initial Public Offering, the Corporation shall
give written notice thereof to each holder of Series C Preferred Stock who has
not previously made an election, or has not been deemed to have made an
irrevocable election under any agreement binding on such holder, to receive
Class A Common Stock or Class B Common Stock upon conversion of the Series C
Preferred Stock. Not later than 10 days after receipt of such written notice,
each such holder shall give written notice of election to the Corporation
specifying whether such holder elects to receive shares of Class A Common Stock
or Class B Common Stock upon such automatic conversion. Any holder who does not
deliver a written election to the Corporation and who has not been deemed to
have already made an irrevocable election pursuant to any agreement binding on
such holder, shall be deemed to have elected to receive Class A Common Stock in
respect of all shares of Series C Preferred Stock owned by such holder.
(e) The Class A Common Stock or Class B Common Stock, as the case
may be, issuable upon conversion of the Series C Preferred Stock shall, when so
issued, be duly and validly authorized and issued, fully paid and nonassessable.
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5. Adjustments.
(a) Except as provided in this Section 5(a) or in Sections 5(b) and
5(c) hereof, if and whenever the Corporation issues or sells, or in accordance
with the provisions of this Section 5 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the Stated
Value in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Conversion Price shall be reduced to the
Conversion Price determined by dividing (1) the sum of (x) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale by the Fully Diluted Capitalization (as hereinafter defined) immediately
prior to such issue or sale, plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, by (2) the Fully Diluted Capitalization
immediately after such issue or sale. As used herein, the term "Fully Diluted
Capitalization" shall mean the number of shares of issued and outstanding Common
Stock assuming full conversion, exchange and exercise of all then outstanding
Options and Convertible Securities (each as defined below).
(b) For purposes of determining the adjusted Conversion Price under
Section 5(a) above, the following shall be applicable:
(i) If the Corporation in any manner grants or sells any
options for the purchase of Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such options or other securities being
called "Options", and such convertible or exchangeable securities being called
"Convertible Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Stated Value in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 5(b)(i), the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options (it being understood that any
consideration to be received at a date later than the date of such grant or sale
shall be valued at the fair market value of such consideration on the date of
such grant or sale, as determined by the Board of Directors of the Corporation
in its good faith discretion), plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
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(ii) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the Stated Value in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 5(b)(ii), the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (it being understood that any consideration to be received at a date
later than the date of such issue or sale shall be valued at the fair market
value of such consideration on the date of such issue or sale, as determined by
the Board of Directors of the Corporation in its good faith discretion), plus
the minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 5(b), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii) If the purchase price provided for in any Options
referred to in Section 5(b)(i) hereof, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in Sections 5(b)(i) or 5(b)(ii) hereof, or the rate at which any Convertible
Securities referred to in Sections 5(b)(i) or 5(b)(ii) hereof are convertible
into or exchangeable for Common Stock, changes at any time (whether increases or
decreases), the Conversion Price in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
(iv) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) If any Common Stock, Option or Convertible Security is
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price (as hereinafter defined)
thereof as of the date of receipt. If any Common Stock, Option
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or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Option or Convertible Security, as the
case may be. The fair value of any consideration other than cash and securities
shall be determined by the Board of Directors of the Corporation using its good
faith discretion.
(vi) In case any Option is issued in connection with the issue
or sale of other securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option shall be deemed to have been issued
for an aggregate consideration of $1.00.
(vii) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities,
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
(ix) As used in this Certificate of Designation, the term
"Market Price" shall mean, at the date of determination for any security
(including, without limitation, Common Stock), the average of the closing prices
for such security's sales on all securities exchanges on which such security may
at the time be listed or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors of the Corporation, in its good faith discretion. Notwithstanding the
foregoing, in the event the Series C Preferred Stock is converted in connection
with the first public offering of Common Stock after the date of the adoption of
this Certificate of Designation, the Market Price per share of Common Stock
shall be equal to the per share offering price to the public of the Common Stock
issued in such public offering.
(c) Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Conversion Price in
connection with the issuance of any of the following securities or the issuance
of any Common Stock upon exercise or conversion of any
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of the following securities: (i) any option issued by the Corporation on or
prior to December 31, 1998, (ii) any warrant issued by the Corporation on or
prior to December 31, 1998, (iii) any shares of Series A Preferred Stock issued
and outstanding as of December 31, 1998, (iv) any shares of Series B Preferred
Stock issued and outstanding as of December 31, 1998, (v) any shares of Series C
Preferred Stock issued pursuant to the Merger Agreements (as such term is
defined in the Appendix annexed hereto), (vi) any shares of Series D Preferred
Stock or Series E Preferred Stock issued pursuant to the Series D Stock Purchase
Agreement or the Series D and E Stock Purchase Agreement (as such terms are
defined in the Appendix annexed hereto); or (vii) the Options to be granted
under any Option Plan (as defined in the Appendix annexed hereto).
Notwithstanding the foregoing, the Corporation shall make all necessary
adjustments (including successive adjustments if required) to the Conversion
Price in accordance with this Section 5 to the extent that any anti-dilution
adjustments which may be made under the terms of any outstanding securities of
the Corporation would, in the absence of this Section 5(c), require such
adjustments to be made in the Conversion Price.
(d) In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) If any capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of Series C Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon conversion of
the Series C Preferred Stock, such shares of stock, securities or assets 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 Common Stock
immediately theretofore receivable upon conversion of the Series C Preferred
Stock had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the holder of the Series C Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Stated Value and Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon conversion of the Series C Preferred
Stock.
(f) No adjustment of the Conversion Rate pursuant to this Section 5
shall be required unless such adjustment results in an increase or decrease of
the Conversion Rate of at least one percent (1%); provided, however, that any
adjustments which by reason of this Section (5)(f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 5 shall be rounded to the one-hundredth
(1/100) of a share and to the next higher or lower one cent ($.01), as the case
may be.
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(g) The Corporation may retain a firm of independent certified
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Section 5 of this Certificate of Designation, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In case at any time:
(i) the Corporation shall declare any dividend payable in
stock upon Common Stock or make any distribution (other than cash dividends
which are not in a greater amount per share than the most recent cash dividend)
to the holders of the Common Stock;
(ii) the Corporation shall propose to make an offer for
subscription pro rata to the holders of its Common Stock of any additional
shares of stock of any class or other rights;
(iii) there shall be proposed any other transaction of a type
referred to in this Section 5; or
(iv) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give written
notice to the holders of the Series C Preferred Stock of the date on which (x)
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution, subscription rights, or other transaction, and (y) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for, or receive in
respect of their Common Stock, securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation, or winding up, as the case may be. Such written
notice shall be given not less than ten (10) days prior to the taking of the
action in question.
(i) No fractional shares or script representing fractional shares
shall be issued upon the conversion of shares of Series C Preferred Stock. If,
upon conversion of any shares of Series C Preferred Stock as an entirety, the
holder would, except for the provisions of this Section 5(i), be entitled to
receive a fractional share of Common Stock, then an amount equal to such
fractional share, multiplied by the Market Price per share of the Corporation's
Common Stock on the last business day prior to the Conversion Date, shall be
paid by the Corporation in cash to such holder.
(j) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock for
the purpose of effecting the conversion of the shares of Series C Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series C Preferred Stock then outstanding.
6. Liquidation Rights.
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(a) In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of the Series C
Preferred Stock shall be entitled to receive out of the assets of the
Corporation before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series C Preferred Stock as to such payment or distribution, and after all
such payments or distributions have been made on any series or class of capital
stock ranking senior to the Series C Preferred Stock as to such payment or
distribution, an amount per share equal to the greater of (i) the "Adjusted
Purchase Price" (as hereinafter defined), plus all declared but unpaid cash
dividends, if any (the "Liquidation Amount"), (ii) the Adjusted Value, or (iii)
that which the holders would have received if they had converted the Series C
Preferred Stock immediately prior to such transaction (without giving effect to
the liquidation preference of or any dividends on any other capital stock
ranking prior to the Common Stock). The "Adjusted Purchase Price" shall be
$4.75, as same may be proportionately adjusted for any subdivisions (by stock
split, stock dividend or otherwise) or any combinations of the Series C
Preferred Stock having occurred up to the effective date of the event of
liquidation, dissolution or winding up of the Corporation. The "Adjusted Value"
shall be an amount per share equal to the Adjusted Purchase Price plus a
cumulative accretion computed on the Adjusted Purchase Price at the rate of 8%
per annum (compounded annually) from the date of issuance of the shares of
Series C Preferred Stock up to the effective date of the event of liquidation,
dissolution or winding-up of the Corporation, reduced by an amount equal to the
aggregate of all declared and paid cash dividends, if any.
(b) A merger or consolidation of the Corporation (in the event that
the Corporation is not the surviving corporation), or the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and assets of the
Corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for purposes of this Section 6. In the event that
the Corporation undertakes any of the transactions referred to in this Section
6(b), the holders of Series C Preferred Stock shall be entitled to receive the
greater of (x) the Liquidation Amount, (y) the Adjusted Value, or (z) that which
the holders would have received if they had converted the Series C Preferred
Stock immediately prior to such transaction (without giving effect to the
liquidation preference of or any dividends on any other capital stock ranking
prior to the Common Stock).
(c) After the payment in cash to the holders of Series C Preferred
Stock of the full preferential amounts in the amounts which have been fixed
hereby for the shares of Series C Preferred Stock, such holders as such shall
have no right or claim to any of the remaining assets of the Corporation.
(d) In respect of liquidation, dissolution or winding up of the
Corporation, (i) the shares of Series D Preferred Stock and the shares of Series
E Preferred Stock rank prior to the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock and the shares of Series C Preferred Stock,
and (ii) the shares of Series A Preferred Stock, the shares of Series B
Preferred Stock and the shares of Series C Preferred Stock rank on a parity with
each other. Accordingly, if the assets of the Corporation available for
distribution on liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which the holders of Series C Preferred Stock are entitled pursuant
to Section 6(a) of this Certificate
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of Designation and all amounts to which the holders of Series A Preferred Stock,
Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
are entitled upon liquidation, dissolution or winding up pursuant to the
certificates of designation of the Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock,
respectively, then after payment of the full distributable amounts which the
holders of Series D Preferred Stock and Series E Preferred Stock would be
entitled to receive if the assets of the Corporation were sufficient to pay the
full distributable amounts of Series D Preferred Stock and Series E Preferred
Stock, proportionate distributable amounts shall be paid on account of the
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, ratably, in proportion to the full distributable amounts which
the holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock would be entitled to receive if the assets of the Corporation
were sufficient to pay such full distributable amounts.
7. Rank of Series. For purposes of the Certificate of Designation, any
stock of any series or class of the Corporation shall be deemed to rank:
(a) prior to the shares of Series C Preferred Stock, as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if the
holders of such class or classes shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series C Preferred Stock;
(b) on a parity with shares of Series C Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series C Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series C Preferred Stock;
(c) junior to shares of Series C Preferred Stock as to dividends or
upon liquidation, dissolution or winding up, as the case may be, if such class
shall be Common Stock or if the holders of shares of Series C Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
8. Additional Rights. The holders of the Series C Preferred Stock shall
also have such other rights, and subject to the terms, conditions and
limitations, set forth in the Appendix annexed hereto to the extent that, under
the provisions of such Appendix, such rights are exercisable by (without giving
effect to any specified minimum percentages of ownership of shares of Series C
Preferred Stock that must consent or act in order to exercise such rights), and
are for the benefit of, all holders of Series C Preferred Stock. All
calculations and determinations to be made with respect to the Series C
Preferred Stock shall be made in accordance with GAAP (as defined in the
Appendix annexed hereto). To the extent that any priority right of the holders
of Series C Preferred Stock to acquire securities pursuant to Section 4.3(b),
Section 7.1 or any other provision of the Appendix are
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rights of individual holders of Series C Preferred Stock instead of rights of
the class of Series C Preferred Stock, such priority right shall be deemed to
arise solely by reason of the Stockholders' Agreement which such holders and all
other holders of Series C Preferred Stock have entered into with the Corporation
and shall not be deemed to arise by reason of Chapter 78 of the Nevada Revised
Statutes.
9. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance and transfer of the Series C Preferred
Stock and for the payment of dividends to the holders of the Series C Preferred
Stock.
10. Construction. This Amended and Restated Certificate of Designation for
the Corporation's Series C Convertible Preferred Stock amends, supersedes and
restates in its entirety the Certificate of Designation of Series C Convertible
Preferred Stock dated December 29, 1998.
Appendix to Amended and Restated Certificate of Designation of Series C
Convertible Preferred Stock is hereby incorporated by reference from Exhibit 3.2
Appendix to the Fifth Amended and Restated Certificate of Designation of Series
A Convertible Preferred Stock.
13
Exhibit 3.5
CERTIFICATE OF DESIGNATION
OF
VANTAS INCORPORATED
Series D Convertible Preferred Stock
Pursuant to Chapter 78 of the Nevada Revised Statutes,VANTAS Incorporated,
a Nevada corporation (the "Corporation"), does hereby certify as follows:
1. The following resolutions were duly adopted by the Board of Directors
of the Corporation as of July 19, 1999:
RESOLVED, that pursuant to Article IV of the Amended and Restated
Articles of Incorporation of this Corporation dated July 20, 1999, there
shall be created a series of Preferred Stock, par value $.01 per share, of
this Corporation consisting of Five Million Two Hundred Thousand
(5,200,000) shares to be designated as the Series D Convertible Preferred
Stock ("Series D Preferred Stock"), and that the holders of such shares
shall have the rights, preferences and privileges and restrictions set
forth in a certificate of designation attached as Exhibit A to this
resolution (the "Series D Certificate of Designation"); and be it further
RESOLVED, that the officers of this Corporation be, and they hereby
are, authorized and empowered to execute and file with the Secretary of
State of Nevada, the Series D Certificate of Designation.
2. The Series D Certificate of Designation is set forth as Exhibit A
annexed hereto and is a true and correct copy of the rights, preferences,
privileges and restrictions of the holders of the Series D Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, ALLIANCE National Incorporated has caused this
Certificate to be signed by its President and its Senior Vice President as of
this 20th day of July, 1999.
By: /s/ David W. Beale
-----------------------------------
David W. Beale, President
Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- -----------------------------------------
Steven M. Cooperman
Senior Vice President and General Counsel
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 20th day of July, 1999, personally appeared before me David
W. Beale, the President and Chief Executive Officer of the Corporation, and
Steven M. Cooperman, the Senior Vice President and General Counsel of the
Corporation, and who acknowledged that they executed the above Certificate.
/s/ Barabara DiMartino
--------------------------------------
Barbara DiMartino
Notary Public
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Exhibit A
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series D Convertible
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
Five Million Two Hundred Thousand (5,200,000) shares of Preferred Stock, par
value $.01 per share, created by the Board of Directors of the Corporation
pursuant to the authority granted to it by the Articles of Incorporation of the
Corporation is "Series D Convertible Preferred Stock," which is hereinafter
referred to as the "Series D Preferred Stock." In the event that the Corporation
does not issue the maximum number of shares of Series D Preferred Stock, the
Corporation may, from time to time, by resolution of the Board of Directors,
reduce the number of shares of Series D Preferred Stock authorized, provided,
that no such reduction shall reduce the number of authorized shares to a number
which is less than the number of shares of Series D Preferred Stock then issued
or reserved for issuance. The number of shares by which the Series D Preferred
Stock is reduced shall have the status of authorized but unissued shares of
Preferred Stock, without designation as to series until such stock is once more
designated as part of a particular series by the Corporation's Board of
Directors. The Series D Preferred Stock, the Corporation's Series A convertible
preferred stock, par value $.01 per share (the "Series A Preferred Stock"), the
Corporation's Series B convertible preferred stock, par value $.01 per share
(the "Series B Preferred Stock"), the Corporation's Series C convertible
preferred stock, par value $.01 per share (the "Series C Preferred Stock"), and
the Corporation's Series E convertible preferred stock, par value $.01 per share
(the "Series E Preferred Stock" and, together with the Series A Preferred Stock,
the Series B Preferred Stock, Series C Preferred Stock and the Series D
Preferred Stock, the "Preferred Stock"), shall be pari passu, and without
distinction as to class or series, except as otherwise set forth herein or as
the context otherwise requires, and with respect to dividend rights and rights
on liquidation, dissolution, or winding up, shall rank senior to the
Corporation's Class A common stock, par value $.01 per share (the "Class A
Common Stock"), and the Corporation's Class B common stock, par value $.01 per
share (the "Class B Common Stock" and, together with the Class A Common Stock,
the "Common Stock").
2. Dividend Rights.
(a) Holders of shares of Series D Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds of this
Corporation legally available therefor, non-cumulative cash dividends in an
amount equal to the equivalent per share cash dividend (based on the number of
whole shares of Common Stock issuable upon the conversion of a share of Series D
Preferred Stock as of the record date for such dividend) declared on the Common
Stock, when and as declared by the Board of Directors.
(b) No dividends shall be declared or paid or set aside for payment
on the Common Stock, the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock or the Series E Preferred Stock unless dividends at
an equivalent rate (based on the number of shares of outstanding Common Stock
and the number of shares of Common Stock issuable upon the conversion of the
Preferred Stock, in each case, as of the record date for such dividend) have
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<PAGE>
been or contemporaneously are declared and paid or declared and a sum sufficient
for payment thereof is set aside for such payment on the Series D Preferred
Stock.
(c) In the event that any holder of Series D Preferred Stock shall
surrender shares for conversion pursuant to the provisions of Section 4 of this
Certificate of Designation, the holder shall be entitled to dividends as
provided for in this Section 2 of this Certificate of Designation (to the extent
such dividends have been declared prior to the close of business on the
Conversion Date (as defined below) but are unpaid at such time).
3. Voting Rights.
(a) Holders of shares of Series D Preferred Stock shall have no
voting rights in respect thereof except as provided by law and except as
provided in this Section 3 of this Certificate of Designation.
(b) Except as to the matters as to which the holders of Series D
Preferred Stock are granted voting rights as a class as set forth in the
Appendix annexed hereto, the holders of Series D Preferred Stock shall vote as
one class with the holders of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series E Preferred Stock, and
shall have the right to that number of votes equal to the number of whole shares
of Common Stock issuable upon the conversion of shares of Series D Preferred
Stock as of the date which is the record date for the meeting of shareholders at
which such vote shall be taken (or if such vote shall be taken by written
consent, the date of the written consent of shareholders of the Corporation), as
may be adjusted pursuant to Section 5 hereof.
4. Conversion Rights.
(a) (i) At any time, each of the holders of the Series D Preferred
Stock shall have the right to convert the Series D Preferred Stock, in whole or
in part (provided that, if conversion is to be effected in part, it shall be
effected in increments of 25% of the number of shares then held by each holder
as may be adjusted pursuant to this Certificate of Designation), into shares of
either Class A Common Stock or Class B Common Stock, at such holder's election,
at the "Conversion Rate." The Conversion Rate shall mean the number of shares of
Common Stock issuable upon conversion of one (1) share of Series D Preferred
Stock. The Conversion Rate shall be determined by dividing (x) the "Stated
Value" by (y) the "Conversion Price" (as such terms are hereinafter defined).
(ii) For purposes of this Certificate of Designation, the term
"Stated Value" shall initially mean $5.25, as adjusted for events described in
Section 5(e) or (with respect to certain shares of Series D Preferred Stock)
Section 5(k), and for any subdivisions (by stock split, stock dividend or
otherwise) or any combinations of the Series D Preferred Stock having occurred
prior to the Conversion Date of the shares of Series D Preferred Stock in
question.
(iii) For purposes of this Certificate of Designation, the
term "Conversion Price" shall initially mean $5.25, as adjusted pursuant to
Section 5 hereof.
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<PAGE>
(b) Conversion of the Series D Preferred Stock shall be effected by
surrender of the certificates representing the shares of Series D Preferred
Stock being converted to the transfer agent for the Series D Preferred Stock, or
if none shall have been appointed, to the Corporation, together with the form of
notice of election to convert as may be provided from time to time by the
Corporation.
(c) Shares of Series D Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day ("Conversion
Date") of the surrender for conversion of the certificate therefor, together
with the form of notice of election provided by the Corporation duly signed by
the holder thereof, and the person or persons entitled to receive shares of
Class A Common Stock or Class B Common Stock, as the case may be, issuable upon
such conversion shall be treated for all purposes as the record holder of such
shares of Class A Common Stock or Class B Common Stock, as the case may be, as
of such time. As promptly as practicable on or after the Conversion Date, the
Corporation or its transfer agent shall issue and shall deliver a certificate or
certificates for the number of full shares of Class A Common Stock or Class B
Common Stock, as the case may be, issuable upon such conversion, together with a
cash payment (determined in accordance with Section 5(i) hereof) in lieu of any
fraction of any share of Class A Common Stock or Class B Common Stock, as the
case may be, to the person or persons entitled to receive the same.
Notwithstanding the foregoing provisions of this Section 4(c), if at the
Conversion Date, there shall be declared but unpaid dividends on the Common
Stock of the Corporation, other than any dividend payable with respect to a
record date subsequent to the Conversion Date of such conversion and other than
any dividend as to which there shall have been paid dividends at an equivalent
rate on the Series D Preferred Stock, the Corporation shall, at the time of such
conversion, pay to the converting holder of Series D Preferred Stock the amount
of such unpaid dividends.
(d) Each share of Series D Preferred Stock shall be automatically
converted into shares of Class A Common Stock or Class B Common Stock, as
determined by the election of each holder of shares of Series D Preferred Stock,
at the then applicable Conversion Rate, upon the consummation of an Initial
Public Offering (as defined in the Appendix annexed hereto). At least 30 days
prior to the consummation of an Initial Public Offering, the Corporation shall
give written notice thereof to each holder of Series D Preferred Stock who has
not previously made an election, or has not been deemed to have made an
irrevocable election under any agreement binding on such holder, to receive
Class A Common Stock or Class B Common Stock upon conversion of the Series D
Preferred Stock. Not later than 10 days after receipt of such written notice,
each such holder shall give written notice of election to the Corporation
specifying whether such holder elects to receive shares of Class A Common Stock
or Class B Common Stock upon such automatic conversion. Any holder who does not
deliver a written election to the Corporation and who has not been deemed to
have already made an irrevocable election pursuant to any agreement binding on
such holder, shall be deemed to have elected to receive Class A Common Stock in
respect of all shares of Series D Preferred Stock owned by such holder.
(e) The Class A Common Stock or Class B Common Stock, as the case
may be, issuable upon conversion of the Series D Preferred Stock shall, when so
issued, be duly and validly authorized and issued, fully paid and nonassessable.
5
<PAGE>
5. Adjustments.
(a) Except as provided in this Section 5(a) or in Sections 5(b) and
5(c) hereof, if and whenever the Corporation issues or sells, or in accordance
with the provisions of this Section 5 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the Stated
Value in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Conversion Price shall be reduced to the
Conversion Price determined by dividing (1) the sum of (x) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale by the Fully Diluted Capitalization (as hereinafter defined) immediately
prior to such issue or sale, plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, by (2) the Fully Diluted Capitalization
immediately after such issue or sale. As used herein, the term "Fully Diluted
Capitalization" shall mean the number of shares of issued and outstanding Common
Stock assuming full conversion, exchange and exercise of all then outstanding
Options and Convertible Securities (each as defined below).
(b) For purposes of determining the adjusted Conversion Price under
Section 5(a) above, the following shall be applicable:
(i) If the Corporation in any manner grants or sells any
options for the purchase of Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such options or other securities being
called "Options", and such convertible or exchangeable securities being called
"Convertible Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Stated Value in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 5(b)(i), the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options (it being understood that any
consideration to be received at a date later than the date of such grant or sale
shall be valued at the fair market value of such consideration on the date of
such grant or sale, as determined by the Board of Directors of the Corporation
in its good faith discretion), plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
6
<PAGE>
(ii) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the Stated Value in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 5(b)(ii), the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (it being understood that any consideration to be received at a date
later than the date of such issue or sale shall be valued at the fair market
value of such consideration on the date of such issue or sale, as determined by
the Board of Directors of the Corporation in its good faith discretion), plus
the minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 5(b), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii) If the purchase price provided for in any Options
referred to in Section 5(b)(i) hereof, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in Sections 5(b)(i) or 5(b)(ii) hereof, or the rate at which any Convertible
Securities referred to in Sections 5(b)(i) or 5(b)(ii) hereof are convertible
into or exchangeable for Common Stock, changes at any time (whether increases or
decreases), the Conversion Price in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
(iv) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) If any Common Stock, Option or Convertible Security is
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price (as hereinafter defined)
thereof as of the date of receipt. If any Common Stock, Option
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<PAGE>
or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Option or Convertible Security, as the
case may be. The fair value of any consideration other than cash and securities
shall be determined by the Board of Directors of the Corporation using its good
faith discretion.
(vi) In case any Option is issued in connection with the issue
or sale of other securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option shall be deemed to have been issued
for an aggregate consideration of $1.00.
(vii) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities,
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
(ix) As used in this Certificate of Designation, the term
"Market Price" shall mean, at the date of determination for any security
(including, without limitation, Common Stock), the average of the closing prices
for such security's sales on all securities exchanges on which such security may
at the time be listed or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors of the Corporation, in its good faith discretion. Notwithstanding the
foregoing, in the event the Series D Preferred Stock is converted in connection
with the first public offering of Common Stock after the date of the adoption of
this Certificate of Designation, the Market Price per share of Common Stock
shall be equal to the per share offering price to the public of the Common Stock
issued in such public offering.
(c) Anything herein to the contrary notwithstanding (but without
intending to limit any adjustment to the Conversion Price which may occur
pursuant to the provisions of Section 5(k)(iii)(A)), the Corporation shall not
be required to make any adjustment of the Conversion Price
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<PAGE>
in connection with the issuance of any of the following securities or the
issuance of any Common Stock upon exercise or conversion of any of the following
securities: (i) any option issued by the Corporation on or prior to December 31,
1998, (ii) any warrant issued by the Corporation on or prior to December 31,
1998, (iii) any shares of Series A Preferred Stock issued and outstanding as of
December 31, 1998, (iv) any shares of Series B Preferred Stock issued and
outstanding as of December 31, 1998, (v) any shares of Series C Preferred Stock
issued pursuant to the Merger Agreements (as such term is defined in the
Appendix annexed hereto), (vi) any shares of Series D Preferred Stock or Series
E Preferred Stock issued pursuant to the Series D Stock Purchase Agreement or
the Series D and E Stock Purchase Agreement (as such terms are defined in the
Appendix annexed hereto); or (vii) the Options to be granted under any Option
Plan (as defined in the Appendix annexed hereto). Notwithstanding the foregoing,
the Corporation shall make all necessary adjustments (including successive
adjustments if required) to the Conversion Price in accordance with this Section
5 to the extent that any anti-dilution adjustments which may be made under the
terms of any outstanding securities of the Corporation would, in the absence of
this Section 5(c), require such adjustments to be made in the Conversion Price.
(d) In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) If any capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of Series D Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon conversion of
the Series D Preferred Stock, such shares of stock, securities or assets 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 Common Stock
immediately theretofore receivable upon conversion of the Series D Preferred
Stock had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the holder of the Series D Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Stated Value and Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon conversion of the Series D Preferred
Stock.
(f) No adjustment of the Conversion Rate pursuant to this Section 5
(other than an adjustment resulting from Section 5(k)) shall be required unless
such adjustment results in an increase or decrease of the Conversion Rate of at
least one percent (1%); provided, however, that any adjustments which by reason
of this Section (5)(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section
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5 shall be rounded to the one-hundredth (1/100) of a share and to the next
higher or lower one cent ($.01), as the case may be.
(g) The Corporation may retain a firm of independent certified
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Section 5 of this Certificate of Designation, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In case at any time:
(i) the Corporation shall declare any dividend payable in
stock upon Common Stock or make any distribution (other than cash dividends
which are not in a greater amount per share than the most recent cash dividend)
to the holders of the Common Stock;
(ii) the Corporation shall propose to make an offer for
subscription pro rata to the holders of its Common Stock of any additional
shares of stock of any class or other rights;
(iii) there shall be proposed any other transaction of a type
referred to in this Section 5; or
(iv) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give written
notice to the holders of the Series D Preferred Stock of the date on which (x)
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution, subscription rights, or other transaction, and (y) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for, or receive in
respect of their Common Stock, securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation, or winding up, as the case may be. Such written
notice shall be given not less than ten (10) days prior to the taking of the
action in question.
(i) No fractional shares or script representing fractional shares
shall be issued upon the conversion of shares of Series D Preferred Stock. If,
upon conversion of any shares of Series D Preferred Stock as an entirety, the
holder would, except for the provisions of this Section 5(i), be entitled to
receive a fractional share of Common Stock, then an amount equal to such
fractional share, multiplied by the Market Price per share of the Corporation's
Common Stock on the last business day prior to the Conversion Date, shall be
paid by the Corporation in cash to such holder.
(j) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock for
the purpose of effecting the
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conversion of the shares of Series D Preferred Stock, the full number of shares
of Common Stock then deliverable upon the conversion of all shares of Series D
Preferred Stock then outstanding.
(k) In addition to the other adjustments to the Conversion Price and
the Stated Value provided for in this Section 5, the Conversion Price and the
Stated value also shall be adjusted in accordance with the following provisions:
(i) The following definitions shall apply for purposes of this
Section 5(k) (terms used which are not defined below shall have the meaning of
such terms as defined in the Appendix annexed hereto):
(A) "Adjusted EBITDA" means two times the net income
before interest, taxes, depreciation and amortization of the Corporation
(excluding extraordinary, unusual or non-operating items), plus Startup Losses,
for the third and fourth calendar quarters of 1999.
(B) "Startup Losses" means the sum of all operating
losses (which shall include only items which are part of the calculation of
business center operating income as customarily done by the Corporation)
incurred in the third and fourth calendar quarters of 1999, in connection with
the development and operation of the business centers listed on Schedule 1
annexed hereto and any other new business centers or business center expansions
for which the Corporation commences development after May 24, 1999 ("Startup
Centers").
(C) "Per Share Equity Value" means the result of the
following calculation: (1) Adjusted EBITDA; multiplied by (2) 7; minus (3)
Adjusted Debt; divided by (4) Fully Diluted Capitalization as of December 31,
1999 modified as follows ("Modified Fully Diluted Capitalization"): (i) exclude
all Series D Preferred Stock and Series E Preferred Stock issued as contemplated
by the Series D Stock Purchase Agreement and the Series D and E Stock Purchase
Agreement, and (ii) exclude any Options or Warrants granted on or prior to
December 31, 1999 which have an exercise price greater than the Per Share Equity
Value (it being intended that any additional options granted under the
Corporation's 1999 Stock Option Plan on or prior to December 31, 1999 which have
an Exercise Price equal to or less than the Per Share Equity Value be included
in the Modified Fully Diluted Capitalization).
(D) "Adjusted Debt" means the result of the following
calculation: (1) the average of the debt (excluding letters of credit which have
not been drawn upon) outstanding under the Credit Agreement (plus any other
interest bearing debt, if any, which may be outstanding) on July 31, August 31,
September 30, October 31, November 30 and December 31, 1999 (the "Month End
Dates"), provided that the amount of any debt under the Credit Agreement or
other interest bearing debt which is paid down with the proceeds of issuance of
Series D Preferred Stock and Series E Preferred Stock issued as contemplated by
the Series D Stock Purchase Agreement and the Series D and E Stock Purchase
Agreement shall nonetheless be deemed to be outstanding on each of the Month End
Dates for purposes of calculating the average pursuant to this clause (1); plus
(2) the average outstanding balance of capital leases on the Month End Dates;
minus (3) capital expenditures incurred in connection with the development and
operation of Startup Centers at any time in 1999; minus (4) the aggregate
exercise price of all Options and Warrants (whether or not exercisable) which
are included in Modified Fully Diluted Capitalization.
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(ii) The Corporation shall calculate Per Share Equity Value,
and shall deliver to the holders of Series D Preferred Stock a certificate (the
"Certificate") setting forth Per Share Equity Value, within 30 days after the
date of release by the Corporation's independent certified public accountants of
the Corporation's audited financial statements for 1999. The date that such
certificate shall be deemed delivered for purposes hereof (the "Notice Date")
shall be the date that a notice would be deemed delivered pursuant to the
Stockholders' Agreement referred to in Section 8 hereof. All calculations in
connection with Per Share Equity Value shall be made in accordance with GAAP. If
the holders of Series D Preferred Stock dispute the Per Share Equity Value set
forth in the Certificate, they shall give notice of such dispute (a "Dispute
Notice") within 20 days after the Notice Date (determined in accordance with the
provisions for giving notices set forth in the Stockholders' Agreement). If the
holders of Series D Preferred Stock give a Dispute Notice within such 20 day
period, the dispute shall be resolved by the Corporation's independent certified
public accountants doing an audit or review, as the holders of Series D
Preferred Stock elect, of the third and fourth quarter 1999 financial statements
for the Corporation, and by such accountants recalculating the Per Share Equity
Value based on the results of such audit or review and delivering a notice to
the Corporation and the holders of the Series D Preferred Stock setting forth
the recalculated value (the "Accountant Notice"). If the Per Share Equity Value
set forth in the Accountant Notice is more than 2% lower than the Per Share
Equity Value set forth in the Certificate, the Corporation shall pay the
expenses of such audit or review and recalculation. Otherwise, the holders of
Series D Preferred Stock shall pay such expenses. In the event of such an audit
or review and recalculation, the Notice Date for purposes of Section 5(k)(iv)
shall be deemed to be the date that the Accountant Notice would be deemed
delivered to the Corporation and the holders of the Series D Preferred Stock
pursuant to the Stockholders' Agreement. If the holders of the Series D
Preferred Stock do not deliver a Dispute Notice within the 20 day period
provided above, the Per Share Equity Value set forth in the Certificate shall be
final and binding on all parties.
(iii) If the Per Share Equity Value is greater than $5.25:
(A) the Conversion Price for all shares of Series D
Preferred Stock (including all shares which may be authorized but unissued)
shall be increased automatically to be equal to the Per Share Equity Value; and
(B) the Stated Value and the Adjusted Purchase Price (as
such term is used in Section 6) for all shares of Series D Preferred Stock which
are authorized but unissued on the Notice Date shall be increased automatically
to be equal to the Per Share Equity Value;
provided that the Conversion Price, Stated Value and Adjusted Purchase Price
shall not be increased pursuant to this Section 5(k) to more than $6.25. No
change shall be made to the Conversion Price, Stated Value or Adjusted Purchase
(P)rice pursuant to this Section 5(k) if the Per Share Equity Value is less than
$5.25.
(iv) If an increase in the Conversion Price is made under this
Section 5(k), each holder of Series D Preferred Stock shall have the right to
have the Stated Value of the shares of Series D Preferred Stock held by such
holder increased to the Per Share Equity Value, by
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<PAGE>
delivering payment to the Corporation, within 30 days after the Notice Date, of
an amount equal to the difference between the Per Share Equity Value and $5.25,
multiplied by the number of shares of Series D Preferred Stock held by such
holder, plus interest calculated on such amount at the rate of 9% per annum from
and including the date of issuance of such shares of Series D Preferred Stock to
and including the date of such payment to the Corporation. If such payment is
made by such holder with respect to all of the shares of Series D Preferred
Stock held by such holder, within such 30 day period, the Adjusted Purchase
Price with respect to the shares of Series D Preferred Stock held by such holder
also shall be adjusted, retroactively to the date of issuance of such shares of
Series D Preferred Stock, to be equal to the Per Share Equity Value. If the full
amount of such payment is not made by such holder within such 30 day period, no
adjustment to the Stated Value or the Adjusted Purchase Price with respect to
the shares of Series D Preferred Stock held by such holder shall be made
pursuant to this Section 5(k), but the adjustment to the Conversion Price of
such shares pursuant to Section 5(k)(iii)(A) nonetheless shall be effective as
to such shares.
(v) If an increase in the Conversion Price is made under
Section 5(k)(iii)(A) above, then whether or not a holder of Series D Preferred
Stock makes the cash payment pursuant to Section 5(k)(iv) above to increase the
Stated Value of the shares of Series D Preferred Stock held by such holder to be
equal to the Per Share Equity Value, solely for purposes of determining any
future rights of any RSI Beneficial Holder to exercise priority rights of first
refusal under Section 4.3(b) or priority preemptive rights under Section 7.1(a)
or 7.1(b) of the Stockholders Agreement, the Stated Value of all shares of
Series D Preferred Stock held by RSI Beneficial Holders or Series C Holders
shall be deemed to have been increased to be equal to the Per Share Equity
Value.
(vi) No adjustments to the Conversion Price, Stated Value or
Adjusted Purchase Price under this Section 5(k) shall cause any adjustments to
be made to the Conversion Price pursuant to Section 5(a). Any adjustment to the
Conversion Price, Stated Value or Adjusted Purchase Price which may be made
pursuant to this Section 5(k) shall be given effect before any adjustments to
Conversion Price under Section 5(a) or to Adjusted Purchase Price pursuant to
Section 6 are given effect.
6. Liquidation Rights.
(a) In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of the Series D
Preferred Stock shall be entitled to receive out of the assets of the
Corporation before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series D Preferred Stock as to such payment or distribution, and after all
such payments or distributions have been made on any series or class of capital
stock ranking senior to the Series D Preferred Stock as to such payment or
distribution, an amount per share equal to the greater of (i) the "Adjusted
Purchase Price" (as hereinafter defined), plus all declared but unpaid cash
dividends, if any (the "Liquidation Amount"), (ii) the Adjusted Value, or (iii)
that which the holders would have received if they had converted the Series D
Preferred Stock immediately prior to such transaction (without giving effect to
the liquidation preference of or any dividends on any other capital stock
ranking prior to the Common Stock). The "Adjusted Purchase Price" shall be
$5.25, as same may be adjusted pursuant to Section 5(k)(iii)(B) or Section
5(k)(iv) and proportionately adjusted for any
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<PAGE>
subdivisions (by stock split, stock dividend or otherwise) or any combinations
of the Series D Preferred Stock having occurred up to the effective date of the
event of liquidation, dissolution or winding up of the Corporation. The
"Adjusted Value" shall be an amount per share equal to the Adjusted Purchase
Price plus a cumulative accretion computed on the Adjusted Purchase Price at the
rate of 8% per annum (compounded annually) from the date of issuance of the
shares of Series D Preferred Stock up to the effective date of the event of
liquidation, dissolution or winding-up of the Corporation, reduced by an amount
equal to the aggregate of all declared and paid cash dividends, if any.
(b) A merger or consolidation of the Corporation (in the event that
the Corporation is not the surviving corporation), or the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and assets of the
Corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for purposes of this Section 6. In the event that
the Corporation undertakes any of the transactions referred to in this Section
6(b), the holders of Series D Preferred Stock shall be entitled to receive the
greater of (x) the Liquidation Amount, (y) the Adjusted Value, or (z) that which
the holders would have received if they had converted the Series D Preferred
Stock immediately prior to such transaction (without giving effect to the
liquidation preference of or any dividends on any other capital stock ranking
prior to the Common Stock).
(c) After the payment in cash to the holders of Series D Preferred
Stock of the full preferential amounts in the amounts which have been fixed
hereby for the shares of Series D Preferred Stock, such holders as such shall
have no right or claim to any of the remaining assets of the Corporation.
(d) In respect of liquidation, dissolution or winding up of the
Corporation, (i) the shares of Series D Preferred Stock and the shares of Series
E Preferred Stock rank prior to the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock and the shares of Series C Preferred Stock,
and (ii) the shares of Series D Preferred Stock and the shares of Series E
Preferred Stock rank on a parity with each other. Accordingly, if the assets of
the Corporation available for distribution on liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which the holders of Series D
Preferred Stock are entitled pursuant to Section 6(a) of this Certificate of
Designation and all amounts to which the holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series E Preferred Stock
are entitled upon liquidation, dissolution or winding up pursuant to the
certificates of designation of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series E Preferred Stock,
respectively, proportionate distributable amounts shall be paid on account of
the shares of Series D Preferred Stock and Series E Preferred Stock, ratably, in
proportion to the full distributable amounts which the holders of Series D
Preferred Stock and Series E Preferred Stock would be entitled to receive if the
assets of the Corporation were sufficient to pay such full distributable
amounts, and prior to any amounts being paid on account of the distributable
amounts which the holders of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock would be entitled to receive if the assets of the
Corporation were sufficient to pay the full distributable amounts of all
Preferred Stock.
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<PAGE>
7. Rank of Series. For purposes of the Certificate of Designation, any
stock of any series or class of the Corporation shall be deemed to rank:
(a) prior to the shares of Series D Preferred Stock, as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if the
holders of such class or classes shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series D Preferred Stock;
(b) on a parity with shares of Series D Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series D Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series D Preferred Stock;
(c) junior to shares of Series D Preferred Stock as to dividends or
upon liquidation, dissolution or winding up, as the case may be, if such class
shall be Common Stock or if the holders of shares of Series D Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
8. Additional Rights. The holders of the Series D Preferred Stock shall
also have such other rights, and subject to the terms, conditions and
limitations, set forth in the Appendix annexed hereto to the extent that, under
the provisions of such Appendix, such rights are exercisable by (without giving
effect to any specified minimum percentages of ownership of shares of Series D
Preferred Stock that must consent or act in order to exercise such rights), and
are for the benefit of, all holders of Series D Preferred Stock. All
calculations and determinations to be made with respect to the Series D
Preferred Stock shall be made in accordance with GAAP (as defined in the
Appendix annexed hereto). To the extent that any priority right of the holders
of Series D Preferred Stock to acquire securities pursuant to Section 4.3(b),
Section 7.1 or any other provision of the Appendix are rights of individual
holders of Series D Preferred Stock instead of rights of the class of Series D
Preferred Stock, such priority right shall be deemed to arise solely by reason
of the Stockholders' Agreement which such holders and all other holders of
Series D Preferred Stock have entered into with the Corporation and shall not be
deemed to arise by reason of Chapter 78 of the Nevada Revised Statutes.
9. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance and transfer of the Series D Preferred
Stock and for the payment of dividends to the holders of the Series D Preferred
Stock.
Appendix to Certificate of Designation of Series D Convertible Preferred Stock
is hereby incorporated by reference from Exhibit 3.2 Appendix to the Fifth
Amended and Restated Certificate of Designation of Series A Convertible
Preferred Stock.
15
Exhibit 3.6
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
VANTAS INCORPORATED
Series E Convertible Preferred Stock
Pursuant to Chapter 78 of the Nevada Revised Statutes, VANTAS
Incorporated, a Nevada corporation (the "Corporation"), does hereby certify as
follows:
The following resolutions were duly adopted by the Board of
Directors of the Corporation as of September 13, 1999:
RESOLVED, that pursuant to Article IV of the Amended and Restated
Articles of Incorporation of this Corporation dated July 20, 1999, the
Corporation hereby amends and restates in its entirety the Certificate of
Designation for the Corporation's Series E Convertible Preferred Stock,
dated July 20, 1999, and filed with the Nevada Secretary of State on July
23, 1999 (the "Series E Certificate of Designation"), as set forth on
Exhibit A annexed hereto (the "Amended and Restated Series E Certificate
of Designation"), to amend Section 5(k)(ii) of the Series E Certificate of
Designation with respect to holders of Series E Preferred Stock entitled
to dispute Per Share Equity Value (as defined in the Amended and Restated
Series E Certificate of Designation"); and be it further
RESOLVED, that the officers of this Corporation be, and they hereby
are, authorized and empowered to execute and file with the Secretary of
State of Nevada, the Amended and Restated Series E Certificate of
Designation.
1. The original designation of the Series E Convertible Preferred Stock
has not been changed and shall remain designated as the Series E Convertible
Preferred Stock.
2. The approval of the stockholders holding at least 66 _% of the combined
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series E Convertible Preferred Stock issued and outstanding, and at least 50.1%
of the combined Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock issued and outstanding has been obtained as required.
3. The Amended and Restated Series E Certificate of Designation is set
forth as Exhibit A annexed hereto and is a true and correct copy of the rights,
preferences, privileges and restrictions of the holders of the Series E
Convertible Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, ALLIANCE National Incorporated has caused this
Certificate to be signed by its President and its Assistant Secretary as of this
17th day of September, 1999.
By: /s/ David W. Beale
--------------------------------
David W. Beale, President
Chief Executive Officer
ATTEST:
/s/ Steven M. Cooperman
- --------------------------------------
Steven M. Cooperman
Senior Vice President, General Counsel
and Assistant Secretary
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 17th day of September, 1999, personally appeared before me
David W. Beale, the President and Chief Executive Officer of the Corporation,
and Steven M. Cooperman, the Senior Vice President, General Counsel and
Assistant Secretary of the Corporation, and who acknowledged that they executed
the above Certificate.
/s/ Barbara DiMartino
-----------------------------------
Barbara DiMartino
Notary Public
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Exhibit A
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series E Convertible
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of One
Million (1,000,000) shares of Preferred Stock, par value $.01 per share, created
by the Board of Directors of the Corporation pursuant to the authority granted
to it by the Articles of Incorporation of the Corporation is "Series E
Convertible Preferred Stock," which is hereinafter referred to as the "Series E
Preferred Stock." In the event that the Corporation does not issue the maximum
number of shares of Series E Preferred Stock, the Corporation may, from time to
time, by resolution of the Board of Directors, reduce the number of shares of
Series E Preferred Stock authorized, provided, that no such reduction shall
reduce the number of authorized shares to a number which is less than the number
of shares of Series E Preferred Stock then issued or reserved for issuance. The
number of shares by which the Series E Preferred Stock is reduced shall have the
status of authorized but unissued shares of Preferred Stock, without designation
as to series until such stock is once more designated as part of a particular
series by the Corporation's Board of Directors. The Series E Preferred Stock,
the Corporation's Series A convertible preferred stock, par value $.01 per share
(the "Series A Preferred Stock"), the Corporation's Series B convertible
preferred stock, par value $.01 per share (the "Series B Preferred Stock"), the
Corporation's Series C convertible preferred stock, par value $.01 per share
(the "Series C Preferred Stock"), the Corporation's Series D convertible
preferred stock, par value $.01 per share (the "Series D Preferred Stock" and,
together with the Series A Preferred Stock, the Series B Preferred Stock, Series
C Preferred Stock and the Series E Preferred Stock, the "Preferred Stock"),
shall be pari passu, and without distinction as to class or series, except as
otherwise set forth herein or as the context otherwise requires, and with
respect to dividend rights and rights on liquidation, dissolution, or winding
up, shall rank senior to the Corporation's Class A common stock, par value $.01
per share (the "Class A Common Stock"), and the Corporation's Class B common
stock, par value $.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock").
2. Dividend Rights.
(a) Holders of shares of Series E Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds of this
Corporation legally available therefor, non-cumulative cash dividends in an
amount equal to the equivalent per share cash dividend (based on the number of
whole shares of Common Stock issuable upon the conversion of a share of Series E
Preferred Stock as of the record date for such dividend) declared on the Common
Stock, when and as declared by the Board of Directors.
(b) No dividends shall be declared or paid or set aside for payment
on the Common Stock, the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock or the Series D Preferred Stock unless dividends at
an equivalent rate (based on the number of shares of outstanding Common Stock
and the number of shares of Common Stock issuable upon the conversion of the
Preferred Stock, in each case, as of the record date for such dividend) have
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<PAGE>
been or contemporaneously are declared and paid or declared and a sum sufficient
for payment thereof is set aside for such payment on the Series E Preferred
Stock.
(c) In the event that any holder of Series E Preferred Stock shall
surrender shares for conversion pursuant to the provisions of Section 4 of this
Certificate of Designation, the holder shall be entitled to dividends as
provided for in this Section 2 of this Certificate of Designation (to the extent
such dividends have been declared prior to the close of business on the
Conversion Date (as defined below) but are unpaid at such time).
3. Voting Rights.
(a) Holders of shares of Series E Preferred Stock shall have no
voting rights in respect thereof except as provided by law and except as
provided in this Section 3 of this Certificate of Designation.
(b) Except as to the matters as to which the holders of Series E
Preferred Stock are granted voting rights as a class as set forth in the
Appendix annexed hereto, the holders of Series E Preferred Stock shall vote as
one class with the holders of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and
shall have the right to that number of votes equal to the number of whole shares
of Common Stock issuable upon the conversion of shares of Series E Preferred
Stock as of the date which is the record date for the meeting of shareholders at
which such vote shall be taken (or if such vote shall be taken by written
consent, the date of the written consent of shareholders of the Corporation), as
may be adjusted pursuant to Section 5 hereof.
4. Conversion Rights.
(a) (i) At any time, each of the holders of the Series E Preferred
Stock shall have the right to convert the Series E Preferred Stock, in whole or
in part (provided that, if conversion is to be effected in part, it shall be
effected in increments of 25% of the number of shares then held by each holder
as may be adjusted pursuant to this Certificate of Designation), into shares of
Class A Common Stock at the "Conversion Rate." The Conversion Rate shall mean
the number of shares of Common Stock issuable upon conversion of one (1) share
of Series E Preferred Stock. The Conversion Rate shall be determined by dividing
(x) the "Stated Value" by (y) the "Conversion Price" (as such terms are
hereinafter defined).
(ii) For purposes of this Certificate of Designation, the term
"Stated Value" shall initially mean $5.25, as adjusted for events described in
Section 5(e) or (with respect to certain shares of Series E Preferred Stock)
Section 5(k), and for any subdivisions (by stock split, stock dividend or
otherwise) or any combinations of the Series E Preferred Stock having occurred
prior to the Conversion Date of the shares of Series E Preferred Stock in
question.
(iii) For purposes of this Certificate of Designation, the
term "Conversion Price" shall initially mean $5.25, as adjusted pursuant to
Section 5 hereof.
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<PAGE>
(b) Conversion of the Series E Preferred Stock shall be effected by
surrender of the certificates representing the shares of Series E Preferred
Stock being converted to the transfer agent for the Series E Preferred Stock, or
if none shall have been appointed, to the Corporation, together with the form of
notice of election to convert as may be provided from time to time by the
Corporation.
(c) Shares of Series E Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day ("Conversion
Date") of the surrender for conversion of the certificate therefor, together
with the form of notice of election provided by the Corporation duly signed by
the holder thereof, and the person or persons entitled to receive shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Class A Common Stock as of such
time. As promptly as practicable on or after the Conversion Date, the
Corporation or its transfer agent shall issue and shall deliver a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
such conversion, together with a cash payment (determined in accordance with
Section 5(i) hereof) in lieu of any fraction of any share of Class A Common
Stock to the person or persons entitled to receive the same. Notwithstanding the
foregoing provisions of this Section 4(c), if at the Conversion Date, there
shall be declared but unpaid dividends on the Common Stock of the Corporation,
other than any dividend payable with respect to a record date subsequent to the
Conversion Date of such conversion and other than any dividend as to which there
shall have been paid dividends at an equivalent rate on the Series E Preferred
Stock, the Corporation shall, at the time of such conversion, pay to the
converting holder of Series E Preferred Stock the amount of such unpaid
dividends.
(d) Each share of Series E Preferred Stock shall be automatically
converted into shares of Class A Common Stock, at the then applicable Conversion
Rate, upon the consummation of an Initial Public Offering (as defined in the
Appendix annexed hereto).
(e) The Class A Common Stock issuable upon conversion of the Series
E Preferred Stock shall, when so issued, be duly and validly authorized and
issued, fully paid and nonassessable.
5. Adjustments.
(a) Except as provided in this Section 5(a) or in Sections 5(b) and
5(c) hereof, if and whenever the Corporation issues or sells, or in accordance
with the provisions of this Section 5 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the Stated
Value in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale the Conversion Price shall be reduced to the
Conversion Price determined by dividing (1) the sum of (x) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale by the Fully Diluted Capitalization (as hereinafter defined) immediately
prior to such issue or sale, plus (y) the consideration, if any, received by the
Corporation upon such issue or sale, by (2) the Fully Diluted Capitalization
immediately after such issue or sale. As used herein, the term "Fully Diluted
Capitalization" shall mean the number of shares of issued and outstanding Common
Stock assuming full conversion, exchange and exercise of all then outstanding
Options and Convertible Securities (each as defined below).
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<PAGE>
(b) For purposes of determining the adjusted Conversion Price under
Section 5(a) above, the following shall be applicable:
(i) If the Corporation in any manner grants or sells any
options for the purchase of Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such options or other securities being
called "Options", and such convertible or exchangeable securities being called
"Convertible Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Stated Value in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 5(b)(i), the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options (it being understood that any
consideration to be received at a date later than the date of such grant or sale
shall be valued at the fair market value of such consideration on the date of
such grant or sale, as determined by the Board of Directors of the Corporation
in its good faith discretion), plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the Stated Value in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 5(b)(ii), the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (it being understood that any consideration to be received at a date
later than the date of such issue or sale shall be valued at the fair market
value of such consideration on the date of such issue or sale, as determined by
the Board of Directors of the Corporation in its good faith discretion), plus
the minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such
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Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 5(b), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii) If the purchase price provided for in any Options
referred to in Section 5(b)(i) hereof, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in Sections 5(b)(i) or 5(b)(ii) hereof, or the rate at which any Convertible
Securities referred to in Sections 5(b)(i) or 5(b)(ii) hereof are convertible
into or exchangeable for Common Stock, changes at any time (whether increases or
decreases), the Conversion Price in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
(iv) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) If any Common Stock, Option or Convertible Security is
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price (as hereinafter defined)
thereof as of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity in connection with
any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined by
the Board of Directors of the Corporation using its good faith discretion.
(vi) In case any Option is issued in connection with the issue
or sale of other securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option shall be deemed to have been issued
for an aggregate consideration of $1.00.
(vii) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
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(viii) If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities,
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
(ix) As used in this Certificate of Designation, the term
"Market Price" shall mean, at the date of determination for any security
(including, without limitation, Common Stock), the average of the closing prices
for such security's sales on all securities exchanges on which such security may
at the time be listed or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors of the Corporation, in its good faith discretion. Notwithstanding the
foregoing, in the event the Series E Preferred Stock is converted in connection
with the first public offering of Common Stock after the date of the adoption of
this Certificate of Designation, the Market Price per share of Common Stock
shall be equal to the per share offering price to the public of the Common Stock
issued in such public offering.
(c) Anything herein to the contrary notwithstanding (but without
intending to limit any adjustment to the Conversion Price which may occur
pursuant to the provisions of Section 5(k)(iii)(A)), the Corporation shall not
be required to make any adjustment of the Conversion Price in connection with
the issuance of any of the following securities or the issuance of any Common
Stock upon exercise or conversion of any of the following securities: (i) any
option issued by the Corporation on or prior to December 31, 1998, (ii) any
warrant issued by the Corporation on or prior to December 31, 1998, (iii) any
shares of Series A Preferred Stock issued and outstanding as of December 31,
1998, (iv) any shares of Series B Preferred Stock issued and outstanding as of
December 31, 1998, (v) any shares of Series C Preferred Stock issued pursuant to
the Merger Agreements (as such term is defined in the Appendix annexed hereto),
(vi) any shares of Series D Preferred Stock or Series E Preferred Stock issued
pursuant to the Series D Stock Purchase Agreement or the Series D and E Stock
Purchase Agreement (as such terms are defined in the Appendix hereto); or (vii)
the Options to be granted under any Option Plan (as defined in the Appendix
annexed hereto). Notwithstanding the foregoing, the Corporation shall make all
necessary adjustments (including successive adjustments if required) to the
Conversion Price in accordance with this Section 5 to the extent that any
anti-dilution adjustments which may be made under the terms of any outstanding
securities of the Corporation would, in the absence of this Section 5(c),
require such adjustments to be made in the Conversion Price.
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<PAGE>
(d) In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) If any capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of Series E Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon conversion of
the Series E Preferred Stock, such shares of stock, securities or assets 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 Common Stock
immediately theretofore receivable upon conversion of the Series E Preferred
Stock had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the holder of the Series E Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Stated Value and Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon conversion of the Series E Preferred
Stock.
(f) No adjustment of the Conversion Rate pursuant to this Section 5
(other than an adjustment resulting from Section 5(k)) shall be required unless
such adjustment results in an increase or decrease of the Conversion Rate of at
least one percent (1%); provided, however, that any adjustments which by reason
of this Section (5)(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be rounded to the one-hundredth (1/100) of a share and to the
next higher or lower one cent ($.01), as the case may be.
(g) The Corporation may retain a firm of independent certified
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Section 5 of this Certificate of Designation, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In case at any time:
(i) the Corporation shall declare any dividend payable in
stock upon Common Stock or make any distribution (other than cash dividends
which are not in a greater amount per share than the most recent cash dividend)
to the holders of the Common Stock;
(ii) the Corporation shall propose to make an offer for
subscription pro rata to the holders of its Common Stock of any additional
shares of stock of any class or other rights;
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<PAGE>
(iii) there shall be proposed any other transaction of a type
referred to in this Section 5; or
(iv) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give written
notice to the holders of the Series E Preferred Stock of the date on which (x)
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution, subscription rights, or other transaction, and (y) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for, or receive in
respect of their Common Stock, securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
other transaction, liquidation, or winding up, as the case may be. Such written
notice shall be given not less than ten (10) days prior to the taking of the
action in question.
(i) No fractional shares or script representing fractional shares
shall be issued upon the conversion of shares of Series E Preferred Stock. If,
upon conversion of any shares of Series E Preferred Stock as an entirety, the
holder would, except for the provisions of this Section 5(i), be entitled to
receive a fractional share of Common Stock, then an amount equal to such
fractional share, multiplied by the Market Price per share of the Corporation's
Common Stock on the last business day prior to the Conversion Date, shall be
paid by the Corporation in cash to such holder.
(j) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock for
the purpose of effecting the conversion of the shares of Series E Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series E Preferred Stock then outstanding.
(k) In addition to the other adjustments to the Conversion Price and
the Stated Value provided for in this Section 5, the Conversion Price and the
Stated value also shall be adjusted in accordance with the following provisions:
(i) The following definitions shall apply for purposes of this
Section 5(k) (terms used which are not defined below shall have the meaning of
such terms as defined in the Appendix annexed hereto):
(A) "Adjusted EBITDA" means two times the net income
before interest, taxes, depreciation and amortization of the Corporation
(excluding extraordinary, unusual or non-operating items), plus Startup Losses,
for the third and fourth calendar quarters of 1999.
(B) "Startup Losses" means the sum of all operating
losses (which shall include only items which are part of the calculation of
business center operating income as customarily done by the Corporation)
incurred in the third and fourth calendar quarters of 1999, in
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connection with the development and operation of the business centers listed on
Schedule 1 annexed hereto and any other new business centers or business center
expansions for which the Corporation commences development after May 24, 1999
("Startup Centers").
(C) "Per Share Equity Value" means the result of the
following calculation: (1) Adjusted EBITDA; multiplied by (2) 7; minus (3)
Adjusted Debt; divided by (4) Fully Diluted Capitalization as of December 31,
1999 modified as follows ("Modified Fully Diluted Capitalization"): (i) exclude
all Series D Preferred Stock and Series E Preferred Stock issued as contemplated
by the Series D Stock Purchase Agreement and the Series D and E Stock Purchase
Agreement, and (ii) exclude any Options or Warrants granted on or prior to
December 31, 1999 which have an exercise price greater than the Per Share Equity
Value (it being intended that any additional options granted under the
Corporation's 1999 Stock Option Plan on or prior to December 31, 1999 which have
an Exercise Price equal to or less than the Per Share Equity Value be included
in the Modified Fully Diluted Capitalization).
(4) "Adjusted Debt" means the result of the following
calculation: (1) the average of the debt (excluding letters of credit which have
not been drawn upon) outstanding under the Credit Agreement (plus any other
interest bearing debt, if any, which may be outstanding) on July 31, August 31,
September 30, October 31, November 30 and December 31, 1999 (the "Month End
Dates"), provided that the amount of any debt under the Credit Agreement or
other interest bearing debt which is paid down with the proceeds of issuance of
Series D Preferred Stock and Series E Preferred Stock issued as contemplated by
the Series D Stock Purchase Agreement and the Series D and E Stock Purchase
Agreement shall nonetheless be deemed to be outstanding on each of the Month End
Dates for purposes of calculating the average pursuant to this clause (1); plus
(2) the average outstanding balance of capital leases on the Month End Dates;
minus (3) capital expenditures incurred in connection with the development and
operation of Startup Centers at any time in 1999; minus (4) the aggregate
exercise price of all Options and Warrants (whether or not exercisable) which
are included in Modified Fully Diluted Capitalization.
(ii) The Corporation shall calculate Per Share Equity Value,
and shall deliver to the holders of Series E Preferred Stock a certificate (the
"Certificate") setting forth Per Share Equity Value, within 30 days after the
date of release by the Corporation's independent certified public accountants of
the Corporation's audited financial statements for 1999. The date that such
certificate shall be deemed delivered for purposes hereof (the "Notice Date")
shall be the date that a notice would be deemed delivered pursuant to the
Stockholders' Agreement referred to in Section 8 hereof. All calculations in
connection with Per Share Equity Value shall be made in accordance with GAAP. If
the holders of at least 50% of the Series E Preferred Stock (the "Requisite
Series E Holders") dispute the Per Share Equity Value set forth in the
Certificate, they shall give notice of such dispute (a "Dispute Notice") within
20 days after the Notice Date (determined in accordance with the provisions for
giving notices set forth in the Stockholders' Agreement). If the Requisite
Series E Holders give a Dispute Notice within such 20 day period, the dispute
shall be resolved by the Corporation's independent certified public accountants
doing an audit or review, as the holders of Series D Preferred Stock elect, of
the third and fourth quarter 1999 financial statements for the Corporation, and
by such accountants recalculating the Per Share Equity Value based on the
results of such audit or review and delivering a notice to the Corporation and
the Requisite Series E Holders setting forth the recalculated value (the
"Accountant Notice"). If the Per
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Share Equity Value set forth in the Accountant Notice is more than 2% lower than
the Per Share Equity Value set forth in the Certificate, the Corporation shall
pay the expenses of such audit or review and recalculation. Otherwise, the
Requisite Series E Holders shall pay such expenses. In the event of such an
audit or review and recalculation, the Notice Date for purposes of Section
5(k)(iv) shall be deemed to be the date that the Accountant Notice would be
deemed delivered to the Corporation and the Requisite Series E Holders pursuant
to the Stockholders' Agreement. If the Requisite Series E Holders do not deliver
a Dispute Notice within the 20 day period provided above, the Per Share Equity
Value set forth in the Certificate shall be final and binding on all parties.
(iii) If the Per Share Equity Value is greater than $5.25:
(A) the Conversion Price for all shares of Series E
Preferred Stock (including all shares which may be authorized but unissued)
shall be increased automatically to be equal to the Per Share Equity Value; and
(B) the Stated Value and the Adjusted Purchase Price (as
such term is used in Section 6) for all shares of Series E Preferred Stock which
are authorized but unissued on the Notice Date shall be increased automatically
to be equal to the Per Share Equity Value;
provided that the Conversion Price, Stated Value and Adjusted Purchase Price
shall not be increased pursuant to this Section 5(k) to more than $6.25. No
change shall be made to the Conversion Price, Stated Value or Adjusted Purchase
Price pursuant to this Section 5(k) if the Per Share Equity Value is less than
$5.25.
(iv) If an increase in the Conversion Price is made under this
Section 5(k), each holder of Series E Preferred Stock shall have the right to
have the Stated Value of the shares of Series E Preferred Stock held by such
holder increased to the Per Share Equity Value, by delivering payment to the
Corporation, within 30 days after the Notice Date, of an amount equal to the
difference between the Per Share Equity Value and $5.25, multiplied by the
number of shares of Series E Preferred Stock held by such holder, plus interest
calculated on such amount at the rate of 9% per annum from and including the
date of issuance of such shares of Series E Preferred Stock to and including the
date of such payment to the Corporation. If such payment is made by such holder
with respect to all of the shares of Series E Preferred Stock held by such
holder, within such 30 day period, the Adjusted Purchase Price with respect to
the shares of Series E Preferred Stock held by such holder also shall be
adjusted, retroactively to the date of issuance of such shares of Series E
Preferred Stock, to be equal to the Per Share Equity Value. If the full amount
of such payment is not made by such holder within such 30 day period, no
adjustment to the Stated Value or the Adjusted Purchase Price with respect to
the shares of Series E Preferred Stock held by such holder shall be made
pursuant to this Section 5(k), but the adjustment to the Conversion Price of
such shares pursuant to Section 5(k)(iii)(A) nonetheless shall be effective as
to such shares.
(v) No adjustments to the Conversion Price, Stated Value or
Adjusted Purchase Price under this Section 5(k) shall cause any adjustments to
be made to the Conversion Price pursuant to Section 5(a). Any adjustment to the
Conversion Price, Stated Value or Adjusted Purchase Price which may be made
pursuant to this Section 5(k) shall be given effect before any
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<PAGE>
adjustments to Conversion Price under Section 5(a) or to Adjusted Purchase Price
pursuant to Section 6 are given effect.
6. Liquidation Rights.
(a) In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of the Series E
Preferred Stock shall be entitled to receive out of the assets of the
Corporation before any payment or distribution upon dissolution, liquidation or
winding up shall be made on any series or class of capital stock ranking junior
to Series E Preferred Stock as to such payment or distribution, and after all
such payments or distributions have been made on any series or class of capital
stock ranking senior to the Series E Preferred Stock as to such payment or
distribution, an amount per share equal to the greater of (i) the "Adjusted
Purchase Price" (as hereinafter defined), plus all declared but unpaid cash
dividends, if any (the "Liquidation Amount"), (ii) the Adjusted Value, or (iii)
that which the holders would have received if they had converted the Series E
Preferred Stock immediately prior to such transaction (without giving effect to
the liquidation preference of or any dividends on any other capital stock
ranking prior to the Common Stock). The "Adjusted Purchase Price" shall be
$5.25, as same may be adjusted pursuant to Section 5(k)(iii)(B) or Section
5(k)(iv) and proportionately adjusted for any subdivisions (by stock split,
stock dividend or otherwise) or any combinations of the Series E Preferred Stock
having occurred up to the effective date of the event of liquidation,
dissolution or winding up of the Corporation. The "Adjusted Value" shall be an
amount per share equal to the Adjusted Purchase Price plus a cumulative
accretion computed on the Adjusted Purchase Price at the rate of 8% per annum
(compounded annually) from the date of issuance of the shares of Series E
Preferred Stock up to the effective date of the event of liquidation,
dissolution or winding-up of the Corporation, reduced by an amount equal to the
aggregate of all declared and paid cash dividends, if any.
(b) A merger or consolidation of the Corporation (in the event that
the Corporation is not the surviving corporation), or the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and assets of the
Corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for purposes of this Section 6. In the event that
the Corporation undertakes any of the transactions referred to in this Section
6(b), the holders of Series E Preferred Stock shall be entitled to receive the
greater of (x) the Liquidation Amount, (y) the Adjusted Value, or (z) that which
the holders would have received if they had converted the Series E Preferred
Stock immediately prior to such transaction (without giving effect to the
liquidation preference of or any dividends on any other capital stock ranking
prior to the Common Stock).
(c) After the payment in cash to the holders of Series E Preferred
Stock of the full preferential amounts in the amounts which have been fixed
hereby for the shares of Series E Preferred Stock, such holders as such shall
have no right or claim to any of the remaining assets of the Corporation.
(d) In respect of liquidation, dissolution or winding up of the
Corporation, (i) the shares of Series D Preferred Stock and the shares of Series
E Preferred Stock rank prior to the shares of Series A Preferred Stock, the
shares of Series B Preferred Stock and the shares of Series C
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Preferred Stock, and (ii) the shares of Series D Preferred Stock and the shares
of Series E Preferred Stock rank on a parity with each other. Accordingly, if
the assets of the Corporation available for distribution on liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which the holders of Series
E Preferred Stock are entitled pursuant to Section 6(a) of this Certificate of
Designation and all amounts to which the holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
are entitled upon liquidation, dissolution or winding up pursuant to the
certificates of designation of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock,
respectively, proportionate distributable amounts shall be paid on account of
the shares of Series D Preferred Stock and Series E Preferred Stock, ratably, in
proportion to the full distributable amounts which the holders of Series D
Preferred Stock and Series E Preferred Stock would be entitled to receive if the
assets of the Corporation were sufficient to pay such full distributable
amounts, and prior to any amounts being paid on account of the distributable
amounts which the holders of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock would be entitled to receive if the assets of the
Corporation were sufficient to pay the full distributable amounts of all
Preferred Stock.
7. Rank of Series. For purposes of the Certificate of Designation, any
stock of any series or class of the Corporation shall be deemed to rank:
(a) prior to the shares of Series E Preferred Stock, as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if the
holders of such class or classes shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series E Preferred Stock;
(b) on a parity with shares of Series E Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series E Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series E Preferred Stock;
(c) junior to shares of Series E Preferred Stock as to dividends or
upon liquidation, dissolution or winding up, as the case may be, if such class
shall be Common Stock or if the holders of shares of Series E Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
8. Additional Rights. The holders of the Series E Preferred Stock shall
also have such other rights, and subject to the terms, conditions and
limitations, set forth in the Appendix annexed hereto to the extent that, under
the provisions of such Appendix, such rights are exercisable by (without giving
effect to any specified minimum percentages of ownership of shares of Series E
Preferred Stock that must consent or act in order to exercise such rights), and
are for the benefit of,
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all holders of Series E Preferred Stock. All calculations and determinations to
be made with respect to the Series E Preferred Stock shall be made in accordance
with GAAP (as defined in the Appendix annexed hereto).
9. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance and transfer of the Series E Preferred
Stock and for the payment of dividends to the holders of the Series E Preferred
Stock.
Appendix to Amended and Restated Certificate of Designation of Series E
Convertible Preferred Stock is hereby incorporated by reference from Exhibit 3.2
Appendix to the Fifth Amended and Restated Certificate of Designation of Series
A Convertible Preferred Stock.
15
RESTATED BY-LAWS
OF
EXECUTIVE OFFICE GROUP, INC.
ARTICLE I
Offices
The registered office of the Corporation in the State of Nevada is located
at 502 East John Street, Carson City, Nevada 89702, and the name of the
registered agent of the Corporation at such office is the Prentice-Hall
Corporation System, Inc. The Corporation may also have offices at such other
places, within or without the State of Nevada, as the Board of Directors (the
"Board") may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meting shall be held at such place
within or without the State of Nevada as may be specified in the notice of
meeting or the waiver thereof, on the last Wednesday in July in each year at
10:00 a.m., unless said day shall fall on a legal holiday, in which case such
meeting shall be held at such place at the same hour on the next day thereafter
not a Saturday, Sunday or legal holiday.
Section 2. Special Meetings. A special meeting of the stockholders of the
Corporation may be called by the President and shall be called by the President,
the Secretary, or an Assistant Secretary when directed to do so by resolution of
the Board at a duly convened meeting of the Board, or at the request in writing
of a majority of the Board. Such request shall state the purpose or purposes of
the proposed meeting. Special meetings shall be held at such place within or
without the State of Nevada as may be specified in the notice of meeting or
waiver thereof. Business transacted at all special meetings shall be confined to
the purposes stated in the notice of meeting.
Section 3. Notice of Meetings. Written notice of every meeting of the
Stockholders shall be given by or under the direction of the Secretary or an
Assistant Secretary, either personally or by mail, by telegraph or by any other
lawful means of communication, upon each stockholder of record entitled to vote
at such meeting, not less than 10 or more than 60 days before the meeting. In
the event of the death, absence, incapacity or refusal of the specified officer,
notice of a meeting may be given by a person designated by either the Secretary,
the person or persons requesting the meeting or the Board. If mailed, the notice
of a meeting shall be directed to a stockholder at his address as it appears on
the records of the Corporation. The notice of every meeting of the
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stockholders shall stated the place, date and hour of the meeting, and the
purpose or purposes for which the meeting is called, except as otherwise
expressly provided by law, no notice of any meting of stockholders shall be
required to be given to any stockholder who shall attend such meeting in person
or by proxy, or who shall, in person or by attorney thereunder authorized, waive
such notice in writing or by telegraph, cable, radio or wireless either before
or after such meeting.
Section 4. Quorum. At all meetings of stockholders, a majority of the
issued and outstanding stock entitled to vote present in person or by proxy
shall constitute a quorum. If such quorum is not present, a majority of the
issued and outstanding stock entitled to vote present thereat may adjourn the
meeting form time to time without notice, other than the announcement at the
meeting of the date, time and place of the adjourned meeting, until a quorum is
present, and thereupon any business may be transacted at the meting as
originally called. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 5. Voting. At every meeting of the stockholders, except as may be
otherwise provided by law or in the Corporation's Articles of Incorporation, as
amended and restated to date (the "Articles of Incorporation"),every stockholder
of the Corporation entitled to vote thereat shall be entitled to one vote for
each share of stock entitled to vote standing in his name on the books of the
Corporation on the record date as determined in accordance with Article VI,
Section 4 of these By-Laws. Directors shall be elected by a plurality of the
votes cast at a meeting of stockholders (at which a quorum is present) by the
holders of shares entitled to vote in the election, except as otherwise required
by law or by the Articles of Incorporation. Except as otherwise required by the
Articles of Incorporation, by law, or by any regulations of any security
exchange, whenever any corporate action, other than the election of directors
and the transactions set forth in Section 6 of this Article II, is to be taken
by vote of the stockholders, it shall be authorized by majority of the votes
cast at a meeting of stockholders (at which quorum is present) by the holders of
the shares entitled to vote thereon. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine such
stock ledger, the list required by Article II, Section 9 of these By-Laws, or
the books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders. Upon the demand of any stockholder entitled to vote, the vote at
any election of directors, or the vote upon any question before a meeting, shall
be by ballot; but otherwise the method of voting shall be discretionary with the
presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all meetings of the
stockholders, the President, or if such officer be vacant or he be absent, a
Vice President of the Corporation, or if none be present the appointee of the
meeting, shall preside. The Secretary of the Corporation, or in his absence an
Assistant Secretary, or if none be present the appointee of the Presiding
Officer of the meeting, shall act as secretary of the meeting.
Section 7. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy, but no proxy shall be voted
after three years from its date, unless
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such proxy provides for a longer period. Every proxy must be executed in writing
by the stockholder himself, or by his duly authorized attorney, and dated, but
need not be sealed, witnessed or acknowledged. Proxies shall be delivered to the
secretary of the meeting before the meeting begins or to the Inspectors of
Election at the meeting.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
Section 8. Inspectors of Election. At each meeting of the stockholders at
which the vote for directors, or the vote upon any question before the meeting,
is taken by ballot, the polls shall be opened and closed by, and the proxies and
ballots shall be received and taken in charge by, and all questions touching on
the qualifications of voters and the validity of proxies and the acceptance and
rejection of the same shall be decided by two Inspectors of Election. Such
Inspectors of Election may be appointed by the Board before the meeting, but if
no such appointment shall have been made, they shall be appointed by the
meeting. If for any reason any Inspector of Election previously appointed shall
fail to attend or refuse or be unable to serve, an Inspector of Election in his
place shall be appointed by the meeting. Any appointment of Inspectors of
Election by the meeting shall be by per capita vote of the stockholders present
and entitled to vote.
Section 9. List of Stockholders. At least 10 days prior to every meeting
of stockholders, a complete list of the stockholders entitled to vote at such
meeting, arranged in alphabetical order and showing the address of each
stockholders and the number of shares registered in the name of each, shall be
prepared by the Secretary or an Assistant Secretary. Such list shall be open to
examination at a place within the city where the meeting is to be held, which
place shall be specified where the meeting is held and shall be open, during
normal business hours for a period of 10 days prior to the meeting, to the
examination of any stockholder for any purpose germane to the meeting. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 10.Consent of Stockholders in Lieu of Meeting. Except as may be
otherwise provided in the Articles of Incorporation, any action required by law
to be taken at any meeting of stockholders, or any action which may be taken at
any meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon where present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
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ARTICLE III
Board of Directors
Section 1. Powers, Number and Election of Directors. The business and
affairs of the Corporation shall be managed by its Board of Directors,
consisting of not less than three nor more than ten persons. Directors shall be
elected at the annual meeting of stockholders in each year, to serve until the
next annual meeting of stockholders and until their successors shall be elected
and shall qualify. The directors shall have the power, from time to time, to
increase or decrease their own number, within the minimum and maximum
limitations specified herein. As used herein, the term "whole Board" shall mean
the total number of directors authorized at the time, whether or not any
vacancies exist.
Section 2. Vacancies. Any vacancy in the Board caused by death,
resignation, disqualification, removal, an increase in the number of directors
(caused by the Board or otherwise) or any other cause may be filled by a
majority of the directors then in office although less than a quorum, or by the
stockholders, and directors so chosen shall hold office until the next election
of the directors and until their respective successors shall be elected and
qualified. When one or more directors shall resign form the Board, effective at
a future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective.
Section 3. Resignations and Removals. Any director may resign from his
office at any time by delivering his resignation in writing to the Corporation,
and the acceptance of such resignation, unless required by the terms thereof,
shall not be necessary to make such resignation effective. No director may be
removed from office except for cause and then only by the holders of a majority
of the outstanding shares of capital stock of the corporation entitled to vote
at an election of directors.
Section 4. Meetings. The Board may hold its meetings in such place or
places within or without the State of Nevada as the Board from time to time by
resolution may determine or as shall be specified in the respective notices or
waivers of notice thereof, and the directors may adopt such rules and
regulations for the conduct of their meetings and the management of the
Corporation not inconsistent with these By-Laws as they may deem proper. The
Board from time to time by resolution may fix a time and place (or varying times
and places) for the annual and other regular meetings of the Board; provided
that unless a time and place is so fixed for any annual meeting of the Board,
the same shall be held immediately following the annual meeting of the
stockholders at the same place at which such meeting shall have been held. No
notice of the annual or other regular meetings of the Board need be given. Other
meetings of the Board shall be held whenever called by the President or by
one-third of the directors then in office; and the Secretary or an Assistant
Secretary shall give notice of each such meeting to each director not later than
the day before the day of the meeting, personally or by mailing, telegraphing,
cabling or telephoning such notice to him at
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his address as it appears on the books of the Corporation or by leaving such
notice at his residence or usual place of business.
No notice of a meeting need be given if all the directors are
present in person. Any business may be transacted at any meeting of the Board,
whether or not specified in a notice of the meeting.
Section 5. Meetings by Conference Telephone. Members of the Board, or any
committee designated by the Board, may participate in a meeting of the Board or
such committee by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other.
Participating in a meeting pursuant to this section shall constitute presence in
person at such meeting. The chairman or the secretary of the meeting shall make
sure that all persons participating in the meeting (i) can hear each other and
(ii) understand that their participation will constitute a meeting of the Board
or such committee.
Section 6. Unanimous Consent of Directors in Lieu of Meeting. Any action
required or permitted to be taken at any meeting of the Board may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board, and such written consent is filed with the minutes of proceedings of the
Board.
Section 7. Quorum. One-third of the whole Board shall constitute a quorum
for the transaction of business, except that when the number of directors is
fewer than six, any two directors shall constitute a quorum. If there be less
than a quorum at any meeting of the Board, a majority of those present (or if
only one be present, then that one) may adjourn the meeting from time to time,
and no further notice thereof need be given other than announcement at the
meeting which shall be so adjourned of the time of, and the place to which, the
meeting is adjourned. The act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board, except as may
be otherwise specifically provided by law or by the Articles of Incorporation or
by these By-Laws.
Section 8. Compensation of Directors. The Board shall have authority to
fix the compensation of directors for acting in either that capacity or any
other capacity.
Section 9. Committees. An Executive Committee of three or more directors
may be designated by resolution passed by a majority of the whole Board. To the
extent permitted by law and provided in any such resolution, 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 Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. It shall not have the power or authority to amend the Certificate of
Incorporation, adopt an agreement of merger or consolidation, recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommend to the stockholders a dissolution
of the Corporation or a revocation of a dissolution, or amend these By-Laws. The
Board may also designate one or more committees in addition to the Executive
Committee by resolution
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or resolutions passed by a majority of the whole Board; such committees shall
consist of three or more directors of the Corporation and, to the extent
permitted by law and provided in the resolution or resolutions designating them,
shall have or may exercise the specific powers of the Board in the management of
the business and affairs of the Corporation. The act of a majority of the
members of any committee of the Board shall be the act of that committee, and
said committee may meet at stated times or on notice. The Board may designate
one or more directors as alternate member of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member.
ARTICLE IV
Officers and Agents
Section 1. General Provisions. The officers of the Corporation shall be a
President, a Treasurer and a Secretary, and may include one or more Vice
Presidents, one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries, all of whom shall be appointed
by the Board as soon as may be practicable after the election of directors in
each year. Any two offices may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity if such
instrument is required by law or by these By-Laws to be executed, acknowledged
or verified by any two or more officers. Each of such officers shall serve until
the annual meeting of the Board next succeeding his appointment and until his
successor shall have been chosen and shall have qualified. The Board may appoint
such officers, agents and employees as it may deem necessary or proper, who
shall respectively have such authority and perform such duties as may from time
to time be prescribed by the Board. All officers, agents and employees appointed
by the Board shall be subject to removal at any time by the affirmative vote of
a majority of the whole Board. Other agents and employees may be removed at any
time by the Board, by the officer appointing them, or by any other superior
officer upon whom such power of removal. may be conferred by the Board. The
salaries of the officers of the Corporation shall be fixed by the Board, but
this power may be delegated to any officer. The Corporation may secure the
fidelity of any or all of its officers or agents by bond or otherwise.
Section 2. The President. The President shall be a member of the Board and
shall preside at its meetings and at all meetings of stockholders. He shall,
subject to the direction and under the supervision of the Board, be the chief
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation and shall keep the Board fully advised.
He shall have such powers and perform such duties as generally pertain to the
office of President, as well as such further powers and duties as may be
prescribed by the Board.
Section 3. Vice Presidents. Each Vice President shall have such powers and
perform such duties as the Board of the President may from time to time
prescribe, and shall perform such
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other duties as may be prescribed in these By-Laws. In the absence or inability
to act of the President, the Vice President next in order as designated by the
Board or, in the absence of such designation, senior in length of service in
such capacity, who shall be present and able to act, shall perform all the
duties and may exercise any of the powers of the President, subject to the
control of the Board. The performance of any duty by a Vice President shall be
conclusive evidence of his power to act.
Section 4. The Treasurer. The Treasurer shall have the case and custody of
all funds and securities of the Corporation which may come into his hands and
shall deposit the same to the credit of the Corporation in such bank or banks or
other depository or depositories as the Board may designate. He may endorse all
commercial documents requiring endorsements for or on behalf of the Corporation
and may sign all receipts and vouchers for payments made to the Corporation. He
shall render an account of his transactions to the Board as often as it shall
require the same and shall at all reasonable times exhibit his books and
accounts to any director, and shall cause to be entered regularly in goods kept
for that purpose full and accurate account of all moneys received and disbursed
by him on account of the Corporation. He shall, if required by the Board, give
the Corporation a bond in such sums and with such sureties as shall be
satisfactory to the Board, conditioned upon the faithful performance of his
duties and for the restoration to the Corporation in case of his death,
resignation, retirement or removal from office of all books, papers, vouchers,
money and other property of whatever kind in his possession, or under his
control, belonging to the Corporation. He shall have such further powers and
duties as are incident to the position of Treasurer, subject to the control of
the Board.
Section 5. The Secretary. The Secretary shall record the proceedings of
meetings of the Board and of the stockholders in a book kept for that purpose
and shall attend to the giving and serving of all notices of the Corporation. He
shall have custody of the seal of the Corporation and shall affix the seal to
all certificates of shares of stock of the Corporation (if required by the form
of such certificates) and to such other papers or documents as may be proper
and, when the seal is so affixed, he shall attest the same by his signature
wherever required. He shall have charge of the stock certificate book, transfer
book and stock ledger, and such other books and papers as the Board may direct.
He shall, in general, perform all duties of Secretary, subject to the control of
the Board.
Section 6. Assistant Treasurers In the absence or inability of the
Treasurer to act, any Assistant Treasurer may perform all the duties and
exercise all of the powers of the Treasurer, subject to the control of the
Board. The performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Treasurer shall also perform such other duties as the
Treasurer or the Board may from time to time assign to him.
Section 7. Assistant Secretaries In the absence or inability of the
Secretary to act, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary, subject to the control of the Board.
The performance of any such duty shall be conclusive evidence of his power to
act. An Assistant Secretary shall also perform such other duties as the
Secretary or the Board may from time to time assign to him.
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Section 8. Other Officers Other officers shall perform such duties and
have such powers as may from time to time be assigned to them by the Board.
Section 9. Delecation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer, for the time being, the powers or duties, or any of them, of
such officer upon any other officer, or upon any director.
Section 10.Proxies in Respect of Securities of Other Corporations Unless
otherwise provided by resolution adopted by the Board, the President may from
time to time appoint an attorney or attorneys or an agent or agents to exercise
in the name and on behalf of the Corporation the powers and rights which the
Corporation may have as the holder of stock or other securities in any other
corporation to vote or to consent in respect of such stock or other securities,
and the President may instruct the person or persons so appointed as to the
manner of exercising such powers and rights of the Corporation and be executed
in the name and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies, powers of attorneys or other written
instruments as he may deem necessary in order that the Corporation may exercise
such powers and rights.
ARTICLE V
Capital Stock
Section 1. Certificate for Shares. Certificates for shares of stock of the
Corporation certifying the number and class of shares owned shall be issued to
each stockholder in such form, not inconsistent with the Articles of
Incorporation and these By-Laws, as shall be approved by the Board. The
certificates for the shares of each class shall be numbered and registered in
the order in which they are issued and shall be signed by the President and Vice
President and by the Secretary or an Assistant Secretary or a Vice President and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer. Any or all of the signatures on a certificate may be a facsimile. In
case any officer, transfer agent or registrar, who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if were such officer,
transfer agent or registrar at the date of issue. All certificates exchanged or
returned to the Corporation shall be cancelled.
Section 2. Transfer of Shares of Stock Transfer of shares shall be made
only upon the books of the Corporation by the holder, in person or by his
attorney lawfully constituted in writing, and on the surrender of the
certificate or certificates for such shares properly assigned. The Board shall
have the power to make all such rules and regulations, not inconsistent with the
Articles of Incorporation and these By-Laws, as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
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Section 3. Lost, Stolen or Destroyed Certificates. The Board, in its
discretion, may issue a new certificate of stock in place of any certificate
theretofore issued and alleged to have been lost, stolen or destroyed, any may
require the owner of any certificate of stock alleged to have been lost, stolen
or destroyed, or his legal representatives, to give the Corporation a bond in
such sum as the Board may direct, to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any certificate or the issuance of such new certificate. Proper evidence of
such loss, theft or destruction shall be procured, if required, by the Board.
The Board in its discretion may refuse to issue such new certificate, save upon
the order of some court having jurisdiction in such matter.
Section 4. Record Date In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend without a
meeting, or entitled to receive payment of any divided or other distribution or
allotment of any right, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If no record date is fixed:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the date next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held;
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed; and
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VI
Interested Directors and Officers
No contract or transaction between the Corporation and one or more
of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, of have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or
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officer is present at or participates in the meeting of the Board of committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purposes, if:
(a) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board, a committee
thereof or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
ARTICLE VII
Indemnification
Section 1. Actions, Suits or Proceedings Other than by or in the Right of
the Corporation. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against expenses, including without limitation,
expenses of investigations, judicial or administrative proceedings or appeals,
amounts paid in settlement by or on behalf of the Indemnitee, attorneys' fees
and disbursements and any expenses of establishing a right to indemnification
under this Article VII (the "Expenses"), judgments, fines and penalties actually
and reasonably incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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Section 2. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was or has agreed to become a director, officer, employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
Expenses, judgments, fines and penalties actually and reasonably incurred by him
or on his behalf in connection with the defense or settlement of such action or
suit and any appeal therefrom, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses which the
Court of Chancery of Delaware or such other court shall deem proper.
Section 3. Indemnification for Expenses of Successful Party.
Notwithstanding the other provisions of this Article VII, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Sections 1 and 2 of this Article VII, or in defense of any claim, issue or
matter therein, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 4. Determination of Right to Indemnification. Any indemnification
under Sections 1 and 2 of this Article VII (unless ordered by a court) shall be
paid by the Corporation unless a determination is made (1) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders, that
indemnification of the director, officer, employee or agent is not proper in the
circumstances because he has not met the applicable standard of conduct set
forth in Sections 1 and 2 of this Article VII.
Section 5. Advancement of Expenses. Expenses incurred by a person referred
to in Sections 1 and 2 of this Article VII in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation in advance at the
written request of a director, officer, employee or agent, if such person shall
undertake to repay such amount to the extent that it is ultimately determined
that such person was not entitled to such indemnification; provided, however,
such an undertaking shall not be secured and shall be accepted without reference
to such person's financial ability to make such repayment and shall not be
claimable against such person's spouse or children. The Board
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may, in the manner set forth above in Section 4, and upon approval of such
director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
Section 6. Procedure for Indemnification. Any indemnification under
Sections 1, 2 and 3, or advancement of Expenses under Section 5 of this Article
VII, shall be made promptly, and in any event within 45 days, upon the written
request of the director, officer, employee or agent. The right to
indemnification or advancement of Expenses as granted by this Article VII shall
be enforceable by the director, officer, employee or agent in any court of
competent jurisdiction, if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within 45 days. Such person's
Expenses incurred in connection with successfully establishing such right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advancement of Expenses under
Section 5 of this Article VII where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Sections 1 or 2 of this Article VII, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Sections 1 and 2 or this Article VII, nor the fact that there has been an actual
determination by the Corporation (including its Board, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 7. Other Rights. The indemnification and advancement of Expenses
provided by, or granted pursuant to, this Article VII shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of Expenses may be entitled under any law (common or statutory),
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding office or while employed by or acting as agent for the
Corporation.
Section 8. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him or on his behalf in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VII, provided that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the entire Board.
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Section 9. Continuation of Right to Indemnification. The indemnification
and advancement of Expenses provided by, or granted pursuant to, this Article
VII shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent, and shall
inure to the benefit of the estate, heirs, executors and administrators of such
person.
Section 10.Savings Clause. If this Article VII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee and
agent of the Corporation as to Expenses, judgments, fines and penalties with
respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article VII that shall not have been invalidated and to the full extent
permitted by applicable law.
ARTICLE VIII
Corporate Seal
The seal of the Corporation shall be circular in form and shall contain
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Nevada" inscribed thereon. The seal may be affixed to any
instrument by causing it, or a facsimile thereof, to be impressed or otherwise
reproduced thereon.
ARTICLE IX
Waiver
Whenever any notice whatsoever is required to be given by law, or under
the provisions of the Articles of Incorporation or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
ARTICLE X
Checks, Notes, Drafts, Etc.
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Checks, notes, drafts, acceptances, bills of exchange and other
orders or obligations for the payment of money shall be signed by such officer
or officers or person or persons as the Board shall from time to time determine.
ARTICLE XI
Amendments
Except as may be provided in the Articles of Incorporation, these
By-Laws or any of them may be amended or repealed, and new By-Laws may be
adopted (a) by the stockholders, at any annual meeting, or at any special
meeting called for that purpose, by the vote of a majority of the issued and
outstanding stock entitled to vote thereat, or (b) by the Board at any duly
convened meeting by a majority vote of the whole Board, but any such action of
the Board may by amended or repealed by the stockholders at any annual meeting
or any special meeting called for that purpose; provided, however, that no
amendment may be made which will conflict with any provision of law or of the
Articles of Incorporation.
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BY-LAW AMENDMENT ADOPTED APRIL 22, 1998
1. The Restated By-laws shall be amended to add the following Article XII
to the end thereof:
Article XII
Stockholder Agreement
In the event of a conflict between these By-laws and the Third Amended and
Restated Stockholders' Agreement of the Corporation (the "Stockholders'
Agreement"), the provisions of the Stockholders' Agreement shall govern.
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SECOND BY-LAW AMENDMENT ADOPTED DECEMBER 29, 1998
The Restated By-laws of the Corporation, as amended by By-law Amendment
adopted April 22, 1998, is further amended as follows:
1. The first sentence of Section 2 of Article II is hereby amended and
restated to read in its entirety as follows:
A special meeting of the stockholders of the Corporation may be
called by the President or the Chairman and shall be called by the
President, the Secretary or an Assistant Secretary when directed to
do so by resolution of the Board at a duly convened meeting of the
Board, or at the request in writing of a majority of the Board.
2. Section 10 of Article II is hereby amended by deleting the last
sentence thereof in its entirety.
3. Section 2 of Article IV is hereby amended by deleting all references to
the "Court of Chancery of Delaware" and substituting in place thereof the
"courts of the State of Nevada".
4. The third sentence of Section 2 of Article IV is hereby amended by
deleting the words "and the transactions set forth in Section 6 of this Article
II".
5. The fourth sentence of Section 4 of Article III is hereby amended by
adding between the words "by" and "the" in the second line of such sentence, the
words "the Chairman or"
6. Article XII is hereby amended and restated to read in its entirety as
follows:
Article XII
Stockholders' Agreement
In the event of a conflict between these By-laws and the Fourth Amended
and Restated Stockholders' Agreement of the Corporation (the "Stockholders'
Agreement"), the provisions of the Stockholders' Agreement shall govern.
- --------------------------------------------------------------------------------
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
SCHEDULE 2 List of Certain Officers
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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.
<PAGE>
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) 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
RSI Beneficial Holders to provide products and services under the terms of the
Intercompany Agreement, or (ii) any Non-Competing Party to own not more than
4.9% of the outstanding shares of a corporation or other entity whose shares or
other equity or debt interests are listed on any United States national or
regional securities exchange or reported by NASDAQ or any successor thereto. In
the event of a final determination by a court of competent jurisdiction that any
Non-Competing Party has breached the covenants in this Section 9.17, then,
except as set forth in Section 9.17(d) below, the Company shall be entitled to
all available remedies at law and in equity for such breach. It is acknowledged
and agreed that no provision of this Section 9.17 shall require any
Non-Competing Party to divest or refrain from conducting any investment or
business (a "Pre-Existing Business") which it acquired or developed prior to the
time that, as a result of developments of or modifications to the Prohibited
Business, such Pre-Existing Business taken as a whole Competes with the
Prohibited Business. However, the restrictions set forth in Section 9.17 shall
apply to such Pre-Existing Business if, as a result of developments of or
modifications to such Pre-Existing Business, such Pre-Existing Business taken as
a whole then Competes with the Prohibited Business.
(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)
69
<PAGE>
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
70
<PAGE>
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
71
<PAGE>
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]
[SIGNATURE 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
[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
<PAGE>
Page 3
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
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>
Page 4
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
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Page 5
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
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Page 6
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
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<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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<PAGE>
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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<PAGE>
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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<PAGE>
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
-5-
<PAGE>
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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<PAGE>
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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<PAGE>
(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
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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"):
Scheduled A Term Loan Repayment Date Amount
------------------------------------ ------
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
(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"):
Scheduled B Term Loan Repayment Date Amount
------------------------------------ ------
September 30, 1999 $125,000
December 31, 1999 $125,000
March 31, 2000 $125,000
June 30, 2000 $125,000
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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
(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"):
Scheduled Acquisition Loan Repayment Dates Percentage
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%
(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:
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(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
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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:
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(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
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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.
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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
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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
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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
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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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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:
Fiscal Quarter Ended Ratio
- -------------------- -----
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
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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
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:
Fiscal Quarter Ended Ratio
- -------------------- -----
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
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September 30, 2005 0.60:1.00
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:
Fiscal Quarter Ended Amount
- -------------------- ------
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
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Fiscal Quarter Ended Amount
- -------------------- ------
September 30, 2005 17,720,000
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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(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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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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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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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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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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"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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"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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"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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<PAGE>
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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<PAGE>
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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<PAGE>
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)
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<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>
EXECUTION COPY
EMPLOYMENT AGREEMENT
This AGREEMENT is made this 15th day of November, 1996 (this "Agreement"), by
and between ALLIANCE National Incorporated, a Nevada corporation (the "Company")
and David W. Beale (the "Employee").
WITNESSETH:
WHEREAS, the Employee has agreed to be employed by the Company as its President
and Chief Executive Officer; and
WHEREAS, the Employee will serve on the Company's Board of Directors; and
WHEREAS, it is in the Company's best interest to obtain the services of
Employee; and
WHEREAS, the Company and the Employee have previously engaged in negotiations
regarding the terms and conditions of their future employment relationship by
way of this Agreement; and
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants and
conditions set forth herein, and the performance of each, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. Employment. The Company hereby authorizes and agrees to employ the
Employee and confirms said authority by the Senior Vice President and
Chief Financial Officer executing this Agreement on behalf of the Company,
and the Employee hereby accepts said employment upon the terms and
conditions hereinafter set forth.
2. Positions and Titles. The Employee shall have the title of President and
Chief Executive Officer. The Employee shall perform such duties as
normally associated with the position of President and Chief Executive
Officer of the Company and shall further have the usual authority
associated with said position and office. In addition, it is further
agreed that:
a. The Employee shall have no less authority, position and title
granted the Employee pursuant to this Paragraph;
b. The Employee shall perform such other duties as the Board from time
to time may determine is appropriate and agreeable to the Employee.
The Employee shall be responsible to the Board of Directors of the
Company.
3. Term of Employment. The Company hereby employs the Employee to perform the
duties described herein, and the Employee hereby accepts employment with
the Company, for a term beginning on the date hereof and continuing for a
period of approximately five and one-half years ending on June 30, 2002
(the "Employment Term"), at which time this Agreement shall terminate
unless otherwise agreed to by the parties in writing. The Employee agrees
to remain in the employ of the Company during
1
<PAGE>
the period of time this Agreement is in effect unless terminated pursuant
to either Paragraph 7, 8 or 10 herein.
In the event employment is terminated pursuant to this Paragraph 3, which
shall not be deemed a "Termination" under Paragraph 7 of this Agreement,
then the Employee shall continue to receive compensation for the remainder
of the Employment Term; provided, however, that the Employee continues to
perform his duties and otherwise fully complies with the terms of this
Agreement.
4. Performance of Duties. During the period of the Employee's employment, he
shall perform faithfully the duties required of him. The foregoing,
however, shall not be construed as preventing the Employee from investing
his assets in such manner as will not require any significant Services on
the part of the Employee in the operation of the affairs of the entitles
in which such investments are made nor will the foregoing prevent the
Employee from serving on the Board of Directors of other corporations,
providing such does not interfere with the performance of his duties for
the Company, create any actual or potential conflict of interest with
respect to the Employee's loyalties, obligations or duties to the Company,
violate any of the provisions of this Agreement, or involve a competitor
of the Company or its subsidiaries.
5. Compensation.
a. Salary. The Company shall pay to the Employee as compensation for
his services hereunder an annual salary of Two Hundred Fifty
Thousand Dollars ($250,000.00), payable pursuant to the Company's
salary payment practices. Employee's salary shall be increased for
each fiscal year beginning after June 30, 1997, in an amount equal
to the actual increase in the Consumer Price Index for New York
City.
b. Performance Bonus. In addition to the salary set forth in Paragraph
5(a) of this Agreement, the Employee shall be eligible to receive a
performance bonus ("Bonus") determinable as set forth on Appendix I
attached hereto and based on the Company, under the leadership of
the Employee, achieving the performance levels set forth in Appendix
I. Any Bonus to which the Employee is entitled with respect to any
fiscal year shall be paid within thirty (30) days after the issuance
by the Company of its audited financial statements for such fiscal
year.
c. Incentive Plan. The Company shall create a long-term incentive plan
fore the Employee ("Incentive Plan"). The employee shall be eligible
for vesting under this Incentive Plan ("Vesting Test"), if the
Company, under the leadership of the Employee, achieves an average
of 100% or more of its EPS Target for three consecutive fiscal years
(a "Three-Year Cycle"). Subject to the Vesting Test set forth in
this Paragraph 5(c), the Employee shall be eligible for the
following deferred compensation under the Incentive Plan.
(i) For each fiscal year of a Three-Year Cycle, beginning with
fiscal year 1997, an amount ("Annual Set Aside Amount") equal
to 50% of the
2
<PAGE>
Employee's Salary, as set forth in Paragraph 5(a) hereof,
shall be deferred for the Employee's benefit under the
Company's Incentive Plan which Annual Set Aside Amount shall
accrue interest at Prime plus 1% per annum. Such Annual Set
Aside Amount shall be set aside and deferred even if the
Company achieves less than 100% of its EPS Target in any
single fiscal year; subject, however to the Vesting Test.
(ii) If the Vesting Test is met for a Three Year Cycle, the
deferred Annual Set Aside Amounts with the interest accrued
thereon shall be payable on a rolling three year basis.
(iii) If the Vesting Test is not met for a Three Year Cycle, all
Annual Set Aside Amounts shall not vest and the Employee shall
not be entitled to any payment under this Incentive Plan for
such Three Year Cycle.
d. Options.
The Company shall grant the Employee options under the Company's
1996 Option Plan to purchase not less than 600,000 shares of the
Company's common stock.
6. Additional Benefits. In addition to the salary specified in Paragraph 5(a)
above, Company shall provide Employee comparable additional benefits as
are provided to any Executive of the Company; provided, however, the said
additional benefits shall not be less favorable to Employee than as more
particularly described in Subparagraphs (a) through (e) of this Paragraph
6. The term "comparable" as used in this Paragraph 6 shall mean by using
the same factors, formulate and considerations, as any being utilized in
determining the benefits granted to the aforesaid officers.
a. Vacations, Holidays and Sick Leave. The Employee shall be entitled
to vacations, holidays and sick leave to the same extent as other
executives of Company; provided, however, Employee shall receive,
minimally, three (3) weeks paid vacation annually.
b. Business Expenses. The Company will reimburse the Employee in full
for all expenses incurred by the Employee in the pursuit of the
Company's business during the period of this Agreement. The Employee
shall be required to submit the usual and customary expense reports
and vouchers in support of the expenses incurred on behalf of the
Company as required by general practices and procedures of the
Company.
c. Hospital, Medical and Dental Reimbursement Plan. The Company shall
provide the Employee major medical and dental benefits for the
Employee and his immediate family. Such hospital, medical and dental
benefits shall be no less favorable to Employee than those benefits
enjoyed by the other Executives of Company.
3
<PAGE>
d. Insurance.
(1) During the term of this Agreement, the Company shall obtain
and pay the premium on a term life insurance policy on the
Employee in the highest face amount allowed by law. The
Employee shall be entitled to designate the beneficiary under
such policy of insurance. The Company agrees that it shall:
(a) Pay the premium on such policy and otherwise maintain it
in full force and effect.
(b) Not borrow on the policy or otherwise encumber it.
(c) Regularly exhibit to the Employee, if requested, receipt
for premium payments as well as to furnish the Employee
with proof that the policy is in full force.
(2) The Company will provide the Employee with long-term
disability insurance with a value consistent with the
Employee's annual compensation and Bonus hereunder
("Disability Plan").
e. The Company shall provide to the Employee during the term of this
Agreement a motor vehicle for business use and shall pay for all
costs, expenses (including insurance, maintenance and like charges)
up to $1,300.00 per month in connection with such use.
7. Termination. This Agreement may be terminated pursuant to the following:
a. Termination by Employee. The Employee may terminate this Agreement
upon fourteen (14) days advance written notice to the Company if the
Company is fifteen (15) days or more delinquent in payments under
Paragraph 5 herein.
b. Termination by Company. The Company may terminate this Agreement
upon fourteen (14) days advance written notice to the Employee;
provided, however, that the Company's decision to terminate the
Employee was approved by a majority of the Company's Board of
Directors. Upon termination of the Employee by the Company under
this Paragraph 7(b), the Company shall pay the Employee in a lump
sum an amount equal to the Employee's pro rata salary, as set out in
Paragraph 5(a) hereof, that would have otherwise been due for the
remainder of the Employment Term or two (2) years, whichever is
greater. In addition, the Company shall pay the Employee any Bonus
and Incentive Plan payment(s) accrued for the preceding fiscal year
but not yet paid or set aside and the pro rata portion of any Bonus
and Incentive Plan payment for the year in which termination
occurred to the extent that the performance goals are met.
c. Termination for Cause: Resignation Without Good Reason. If, before
the expiration of the Employment Term, the company terminates the
Employee's employment for Cause, as defined in Paragraph 7(c)
hereof, or if the Employee
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<PAGE>
resigns from his employment hereunder, other than for the reasons
set out in Paragraphs 7(a) and 8 hereof, the Employee shall be
entitled to no compensation in any form after the date of his
termination.
(1) The Company may terminate the Employment Term 10 days after
written notice to the Employee for "Cause," which under this
Agreement shall mean: (i) the Employee's material breach of
this Agreement, which breach is not cured within10 days of
receipt by the Employee of written notice for the Company
specifying the breach; (ii) the Employee's gross negligence in
the performance of his duties hereunder, intentional
nonperformance or mis-performance of such duties, or refusal
to abide by or comply with the directives of the Board, or the
Company's policies and procedures, which actions continue for
a period of at least 10 days after receipt by the Employee of
written notice of the need to cure or cease; (iii) the
Employee's willful dishonesty, fraud, or misconduct with
respect to the business or affairs of the Company, and that in
the judgment of a majority of the Company's Board materially
and adversely affects the operations or reputation of the
Company; (iv) the Employee's conviction of a felony or other
crime involving moral turpitude; (v) the Employee's abuse of
alcohol or drugs (legal or illegal) that, in the Company's
judgment, materially impairs Employee's ability to perform his
duties hereunder; or (vi) the declaration by court order of
the Employee's unsound mind. In the event of a termination for
Cause, as enumerated above, the Employee shall have no right
to any severance compensation.
d. If, before the expiration of the Employment Term, the Employee
resigns his employment for the reasons set forth in Paragraphs 7(a)
or 8, the Employee dies or becomes disabled, or the Company
terminates the Employee's employment other than for Cause, then, in
any such event, the Employee shall have the right to put to the
Company all of his Common Stock and Common Stock Equivalents (as
such terms are defined in the Stockholders' Agreement), including
without limitation, any non-vested options granted to the Employee
under the Company's 1996 Option Plan which would vest pursuant to
the terms of such Plan within two years of such termination event
shall immediately vest, and become exercisable for a period of up to
one year after the date of termination and the Company shall be
obligated to purchase such Common Stock, Common Stock Equivalents
and vested options, in accordance with the provisions of Section 4.7
of the Stockholders' Agreement dated the date hereof among the
Company, the Employee and the Cahill Parties (as defined herein).
8. Change in Management. If there is substantial change in the management of
the Company, wherein any Board of Directors that may be elected becomes
opposed to, or acts contrary to, the policy of the Board of Directors
elected after the consummation of the current transaction, and as a result
thereof, Employee, in his sole discretion, finds it difficult for him to
work harmoniously and effectively with any such Board of Directors of the
Company, or the Board of Directors of the Company shall determine (that
Employee shall not be the President and Chief Executive Officer of the
Company, or
5
<PAGE>
Employee shall not be elected as a member of the Board of Directors of the
Company), then, in any such events, Employee shall have the absolute right
and option to terminate this Agreement upon giving the Company sixty (60)
days written notice of his intention to do so. Upon such termination, the
Employee shall be entitled to a lump sum payment of an amount equal to his
annual salary as set out in Paragraph 5(a) of this Agreement for the
remainder of his Employment Term or two years, whichever his greater.
9. Indemnification. The Company agrees to indemnify and defend Employee (and
his heirs, executors and administrators) from all claims, liabilities,
judgments, settlements, costs and expenses, including all attorney's fees,
imposed upon or incurred by him on an as incurred basis in connection will
or resulting from any action, suit, proceeding, or claim to which he is or
may be made a party by reason of his being or having been an employee or
officer or Director of the Company or the company's subsidiaries or
affiliates or by reason of his being or have been a Trustee of the
Company's 401(k) plan (whether or not an employee or officer or Director
or Trustee at the time such costs or expenses are incurred by or imposed
upon him).
Such right of indemnification shall not be deemed exclusive of any rights
to which he may be entitled otherwise.
10. Death or Disability of Employee. In the event of the Employee's death or
permanent disability during the term of this Agreement, the Employment
Term shall be terminated as of the date of death or the date of
determination of the Employee's permanent disability in accordance with
the Disability Plan the in effect, as the case may be, except as to the
following:
a. The salary being paid to the Employee by the Company as of the date
of death or permanent disability shall continue to be paid to
Employee's estate or disabled Employee for a period of three (3)
months after the date of death or, in the case of disability, until
the date of commencement of long-term disability payments under the
Disability Plan as then in effect.
b. The Company shall cooperate and take all necessary steps to
effectuate the timely payment of the insurance proceeds established
in Paragraph 6(d) of this Agreement.
c. All accrued and unpaid Bonuses and Incentive Plan payments and
benefits under this Agreement, whatsoever in nature, shall
immediately vest and be payable to the Employee's estate or the
disabled Employee as applicable.
d. All stock options and other Common Stock Equivalents shall vest
immediately as set forth in Paragraph 7(d) and shall remain
exercisable for at least one year from the date of death or date of
termination due to disability.
11. Assignment of Agreement. The obligations of the Company under this
Agreement shall be binding upon the successors and assign of the Company.
In the event this contract is assigned, Employee shall be entitled to
enforce the provisions of this Agreement or, in his sole discretion,
terminate this Agreement upon the terms provided in Paragraph 8 hereof.
6
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For purposes of this Agreement, the term "successors" and "assigns" shall
include any person, firm, corporation, or other entity which at any time,
whether by merger, reorganization, purchase, or otherwise, shall acquire
substantially all or control of the assets, stock, or business of the
Company. No assignment shall release the Company from its liability under
this Agreement.
12. Amendments. This Agreement cannot be changed or terminated orally and no
waiver of compliance with any provision or condition hereof shall be
effective unless evidenced by an instrument in writing duly executed by
the parties hereto and sought to be charged by such waiver.
13. Writing. This Agreement sets forth the entire understanding of the parties
with respect to the employment of the Employee by the Company and
supersedes any and all prior agreements, arrangements and understandings
relating to the subject matter hereof, including that certain Employment
Agreement dated April 1, 1994 by and between the Employee and Executive
Office Group, Inc. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
14. Waiver. The waiver by the Company or the Employee of any breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach of this Agreement.
15. General Provision.
a. Should the parties disagree as to the meaning or effect of the
provisions of this Agreement, they shall attempt to negotiate a
settlement of their differences. If, however, the negotiations are
unsuccessful, either party may seek the aid of a court of competent
jurisdiction in the City, County and State of New York, to either
settle disputes arising as to the meaning or intent of this
Agreement or to declare the parties rights to enforce this
Agreement. In that event, the court shall deny attorneys' fees and
costs to the party not substantially prevailing and award the same
to the party who substantially prevails. Notwithstanding the
foregoing, any controversy or claims arising out of, or elating to
this Agreement or the breach thereof, shall at the option of either
party be settled by arbitration in the New York area in accordance
with the rules of commercial arbitration then obtaining of the
American Arbitration Association, and judgment upon the award
rendered by be entered in any court having jurisdiction thereof.
b. In the event that any term, provision, or Paragraph of this
Agreement is declared illegal, void or unenforceable, the same shall
not effect or impair the other terms, provisions or Paragraphs of
this Agreement. Covenants contained in this Agreements shall be
dependent. The doctrine of severability shall be applied. The
parties do not intend by this Statement to imply the illegality,
voidness or unenforceability of any of the terms, provisions or
Paragraphs of this Agreement.
16. Captions. The captions for each Paragraph are not part of this Agreement,
but are for identification purposes.
7
<PAGE>
17. Governing Law. This Agreement is made under and shall be construed
pursuant to the laws of the State of New York.
18. Notices. Any notices, writing, report or other document required or
permitted hereunder shall be in writing and shall be given by prepaid
registered or certified mail, with return receipt requested, addressed as
follows:
a. If to the Company:
ALLIANCE National Incorporated
122 East 42nd Street
Suite 2707
New York, NY 10168
Attn.: Alan Langer, Chief Financial Officer
With a Copy to:
Rosen & Reade, LLP
757 Third Avenue
6th Floor
New York, NY 10017
Attn.: Kevin P. Groarke, Esq.
b. If to the Employee:
David W. Beale
19 Buckingham Road
Merrick, NY 11566-3713
The date of any such notice and of service thereof shall be deemed to be the
date of dispatch. Either party may change its address for purposes of notice by
giving notice in accordance with the provisions of this Paragraph.
19. Restriction on Competition.
a. During the Employment Term, and for a period of two years
thereafter, the Employee shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any other person,
company, partnership, corporation, business, group, or other entity
(each, a "Person"):
(1) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant, advisor, or
sales representative, in any business or entity that is
currently engaged in owning, operating and/or managing
executive office suites and providing related business support
services, including secretarial, telecommunications, word
processing, printing and copying, in direct competition with
the Company, within 100 miles of any location where the
Company conducts business (the "Territory");
8
<PAGE>
(2) call upon any Person who is, at that time, within the
Territory, an employee of the Company for the purpose or with
the intent of enticing such employee away from or out of the
employ of the Company;
(3) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the
Company within the Territory for the purpose of soliciting or
selling products or services in direct competition with the
Company within the Territory; or
(4) on Employee's own behalf or on the behalf of any competitor,
call upon any Person for the purpose of making an acquisition
proposal who or that, during Employee's employment by the
Company was either called upon by the Company as a prospective
acquisition candidate or was the subject of an acquisition
analysis conducted by the Company.
b. The foregoing covenants shall not be deemed to prohibit Employee
from acquiring as an investment not more than one percent of the
capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation
system of a registered securities association.
c. It is further agreed that, in the event that Employee shall cease to
be employed by the Company and enters into a business or pursues
other activities that, at such time, are not in competition with the
Company, Employee shall not be chargeable with a violation of this
Paragraph 19 if the Company subsequently enters the same (or in
similar) competitive business or activity or commences competitive
operations within 100 miles of the Employee's new business or
activities. In addition, if Employee has not actual knowledge that
his actions violate the terms of this Paragraph 19, Employee shall
not be deemed to have breached the restrictive covenants contained
herein if, promptly after being notified by the Company of such
breach. Employee ceases the prohibited actions.
d. The covenants in this Paragraph 19 are severable and separate, and
the unenforceability of any specific covenants shall not affect the
provisions of any other covenant. If any provision of this Paragraph
19 relating to the time period or geographic area of the restrictive
covenants shall be declared by a court of competent jurisdiction to
exceed the maximum time period or geographic area, as applicable,
that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall
become, the maximum time period or largest geographic area that such
court deems reasonable and enforceable and this Agreement shall
automatically be considered to have been amended and revised to
reflect such determination.
e. All of the covenants in this Paragraph 19 shall be construed as an
agreement independent of any other provision in this Agreement, and
the existence of any claim or cause of action of Employee against
the Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of
such covenants; provided, that upon the failure of the
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<PAGE>
Company to make such payments required under this Agreement, the
Employee may, upon 30 days' prior written notice to the Company,
waive his right to receive any additional compensation pursuant to
this Agreement and engage in any activity prohibited by the
covenants of this Paragraph 19. It is specifically agreed that the
period of two years stated at the beginning of this Paragraph 19,
during which the agreements and covenants of Employee made in this
Paragraph 19 shall be effective, shall be computed by excluding from
such computation any time during which Employee is in violation of
any provision of this Paragraph 19.
f. If the time period specified by this Paragraph 19 shall be reduced
by law or court decision, then, notwithstanding the provisions of
Paragraph 7 above, following termination of the Employee's
employment with the Company, the Employee shall be entitled to
receive from the Company his base salary at the rate then in effect
solely for the longer of (i) the time period during which the
provisions of this Paragraph 19 shall be enforceable under the
provisions of such applicable law, or (ii) the time period during
which Employee is not engaging in any competitive activity, but in
no event longer than the applicable period provided in Paragraph 7
above. If Employee is subject to a restriction on competitive
activity as a party to that certain Stockholders' Agreement, dated
as of November 15,1996, by and among the stockholders identified
therein (the "Stockholders' Agreement"), then Employee shall abide
by, and in all cases be subject to, the restrictive covenants
(whether in this Paragraph 19 or in the Stockholders' Agreement)
that, in the aggregate, impose restrictions on Employee for the
longest duration and the broadest geographic scope (taking into
account the effect of any applicable court decisions limiting the
scope or duration of such restrictions), it being agreed that all
such restrictive covenants are supported by separate and distinct
consideration. This Paragraph 19(g) shall be construed and
interpreted in light of the duration of the applicable restrictive
covenants.
g. Employee has carefully read and considered the provisions of this
Paragraph 19 and, having done so, agrees that the restrictive
covenants in this Paragraph 19 impose a fair and reasonable
restraint on Employee and are reasonably required to protect the
interests of the Company, and its officers, directors, employees,
and stockholders. It is further agreed that the Company and Employee
intend that such covenants be construed and enforced in accordance
with the changing activities, business, and locations of the Company
throughout the term of these covenants.
20. Confidential Information. Employee hereby agrees to hold in strict
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic,
sales, and/or other types of proprietary business information relating to
the Company (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to
which Employee has, or is given (or has had or been given), access as a
result of his employment by the Company. It is agreed that the
Confidential Information is confidential and proprietary to the Company
because such Confidential Information encompasses technical know-how,
trade secrets, or technical, financial, organizational,
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<PAGE>
sales, or other valuable aspects of the Company's business and trade,
including, without limitation, technologies, products, processes, plans,
clients, personnel, operations, and business activities. This restriction
shall not apply to any Confidential Information that (a) becomes known
generally to the public through no fault of the Employee; (b) is required
by applicable law, legal process, or any order or mandate of a court or
other governmental authority to be disclosed; or (c) is reasonably
believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit or other legal or
administrative action brought against Employee; provided, that in the case
of clauses (b) or (c), Employee shall give the Company reasonable advance
written notice of the Confidential Information intended to be disclosed
and the reasons and circumstances surrounding such disclosure, in order to
permit the Company to seek a protective order or other appropriate request
for confidential treatment of the applicable Confidential Information.
21. Inventions. Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and
valuable discoveries, whether patentable or not, that are conceived or
made by Employee, solely or jointly with another, during the period of
employment and that are directly related to the business or activities of
the Company and that Employee conceives as a result of his employment by
the Company, regardless of whether or not such ideas, inventions, or
improvements qualify as "works for hire." Employee hereby assigns and
agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and
all applications, assignments, or other instruments that the Company shall
deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect the Company's interest
therein.
22. Return of Company Property. Promptly upon termination of Employee's
employment by the Company, or by the Employee, for any reason or no
reason, Employee or Employee's personal representative shall return to the
Company (a) all Confidential Information; (b) all other records, designs,
patents, business plans, financial statements, manuals, memoranda, lists,
correspondence, reports, records, charts, advertising materials, and other
data or property delivered to or compiled by Employee by or on behalf of
the Company, or its representatives, vendors, or customers that pertain to
the business of the Company, whether in paper, electronic, or other form;
and (c) all keys, credit cards, vehicles, and other property of the
Company. Employee shall not retain or cause to be retained any copies of
the foregoing. Employee hereby agrees that all of the foregoing shall be
and remain the property of the Company, as the case may be, and be subject
at all times to their discretion and control.
23. Past Due Payment. Company agrees that any payments due to Employee
hereunder which are not paid within fourteen (14) days of their due date,
shall accrue interest at the greater of fourteen (14) percent per annum or
prime plus five (5) percent.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
date and year first above written.
COMPANY
Witness: Alliance National Incorporated
/s/ Leslie Flynn By: /s/ Alan Langer
- ----------------------------------- ---------------------------------------
Leslie Flynn Name: Alan Langer
Title: Chief Financial Officer
Witness: EMPLOYEE:
/s/ Leslie Flynn By: /s/ David W. Beale
- ---------------------------------- ---------------------------------------
Leslie Flynn David W. Beale
12
<PAGE>
APPENDIX I
GUIDELINES FOR PERFORMANCE BONUS DETERMINATION
Definitions:
"EPS" = For each fiscal year, the after-tax net income
divided by the weighted averaged of the fully
diluted shares. In determining net income, the
following expenses shall not be included: (i)
extraordinary gain or loss on the sale or
disposition of assets, (ii) the amount of any
performance bonus and incentive plan bonus payable
to the Employee and any other executive officer of
the Company, (iii) any costs or charge
attributable to the issuance or exercise of any
common stock, options or warrants, and (iv) any
changes in the accounting policies applicable for
the fiscal year as approved by the Board.
"Core Business" = The businesses and assets of the Company on the
first day of each fiscal year.
"EPS Target" = For each fiscal year, the forecasts of EPS (set
annually by the Company's Board of Directors) for:
(1) Core Business; and (2) Acquired Business
applying assumptions as to when such Acquisition
occur throughout each fiscal year.
"Pro Forma Target" = For each fiscal year, the forecast of EPS (set
annually by the Company's Board of Directors) for:
(1) Core Business; and (2) Acquired Businesses
assuming such Acquisitions occurred as of the
first day of the fiscal year.
"Actual EPS Results" = For each fiscal year, (1) actual EPS of Core
Businesses and (2) actual EPS for Acquisitions
whenever they are consummated during the fiscal
year.
"Pro Forma EPS Results" = For each fiscal year (1) the actual EPS for Core
Business and (2) actual EPS for Acquisitions
annualized to give effect to such Acquisitions
having occurred as of the first day of the fiscal
year.
"Bonus Factor" = For fiscal year 1997 (7/1/96 - 6/30/97), $250,000.
For fiscal year 1998 (7/1/97 - 6/30/98), $350,000.
For fiscal year 1999 (7/1/98 - 6/30/99), $500,000.
For each subsequent fiscal year thereafter, the
Bonus Factor shall be set by a majority of the
Company's Board of Directors.
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Determination of Bonus
Employee's Bonus for each fiscal year shall be determined by completing
the two-step calculations set forth below using the formula applicable in each
of Step 1 and Step 2.
- --------------------------------------------------------------------------------
Step 1
Actual EPS Results 80% or Actual EPS Results 79% - Actual EPS Results below
more of EPS Target 60% of EPS Target 60% of EPS Target means
no Step 1 bonus shall be
paid.
Achieved Percentage x Achieved Percentage x
(66.6% of Bonus Factor) (66.6% of Bonus Factor) /
2
- --------------------------------------------------------------------------------
Step 2
Pro Forma EPS Results Pro Forma EPS Results 79% Pro Forma EPS Results
80% or more of Pro Forma - 60% of Pro Forma Target below 60% means no Step
Target 2 bonus shall be paid.
Achieved Percentage x Achieved Percentage x
(33.4% of Bonus Factor) (33.4% of Bonus Factor) /
2
- --------------------------------------------------------------------------------
14
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of October 29, 1999 and retroactively effective to
January 1, 1999, between VANTAS Incorporated, a Nevada corporation (the
"Company"), and Alan M. Langer ("Executive").
In consideration of the mutual covenants and conditions provided herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Executive agree as follows:
1. Term of Employment. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, for the period commencing as of
January 1, 1999 and ending on December 31, 2001 (the "Term"), on the terms and
conditions set forth in this Agreement. Executive and the Company explicitly
acknowledge and agree that such employment is terminable prior to the end of the
Term with notice given by either party in accordance with the provisions of
Paragraph 6. The Term of this Agreement shall automatically be extended for
successive six month periods thereafter (ending on a June 30 or December 31, as
the case may be) unless at least six months prior to the commencement date of
any six month extension period, either party shall have given notice to the
other party that the Term of this Agreement will not be extended for such
extension period.
2. Duties of Executive.
(a) Title; Position. Executive is hereby employed as Executive Vice
President and Chief Financial Officer, reporting to the Chief Executive Officer
and as the Board of Directors may direct. Executive will render services to the
Company in this capacity, and in such other suitable and comparable executive
and administrative capacities normally attendant to such responsibilities and as
the Company may reasonably assign to him from time to time.
(b) No Other Employment. Executive shall devote his entire business
time, attention and energies to the business of the Company and shall diligently
and faithfully serve the Company in such capacity during the term of this
Agreement, provided, that this provision shall not prevent Executive from
serving on civic and charitable boards or managing his and his immediate
family's investments, in each case, however, subject to the Company's policies
and only to the extent that such activities do not interfere with Executive's
performance of his duties under this Agreement.
3. Annual Payment. The Company shall pay to Executive (i) a fixed salary
during the Term at an annual rate of $170,000 per year (the "Annual Salary"),
and (ii) in addition to the Annual Payment, a fixed payment at an annual rate of
$30,000 (the "Covenant Payment" and, together with the Annual Salary, the
"Annual Payment") as separate consideration for the Executive's covenants and
agreements contained in Paragraph 7. Each of the Annual Salary and the Covenant
Payment (i) shall be increased effective January 1, 2000, over the Annual Salary
<PAGE>
and the Covenant Payment, respectively, in effect for 1999, by the percentage
increase from the Consumer Price Index (New York-Northern New Jersey-Long
Island, NY-NJ-CT-PA; All Items; 1982-84=100; NSA) (the "CPI") for November 1998
to the CPI for November 1999, and (ii) shall be increased effective January 1,
2001, over the Annual Salary and the Covenant Payment, respectively, in effect
for 2000, by the percentage increase from the CPI for November 1999 to the CPI
for November 2000. The Annual Salary and the Covenant Payment shall be increased
on a similar basis (effective on January 1) for any period during which the Term
may be extended pursuant to Paragraph 1. The Annual Payments shall be payable in
such installments as is customary for executives of the Company.
4. Performance Bonus. Executive shall be eligible to receive a performance
bonus (the "Performance Bonus") for each calendar year during the Term with a
target amount of $150,000. The target amount of the Performance Bonus shall be
increased annually based on the CPI in the same manner as the Annual Salary and
the Covenant Payment. The Performance Bonus shall be determined and paid as
follows:
(a) With respect to calendar year 1999, the Performance Bonus shall
be determined as follows:
(i) $75,000 of the Performance Bonus for 1999 (the "EBITDA
Component") will be based upon the Company, on a consolidated basis, attaining
certain net income before interest, taxes, depreciation and amortization
("EBITDA") objectives for the 1999 calendar year. The Company's forecast for
EBITDA for 1999, as of the effective date of this Agreement, was $34,724,000
("Budgeted EBITDA"). The actual EBITDA of the Company for 1999 ("Actual EBITDA")
will be determined from the Company's audited financial statements. The
percentage ratio between Actual EBITDA and Budgeted EBITDA (the "Achieved EBITDA
Percentage") will be calculated (if the Achieved EBITDA Percentage would be more
than 150% as so calculated, then for purposes hereof the Achieved EBITDA
Percentage shall be deemed to be 150%). The EBITDA Component of the Performance
Bonus will then be determined as follows: (A) if the Achieved EBITDA Percentage
is 80% or more, the EBITDA Component will be equal to the Achieved EBITDA
Percentage multiplied by $75,000; (B) if the Achieved EBITDA Percentage is equal
to or greater than 60% but less than 80%, the EBITDA Component will be equal to
the Achieved EBITDA Percentage multiplied by $75,000 and divided by 2; and (C)
if the Achieved EBITDA Percentage is less than 60%, the EBITDA Component will be
equal to zero.
(ii) $75,000 of the Performance Bonus will be qualitative and
based on an evaluation by the Company's CEO of Executive's performance during
the year, with the actual amount of this component of the Performance Bonus
determined by the CEO with the approval of the Company's Board of Directors (the
"Board").
(b) With respect to calendar years 2000 and 2001, and during any
period for which the Term may be extended pursuant to Paragraph 1, the
Performance Bonus will be determined using the same formulas or evaluation
methods, as are used in determining
2
<PAGE>
performance bonuses for such years for other senior executives of the Company
who do not have written employment contracts, provided that the allocation
between objective measures (tied to the Company's financial performance) and
subjective factors (tied to Executive's individual performance) may differ from
the allocation used for such other senior executives, and shall be determined by
the CEO with the approval of the Board. The portion of the Performance Bonus
based on such subjective factors (as well as the portion of the Performance
Bonus for 1999 determined pursuant to Paragraph 4(a)(ii) above) is referred to
herein as the "Subjective Component".
(c) The Performance Bonus will be paid within 30 days after the
issuance of the Company's audited financial statements for the applicable year.
5. Car Allowance; Benefits; Expenses.
(a) The Company shall pay to Executive an automobile allowance of
$1,250.00 per month (the "Car Allowance"), to be applied by Executive to the
expenses of leasing and/or operation of an automobile selected by Executive. The
Car Allowance shall represent taxable compensation to Executive, except to the
extent that Executive provides to the Company documentation which the Company
deems sufficient to establish the deductibility of such expenses for federal
income tax purposes.
(b) Executive shall be entitled to paid vacation each calendar year
in accordance with the Company's written policy. Executive shall be entitled to
participate in employee benefit plans, policies and programs, including health,
disability and life insurance plans, on the same terms and conditions made
available to other senior executives of the Company (except that the Company
shall pay the premiums for health insurance coverage for Executive's immediate
family).
(c) The Company shall maintain during the Term a policy or policies
of term life insurance in an aggregate face amount of $4,000,000 (which amount
shall include the face amount of any life insurance made available to the
Executive pursuant to Paragraph 5(b) hereof), with proceeds payable to a
beneficiary designated by Executive, and the Company shall pay the premiums due
thereunder.
(d) Executive shall be entitled to reimbursement of expenses
incurred in connection with his duties on behalf of the Company in accordance
with Company policy.
6. Termination of Employment.
(a) Definitions. The following terms shall have the following
meanings:
(i) "Cause" shall mean any of the following conditions:
(A) Executive has engaged in conduct which either (1)
resulted
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in a conviction of or plea of guilty or no contest to a misdemeanor
involving moral turpitude or involving the property of the Company,
or (2) resulted in a conviction of or plea of guilty or no contest
to a felony under the laws of the United States or any state or
political subdivision thereof;
(B) Executive commits or engages in (1) a breach of his
fiduciary duty to the Company or any of its affiliates, (2) gross
negligence or willful misconduct in connection with his employment
with the Company, or (3) any transaction which Executive knows or
should have known would constitute self-dealing or conflict of
interest between Executive and the Company and in which Executive
does or would receive any direct or indirect material economic or
pecuniary benefit without prior disclosure of such transaction to
the Company and receipt of prior approval from the Company;
(C) Executive violates the internal procedures or
policies of the Company of which he has been given notice in a
manner which has or reasonably may be expected to have a material
adverse effect on the reputation, business or prospects of the
Company (and for this purpose, conduct constituting employment
discrimination or sexual harassment shall be conclusively presumed
to have a material adverse effect);
(D) Material default or other material breach by
Executive of Executive's obligations hereunder and failure to remedy
such breach within thirty (30) days after notice thereof; or
(E) Failure by Executive to perform diligently and
competently his duties hereunder, after written notice from the
Company of such failure and a reasonable period of time to remedy
the deficiency described in such notice.
(ii) "Disability" means Executive's physical or mental
incapacity which (A) in the reasonable good faith determination of the Company,
has rendered Executive incapable of performing the essential functions of his
job as contemplated by this Agreement, to the extent required hereunder prior to
the commencement of such Disability, for a total of 90 days in a 180 day period,
or (B) in the opinion of a physician selected by the Company and reasonably
acceptable to Executive, is anticipated to render Executive incapable of
performing the essential functions of his job as contemplated by this Agreement,
to the extent required hereunder prior to the commencement of such Disability,
for a total of 90 days in a 180 day period. The effective date of termination of
employment by reason of Disability shall be the earlier of the date of the
determination by the Company under clause (A) above, or the date the opinion of
the physician is rendered under clause (B) above.
(iii) "Good Reason" means any of the following: (A) the
failure to pay in a timely manner any Annual Payment or Performance Bonus due to
Executive hereunder that the Company fails to remedy within thirty (30) days
after notice thereof by Executive; (B) a
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material breach by the Company of any provision of this Agreement that the
Company fails to remedy or cease within thirty (30) days after notice thereof by
Executive; (C) a material reduction in Executive's duties provided in this
Agreement that is so substantial that it would reasonably be construed to change
his position with the Company; or (D) a reduction in the amount of the Annual
Payments.
(b) Termination of Employment. The employment of Executive may be
terminated at any time:
(i) upon the death of Executive; or
(ii) upon the Disability of Executive; or
(iii) by the Company, immediately for Cause (provided that any
termination of Executive's employment for Cause pursuant to any of clause (B),
(C), (D), or (E) of Paragraph 6(a)(i) of this Agreement shall be based on a good
faith determination by the Company of the facts and circumstances which the
Company deems relevant after giving Executive an opportunity to appear before
the Company's Board of Directors to present any reasons why the Executive
believes he should not be terminated for Cause (provided, however, that nothing
contained herein is intended or shall be deemed to afford the Executive an
opportunity to appear with an attorney, present witnesses or otherwise conduct
an evidentiary hearing before the Board); or
(iv) by the Company, upon 15 days written notice of
termination of Executive's employment without Cause (for purposes of this
Agreement, a notice by the Company pursuant to Paragraph 1 that the Term of the
Agreement is not extended beyond any then scheduled expiration of the Term,
shall not be deemed a termination of Executive's employment without Cause); or
(v) by Executive, upon 15 days written notice of voluntary
termination of employment for Good Reason; or
(vi) by Executive, upon 15 days written notice of voluntary
termination of employment without Good Reason (for purposes of this Agreement, a
notice by Executive pursuant to Paragraph 1 that the Term of the Agreement is
not extended beyond any then scheduled expiration of the Term, shall not be
deemed a voluntary termination of employment without Good Reason).
(c) Compensation on Termination of Employment. Upon termination of
Executive's employment with the Company, his right to compensation or other
benefits following such termination shall be determined exclusively as follows:
(i) If Executive's employment is terminated by reason of death
or Disability, Executive (or his legal representative) shall be entitled (A) to
receive any Annual
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Payments and Car Allowance accrued up to the date of termination which remains
unpaid, (B) to be considered for payment of a Performance Bonus determined in
the manner provided in this Agreement, but prorated for the period up to the
date of termination of employment, provided, however, that with respect to the
Subjective Component of the Performance Bonus, Executive shall receive an amount
not less than the amount of the Subjective Component of the Performance Bonus
awarded to Executive for the previous full calendar year (pro rated for the
period up to the date of termination of employment), (C) in the case of
Disability, to continue to receive payments of Annual Payments for a period of
90 days following the effective date of termination by reason of Disability, but
in no event beyond the date that payments under the Company's long-term
disability policy commence, such payments of Annual Payments to be at the rate
in effect on the effective date of such termination of employment by reason of
Disability, and (D) to be paid such disability or death benefits as are provided
under any Company benefit plans in which Executive is a participant. Except as
set forth in Paragraph 6(d), Executive shall not be entitled to any other or
further compensation after the date of any such termination of employment.
(ii) If Executive's employment is terminated by the Company
for Cause, or is voluntarily terminated by Executive without Good Reason,
Executive shall be entitled to receive any Annual Payments and Car Allowance
accrued up to the date of termination which remains unpaid. Executive shall not
be entitled to any other or further compensation after the date of any such
termination of employment.
(iii) If Executive's employment is terminated by the Company
without Cause, or is voluntarily terminated by Executive for Good Reason,
Executive shall be entitled (A) to receive any Annual Payments and Car Allowance
accrued up to the date of termination which remains unpaid, (B) to be considered
for payment of a Performance Bonus for the calendar year of termination of
employment, determined in the manner provided in this Agreement, but prorated
for the period up to the date of termination of employment, provided, however,
that with respect to the Subjective Component of the Performance Bonus,
Executive shall receive an amount not less than the amount of the Subjective
Component of the Performance Bonus awarded to Executive for the previous full
calendar year (pro rated for the period up to the date of termination of
employment), (C) to receive a severance payment equal to the greater of (x) the
aggregate of Annual Payments and Performance Bonus paid to Executive for the
calendar year preceding the calendar year in which employment terminates, or (y)
the amount of Annual Payments which would have been due during the balance of
the Term (if employment had not terminated), calculated at the rate of Annual
Payments in effect immediately prior to such termination, such severance payment
to be paid in twelve equal monthly installments commencing on the first day of
the calendar month following termination, and (D) to be maintained by the
Company, at its cost, under its health, disability and life insurance plans as
in effect at the time of termination of employment, for a period equal to the
greater of one year, or the balance of the Term (if employment had not
terminated). Except as set forth in Paragraphs 6(d) and 6(e), Executive shall
not be entitled to any other or further compensation after the date of any such
termination of employment. Notwithstanding the foregoing, if the Term of this
Agreement has been extended beyond December 31, 2001 pursuant to the last
sentence of
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Paragraph 1, then (1) instead of the amount of the severance payment calculated
under clause (C) above, the severance payment shall be equal to the aggregate of
Annual Payments paid to Executive for the last six months of the calendar year
preceding the calendar year in which employment terminates plus one half of the
Performance Bonus paid to Executive for such preceding calendar year, such
severance payment to be paid in six equal monthly installments commencing on the
first day of the calendar month following termination, and (2) instead of the
insurance provided under clause (D) above, Executive shall be entitled to be
maintained by the Company, at its cost, under its health, disability and life
insurance plans as in effect at the time of termination of employment, for a
period equal to six months after termination of employment.
(iv) If Executive's employment terminates by reason of the
expiration of the Term of this Agreement, Executive shall be entitled (A) to
receive any Annual Payments and Car Allowance accrued up to the date of
termination which remain unpaid, and (B) to be considered for payment of a
Performance Bonus determined in the manner provided in this Agreement for the
period through the end of the Term, provided, however, that with respect to the
Subjective Component of the Performance Bonus, Executive shall receive an amount
not less than the amount of the Subjective Component of the Performance Bonus
awarded to Executive for the previous full calendar year (pro rated for the
period up to the date of termination of employment). Executive shall not be
entitled to any other or further compensation under this Agreement after the
date of any such termination of employment.
(d) Life Insurance. Upon any termination of employment of Executive,
the Company shall take such steps as are necessary to cause the policies of life
insurance provided for in Paragraph 5(b) to be transferred to Executive or his
designee. The Company shall continue to pay the premiums on such life insurance
policy which are due during any period for which payments of Annual Payments
continue to be made after termination of employment pursuant to Paragraph 6(c).
(e) Options. If Executive's employment is terminated by the Company
without Cause, or is voluntarily terminated by Executive for Good Reason, all
options to purchase capital stock of the Company held by Executive as of the
date of this Agreement ("Options") which are not otherwise then fully vested and
exercisable, shall immediately become fully vested and exercisable,
notwithstanding the terms of any plan, agreement or other document governing the
terms of such Options (the "Option Documents"). Upon any termination of
employment of Executive for any reason, and notwithstanding the terms of the
Option Documents, all Options which are vested and exercisable as of the date of
such termination of employment (whether by the terms of the Option Documents or
pursuant to the first sentence of this paragraph), shall remain exercisable for
six months following the effective date of such termination of employment, and
if not exercised within such six month period, shall expire and be canceled and
no longer be exercisable. Except as set forth in this paragraph, the foregoing
provisions of this Paragraph 6 shall not apply to or affect any Options, and
such Options and Executive's rights therein shall be governed solely by the
terms of the Option Documents.
7. Restrictive Covenants. In consideration of the agreement of the Company
to
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employ Executive in accordance with the terms of this Agreement, Executive
agrees as follows:
(a) Definitions. For purposes of this Paragraph 7, the following
terms shall have the following meanings:
(i) "Affiliate" means, with respect to a Person, any Person
that (a) directly or indirectly controls, is controlled by or is under common
control with such Person or (b) is an executive officer or director of such
Person.
(ii) "Client" means a customer, subtenant or licensee of a
Person engaged in an Executive Office Suite Business.
(iii) "Company Employee" means any Person who is an employee
of the Company or any of its Affiliates, at any time during the six month period
preceding the date that Executive ceases to be an employee of the Company or any
of its Affiliates.
(iv) "Executive Office Suite Business" means 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.
(v) "Person" means any individual, proprietorship,
partnership, corporation, limited liability company, trust, estate, or other
form of entity.
(b) Non-Competition. During the period beginning on the effective
date of this Agreement and ending two years after Executive ceases to be an
employee of the Company or any of its Affiliates, Executive will not directly or
indirectly engage in the business of, or own or control any interest in, or act
as a director, officer, managing member, or partner of, or consultant to, or be
connected in any manner with, as an employee or otherwise, (i) if Executive's
employment is terminated for Disability or for Cause, any Person directly or
indirectly engaged in an Executive Office Suite Business in the United States,
or within a 25 mile radius of any existing executive office suite of the Company
or its subsidiaries located outside of the United States (including executive
office suites managed for other Persons) as of the date of termination of
employment, or (ii) if Executive's employment is terminated without Cause or
Executive voluntarily terminates his employment with Good Reason, any of HQ
Global Workplaces, Inc., Regus Business Center Corp., Omni Offices U.K., or any
other Person which (together with its Affiliates) owns, operates, maintains or
manages 30 or more executive office suite locations. The foregoing shall not
prohibit Executive from owning less than 1% of any class of outstanding voting
securities of any Person whose voting securities are listed on a national
securities exchange or regularly traded in the over-the-counter market.
(c) Non-Solicitation. During the period beginning on the effective
date of this Agreement and ending two years after Executive ceases to be an
employee of the Company or any of its Affiliates (the "Non-Solicitation
Period"), neither Executive, nor any Person of which
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he may act as a director, officer, managing member, partner, or consultant, or
of which he may own, directly or indirectly, 1% or more of the outstanding
voting securities, will (i) employ or solicit for employment, or encourage,
assist, facilitate or participate in the employment or solicitation for
employment of, any Company Employee, or (ii) directly or indirectly, solicit, or
encourage, assist, facilitate or participate in the solicitation of, any Person
that at any time during the Non-Solicitation Period is a Client of the Company
or any of its Affiliates, to become a Client of any other Person engaged in an
Executive Office Suite Business.
(d) Non-Disclosure. Executive recognizes and acknowledges that he
will have access to certain confidential and proprietary information
("Proprietary Information") of the Company which is a valuable, special and
unique asset of the Company's business. Proprietary Information includes, but is
not limited to, the following: business methods of the Company or any of the
trade or business secrets of the Company, including but not limited to,
operating procedures, pricing information, customer or client lists or accounts,
market research and development procedures, marketing strategies, investment or
acquisition opportunities and strategies, and information or lists concerning
the current, future or proposed business of the Company, or the costs associated
therewith and/or any other business related information. Accordingly, Executive
covenants and agrees that during, or at any time after the term of, this
Agreement he will not use for himself or reveal to anyone any part of the
Proprietary Information, and he will take all reasonable precautions to
safeguard the confidential nature of the Proprietary Information and prevent
inadvertent disclosure thereof. The obligations of Executive pursuant to this
Paragraph 7(d) shall not apply to any particular portion of the Proprietary
Information which Executive can document (and satisfy the burden of proof) (i)
was in the public domain at the time Executive received knowledge of it, or (ii)
entered the public domain through no fault of Executive subsequent to the time
Executive received knowledge of it, or (iii) was in Executive's possession free
of any obligation of confidence at the time Executive received knowledge of it.
(e) Savings Provision. If any provision of this Paragraph 7 shall be
adjudicated to be invalid or unenforceable because it is held to be excessively
broad as to duration, geographic scope, activity or subject, then such provision
shall be deemed amended by limiting and reducing it so as to be valid and
enforceable to the maximum extent compatible with the applicable laws and public
policies of the jurisdiction in which such adjudication is made or such
provision is sought to be enforced, such amendment only to apply with respect to
the operation of such provision in the jurisdiction in which such adjudication
is made or such provision is sought to be enforced.
(f) Injunctive and Other Equitable Remedies. Executive understands
and agrees that the Company will suffer immediate, irreparable harm in the event
Executive fails to comply with any of Executive's obligations under this
Paragraph 7, that monetary damages will be inadequate to compensate the Company
for such breach and that the Company shall be entitled to injunctive relief as a
remedy for any such breach. Such remedy shall not be deemed to be the exclusive
remedy in the event of breach of this Paragraph 7 by Executive, but shall be in
addition to all other remedies available to the Company at law or in equity.
Executive hereby
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waives, to the extent he may legally do so, any requirement for security or the
posting of any bond or other surety in connection with any temporary or
permanent award of injunctive or other equitable relief, and further waives, to
the extent he may legally do so, the defense in any action for specific
performance or other equitable remedy that a remedy at law would be adequate.
Notwithstanding anything to the contrary contained in this Agreement, in the
event the Executive violates his obligations under this Paragraph 7, then, in
addition to all other rights and remedies available to the Company, the Company
shall have no further obligation to pay Executive any money or to provide
Executive with any rights or benefits to which Executive would have been
entitled pursuant to this Agreement had Executive not breached this Paragraph 7.
8. Miscellaneous.
(a) Notices. All notices, requests, demands, acceptances and other
communications which are required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, or (b) when sent by fax if received on a business day prior to 5:00
P.M. local time at the place of receipt, or on the following business day if
received after 5:00 P.M. or on a non-business day, or (c) on the day following
delivery to a courier service if sent by next day delivery via a recognized
international courier service, or (d) five (5) days after the date when mailed
by registered or certified mail, return receipt requested, postage prepaid. All
such notices, requests, demands, acceptances and other communications shall be
addressed to the parties as follows, or at such other address as shall be
specified by like notice:
If to the Company: VANTAS Incorporated
90 Park Avenue
Suite 3100
New York, NY 10016
Att: David W. Beale, President
Fax: (212) 907-6444
If to Executive: Alan M. Langer
Strawberry Lane
Irvington, NY 10533
Fax: (914) 591-8347
(b) Waivers. Either party hereto may, at its or his option, by
written notice to the other, (a) extend the time for the performance of any of
the obligations or other actions of the other, (b) waive compliance with any of
the terms, conditions or covenants required to be complied with by the other
hereunder; and (c) waive or modify performance of any of the obligations of the
other hereunder. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
(c) Amendment. No change, amendment or modification of any provision
of
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this Agreement shall be valid unless set forth in a written instrument signed by
the party to be bound thereby.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supercedes all prior written or oral negotiations or agreements with respect
thereto.
(e) Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities.
(f) Assignment. This Agreement is personal in nature and neither of
the parties hereto shall, without the written consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder. In the event of
merger, consolidation, transfer or sale of all or substantially all of the
assets of the Company, the successor or transferee corporation's continued
performance of this Agreement shall not be deemed an assignment.
(g) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
(h) Governing Law. The interpretation and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to such State's conflicts of laws principles.
(i) Jurisdiction, Venue. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND
HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS
FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND
ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
PARAGRAPH 8(a), SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
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(j) Headings. Headings of the paragraphs in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
(k) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same instrument.
(l) Facsimile Signatures. This Agreement may be signed by facsimile
copy and shall be valid and binding upon delivery of a signed copy by facsimile.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
VANTAS INCORPORATED
By: /s/ David W. Beale
-----------------------------------------
Name: David W. Beale
Title: President
/s/ Alan M. Langer
----------------------------------------
Alan M. Langer
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
13
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of May 13,
1998 by and between InterOffice (Holdings) Corporation, a Virginia corporation
(the "Company"), and T.J. TISON, an individual with an address at 9 Parkside
Way, Greenbrae, California 94904 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company, together with its subsidiaries, is engaged in
the Business;
WHEREAS, the Company is a wholly-owned subsidiary of Interoffice
Superholdings Corporation, a Delaware corporation ("Superholdings");
WHEREAS, the Company desires to employ the Employee, and the
Employee desires to accept such employment, on the terms and conditions herein
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions provided herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Employment, Duties and Authority.
1.1. Exclusive Devotion of Business Time. The Company agrees to
employ the Employee and the Employee agrees to devote his full business time,
effort, skills and loyalty to the business of the Company to effectively carry
out his responsibilities to the Company hereunder and to the render his services
and skills in the furtherance of the business of the Company; provided, that
this provision shall not prevent the Employee from: (i) serving on civil and
charitable boards, subject to the Company's policies and standards; and (ii)
managing his investments and the investments of his immediate family, subject to
the Company's policies and standards; provided that the activities referenced in
clauses (i) and (ii) above do not, individually or in the aggregate, interfere
with the performance of the Employee's duties under this Agreement.
1.2. Title; Position. The Company agrees to employ the Employee as
its Chief Investment Officer. The primary responsibility of the Employee shall
be the development, direction, implementation and management of the investment
strategy of the Company for the acquisition, site selection and initial
development of domestic and international executive office suite centers.
Without limiting the foregoing, the Employee shall serve at the request of the
<PAGE>
Board of Directors of the Company (the "Board") as a director or officer of any
corporation of any type or kind, domestic or foreign, or any partnership,
limited liability company, joint venture, trust, employee benefit plan or other
enterprise in the furtherance of the Business and shall otherwise assist in the
preparation of, and implementation of, the strategic business plans and
developments of the Company.
1.3. Reporting. The Employee shall report to the chief executive
officer of the Company, the Board and to each other senior executive of
Superholdings or the Company from time to time designated by the Board
(collectively, the "Management Team") in the manner from time to time determined
by the Board.
1.4. Cooperation. During the term of this Agreement and any time
thereafter, the Employee agrees to give prompt written notice to the Company of
any claim or injury relating to the Company, and to fully cooperate in good
faith and to the best of his ability with the Company in connection with all
pending, potential or future claims, investigations or actions which directly or
indirectly relate to any transaction, event or activity about which the Employee
may have knowledge because of his employment with the Company. Such cooperation
shall include all assistance that the Company, its counsel, or its
representatives may reasonably request, including reviewing and interpreting
documents, meeting with counsel, providing factual information and material, and
appearing or testifying as a witness.
1.5. Primary Office Location; Travel Commitment. The Employee shall
perform his duties primarily from a home office or office location provided by
the Company in Marin County or such other location agreeable to the Company and
Employee; provided, that the Employee shall be available and shall travel from
such location from time to time as is necessary or desirable in furtherance of
the Business, specifically the acquisition, site selection and initial
development of executive office suite centers and meetings of management, the
Board or any committee thereof; provided, further, that it is acknowledged and
agreed that such annual travel commitment is expected to be approximately 50% of
his annual commitment of business time hereunder. It is acknowledged and agreed
that: (i) the Employee shall not be required to maintain a home office after 120
days after the date hereof, unless extended by the mutual agreement of the
Company and the Employee; and (ii) the Employee will require an office facility
currently anticipated to be approximately 1,500 square feet with reasonable and
customary furnishings, equipment and facilities.
1.6. Performance of Duties. During the term of this Agreement, the
Employee shall perform the duties assigned to him, which duties shall be
consistent with the duties described above in this Section 1, and shall observe
and carry out such rules, regulations, policies, directions and restrictions as
the Management Team shall from time to time establish. In performance of his
duties hereunder, the Employee shall comply in each and every respect with
applicable laws, rules and regulations applicable to the Company and the
Business. The Employee shall from time to time request from the Company the
administrative and personnel support services necessary or desirable for the
performance of his duties. The Management Team shall consider such requests in
good faith and provide the Employee (without cost to the Employee) with such
administrative and personnel support services as approved from time to
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<PAGE>
time by the Management Team in accordance with the Company's policies and
consistent with the Company's financial budget. It is the presently anticipated
that during the first two to three years of the Term, that the Employee shall
require the services of two management level employees who will have their
principal office locations outside the United States and two to three
secretarial/administrative level employees.
1.7. Certain Defined Terms. For the purposes of this Agreement, the
following terms shall have the respective meanings ascribed thereto in this
Section:
1.7.1. "Annual EBITDA" means, as of any specified date, the
consolidated earnings of the Company before interest, taxes, depreciation and
amortization, computed for the twelve (12) full calendar months immediately
preceding such specified date.
1.7.2. "Business" means the executive suite business, to wit:
providing lessees with furnished separate office space and use of on-site
administrative support services, such as receptionists, word processing or
secretarial assistance, office management, mail and courier facilities,
conference facilities, telecommunication services and sundries, as such business
is conducted by the Company on the date hereof and as planned or projected to be
conducted during the term of this Agreement.
1.7.3. "Cause" shall mean any of the following conditions:
(i) The Employee has engaged in conduct which: (A) is a
misdemeanor and involves moral turpitude or the property of the Company
that has a material adverse effect on the reputation, business or
prospects of the Company, or (B) is a felony under the laws of the United
States or any state or political subdivision thereof,
(ii) The Employee commits (A) self-dealing or conflict
of interest in which the Employee received a benefit equal to or in excess
of (x) $250, in any transaction, or (y) $2,000 in the aggregate during any
fiscal year of the Company, (B) a breach of his fiduciary duty to the
Company or any of its affiliates, (C) gross negligence or (D) willful
misconduct or;
(iii) The Employee violates the internal procedures or
policies of the Company in a manner which has a material adverse effect on
the reputation, business or prospects of the Company such as conduct
constituting employment discrimination or sexual harassment;
(iv) The Employee breaches any of his material
obligations hereunder and fails to remedy such breach within thirty (30)
days after notice thereof; or
(v) The Employee fails to satisfactorily perform his
duties hereunder after notice from the Company of such unsatisfactory
performance and a reasonable period of time to remedy the deficiency
described in such notice. The
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Company and the Employee shall each in good faith discuss the appropriate
standard of performance and goals of the Employee to on or prior to
December 31, 1998 determine the mutually agreeable parameters of the
Employee's standard of performance (the "Performance Goals").
1.7.4. "Confidential Information" means all confidential and
proprietary information of the Company, including, without limitation,
information relating to or concerning Proprietary Products (as defined below)
and the exploitation of proprietary rights relating thereto; the Business; trade
secret information; client, investor, customer and supplier lists, identities
and contracts or arrangements; financial information (including financial
statements, budgets and projections); market research and development
procedures, processes, techniques, plans and results (including inconclusive
results); all information which may be included in any patent or copyright
application or amendment thereof or defense or litigation with respect thereto;
marketing, licensing and distribution or franchising strategies, plans or
projections; investment or acquisition opportunities, plans or strategies;
products and asset composition; pricing information or policies; royalty,
franchising or licensing arrangements; computer software, passwords, programs or
data; and all other business related information which has not been publicly
disclosed by the Company or its affiliates, whether such information is in
written, graphic, recorded, photographic, data or any machine readable form or
is orally conveyed to, or memorized by, or developed by the Employee; provided,
that Confidential Information shall not include information which: (i) at the
time of disclosure is generally known in the business and industry in which the
Company is engaged; or (ii) after disclosure is published or otherwise becomes
generally known in such business or industry through no fault of the Employee.
1.7.5. "Developments" means discoveries, concepts, ideas,
designs, methods, formulas, know-how, techniques, systems or any improvements or
enhancements thereon, whether or not patentable or copyrightable, made,
conceived, improved or developed, in whole or in part, by the Employee during
the term of this Agreement relating to: (i) any of the Company's or its
affiliates' products or services, potential products or services, developments
or techniques; or (ii) any work in which the Employee is or may be engaged on
behalf of the Company or its affiliates.
1.7.6. "Disability" means the Employee's physical or mental
incapacity which: (i) actually renders the Employee incapable of performing the
essential functions of his duties under this Agreement for any consecutive
forty-five (45) day period or for any sixty (60) days within any period of one
hundred and twenty (120) days; or (ii) in the opinion of a licensed medical
physician selected by the Company (who is reasonably acceptable to the Employee)
would render the Employee so disabled.
1.7.7. "Documents" means any and all books, textbooks,
letters, pamphlets, drafts, memoranda, notes, records, drawings, files,
documents, manuals, compilations of information, correspondence or other
writings of any kind and all copies, abstracts and summaries of any of the
foregoing, whether in printed, written or electronic data or any machine
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readable form: (i) of the Company or its affiliates; or (ii) in the possession
or control of the Employee and pertaining to, and used in the furtherance of,
the Business.
1.7.8. "Employee Shares" means the shares of common stock
which may be purchased by the Employee pursuant to the Employee Options
described in Section 2.7, which such shares, prior to the date of an IPO, shall
be shares of non-voting common stock, par value $0.001 per share, of the Company
and from and after the date of an IPO shall be shares of voting common stock,
par value $0.001 per share, of the Company. Employee Shares shall include any
shares of non-voting common stock converted into shares of voting common stock
pursuant to Section 2.8.
1.7.9. "Fair Market Value" means the value of the Company and
its subsidiaries as of any specified date computed as follows: (i) on or prior
to an IPO, the Fair Market Value shall equal (A) six (6) multiplied by; (B) the
Annual EBITDA as of such date (less consolidated debt of the Company but adding
consolidated cash); or (ii) after an IPO, the Fair Market Value shall equal the
closing price per share of the voting common stock of the Company as reported on
the applicable exchange or trading market on such specified date multiplied by
the total number of issued and outstanding shares of such common stock on such
date.
1.7.10. "Good Reason" means: (i) a material adverse change in
the duties or responsibilities of Employee that Company fails to remedy within
thirty (30) days after notice thereof by the Employee; (ii) the failure to pay
in a timely manner any compensation due to Employee hereunder that Company fails
to remedy within thirty (30) days after notice thereof by the Employee; and
(iii) a material breach by the Company of any provision of this Agreement that
the Company fails to remedy or cease within thirty (30) days after notice
thereof by the Employee.
1.7.11. "IPO" means the closing of an initial public offering
pursuant to an effective registration statement filed by the Company with the
Securities and Exchange Commission for the registration of shares of voting
common stock of the Company under the Securities Act of 1933, as amended.
1.7.12. "Proprietary Products" means collectively Documents,
Developments and Related Property.
1.7.13. "Related Property" means all tangible and intangible
property owned by, or licensed to, or otherwise used by the Company or its
affiliates including, without limitation, ideas, concepts, projects, programs,
computer software or hardware, data bases, specifications, documentation,
algorithms, source codes, object codes, program listings, product platforms and
architectures, concepts, screens, formats, technology, know-how, Developments,
research and development and patents, copyrights, trademarks, trade names,
service names, service marks, logos and designs and other proprietary rights and
registrations and applications and the rights to apply therefor.
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2. Compensation and Benefits.
2.1. Annual Salary and Covenant Payment. From the date hereof until
termination of the Employee's employment hereunder in accordance with Section 3,
the Company shall pay to the Employee (i) a fixed base salary at an annual rate
of $130,000 (the "Salary") and (ii) in addition to the Salary, a fixed base
salary at an annual rate of $45,000 (the "Covenant Payment" and, together with
the Salary, the "Annual Payments") as separate consideration for the Employee's
covenants and agreements provided in Section 8. The Annual Payments shall be
paid to the Employee in accordance with the normal payroll practices of the
Company as in effect from time to time. The aggregate amount of the Annual
Payments shall be increased effective the end of each annual anniversary of this
Agreement in proportion to the proportionate annual increase in the Consumer
Price Index -- All Urban Consumers - National Area, 1997 being the base year
plus a margin of 1%.
2.2. Performance Bonus. The Employee shall be eligible to receive an
annual performance bonus in such amounts as determined by the Board, in its sole
discretion considering, among other factors, the Employee's actual achievements
relative to the Performance Goals; provided, that such performance bonus shall
not exceed 50% of the Annual Payments of the Employee.
2.3. Reimbursement of Expenses. The Company shall reimburse the
Employee for reasonable out-of-pocket expenses incurred by the Employee for the
benefit of the Company upon presentation of appropriate documentation in
accordance with Company policy in effect from time to time.
2.4. Vacation Time. The Employee shall be entitled to paid vacation
at the rate of three (3) weeks per year during the term of this Agreement.
Vacation days shall begin to accrue from and after the date hereof ratably
during each fiscal quarter (or pro rata for any partial quarter) the Employee
actually works. Vacation shall be taken at times when reasonably appropriate
given the Employee's responsibilities and consistent with the needs of the
Company and shall not be for a period greater than two weeks at a time without
the consent of the Company, which consent shall not be unreasonably withheld.
2.5. Car Allowance. The Company shall pay to the Employee an
additional monthly amount sufficient for the Employee to lease an automobile
selected by the Employee for by the Employee. The Company shall also pay the
total amount of automobile reasonable and customary related expenses for the
business use of the automobile, including, without limitation, sales taxes,
registration fees, gas, repairs and insurance but excluding: (i) fines,
penalties, fees, judgement or liabilities (whether civil or criminal) arising
from or related to the operation of the automobile; and (ii) infractions of law,
e.g. parking or speeding tickets (collectively the "Car Allowance"); provided,
that the Company's obligation to pay the Car Allowance shall be limited to
$1,200 per month during the term of this Agreement.
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2.6. Benefits. During the period that the Employee is employed by
the Company and for such longer period as required by applicable law, the
Employee shall be entitled to participate in the employee benefit plans,
policies and programs, including health and disability insurance (collectively,
"Benefits"), on the same terms and conditions made available to other senior
employees of the Company.
2.7. Employee Stock Options.
2.7.1. Subject to the terms and conditions of this Agreement,
the Employee is hereby awarded options (the "Employee Options") to
purchase an amount of shares equal to 1.5% of the aggregate issued and
outstanding shares of voting and nonvoting common stock of the Company on
the date of this Agreement at an aggregate purchase price per share (the
"Option Purchase Price Per Share") equal to 52.2 million dollars divided
by the number of shares outstanding.
2.7.2. The right of the Employee to purchase the Employee
Shares under the Employee Options granted herein shall vest in equal
annual installments over a three (3) year period commencing on the date
hereof and ending on the expiration of the Initial Term (such vested
amount being referred herein as the "Vested Employee Options" and the
amount of the Employee Options which are not Vested Employee Options being
referred herein as the "Unvested Employee Options"). A temporary
disability of the Employee shall not delay such vesting of the unvested
Employee Options.
2.7.3. The Employee may, in his sole discretion but subject to
the terms and provisions of Section 3, exercise all or any part of the
Vested Employee Options upon notice to the Company to such effect at any
time on or prior to the date that is seven (7) years after the date hereof
provided that if the Employee is no longer in the employ of the Company he
must exercise the Vested Employee Options no later than ninety (90) days
after termination of his employment, subject, however, in all events to
the last sentence of this Section 2.7.3 and to the provisions of Section 3
of this Agreement. Subject to the terms and provisions of Section 3, upon
exercise of the Vested Employee Options and receipt by the Company of the
aggregate Option Purchase Price Per Share for such Vested Employee
Options, the Company shall issue and deliver to the Employee the Employee
Shares represented by such Vested Employee Options and, on such date, such
shares shall be duly authorized and issued, fully paid and nonassessable
and free and clear of any liens but subject to the terms and provisions of
this Agreement, provided, that if the Employee breaches his covenants and
agreements provided in Section 8 in any material respect or is terminated
for Cause, (other than Cause as defined in Section 1.7.3 (v)), then in
either said event, the Employee shall no longer be entitled to any
Employee Options nor to exercise the Vested Employee Options.
2.8. Conversion of Non-Voting Shares. The Company hereby agrees that
on the date of any IPO, the Company shall, without cost to the Employee,
exchange all issued and outstanding shares of non-voting common stock issued and
delivered pursuant to the exercise
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of any Employee Options for an equivalent number of shares of voting common
stock of the Company.
2.9. Withholding. All payments of compensation shall be subject to
all applicable withholding taxes and other legally required payroll deductions.
The Employee shall provide the Company with all information reasonably requested
by the Company with respect to such deductions and withholdings.
3. Term and Termination.
3.1. Term. Subject to Section 3.2, this Agreement shall have a term
of three (3) years commencing on the date hereof (the "Term"). The term of
employment may be further extended or renewed upon the mutual agreement of the
Company and the Employee.
3.2. Termination. Notwithstanding any provision in this Agreement to
the contrary, the Employee's employment hereunder shall be terminated upon any
of the following events: (i) the death or Disability of the Employee; (ii) the
termination of the Employee by the Company; or (iii) the termination by the
Employee, provided that any termination hereunder, other than as a result of
death, shall be communicated by a notice from the party terminating the
employment to the other party and such termination shall be effective on the
date such notice is deemed given by such party in accordance with Section 14,
except that in the event of termination by the Employee, the Employee shall give
the Company prior written notice of his intention to terminate his employment
not later than sixty (60) days prior to the date of such resignation. In the
event of the Disability or temporary disability of the Employee, the Company
shall have the right to appoint: (i) a temporary replacement to assume some or
all of the Employee's duties, if the Company, in its sole discretion, determines
that the Employee's condition may render him incapable of effectively performing
some or all of his essential duties as the Chief Investment Officer; and (ii) a
permanent replacement if the Employee's employment hereunder is terminated
because of such Disability. During any period the Employee is temporarily
disabled, the Company will continue, on the same terms and conditions, the
Employee's Annual Payments, Benefits and Performance Bonus (or prorated amount
of the Performance Bonus). Any period of paid disability leave under this
Section shall be counted against any period of unpaid leave to which the
Employee may be entitled under any federal, state or local family and medical
leave laws.
3.3. Payments Upon Termination of Employment. In the event of
termination of the Employee's employment under this Agreement:
3.3.1. The Employee (or his heirs, legatees or personal
representatives) shall be entitled to receive all compensation and
benefits specified in this Agreement which shall have accrued prior to the
date of such termination and the obligation of the Company for the payment
of compensation, and the right of the Employee to receive any further
compensation or benefit, except as provided by applicable law or otherwise
provided herein, shall terminate as at the date of such termination.
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3.3.2. All rights of the Company or the Employee which shall
have accrued hereunder prior to the date of the Employee's termination,
and the provisions of this Agreement which are stated herein to survive
termination, shall survive such termination and the Company and the
Employee shall continue to be bound by such provisions in accordance with
the terms hereof.
3.3.3. If the employment hereunder is terminated because of
the Employee's death or Disability, then the Company shall: (i) pay any
benefits which are expressly provided to the Employee upon his death or
Disability under the terms of any benefit plan, policy or program in
effect at the time of such death or Disability; (ii) shall pay the
Employee (or his heirs, legatees or personal representatives) a lump sum
benefit equal to 50% of the then effective amount of Annual Payments and
the prorated annualized amount of the Performance Bonus for such year; and
(iii) on or prior to one hundred eighty (180) days after the Determination
Date (provided there has been no IPO) redeem all of the Employee Shares
issued to the Employee and repurchase all of the Vested Employee Options
(exercised and unexercised) for an aggregate price equal to the aggregate
Fair Market Value of the (x) Employee Shares issued and outstanding on
each date and (y) Employee Shares represented by the Vested Employee
Options (less the Option Purchase Price Per Share).
3.3.4. If the employment hereunder is terminated by the
Company for Cause (as limited to the conduct described in Section
1.7.3(v)), then (A) the Company shall have the option, but not the
obligation, to redeem and repurchase; and (B) the Employee shall have the
right, but not the obligation, to sell, in each case, all of the Employee
Shares issued to the Employee and all of the Vested Employee Options
(exercised and unexercised) for an aggregate price equal to: (i) the
aggregate Fair Market Value of the (x) Employee Shares issued and
outstanding on such date and (y) Employee Shares represented by the Vested
Employee Options exercised on or prior to the Determination Date; less
(ii) the aggregate Option Purchase Price Per Share for the Employee Shares
which may be purchased by such vested Employee Options and which have not
on such date been issued and delivered. The Company's option to so redeem
and repurchase the Employee Shares and Employee Options may be exercised
by the Company, and the Employee's option to so sell the Employee Shares
and Employee Options, may be exercised by the Employee, in each case, on
or prior to the date that is one (1) year after the Determination Date by
notice to such effect.
3.3.5. If the employment hereunder is terminated by the
Company for Cause (as limited to the conduct described in Section 1.7.3
(i) through (iv)) or by the Employee other than for Good Reason, death or
Disability, then the Company shall have the option, but not the
obligation, to redeem all of the Employee Shares issued to the Employee
and repurchase all of the Vested Employee Options (exercised and
unexercised) for an aggregate price equal to: (i) the paid in capital of
the issued and outstanding Employee Shares; less (ii) the amount of
damages to the Company or its affiliates by the Employee arising from or
related to the Employee's conduct or resignation. The Company's option to
so redeem and repurchase the Employee Shares
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and Employee Options may be exercised by the Company on or prior to the
date that is one (1) year after the Determination Date by notice to such
effect to the Employee by the Company. Notwithstanding anything to the
contrary contained in this Agreement, if the Employee is terminated by the
Company for Cause (as limited to the conduct described in Section 1.7.3
(i) through (iv)) or by the Employee other than for Good Reason, death or
Disability, then the Employee shall have no further right to exercise any
Employee Options, whether Vested or Unvested.
3.3.6. If the employment hereunder is terminated by the
Company for any reason other than for Cause or the death or Disability of
the Employee or by the Employee for Good Reason, then the Company shall,
subject to the terms and provisions of Section 3.5:
(i) pay to the Employee all Annual Payments to which the
Employee would have been entitled had the Employee continued working
through the remainder of the term of this Agreement, excluding the
period of any period which this Agreement may be extended or renewed
(payable on the dates such amounts would have been otherwise payable
to the Employee);
(ii) continue through the end of the term of this
Agreement, excluding the period of any period which this Agreement
may be, but as of the Determination Date has not been, extended or
renewed, any benefits to which the Employee is entitled, subject to
the terms (including cost-sharing by the Employee) of any such
benefit plan, policy or program in effect on the date of such
termination, and only to the extent benefit continuation is
permitted by those benefit plans, policies and programs; and
(iii) on or prior to the date that is sixty (60) days
after the Determination Date redeem all of the Employee Shares
issued to the Employee and repurchase all of the Vested Employee
Options (exercised and unexercised) and Unvested Employee Options
for an aggregate price equal to (A) the aggregate Fair Market Value
of the Employee Shares issued and outstanding and Employee Shares
represented by the Vested Employee Options exercised on or prior to
the Determination Date; less (B) the aggregate Option Purchase Price
Per Share for the Employee Shares which may be purchased by such
Vested Employee Options and which have not on such date been issued
and delivered.
With respect to continuation of retirement and health
insurance benefits, the Company at its election, in its sole discretion,
may provide the Employee with either: (A) benefits substantially similar
to those which the Employee was entitled to receive under the health
insurance and retirement programs of the Company in effect on the date of
termination, at a cost to the Employee which is no greater than the cost
to the Employee at the date of termination; or (B) the cost to replace
those benefits at substantially the same level or value.
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3.4. Determination Date. As used herein, the term "Determination
Date" shall mean the date the Employee exercises the Vested Employee Options
unless the employment of the Employee is terminated pursuant to Section 3, in
which case the Determination Date shall be the date of such termination of
employment.
3.5. Mitigation. Subject to the provisions of Section 8, unless the
employment hereunder is terminated by the Company because the essential duties
performed by the Employee are eliminated because they are no longer required
(including such elimination resulting from the change in the strategic direction
of the Company), the Employee shall use his best efforts to seek comparable
employment and to otherwise mitigate any amounts payable, or any benefits
continued, pursuant to this Section 3. If the Employee obtains other comparable
employment, or has the right to receive any compensation, income or benefits
from comparable services rendered to any person or entity during the remaining
term of this Agreement, the payments and benefits due under this Section 3 will
be reduced by the amount of such compensation, income, or benefits. The Employee
shall give prompt notice to the Company of any employment undertaken or services
rendered by him, which notice shall include a description of the compensation,
income or benefits receivable by or available to him. The Employee shall also
give prompt notice to the Company of any changes in such employment, benefits or
income.
3.6. Exclusive Benefits. Except as so provided in this Section 3, no
further benefits, compensation or rights of the Employee shall continue to
accrue after the date of the termination of the employment of the Employee
hereunder.
3.7. Unvested and Vested Employee Options. All of Employee's rights
in and to Unvested Employee Options shall terminate thirty (30) days after
termination of the Employee's employment. Except as expressly otherwise provided
in this Agreement, all of Employee's rights to exercise a Vested Employee Option
shall terminate ninety (90) days after termination of the Employee's employment.
4. Ownership of Rights to Proprietary Products.
4.1. The Employee acknowledges and agrees that the Proprietary
Products, are and shall be the exclusive and valuable property of the Company
and its affiliates, as the case may be, and the Employee shall neither have, nor
claim to have, any right, title or interest therein or thereto. All
opportunities relating to the Proprietary Products whether or not involving
third parties shall belong to and be carried out for the account of the Company.
4.2. Any and all Developments shall be deemed work specifically
ordered or commissioned by the Company and each such work shall be considered a
"work made for hire" within the meaning of 17 U.S.C. ss.101 of the United States
Copyright Act and all rights to such work shall belong entirely to the Company.
The Employee shall from time to time upon the request of the Company promptly
execute and deliver to the Company any instruments necessary to effect the
irrevocable assignment of all of his right, title and interest, including
copyright and author rights, in such works to the Company and for the Company to
obtain proprietary rights in connection therewith.
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4.3. The Employee's covenants under this Section 4 of this Agreement
shall survive the expiration or termination of this Agreement.
5. Confidentiality. The Employee acknowledges and agrees that it is
imperative to the success of the Company and its affiliates that all
Confidential Information be maintained in strict confidence at all times. The
Employee shall therefore retain in strict confidence and not, directly or
indirectly, copy or disclose or transfer to any third party any Confidential
Information except in the furtherance of the Business for the benefit of the
Company; nor shall he use Confidential Information for any purpose except for
the benefit of the Company or its affiliates. The Employee's covenants under
this Section 5 of this Agreement shall survive the expiration or termination of
this Agreement.
6. Documents. The Employee agrees that any and all Documents made or kept
by him shall be and are the sole and exclusive property of the Company. The
Employee agrees to execute and deliver to the Company or its affiliates, as the
case may be, any and all agreements or instruments of any nature which the
Company or its affiliates deem necessary or appropriate to acquire, enhance,
protect, perfect, assign, sell or transfer his rights under this Section. The
Employee also agrees that upon request he will place all Documents in the
Company's possession and will not remove or cause to be removed any Documents or
reproductions thereof, except as is necessary and customary to directly further
the Business for the benefit of the Company or with the prior consent of the
Management Team. Upon the expiration or termination of the employment of the
Employee hereunder, all Documents shall remain in the possession or control of
the Company and any Documents within the possession or control of the Employee
or any of his affiliates shall be promptly returned to the Company at its
principal office. The Employee's covenants under this Section 6 of this
Agreement shall survive the expiration or termination of this Agreement.
7. Developments.
7.1. The Employee shall communicate and fully disclose to the
Company any and all Developments made or conceived by him during his employment
with the Company, and any and all Developments which he may conceive or make,
during his employment with the Company, shall be at all times and for all
purposes regarded as acquired and held by him in a fiduciary capacity and solely
for the benefit of the Company and shall be the sole and exclusive property of
the Company.
7.2. The Employee shall assist the Company in every proper way upon
request to obtain for its benefit patents, copyrights, trade names, trademarks,
service names, service marks for any and all Proprietary Products and
Developments in the United States and all foreign countries. All such patents,
copyrights, trade names, trademarks, service names, service marks and any
registrations and applications therefor are to be, and remain, the exclusive
property of the Company and the Employee agrees that he will, whenever so
requested by the Company or its duly authorized agent, make, execute and deliver
to the Company its affiliates, successors, assigns, or nominees, without charge,
any and all applications, assignments and all other instruments which the
Company or its affiliates shall deem necessary or appropriate in order to
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apply for and obtain such patents, copyrights, trade names, trademarks, service
names, and service marks or in order to assign and convey to the Company or its
affiliates, their successors, assigns or nominees, the sole and exclusive right,
title and interest therein and thereto. The Employee's obligations to execute
any such instruments shall continue notwithstanding the termination or
expiration of this Agreement.
8. Covenant Not to Compete. The Employee acknowledges and agrees that the
Proprietary Products are the exclusive and valuable property of the Company and
may not be used by the Employee for any purpose of any kind, directly or
indirectly, except during the term of this Agreement for the sole and exclusive
benefit of the Company in his capacity as an employee of the Company and that
the success of the Company depends on the Employee's observance of his covenants
in this Section 8.
8.1. In consideration of the rights and benefits hereunder including
the Covenant Payments, the Employee agrees that so long as he is an employee or
consultant of the Company and for a period of one (1) year thereafter, if the
employment of the Employee is terminated by the Company for Cause (as limited to
the conduct described in Section 1.7.3(i) through (iv)) or by the Employee
without Good Reason, he shall not directly or indirectly:
8.1.1. Engage or participate in any business or line of
business that competes with the Business (or any line of business) conducted by
the Company or under consideration by the Company; or perform any research or
development or distribution or marketing services for any Proprietary Product or
any product which is related to the Business that could be, directly or
indirectly, developed, marketed or otherwise exploited by the Company.
8.1.2. Engage in business with, or provide advice or services
to, any person or entity which directly or indirectly competes with the Business
(or any line of business) of the Company.
8.2. In consideration of the rights and benefits hereunder including
the Covenant Payments, the Employee agrees that so long as he is an employee or
consultant of the Company and for a period of one (1) year thereafter he shall
not directly or indirectly:
8.2.1. Solicit, hire or retain any employee or consultant of
the Company or persuade or entice any such employee or consultant to terminate
or lessen the extent of his, her or its relationship with the Company.
8.2.2. Engage in any activity to interfere with, disrupt or
damage the Business of the Company or its relationships with any of its clients,
customers, distributors, suppliers, investors or other financial co-venturer or
other business relationship.
8.3. In the event the employment of the Employee is terminated by
the Company without Cause or by the Employee for Good Reason, the Restrictive
Period shall be for so long as the Company continues to be obligated to pay the
Employee in accordance with
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the terms of Section 3 of this Agreement, but in no event less than one (1) year
after termination of employment.
8.4. Following termination of the Employee's employment by the
Company for any reason, the Employee shall continue to observe and be bound by
his covenants under Sections 8.1 and 8.2 for the period provided in such
Sections.
8.5. For purposes of this Section 8, the term "Company" shall
include the Company and its affiliates, including any entity that directly or
indirectly controls the business and affairs of the Company.
8.6. Notwithstanding anything to the contrary in this Agreement, in
the event the Employee violates the provisions of this Section 8, then, in
addition to all other rights and remedies available to the Company, the Company
shall have no further obligation to pay Employee any money or to provide
Employee with any rights or benefits to which Employee would have been entitled
pursuant to this Agreement had Employee not breached this Section 8.
9. Specific Enforcement.
9.1. The Employee is obligated under this Agreement to render
services and comply with covenants of a special, unique, unusual and
extraordinary character, thereby giving this Agreement peculiar value so that
the loss of such service or violation by the Employee of this Agreement could
not reasonably or adequately be compensated in damages in an action at law.
Therefore, in addition to any other remedies or sanctions provided by law,
whether criminal or civil, and without limiting the right of the Company and
successors or assigns to pursue all other legal and equitable rights available
to them, the Company shall have the right during the Employee's employment
hereunder (or thereafter with respect to obligations continuing after the
termination of this Agreement) to compel specific performance hereof by the
Employee or to obtain temporary and permanent injunctive relief against
violations hereof by the Employee, and, in furtherance thereof, to apply to any
court with jurisdiction over the parties hereto in accordance with Section 18 to
enforce the provisions hereof.
9.2. The Employee waives any requirement for security or the posting
of any bond or other surety and proof of damages in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief
and further agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
10. Legal Costs and Expenses. If any party hereto prevails in any
proceedings, legal or equitable, to enforce any obligations under this
Agreement, such party shall also be entitled to recover all costs and expenses
incurred by such party in connection therewith, including reasonable attorneys'
and accountants' fees and disbursements.
11. Assignment. The rights and duties of the Employee hereunder are not
assignable. The Company may assign this Agreement and all rights and obligations
hereunder to any third
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party who becomes a successor to the Company's Business. Upon any such
assignment by the Company, the term "Company" as used herein shall be deemed to
include any such assignee of the Company, and the assignee shall have the right
to enforce all of the Company's rights and remedies hereunder in its own name as
if a party hereto in the place and stead of the Company. The Employee agrees to
confirm his obligations to any assignee, transferee, licensee or sublicensee of
the Company or their successors and assigns (a "Successor Employer") by
executing a new contract with such Successor Employer containing substantially
the same terms and conditions as herein provided; provided that such Successor
Employer also confirms to the Employee all of the Company's obligations as
herein provided.
12. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors-in-interest, heirs and personal
representatives and, to the extent permitted herein, the assigns of the Company.
13. Severability. If any provision of this Agreement or any part hereof or
the application hereof to any person or circumstance shall be finally determined
by a court of competent jurisdiction or by any arbitration panel to be invalid
or unenforceable to any extent, the remainder of this Agreement, or the
remainder of such provision or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby and each provision of this
Agreement shall remain in full force and effect to the fullest extent permitted
by law. The parties also agree that if any portion of this Agreement, or any
part hereof or application hereof, to any person or circumstance shall be
finally determined by a court of competent jurisdiction or arbitration panel to
be invalid or unenforceable to any extent, then such objectionable provision
shall be deemed modified to the extent necessary so as to make it valid,
reasonable and enforceable including, without limitation, modification of the
restrictive covenants of Section 8 with respect to geography, time or scope of
business.
14. Notices. Wherever provision is made in this Agreement for the giving
of any notice, such notice shall be in writing and shall be deemed to have been
duly given if mailed by first class United States mail, postage prepaid,
addressed to the party entitled to receive the same or if delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by overnight
courier to such party at the address specified below or to such other address,
in any such case, as any party hereto shall have last designated by notice to
each other party:
If to the Company:
INTEROFFICE (HOLDINGS) CORPORATION
11350 Random Hills Road
Suite 650
Fairfax, VA 22036
Attn: Chief Executive Officer
Telecopy: (703) 273-6811
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With a copy to: (i) Herrick, Feinstein LLP, 2 Park Avenue, New
York, New York 10016, Attn: Irwin A. Kishner, Esq., Telecopy:
212-889-7577; and (ii) Jason Barnett, Esq., General Counsel,
Reckson Realty Associates Corp., 225 Broadhollow Road,
Melville, New York 11747, Telecopy: 516-622-6788
If to the Employee:
T.J. TISON
at the address set forth in the recitals
Telecopy: 415-461-2624
With a copy to: Simpson, Aherne & Garrity, 1 Embarcadero
Center, Suite 240, San Francisco, California 94111, Attn:
Laura E. Innes, Esq., Telecopy: 415-678-2830.
All such notices, requests and other communications will: (i) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery; (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon the completion of the
facsimile transmission, if the receipt is confirmed by the telefax machine;
(iii) if delivered by overnight courier, be deemed given upon the first business
day after such notice, request or other communication is given to such courier
with all charges and fees prepaid and any required signature of the deliveree is
waived; and (iv) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other person to whom a copy of such notice, request or other communication
is to be delivered pursuant to this Section).
15. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior written or oral negotiations, representations,
agreements, commitments, contracts or understandings with respect thereto and no
modification, alteration or amendment to this Agreement may be made unless the
same shall be in writing and signed by both of the parties hereto.
16. Waivers. No failure by either party to exercise any of such party's
rights hereunder or to insist upon strict compliance with respect to any
obligation hereunder, and no custom or practice of the parties at variance with
the terms hereof, shall constitute a waiver by either party to demand exact
compliance with the terms hereof. Waiver by either party of any particular
default by the other party shall not affect or impair such party's rights in
respect to any subsequent default of the same or a different nature, nor shall
any delay or omission of either party to exercise any rights arising from any
default by the other party affect or impair such party's rights as to such
default or any subsequent default.
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17. Governing Law. For purposes of construction, interpretation and
enforcement, this Agreement shall be deemed to have been entered into under the
laws of the State of New York and its validity, effect, performance,
interpretation, construction and enforcement shall be governed by and subject to
the laws of the State of New York without reference to its choice of law rules.
18. Exclusive Jurisdiction. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in the county of New York, New York. Each of the Company
and the Employee, by execution and delivery of this Agreement: (i) expressly and
irrevocably consent and submit to the personal jurisdiction of any of such
courts in any such action or proceeding; (ii) consent to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party by hand or by U.S. certified mail
without return receipt requested, delivered or addressed as set forth in Section
14 of this Agreement; and (iii) waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
19. Interpretation. Section titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
20. Expenses. Each of the Company, on the one hand, and the Employee, on
the other, will pay all of their own costs and expenses incident to the
negotiation and preparation of this Agreement.
21. Miscellaneous.
21.1. This Agreement may be executed in one or more counterparts,
each of which shall be considered an original instrument, but all of which shall
be considered one and the same agreement.
21.2. The Section headings herein are for convenience of reference
only and shall not be used to construe the meaning of any provision of this
Agreement.
21.3. Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires. The
words "herein", "hereof", "hereby" or "hereto" shall refer to this Agreement
unless otherwise expressly provided. Any reference herein to a Section or any
exhibit or schedule shall be a reference to a Section of, and an exhibit or
schedule to, this Agreement unless the context otherwise requires.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
COMPANY:
INTEROFFICE (HOLDINGS) CORPORATION
By: /s/ Scott Rechler
-----------------------------------------
Name: Scott Rechler
Title: Co-Chairman
EMPLOYEE:
/s/ T.J. Tison
--------------------------------------------
T.J. TISON, Individually
-18-
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of July 20,
1998 by and between InterOffice (Holdings) Corporation, a Virginia corporation;
InterOffice Sacramento, LLC, a Delaware limited liability company (said entities
being referred to, respectively as "Holdings" and "Sacramento LLC" and jointly
as the "Company") and Stephen M. Fowler, an individual with an address at 7241
Gunderson Way, Carmichael, CA 95608 (the "Executive").
W I T N E S S E T H:
A. The Company, together with its affiliated companies, is engaged in the
Business (as defined below);
B. Holdings and Sacramento LLC executed an Asset Purchase Agreement of
even date herewith pursuant to which Sacramento LLC (of which Holdings is the
sole member) acquired certain assets (the "Acquisition") of Xebec Management
Services, Inc. ("Xebec") and XMS Greenhaven, Incorporated ("XMS");
C. The Executive holds a substantial stock interest in Xebec and XMS;
D. The Company desires to employ the Executive with the Company, and the
Executive desires to accept such employment, on the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions provided herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Employment, Duties and Authority.
1.1. Exclusive Devotion of Business Time.
(a) The Company agrees to employ the Executive and the Executive agrees to
devote his full business time, effort, skills and loyalty to the business of the
Company to effectively carry out his responsibilities to the Company hereunder
and to render his services and skills in the furtherance of the business of the
Company; provided, that this provision shall not prevent the Executive from: (i)
serving on civil and charitable boards, subject to the Company's policies and
standards; (ii) managing his
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investments and the investments of his immediate family, subject to the
Company's policies and standards; provided that the activities referenced in
clauses (i) and (ii) above do not, individually or in the aggregate, interfere
with the performance of the Executive's duties under this Agreement; and (iii)
operating the building located at 3550 Watt Avenue, Sacramento, California (or
any successor or replacement building).
(b) During the first six (6) months of the Executive's employment he shall
devote at least fifty percent (50%) of his time to the business and affairs of
the six executive office suites located in the Sacramento, California area which
were operated by Xebec and XMS prior to the Acquisition.
1.2. Title; Position. The Company agrees to employ the Executive as
its Regional Director. The primary responsibilities ("Primary Duties") of the
Executive shall be determined by the Board of Directors of Holdings (the
"Board") from time to time. Without limiting the foregoing, the Executive shall
serve at the request of the Board as a director or officer of any corporation of
any type or kind, domestic or foreign, or any partnership, limited liability
company or joint venture in the furtherance of the Business and shall otherwise
assist in the preparation of, and implementation of, the strategic business
plans of the Company.
1.3. Reporting. The Executive shall report to the Board and to such
other senior executives of the Company from time to time designated by the Board
(collectively, the "Management Team") in the manner from time to time reasonably
determined by the Board.
1.4. Cooperation. During the term of this Agreement, the Executive
agrees to give prompt notice to the Company of any material claim or injury
relating to the Company, and fully to cooperate in good faith and to the best of
his ability with the Company in connection with all pending, potential or future
claims, investigations or actions which directly or indirectly relate to any
transaction, event or activity about which the Executive may have knowledge
because of his employment with the Company. Such cooperation shall be at the
Company's expense and shall include all assistance that the Company, its
counsel, or its representatives may reasonably request, including reviewing and
interpreting documents, meeting with counsel, providing factual information and
material, and appearing or testifying as a witness. Notwithstanding anything to
the contrary in this Section 1.4, Executive shall have no obligation to
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provide assistance to the Company (or to any parent, subsidiary, or affiliate of
the Company) in any lawsuit, arbitration, or other proceeding brought by the
Company which relates to, arises out of, or is based upon the acquisition of
assets from Xebec or XMS Greenhaven including, without limitation, any claim for
indemnification.
1.5. Primary Office Location. The Executive shall perform his duties
at the office of the Company in Sacramento, California. The Executive shall
travel for business reasons from time to time as is necessary or advisable for
the performance of his duties hereunder. Notwithstanding the foregoing, the
Executive shall (a) not (during the first six (6) months of the Executive's
employment hereunder) be required to change his current residence and (b) shall
not be required to spend more than 25% of his working time outside of the
greater Sacramento area.
1.6. Performance of Duties. During the term of this Agreement, the
Executive shall perform the duties assigned to him which duties shall be
consistent with his position and shall observe and carry out such reasonable
rules, regulations, policies, directions and restrictions as the Board shall
from time to time establish and as are consistent with such rules, regulations,
policies, directions and restrictions imposed on senior executives of Holdings.
1.7. Certain Defined Terms. For the purposes of this Agreement, the
following terms shall have the respective meanings ascribed thereto in this
Section:
1.7.1. "Business" means the executive suite business, to wit:
providing lessees with furnished separate office space and use of on-site
administrative support services, such as receptionists, word processing or
secretarial assistance, office management, mail and courier facilities,
conference facilities, telecommunication services and sundries, as such business
is conducted on a specified date by the Company and as planned or projected to
be conducted during the one year period after such date.
1.7.2. "Cause" shall mean any of the following conditions:
(i) The Executive has engaged in conduct which: (A) is a
misdemeanor and involves moral turpitude or the property of the Company that has
a material adverse effect on the reputation, business or prospects of the
Company, or (B) is a felony under the laws of the United States or any state or
political subdivision thereof,
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(ii) The Executive (A) commits a breach of his fiduciary
duty to the Company or any of its affiliates, (B) is grossly negligent in the
performance of his duties, (C) engages in willful misconduct or (D) engages in
acts of self-dealing or acts which constitute a conflict of interest; provided
however that the Executive's ownership in the building located at 3550 Watt
Avenue, Sacramento, California (or any successor or replacement building) shall
not violate his Section 1.7.2.
(iii) The Executive violates the internal procedures or
policies of the Company in a manner which has a material adverse effect on the
reputation, business or prospects of the Company such as conduct constituting
employment discrimination or sexual harassment;
(iv) The Executive breaches any of his material
obligations hereunder and fails to remedy such breach within thirty (30) days
after notice thereof; or
(v) The Executive fails to satisfactorily perform his
duties hereunder after notice from the Company of such unsatisfactory
performance and a reasonable period of time to remedy the deficiency described
in such notice.
1.7.3. "Confidential Information" means all confidential and
proprietary information of the Company, including, without limitation,
information relating to or concerning Proprietary Products (as defined below)
and the exploitation of proprietary rights relating thereto; the Business; trade
secret information; client, investor, customer and supplier lists, and contracts
or arrangements; financial information (including financial statements, budgets
and projections); market research and development procedures, processes,
techniques, plans and results (including inconclusive results); all information
which may be included in any patent or copyright application or amendment
thereof or defense or litigation with respect thereto; marketing, licensing and
distribution or franchising strategies, plans or projections; investment or
acquisition opportunities, plans or strategies; products and asset composition;
pricing information or policies; royalty, franchising or licensing arrangements;
computer software, passwords, programs or data; and all other business related
information which has not been publicly disclosed by the Company or its
affiliates, whether such information is in written, graphic, recorded,
photographic, data or any machine readable form or is orally conveyed to, or
memorized by, or developed by the Executive; provided, that Confidential
Information shall not include
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information which: (i) at the time of disclosure is generally known in the
business and industry in which the Company is engaged; or (ii) after disclosure
is published or otherwise becomes generally known in such business or industry
through no fault of the Executive.
1.7.4. "Developments" means discoveries, concepts, ideas,
designs, methods, formulas, know-how, techniques, systems or any improvements or
enhancements thereon, whether or not patentable or copyrightable, made,
conceived, improved or developed, in whole or in part, by the Executive during
the term of this Agreement relating to: (i) any of the Company's or its
affiliates' products or services, potential products or services, developments
or techniques; or (ii) any work in which the Executive is or may be engaged on
behalf of the Company or its affiliates.
1.7.5. "Disability" means the Executive's physical or mental
incapacity which, in the reasonable good faith determination of the Board,
renders the Executive incapable of performing the essential functions of his
duties under this Agreement for any consecutive forty-five (45) day period or
for any sixty (60) days within any period of one hundred and twenty (120) days.
1.7.6. "Documents" means any and all books, textbooks,
letters, pamphlets, drafts, memoranda, notes, records, drawings, files,
documents, manuals, compilations of information, correspondence or other
writings of any kind and all copies, abstracts and summaries of any of the
foregoing, whether in printed, written or electronic data or any machine
readable form: (i) of the Company or its affiliates; or (ii) in the possession
or control of the Executive and pertaining to, and used in the furtherance of,
the Business.
1.7.7. "Good Reason" means: (i) the failure to pay in a timely
manner any compensation due to Executive hereunder that Company fails to remedy
within thirty (30) days after notice thereof by the Executive; (ii) a material
breach by the Company of any provision of this Agreement that the Company fails
to remedy or cease within thirty (30) days after notice thereof by the
Executive; (iii) the failure of the Company to adopt an Executive stock option
plan ("Option Plan") on or before August 31, 1999 and to issue options ("Stock
Options") to the Executive thereunder; and (iv) delivery by the Executive of
written notice to the Company within sixty (60) days after the issuance of such
Stock Options ("Option Objection Notice") which notice states that the number
and terms of Stock Options (including vesting schedule and terms) issued to the
Executive are not
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satisfactory to the Executive, and the Company and the Executive have not,
within thirty (30) days after delivery of the written notice to the Company,
executed an agreement concerning the number and terms of Stock Options to be
granted to the Executive.
1.7.8. "Proprietary Products" means collectively Documents,
Developments and Related Property; provided however that Proprietary Products
shall not include Documents, Developments, and Related Products, relating to the
operation of 3550 Watt Avenue, Sacramento, CA.
1.7.9. "Related Property" includes all tangible and intangible
property owned by, or licensed to, or otherwise used by the Company or its
affiliates including, without limitation, projects, programs, computer software
or hardware, data bases, technology, know-how, copyrights, trademarks, trade
names, service names, service marks, logos and designs and other proprietary
rights and registrations and applications and the rights to apply therefor.
1.7.10 "Temporary Disability" means the Executive's physical or
mental incapacity which, in the reasonable good faith determination of the
Board, renders the Executive incapable of performing the essential functions of
his Primary Duties and which condition does not meet the frequency or duration
criteria necessary pursuant to Section 1.7.5 for such disability to constitute
"Disability."
2. Compensation and Benefits.
2.1. Annual Salary and Covenant Payment.
From the date hereof until termination of the Executive's employment
hereunder in accordance with Section 3, the Company shall pay to the Executive a
fixed base salary at an annual rate of $108,000 (the "Salary"). The Company may,
in its sole discretion, increase the amount of Salary effective for any
specified year or part thereof during the term of this Agreement. In addition to
the Salary, the Executive shall be paid a fixed annual amount of $3,600 (the
"Covenant Payment" and, together with the Salary, the "Annual Payments") as
separate consideration for the Executive's covenants and agreements provided in
Section 8. The aggregate amount of each of the (i) salary; and (ii) covenant
payment shall be increased effective as of the end of each annual anniversary of
this Agreement in proportion to the proportionate annual increase in the
Consumer Price Index -- All Urban Consumers - National Area, 1997 being the base
year. The Annual Payments shall be paid to the Executive in accordance with the
normal
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payroll practices of the Company as in effect from time to time.
2.2. Performance Bonus. The Executive shall be eligible to receive
an annual performance bonus in such amounts, if any, as determined by the Board,
in its sole discretion considering such factors as it deems appropriate
including the success in achieving goals related to the Primary Duties and other
performance criteria determined from time to time by the Board and the direct
contribution by the Executive in any such success; provided, that in no event
shall the performance bonus of any year exceed fifty percent (50%) of the then
effective Annual Payments to the Executive. The Company undertakes, within sixty
(60) days after the date hereof, to establish a bonus plan which will include
the establishment of quarterly targets and clarify performance criteria.
2.3. Reimbursement of Expenses. The Company shall reimburse the
Executive for reasonable out-of-pocket expenses incurred by the Executive for
the benefit of the Company upon presentation of appropriate documentation in
accordance with Company policy in effect from time to time.
2.4. Vacation Time. The Executive shall be entitled to paid vacation
in accordance with the Company's policies in effect from time to time. Vacation
time shall accrue on a daily basis, and shall be taken at times when reasonably
appropriate given the Executive's responsibilities and consistent with the needs
of the Company and shall not be for a period greater than two weeks at a time
without the consent of the Company, which consent shall not be unreasonably
withheld. Notwithstanding anything to the Company's policies in effect from time
to time, the Company hereby acknowledges and agrees that the Executive is
carrying over from Xebec four (4) weeks of vacation and that the Company is
obligated to provide for this four weeks, in addition to any vacation accruals
from and after his employment with the Company under this Section 2.4.
2.5. Benefits. During the period that the Executive is employed by
the Company and for such longer period as required by applicable law, the
Executive shall be entitled to participate in the Executive benefit plans,
policies and programs, including health and disability insurance (collectively,
"Benefits"), on the same terms and conditions made available to other senior
Executives of the Company.
2.6. Executive Stock Options. The Executive shall be entitled to
participate in the Option Plan at the time it is
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adopted, together with other management Executives of the Company, on a basis
which gives due and equitable regard to the Executive's management and reporting
level and the level of Stock Option grants to Executives in comparable positions
within the Company and its affiliated companies covered by the Option Plan.
2.7. Withholding. All payments of compensation shall be subject to
all applicable withholding taxes and other legally required payroll deductions.
The Executive shall provide the Company with all information reasonably
requested by the Company with respect to such deductions and withholdings.
3. Term and Termination.
3.1. Term. Subject to Section 3.2, this Agreement shall have an
initial term of three (3) years commencing on the date hereof (the "Initial
Term"). The Initial Term may be extended upon the mutual agreement of the
Company and the Executive.
3.2. Termination.
3.2.1 Notwithstanding any provision herein to the contrary, the
Executive's employment hereunder shall be terminated upon any of the following
events: (i) the death or Disability of the Executive; or (ii) the termination of
the Executive by the Company; provided that any termination hereunder, other
than as a result of death, shall be communicated by a notice from the party
terminating the employment to the other party and such termination shall be
effective on the date such notice is deemed given by such party in accordance
with Section 14, unless a different effective date is specified in the notice;
provided further that either party, upon receipt of a notice of termination
specifying a future termination date, may require the termination to be
effective earlier than the date specified.
3.2.2 In the event of the Disability or Temporary Disability of the
Executive, the Company shall have the right to appoint: (i) a temporary
replacement to assume some or all of the Executive's duties in the event of a
Temporary Disability; and (ii) a permanent replacement if the Executive's
employment hereunder is terminated because of a Disability. During any period
the Executive is suffering a Temporary Disability, the Company will continue, on
the same terms and conditions, the Executive's Annual Payments, Benefits and
Performance Bonus. Any period of paid disability leave under this Section shall
be counted against any period
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of unpaid leave to which the Executive may be entitled under any federal, state
or local family and medical leave laws.
3.3. Payments Upon Termination of Employment. In the event of
termination of the Executive's employment hereunder pursuant to this Section 3:
3.3.1. The Executive (or his heirs, legatees or personal
representatives) shall be entitled to receive all compensation and benefits
specified in this Agreement which shall have accrued prior to the date of such
termination and the obligation of the Company for the payment of compensation,
and the right of the Executive to receive any further compensation or benefit,
except as provided by applicable law or otherwise provided herein, shall
terminate as at the date of such termination.
3.3.2. All rights of the Company or the Executive which shall
have accrued hereunder prior to the date of the Executive's termination, and the
provisions of this Agreement which are stated herein to survive termination,
shall survive such termination and the Company and the Executive shall continue
to be bound by such provisions in accordance with the terms hereof.
3.3.3. If the employment hereunder is terminated because of
the Executive's death or Disability, then the Company shall, in addition to the
payments under Section 3.3.1, pay any benefits which are expressly provided to
the Executive upon his death or Disability under the terms of any benefit plan,
policy or program in effect at the time of such death or Disability year. The
Company represents that it currently provides to its executives and will provide
to the Executive a life insurance policy payable to the Executive's designated
beneficiary in the amount of $50,000.
3.3.4. If the employment hereunder is terminated by the
Company for any reason other than for Cause or the death or Disability of the
Executive or if the employment hereunder is terminated by the Executive for Good
Reason, then the Company shall, subject to the terms and provisions of Section
3.5:
(i) pay to the Executive all Annual Payments to which
the Executive would have been entitled had the Executive continued working
through the remainder of the Initial Term (as the same may have been extended --
("Continuation Payments") payable on the dates such amounts would have been
otherwise payable to the Executive;
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(ii) continue through the end of the Initial Term (as
the same may have been extended) any benefits to which the Executive is entitled
("Benefit Continuations"), subject to the terms (including cost-sharing by the
Executive) of any such benefit plan, policy or program in effect on the date of
such termination, and only to the extent benefit continuation is permitted by
those benefit plans, policies and programs. Notwithstanding the foregoing
provisions of subsection (i) and (ii) of this Section 3.3, if the Executive
terminates his employment pursuant to Section 1.7.7(iv) (relating to the
delivery of an Option Objection Notice by the Executive) the Executive shall not
be entitled to Continuation Payments or Benefit Continuations; and
(iii) with respect to Benefit Continuations relating to
retirement and health insurance benefits, the Company at its election, in its
sole discretion, may provide the Executive with either: (A) benefits
substantially similar to those which the Executive was entitled to receive under
the health insurance and retirement programs of the Company in effect on the
date of termination, at a cost to the Executive which is no greater than the
cost to the Executive at the date of termination; or (B) the cost to replace
those benefits at substantially the same level.
3.4. Omitted.
3.5. Exclusive Benefits. Except as so provided in this Section 3, no
further benefits, compensation or rights of the Executive shall continue to
accrue after the date of the termination of the employment of the Executive
hereunder, except as required by law.
4. Ownership of Rights to Proprietary Products.
4.1. The Executive acknowledges and agrees that the Proprietary
Products are and shall be the exclusive and valuable property of the Company or
its affiliates, as the case may be, and the Executive shall neither have, nor
claim to have, any right, title or interest therein or thereto. All
opportunities relating to the Proprietary Products whether or not involving
third parties shall belong to and be carried out for the account of the Company.
4.2. Any and all Developments, to the extent that the Executive
assisted in or was partially or fully responsible for the development thereof,
shall be deemed work specifically ordered or commissioned by the Company and
each of such Developments shall be considered a "work made for
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hire" within the meaning of 17 U.S.C. ss.101 of the United States Copyright Act
and all rights to such work shall belong entirely to the Company. The Executive
shall from time to time upon the request of the Company promptly execute and
deliver to the Company any instruments necessary to effect the irrevocable
assignment of all of his right, title and interest, including copyright and
author rights, in such works to the Company and for the Company to obtain
proprietary rights in connection therewith.
4.3. The Executive's covenants under this Section 4 of this
Agreement shall survive the expiration or termination of this Agreement.
5. Confidentiality. The Executive acknowledges and agrees that it is
imperative to the success of the Company and its affiliates that all
Confidential Information be maintained in strict confidence at all times. The
Executive shall therefore retain in strict confidence and not, directly or
indirectly, copy or disclose or transfer to any third party any Confidential
Information except in the furtherance of the Business for the benefit of the
Company; nor shall he use Confidential Information for any purpose except for
the benefit of the Company or its affiliates. The Executive's covenants under
this Section 5 of this Agreement shall survive the expiration or termination of
this Agreement.
6. Documents. The Executive agrees that any and all Documents made or kept
by him shall be and are the sole and exclusive property of the Company. The
Executive agrees to execute and deliver to the Company or its affiliates, as the
case may be, any and all agreements or instruments of any nature which the
Company or its affiliates deem necessary or appropriate to acquire, enhance,
protect, perfect, assign, sell or transfer his rights under this Section. The
Executive also agrees that, upon request, he will place all Documents in the
Company's possession and will not remove or cause to be removed any Documents or
reproductions thereof, except as is necessary and customary to directly further
the Business for the benefit of the Company or with the prior consent of the
Company. Upon the expiration or termination of the employment of the Executive
hereunder, all Documents shall remain in the possession or control of the
Company and any Documents within the possession or control of the Executive or
any of his affiliates shall be promptly returned to the Company at its principal
office. The Executive's covenants under this Section 6 of this Agreement shall
survive the expiration or termination of this Agreement.
7. Developments.
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<PAGE>
7.1. The Executive shall communicate and fully disclose to the
Company any and all Developments made or conceived by him during his employment
with the Company, and any and all Developments which he may conceive or make,
during his employment with the Company, shall be at all times and for all
purposes regarded as acquired and held by his in a fiduciary capacity and solely
for the benefit of the Company and shall be the sole and exclusive property of
the Company.
7.2. The Executive shall assist the Company in every proper way upon
request to obtain for its benefit patents, copyrights, trade names, trademarks,
service names, service marks for any and all Proprietary Products and
Developments in the United States and all foreign countries. All such patents,
copyrights, trade names, trademarks, service names, service marks and any
registrations and applications therefor are to be, and remain, the exclusive
property of the Company and the Executive agrees that he will, whenever so
requested by the Company or its duly authorized agent, make, execute and deliver
to the Company its affiliates, successors, assigns, or nominees, without charge,
any and all applications, assignments and all other instruments which the
Company or its affiliates shall reasonably deem necessary or appropriate in
order to apply for and obtain such patents, copyrights, trade names, trademarks,
service names, and service marks or in order to assign and convey to the Company
or its affiliates, their successors, assigns or nominees, the sole and exclusive
right, title and interest therein and thereto. The Executive's obligations to
execute any such instruments shall continue notwithstanding the termination or
expiration of this Agreement.
8. Covenant Not to Compete. The Executive acknowledges and agrees that the
Proprietary Products are the exclusive and valuable property of the Company and
may not be used by the Executive for any purpose of any kind, directly or
indirectly, except during the term of this Agreement for the sole and exclusive
benefit of the Company in his capacity as an Executive of the Company and that
the success of the Company depends on the Executive's observance of his
covenants in this Section 8.
8.1. In consideration of the rights and benefits hereunder including
the Covenant Payments, the Executive agrees that so long as he is an Executive
or consultant of the Company on the same terms and conditions contained herein,
for the Restrictive Period (as hereinafter defined) he shall not directly or
indirectly:
8.1.1. Engage or participate in any business
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<PAGE>
or line of business that competes with the Business (or any line of business)
conducted by the Company or under consideration by the Company; or perform any
research or development or distribution or marketing services for any
Proprietary Product or any product which is related to the Business that could
be, directly or indirectly, developed, marketed or otherwise exploited by the
Company.
8.1.2. Solicit, hire or retain any Executive or consultant of
the Company or persuade or entice any such Executive or consultant to terminate
or lessen the extent of his, her or its relationship with the Company.
8.1.3. Engage in any activity to interfere with, disrupt or
damage the Business of the Company or its relationships with any of its clients,
customers, distributors, suppliers, investors or other financial co-venturer or
other business relationship, or engage in any activities in preparation for such
conduct.
8.1.4. Engage in business with, or provide advice or services
to, any person or entity which directly or indirectly competes with the Business
(or any line of business) of the Company.
8.1.5. For the purposes of this Agreement, the term
"Restrictive Period" shall mean the Initial Term (as the same may have been
extended). Notwithstanding the foregoing, if the Executive terminates his
employment pursuant to Section 1.7.7(iv) (relating to the delivery of an Option
Objection Notice by the Executive), then (a) the Restrictive Period as
applicable to subsection 8.1.1. shall terminate upon the Executive's termination
of employment, and (b) the non-competition provisions set forth in Section 6 of
the Asset Purchase Agreement shall terminate upon the Executive's termination of
employment.
8.2. For purposes of this Section 8, the term "Company" shall
include the Company and its subsidiaries and affiliates, including any entity
that directly or indirectly controls the business and affairs of the Company.
For purposes of this Section 8, Executive's work involving the management and
operation of the building at 3550 Watt Avenue, Sacramento (or any successor
building) shall not violate the terms of this Section 8.
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<PAGE>
9. Specific Enforcement.
9.1. The Executive is obligated under this Agreement to render
services and comply with covenants of a special, unique, unusual and
extraordinary character, thereby giving this Agreement peculiar value so that
the loss of such service or violation by the Executive of this Agreement could
not reasonably or adequately be compensated in damages in an action at law.
Therefore, in addition to any other remedies or sanctions provided by law,
whether criminal or civil, and without limiting the right of the Company and
successors or assigns to pursue all other legal and equitable rights available
to them, the Company shall have the right during the Executive's employment
hereunder (or thereafter with respect to obligations continuing after the
termination of this Agreement) to compel specific performance hereof by the
Executive or to obtain temporary and permanent injunctive relief against
violations hereof by the Executive, and, in furtherance thereof, to apply to any
court with jurisdiction over the parties hereto in accordance with Section 18 to
enforce the provisions hereof.
9.2. The Executive waives any requirement for security or the
posting of any bond or other surety and proof of damages in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief
and further agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
10. Legal Costs and Expenses. If any party hereto prevails in any
proceedings, legal or equitable, to enforce any obligations under this
Agreement, such party shall also be entitled to recover all costs and expenses
incurred by such party in connection therewith, including reasonable attorneys'
and accountants' fees and disbursements.
11. Assignment. The rights and duties of the Executive hereunder are not
assignable. The Company may assign this Agreement and all rights and obligations
hereunder to any third party who becomes a successor to the Company's Business.
Upon any such assignment by the Company, the term "Company" as used herein shall
be deemed to include any such assignee of the Company, and the assignee shall
have the right to enforce all of the Company's rights and remedies hereunder in
its own name as if a party hereto in the place and stead of the Company. The
Executive agrees to confirm his obligations to any assignee, transferee,
licensee or sublicensee of the Company or their successors and assigns (a
"Successor Employer") by executing a new contract with such Successor Employer
containing, in the aggregate, substantially the same
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<PAGE>
economic terms and conditions as herein provided; provided that such Successor
Employer also confirms to the Executive all of the Company's obligations as
herein provided.
12. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors-in-interest, heirs and personal
representatives and, to the extent permitted herein, the assigns of the Company.
13. Severability. If any provision of this Agreement or any part hereof or
the application hereof to any person or circumstance shall be finally determined
by a court of competent jurisdiction or by any arbitration panel to be invalid
or unenforceable to any extent, the remainder of this Agreement, or the
remainder of such provision or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby and each provision of this
Agreement shall remain in full force and effect to the fullest extent permitted
by law. The parties also agree that if any portion of this Agreement, or any
part hereof or application hereof, to any person or circumstance shall be
finally determined by a court of competent jurisdiction or arbitration panel to
be invalid or unenforceable to any extent, then such objectionable provision
shall be deemed modified to the extent necessary so as to make it valid,
reasonable and enforceable including, without limitation, modification of the
restrictive covenants of Section 8 with respect to geography, time or scope of
business.
14. Notices. Wherever provision is made in this Agreement for the giving
of any notice, such notice shall be in writing and shall be deemed to have been
duly given if mailed by first class United States mail, postage prepaid,
addressed to the party entitled to receive the same or if delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by overnight
courier to such party at the address specified below or to such other address,
in any such case, as any party hereto shall have last designated by notice to
each other party:
If to Xebec and/or XMS:
InterOffice Sacramento, Inc.
2 Manhattanville Road
Purchase, New York 10577
Attn: Board of Directors
Telecopy: 914-694-4614
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<PAGE>
With a copy to: (i) Herrick, Feinstein LLP, 2 Park Avenue, New York,
New York 10016, Attn: David A. Rosen, Esq., Telecopy: 212-889-7577; and (ii)
Jason Barnett, Esq., General Counsel, Reckson Realty Associates Corp., 225
Broadhollow Road, Melville, New York 11747, Telecopy: 516-622-6788
If to the Executive:
Steven M. Fowler
at the address set forth in the recitals
Telecopy: ____________
All such notices, requests and other communications will: (i) if
delivered personally to the address (with a signed receipt of acknowledgment) as
provided in this Section, be deemed given upon delivery; (ii) if delivered by
facsimile transmission to the facsimile number as provided in this Section, be
deemed given upon the completion of the facsimile transmission, if the receipt
is confirmed by the telefax machine; (iii) if delivered by overnight courier, be
deemed given upon the first business day after such notice, request or other
communication is given to such courier with all charges and fees prepaid and any
required signature of the deliveree is waived; and (iv) if delivered by mail in
the manner described above to the address as provided in this Section, be deemed
given upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section).
15. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior written or oral negotiations, representations,
agreements, commitments, contracts or understandings with respect thereto and no
modification, alteration or amendment to this Agreement may be made unless the
same shall be in writing and signed by both of the parties hereto.
16. Waivers. No failure by either party to exercise any of such party's
rights hereunder or to insist upon strict compliance with respect to any
obligation hereunder, and no custom or practice of the parties at variance with
the terms hereof, shall constitute a waiver by either party to demand exact
compliance with the terms hereof. Waiver by either party of any particular
default by the other party shall not affect or impair such party's rights in
respect to any
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<PAGE>
subsequent default of the same or a different nature, nor shall any delay or
omission of either party to exercise any rights arising from any default by the
other party affect or impair such party's rights as to such default or any
subsequent default.
17. Governing Law. For purposes of construction, interpretation and
enforcement, this Agreement shall be deemed to have been entered into under the
laws of the State of California and its validity, effect, performance,
interpretation, construction and enforcement shall be governed by and subject to
the laws of the State of California without reference to its choice of law
rules.
18. Exclusive Jurisdiction. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in the county of Sacramento, California. Each of the
Company and the Executive, by execution and delivery of this Agreement: (i)
expressly and irrevocably consent and submit to the personal jurisdiction of any
of such courts in any such action or proceeding; (ii) consent to the service of
any complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party by hand or by U.S. certified mail
without return receipt requested, delivered or addressed as set forth in Section
14 of this Agreement; and (iii) waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
19. Interpretation. Section titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
20. Expenses. Each of the Company, on the one hand, and the Executive, on
the other, will pay all of their own costs and expenses incident to the
negotiation and preparation of this Agreement.
21. Miscellaneous.
21.1. This Agreement may be executed in one or more counterparts,
each of which shall be considered an original instrument, but all of which shall
be considered one and the same agreement.
21.2. The Section headings herein are for convenience of reference
only and shall not be used to
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<PAGE>
construe the meaning of any provision of this Agreement.
21.3. Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires. The
words "herein", "hereof", "hereby" or "hereto" shall refer to this Agreement
unless otherwise expressly provided. Any reference herein to a Section or any
exhibit or schedule shall be a reference to a Section of, and an exhibit or
schedule to, this Agreement unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
COMPANY:
InterOffice Sacramento, LLC
by: InterOffice (Holdings) Corporation
(Sole Member)
By: /s/ Terrence J. Burns
----------------------------------
Name: Terrence J. Burns
Title: Secretary
InterOffice (Holdings) Corporation
By: /s/ Terrence J. Burns
----------------------------------
Name: Terrence J. Burns
Title: Secretary
EXECUTIVE:
/s/ Stephen M. Fowler
-------------------------------------
Stephen M. Fowler
Page 18
AGREEMENT
Agreement dated as of October 29, 1999 ("Agreement") among David W.
Beale, an individual residing at 3230 Hewlett Avenue, Merrick, New York 11564
(the "Employee"), Reckson Service Industries, Inc., a Delaware corporation
("RSI"), and VANTAS Incorporated, a Nevada corporation ("VANTAS"). Unless
otherwise defined, capitalized terms used herein shall have the meaning ascribed
to such terms in the Stockholders' Agreement (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Employee and VANTAS (f/k/a ALLIANCE National
Incorporated) are parties to an employment agreement dated November 15, 1996
(the "Employment Agreement");
WHEREAS, the Employee is a significant stockholder of VANTAS and
party to a Fifth Amended and Restated Stockholders' Agreement dated as of July
29, 1999 (the "Stockholders' Agreement") by and among VANTAS and the other
Securityholders identified therein;
WHEREAS, the Employee, in (i) further consideration of his continued
employment with VANTAS and (ii) consideration of maintaining a significant
equity position in VANTAS, has requested that RSI and VANTAS enter into this
Agreement; and
WHEREAS, each of RSI and VANTAS is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of VANTAS Equity Securities.
(a) Schedule A to this Agreement sets forth the number of (i) shares
of Common Stock and Preferred Stock (the "Outstanding Shares"), (ii) shares of
Common Stock issuable under Warrants (the "Warrant Shares") and (iii) shares of
Common Stock issuable under vested and unvested Options granted under the VANTAS
1996 Stock Option Plan beneficially owned (as such term is defined under Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) by the
Employee as of October 14, 1999 (collectively, the "Employee Securities"). The
Employee hereby represents to RSI that the information set forth on Schedule A
to this Agreement is true, correct and complete. The Employee hereby further
represents and warrants to RSI that he has not made any Transfer of any of his
Shares, Warrants or Options to a Permitted Transferee or otherwise.
(b) The Employee hereby acknowledges that in the event he shall
Transfer any of the Employee Securities to one or more Permitted Transferees,
the Employee Securities so Transferred shall continue to be subject to the terms
and conditions of this Agreement. The Employee hereby covenants, for the benefit
of RSI and VANTAS, that he shall cause each of his Permitted Transferees to take
all such action as shall be necessary in order to enable the Employee to fully
perform his obligations with respect to the Employee Securities hereunder.
<PAGE>
2. Exchange Transaction; Amendments to Employment Agreement and
Stockholders' Agreement.
(a) At the Exchange Closing (as hereinafter defined), RSI shall
issue the RSI Shares (as hereinafter defined) to the Employee in exchange (the
"Exchange Transaction") for the Exchange Securities (as hereinafter defined).
For purposes of this Agreement, the term "Exchange Securities" means that number
(which if not a whole number shall be rounded up to the nearest whole number) of
Option Shares (as hereinafter defined) equal to the product obtained by
multiplying (i) the number of shares of the Employee Securities by (ii) thirty
percent (30%); provided, however, that in the event the number of Option Shares
is insufficient to constitute all of the Exchange Securities, the balance (but
only the balance) of the Exchange Securities shall be comprised of Outstanding
Shares. For purposes of this Agreement, the term "Option Shares" means shares of
Common Stock issued as a result of the exercise, at or prior to the effective
time of the Exchange Closing, of Options included within the Employee
Securities. For purposes of this Agreement, the term "RSI Shares" means that
number (which if not a whole number shall be rounded up to the nearest whole
number) of shares of RSI's common stock, $0.01 par value per share ("RSI Common
Stock"), equal to the quotient obtained by dividing (i) the Exchange Amount (as
hereinafter defined) by (ii) $19.00. For purposes of this Agreement, the term
"Exchange Amount" means thirty percent (30%) of the sum of the (i) product
obtained by multiplying (A) $8.00 by (B) the number of Outstanding Shares and
Option Shares and (ii) difference between the (A) product obtained by
multiplying (1) $8.00 by (2) the number of Warrant Shares and shares of Common
Stock issuable under Options included within the Employee Securities, if any,
which have not been exercised at or prior to the effective time of the Exchange
Closing and (B) aggregate exercise price of the Warrants included within the
Employee Securities and Options, if any, included within the Employee Securities
which have not been exercised at or prior to the effective time of the Exchange
Closing. The Employee hereby acknowledges that in order to receive the RSI
Shares at the Exchange Closing, he must first take all necessary action
(including, without limitation, delivery of the exercise price therefor and all
required exercise documentation to VANTAS) to exercise all or a portion of his
Options included within the Employee Securities at or prior to the effective
time of the Exchange Closing.
(b) Subject to the closing of the purchase of the equity securities
of VANTAS covered by the Transfer Offer (as such term is defined in the
Stockholders' Agreement) made by Cahill, Warnock Strategic Partners Fund L.P.,
Strategic Associates L.P. and David L. Warnock, the closing (the "Exchange
Closing") for the Exchange Transaction shall be held at the offices of Herrick,
Feinstein LLP, 2 Park Avenue, New York, New York 10016 at 11:00 a.m. (New York
City time) on such date (which shall in no event be later than December 31,
1999) as shall be designated in writing by RSI to the Employee. At the Exchange
Closing, RSI shall deliver to the Employee the stock certificate evidencing the
RSI Shares registered in the name of the Employee, which shares shall have been
duly authorized and validly issued, and shall be fully paid and non-assessable
and free of preemptive rights. At the Exchange Closing, the Employee shall
deliver to RSI the stock certificate(s) evidencing the Exchange Securities, duly
endorsed in blank or accompanied by stock
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<PAGE>
powers duly executed in blank in proper form for transfer and with all required
stock transfer stamps attached, free and clear of any title defect, objection,
security interest, pledge, encumbrance, mortgage, lien, charge, claim, option,
preferential arrangement or restriction of any kind, including, but not limited
to, any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership (collectively, "Liens"), other than
those Liens, if any, existing under the Stockholders' Agreement. At the Exchange
Closing, VANTAS, subject to (i) the proviso contained in Section 3(a) hereof and
(ii) Section 3(c) hereof, shall deliver to the Employee a check payable to the
order of the Employee in an amount equal to the Additional Compensation (as
hereinafter defined).
(c) In connection with each registration statement filed by RSI
under the Securities Act of 1933, as amended (the "Securities Act"), after the
date of the Exchange Closing registering a secondary offering ("Offering") of
equity securities of RSI, RSI shall use commercially reasonable efforts to
afford the Employee "piggy back" registration rights with respect to the RSI
Shares issued to the Employee pursuant to this Agreement. Notwithstanding the
foregoing, in connection with each such Offering effected pursuant to the terms
of a registration rights or underwriting agreement ("Offering Agreement"), RSI
shall not be obligated to provide the aforesaid "piggy back" registration rights
unless the Employee shall have entered into a registration rights or
underwriting agreement with RSI containing terms and conditions similar to those
contained in the Offering Agreement.
(d) Effective upon the date of the Exchange Closing:
(i) Paragraph 7(d) of the Employment Agreement shall be
deleted in its entirety and be of no further force and
effect.
(ii) The Employee shall unconditionally and irrevocably
refrain from exercising and otherwise relinquish for the
benefit of each of VANTAS and RSI, any and all rights
afforded to him under Section 4.7 of the Stockholders'
Agreement, except as relates to options under the 1999
VANTAS Option Plan not vested at the time of
termination.
(iii) For so long as the Employee shall have the right under
Section 2.1 of the Stockholders' Agreement to nominate
three individuals (each a "Nominee") to serve on the
VANTAS board of directors, the Employee shall take all
action as may be requested from time to time by RSI to
nominate two (2) Nominees designated by RSI in its sole
and absolute discretion (the "RSI Nominees").
(iv) The Employee shall vote, and shall cause each of his
Permitted Transferees to vote, at all meetings of
stockholders of VANTAS and in all proceedings regarding
VANTAS where the vote or written
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<PAGE>
consent of stockholders may be required or authorized by
law, all of the Shares of which he or any of his
Permitted Transferees may from time to time possess
nominal or beneficial ownership in favor of the RSI
Nominees. To the extent the Employee or any of his
Permitted Transferees shall acquire additional Shares
after the date hereof, the Employee shall promptly give
written notice thereof to RSI. In order to provide for a
non-exclusive method to effectuate the voting agreement
set forth in this Section 2(d)(iv), the Employee
irrevocably appoints, and shall cause each of his
Permitted Transferees which may hereafter acquire
nominal or beneficial ownership of any Shares to
irrevocably appoint, RSI as the attorney and proxy for
the Employee or such Permitted Transferee, as the case
may be, with full power of substitution, to vote and
take such other actions contemplated by this Section
2(d)(iv) with respect to the Shares covered by this
Section 2(d)(iv) in such manner as RSI shall in its sole
and absolute discretion determine. On the date of the
Exchange Closing, the Employee shall execute and deliver
to RSI an irrevocable proxy ("Irrevocable Proxy"),
substantially in the form of Exhibit A attached hereto,
for all Shares nominally or beneficially owned by the
Employee on the date of the Exchange Closing.
Concurrently with each acquisition, if any, of nominal
or beneficial ownership of any Shares after the date
hereof by the Employee or any of his Permitted
Transferees, the Employee shall execute and deliver or
shall cause such Permitted Transferee to execute and
deliver, as the case may be, to RSI an Irrevocable Proxy
with respect to such Shares. The Employee acknowledges
for himself and each Permitted Transferee that executes
and delivers an Irrevocable Proxy pursuant hereto that
each such Irrevocable Proxy is coupled with an interest
granted for value.
(e) Except as expressly amended by this Agreement, all of the terms
and conditions of the Employment Agreement shall remain in full force and
effect.
(f) The Employee acknowledges that RSI and certain affiliates of RSI
party to the Stockholders' Agreement will in the future seek to amend the
Stockholders' Agreement. The Employee shall consent to and take all other action
as may be requested by RSI in order to amend the Stockholders' Agreement in a
manner consistent with the terms and provisions of this Section 2.
3. Additional Compensation.
(a) In connection with the Employee's receipt of the Exchange
Securities at the Exchange Closing, VANTAS shall make a cash payment (the
"Additional Compensation") to the
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<PAGE>
Employee, in the manner provided for in Section 2(b) hereof, in an amount that
after reduction for federal, state and local personal income taxes owed by the
Employee with respect to the Additional Compensation is sufficient to pay the
federal, state and local personal income taxes of the Employee arising from his
(i) exercise of the Options underlying the Option Shares and (ii) receipt of the
Exchange Securities; provided, however, that VANTAS' obligation to pay the
Additional Compensation is expressly conditioned upon the Employee having
demonstrated to VANTAS' reasonable satisfaction (prior to the date of the
Exchange Closing) the basis for the calculation of the Additional Compensation.
In the event that the Employee shall receive a refund ("Refund") from any
federal, state or local taxing authority on account of the taxes associated with
the Additional Compensation, the Employee shall promptly remit the full amount
of such Refund to VANTAS and, following VANTAS' receipt thereof, the amount of
the Additional Compensation for all purposes of this Agreement shall be reduced
by the amount of such Refund.
(b) In the event that either the (i) employment of the Employee is
terminated for "cause" as such term is defined in the VANTAS 1999 Stock Option
Plan or (ii) Employee voluntarily terminates his employment, in either case,
prior to the second anniversary of the date of the Exchange Closing (each a
"Repayment Event"), then the Employee shall be obligated to repay the Additional
Compensation to VANTAS within ninety (90) days after the date of the Repayment
Event. The Employee's obligation to repay the Additional Compensation pursuant
to this Section 3(b) shall be recourse only to the VANTAS equity securities
owned by the Employee and his Permitted Transferees on the date of the
occurrence of the Repayment Event and any proceeds realized from the sale of any
VANTAS equity securities pursuant to any long term incentive program hereafter
adopted by VANTAS, unless the Employee has transferred such securities in
violation of the Company's policy governing the Employee's right to transfer
such securities or in contravention of any agreement between the Employee and
the Company or RSI, in which event(s) the Employee's obligation to repay the
Additional Compensation shall be full personal recourse against the Employee.
(c) To secure the prompt payment to VANTAS of the Additional
Compensation in the event that a Repayment Event shall occur, the Employee
shall, at the Exchange Closing, execute and deliver to VANTAS UCC-1 financing
statements and a pledge agreement, in each case in form and substance
satisfactory to VANTAS, pursuant to which the Employee shall pledge and
otherwise grant to VANTAS a security interest in all of his right, title and
interest in the Employee Securities (other than the Exchange Securities).
Concurrently with the Employee's execution and delivery of the aforesaid pledge
agreement, the Employee shall also deliver to VANTAS the certificates and other
instruments representing the Employee Securities (other than the Exchange
Securities) required to be pledged thereunder.
4. Accredited Investor. Each of the Employee and RSI represents and
warrants to the other that he or it, as the case may be (i) is an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act); (ii) has requested and received all information he or it, as
the case may be, considers necessary or appropriate for deciding whether to
engage in the Exchange Transaction; (iii) has such knowledge and experience in
financial or business matters that
- 5 -
<PAGE>
he or it, as the case may be, is capable of evaluating the merits and risks of
engaging in Exchange Transaction; (iv) has the ability to protect his or its, as
the case may be, own interests in the Exchange Transaction; and (v) is
financially capable of bearing the total loss of his or its, as the case may be,
investment in any securities acquired pursuant to the Exchange Transaction. Each
of the Employee and RSI shall not transfer or otherwise dispose of any of the
securities subject to the Exchange Transactions, except in accordance with
applicable federal and state securities laws or the rules and regulations
promulgated thereunder.
5. Adjustments. In the event of any change in the number of shares
representing the shares of RSI Common Stock or any of the Employee Securities by
reason of any stock dividend, stock split, subdivision, merger,
recapitalization, consolidation, reorganization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
RSI or VANTAS (including, without limitation, the declaration or payment of an
extraordinary dividend of securities) which would have the effect of increasing
or decreasing the number of shares comprising the RSI Common Stock or the
Employee Securities, the number and kind of the shares subject to the Exchange
Transaction and the valuation and consideration payable in respect of such
shares shall be appropriately adjusted to restore to the parties hereto their
rights and privileges under this Agreement.
6. Specific Performance. The Employee recognizes and acknowledges
that the market for the Shares is limited and that, accordingly, in the event of
a breach or default by the Employee of the terms and conditions of this
Agreement involving any of the Employee Securities, the damages to RSI may be
impossible to ascertain and RSI will not have an adequate remedy at law. In the
event of any such breach or default, RSI shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction, either at law or
in equity, to enforce the specific performance of the terms and conditions of
this Agreement, to enjoin further violations of the provisions of this Agreement
and/or to obtain damages. Such remedies shall however be cumulative and not
exclusive and shall be in addition to any other remedies which RSI may have
under this Agreement or at law.
7. Legend. Each certificate, instrument or agreement representing
Employee Securities shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN AN AGREEMENT DATED AS OF OCTOBER 29, 1999, A COPY OF WHICH
MAY BE OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES SHALL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
8. Consent of VANTAS and RSI. VANTAS hereby covenants for the
benefit of the Employee that it shall take all such necessary action to adopt
the long term incentive program (the "Program") substantially in the form
described on Schedule B to this Agreement no later than
- 6 -
<PAGE>
February 28, 2000. RSI hereby covenants for the benefit of the Employee that it
shall recommend to the individuals nominated by RSI and who are serving on the
VANTAS board of directors that they vote in favor of the adoption of the
Program.
9. Miscellaneous.
(a) This Agreement contains, and is intended as, a complete
statement of all of the terms of the arrangements and understandings among the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings among the parties with respect to those
matters.
(b) This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of New York without regard to its
principles of conflicts of law. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New York, New York. In the event of any dispute as to
the terms of this Agreement, the prevailing party in any litigation or other
proceeding shall be entitled to its reasonable attorneys' fees, costs and
expenses in connection therewith.
(c) All notices and other communications under this Agreement shall
be in writing and shall be hand delivered, mailed by registered or certified
mail, return receipt requested (with a copy simultaneously by ordinary mail), or
recognized overnight delivery service to the parties at the following addresses
(or to such other address as a party may have specified by notice given to the
other parties pursuant to this provision):
If to RSI, to:
Reckson Service Industries, Inc.
10 East 50th Street
New York, New York 10022
Attention: Jason M. Barnett, Esq.
Stephen M. Rathkopf, Esq.
with a copy to:
Herrick, Feinstein LLP
Two Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
- 7 -
<PAGE>
If to VANTAS, to:
VANTAS Incorporated
90 Park Avenue
New York, New York 10016
Attention: Steven M. Cooperman, Esq.
If to the Employee, to:
David W. Beale
3230 Hewlett Avenue
Merrick, New York 11564
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five (5) business days after being deposited in
the mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
(d) No provision of this Agreement may be amended or modified except
by an instrument or instruments in writing signed by the parties hereto. The
failure of a party at any time or times to require performance of any provision
hereof shall in no manner be deemed to affect the party's right at a later time
to enforce the same. No waiver by any party of the breach of any term contained
in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such breach or of the breach of any other term or provision of this
Agreement.
(e) This Agreement shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns. The rights and obligations of any party hereto may not be assigned or
transferred without the prior written consent of the other parties hereto.
(f) From and after the date hereof, each of the parties hereto
agrees to execute and deliver such further documents and instruments and to do
such other acts and things any of them, as the case may be, may reasonably
request in order to effectuate the transactions contemplated by this Agreement.
(g) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires.
(h) Time shall be of the essence with respect to all notices
required to be given, all payments and other deliveries required to be made and
all conditions required to be satisfied under this Agreement.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
VANTAS INCORPORATED
By: /s/ Alan Langer
----------------------------------------
Name: Alan Langer
Title: Chief Financial Officer
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Jason Barnett
----------------------------------------
Name: Jason Barnett
Title: Executive Vice President
By: /s/ David W. Beale
----------------------------------------
Name: David W. Beale
- 9 -
AGREEMENT
Agreement dated as of October 29, 1999 ("Agreement") among Alan M.
Langer, an individual residing at Strawberry Lane, Irvington, New York 10533
(the "Employee"), Reckson Service Industries, Inc., a Delaware corporation
("RSI"), and VANTAS Incorporated, a Nevada corporation ("VANTAS"). Unless
otherwise defined, capitalized terms used herein shall have the meaning ascribed
to such terms in the Stockholders' Agreement (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Employee is a stockholder of VANTAS and party to a
Fifth Amended and Restated Stockholders' Agreement dated as of July 29, 1999
(the "Stockholders' Agreement") by and among VANTAS and the other
Securityholders identified therein;
WHEREAS, the Employee and VANTAS are parties to an employment
agreement dated as of the date hereof (the "Employment Agreement");
WHEREAS, the Employee has requested that RSI and VANTAS enter into
this Agreement in order to encourage the Employee to maintain his equity
position in, and continue his employment with, VANTAS; and
WHEREAS, each of RSI and VANTAS is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of VANTAS Equity Securities.
(a) Schedule A to this Agreement sets forth the number of (i) shares
of Common Stock and Preferred Stock (the "Outstanding Shares"), (ii) shares of
Common Stock issuable under Warrants (the "Warrant Shares") and (iii) shares of
Common Stock issuable under vested and unvested Options granted under the VANTAS
1996 Stock Option Plan beneficially owned (as such term is defined under Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) by the
Employee as of October 14, 1999 (collectively, the "Employee Securities"). The
Employee hereby represents to RSI that the information set forth on Schedule A
to this Agreement is true, correct and complete. The Employee hereby further
represents and warrants to RSI that he has not made any Transfer of any of his
Shares, Warrants or Options to a Permitted Transferee or otherwise.
(b) The Employee hereby acknowledges that in the event he shall
Transfer any of the Employee Securities to one or more Permitted Transferees,
the Employee Securities so Transferred shall continue to be subject to the terms
and conditions of this Agreement. The Employee hereby covenants, for the benefit
of RSI and VANTAS, that he shall cause each of his
<PAGE>
Permitted Transferees to take all such action as shall be necessary in order to
enable the Employee to fully perform his obligations with respect to the
Employee Securities hereunder.
2. Exchange Transaction.
(a) At the Exchange Closing (as hereinafter defined), RSI shall
issue the RSI Shares (as hereinafter defined) to the Employee in exchange (the
"Exchange Transaction") for the Exchange Securities (as hereinafter defined).
For purposes of this Agreement, the term "Exchange Securities" means that number
(which if not a whole number shall be rounded up to the nearest whole number) of
Option Shares (as hereinafter defined) equal to the product obtained by
multiplying (i) the number of shares of the Employee Securities by (ii) thirty
percent (30%); provided, however, that in the event the number of Option Shares
is insufficient to constitute all of the Exchange Securities, the balance (but
only the balance) of the Exchange Securities shall be comprised of Outstanding
Shares. For purposes of this Agreement, the term "Option Shares" means shares of
Common Stock issued as a result of the exercise, at or prior to the effective
time of the Exchange Closing, of Options included within the Employee
Securities. For purposes of this Agreement, the term "RSI Shares" means that
number (which if not a whole number shall be rounded up to the nearest whole
number) of shares of RSI's common stock, $0.01 par value per share ("RSI Common
Stock"), equal to the quotient obtained by dividing (i) the Exchange Amount (as
hereinafter defined) by (ii) $19.00. For purposes of this Agreement, the term
"Exchange Amount" means thirty percent (30%) of the sum of the (i) product
obtained by multiplying (A) $8.00 by (B) the number of Outstanding Shares and
Option Shares and (ii) difference between the (A) product obtained by
multiplying (1) $8.00 by (2) the number of Warrant Shares and shares of Common
Stock issuable under Options included within the Employee Securities, if any,
which have not been exercised at or prior to the effective time of the Exchange
Closing and (B) aggregate exercise price of the Warrants included within the
Employee Securities and Options, if any, included within the Employee Securities
which have not been exercised at or prior to the effective time of the Exchange
Closing. The Employee hereby acknowledges that in order to receive the RSI
Shares at the Exchange Closing, he must first take all necessary action
(including, without limitation, delivery of the exercise price therefor and all
required exercise documentation to VANTAS) to exercise all or a portion of his
Options included within the Employee Securities at or prior to the effective
time of the Exchange Closing.
(b) Subject to the closing of the purchase of the equity securities
of VANTAS covered by the Transfer Offer (as such term is defined in the
Stockholders' Agreement) made by Cahill, Warnock Strategic Partners Fund L.P.,
Strategic Associates L.P. and David L. Warnock, the closing (the "Exchange
Closing") for the Exchange Transaction shall be held at the offices of Herrick,
Feinstein LLP, 2 Park Avenue, New York, New York 10016 at 11:00 a.m. (New York
City time) on such date (which shall in no event be later than December 31,
1999) as shall be designated in writing by RSI to the Employee. At the Exchange
Closing, RSI shall deliver to the Employee the stock certificate evidencing the
RSI Shares registered in the name of the Employee, which shares shall have been
duly authorized and validly issued, and shall be fully paid and non-assessable
and free of preemptive rights. At the Exchange Closing, the Employee shall
deliver to RSI the stock
- 2 -
<PAGE>
certificate(s) evidencing the Exchange Securities, duly endorsed in blank or
accompanied by stock powers duly executed in blank in proper form for transfer
and with all required stock transfer stamps attached, free and clear of any
title defect, objection, security interest, pledge, encumbrance, mortgage, lien,
charge, claim, option, preferential arrangement or restriction of any kind,
including, but not limited to, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership
(collectively, "Liens"), other than those Liens, if any, existing under the
Stockholders' Agreement. At the Exchange Closing, VANTAS, subject to (i) the
proviso contained in Section 3(a) hereof and (ii) Section 3(c) hereof, shall
deliver to the Employee a check payable to the order of the Employee in an
amount equal to the Additional Compensation (as hereinafter defined).
(c) In connection with each registration statement filed by RSI
under the Securities Act of 1933, as amended (the "Securities Act"), after the
date of the Exchange Closing registering a secondary offering ("Offering") of
equity securities of RSI, RSI shall use commercially reasonable efforts to
afford the Employee "piggy back" registration rights with respect to the RSI
Shares issued to the Employee pursuant to this Agreement. Notwithstanding the
foregoing, in connection with each such Offering effected pursuant to the terms
of a registration rights or underwriting agreement ("Offering Agreement"), RSI
shall not be obligated to provide the aforesaid "piggy back" registration rights
unless the Employee shall have entered into a registration rights or
underwriting agreement with RSI containing terms and conditions similar to those
contained in the Offering Agreement.
3. Additional Compensation.
(a) In connection with the Employee's receipt of the Exchange
Securities at the Exchange Closing, VANTAS shall make a cash payment (the
"Additional Compensation") to the Employee, in the manner provided for in
Section 2(b) hereof, in an amount that after reduction for federal, state and
local personal income taxes owed by the Employee with respect to the Additional
Compensation is sufficient to pay the federal, state and local personal income
taxes of the Employee arising from his (i) exercise of the Options underlying
the Option Shares and (ii) receipt of the Exchange Securities; provided,
however, that VANTAS' obligation to pay the Additional Compensation is expressly
conditioned upon the Employee having demonstrated to VANTAS' reasonable
satisfaction (prior to the date of the Exchange Closing) the basis for the
calculation of the Additional Compensation. In the event that the Employee shall
receive a refund ("Refund") from any federal, state or local taxing authority on
account of the taxes associated with the Additional Compensation, the Employee
shall promptly remit the full amount of such Refund to VANTAS and, following
VANTAS' receipt thereof, the amount of the Additional Compensation for all
purposes of this Agreement shall be reduced by the amount of such Refund.
(b) In the event that either the (i) employment of the Employee is
terminated for "cause" as such term is defined in the VANTAS 1999 Stock Option
Plan or (ii) Employee voluntarily terminates his employment, in either case,
prior to the second anniversary of the date of the Exchange Closing (each a
"Repayment Event"), then the Employee shall be obligated to repay
- 3 -
<PAGE>
the Additional Compensation to VANTAS within ninety (90) days after the date of
the Repayment Event. The Employee's obligation to repay the Additional
Compensation pursuant to this Section 3(b) shall be recourse only to the VANTAS
equity securities owned by the Employee and his Permitted Transferees on the
date of the occurrence of the Repayment Event and any proceeds realized from the
sale of any VANTAS equity securities pursuant to any long term incentive program
hereafter adopted by VANTAS, unless the Employee has transferred such securities
in violation of the Company's policy governing the Employee's right to transfer
such securities or in contravention of any agreement between the Employee and
the Company or RSI, in which event(s) the Employee's obligation to repay the
Additional Compensation shall be full personal recourse against the Employee.
(c) To secure the prompt payment to VANTAS of the Additional
Compensation in the event that a Repayment Event shall occur, the Employee
shall, at the Exchange Closing, execute and deliver to VANTAS UCC-1 financing
statements and a pledge agreement, in each case in form and substance
satisfactory to VANTAS, pursuant to which the Employee shall pledge and
otherwise grant to VANTAS a security interest in all of his right, title and
interest in the Employee Securities (other than the Exchange Securities).
Concurrently with the Employee's execution and delivery of the aforesaid pledge
agreement, the Employee shall also deliver to VANTAS the certificates and other
instruments representing the Employee Securities (other than the Exchange
Securities) required to be pledged thereunder.
4. Accredited Investor. Each of the Employee and RSI represents and
warrants to the other that he or it, as the case may be (i) is an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act); (ii) has requested and received all information he or it, as
the case may be, considers necessary or appropriate for deciding whether to
engage in the Exchange Transaction; (iii) has such knowledge and experience in
financial or business matters that he or it, as the case may be, is capable of
evaluating the merits and risks of engaging in the Exchange Transaction; (iv)
has the ability to protect his or its, as the case may be, own interests in the
Exchange Transaction; and (v) is financially capable of bearing the total loss
of his or its, as the case may be, investment in any securities acquired
pursuant to the Exchange Transaction. Each of the Employee and RSI shall not
transfer or otherwise dispose of any of the securities subject to the Exchange
Transaction, except in accordance with applicable federal and state securities
laws or the rules and regulations promulgated thereunder.
5. Adjustments. In the event of any change in the number of shares
representing the shares of RSI Common Stock or any of the Employee Securities by
reason of any stock dividend, stock split, subdivision, merger,
recapitalization, consolidation, reorganization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
RSI or VANTAS (including, without limitation, the declaration or payment of an
extraordinary dividend of securities) which would have the effect of increasing
or decreasing the number of shares comprising the RSI Common Stock or the
Employee Securities, the number and kind of the shares subject to the Exchange
Transaction and the valuation and consideration payable in respect of such
- 4 -
<PAGE>
shares shall be appropriately adjusted to restore to the parties hereto their
rights and privileges under this Agreement.
6. Specific Performance. The Employee recognizes and acknowledges
that the market for the Shares of VANTAS is limited and that, accordingly, in
the event of a breach or default by the Employee of the terms and conditions of
this Agreement involving any of the Employee Securities, the damages to RSI may
be impossible to ascertain and RSI will not have an adequate remedy at law. In
the event of any such breach or default, RSI shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction, either at law or
in equity, to enforce the specific performance of the terms and conditions of
this Agreement, to enjoin further violations of the provisions of this Agreement
and/or to obtain damages. Such remedies shall however be cumulative and not
exclusive and shall be in addition to any other remedies which RSI may have
under this Agreement or at law.
7. Legend. Each certificate, instrument or agreement representing
Employee Securities shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN AN AGREEMENT DATED AS OF OCTOBER 29, 1999, A COPY OF WHICH
MAY BE OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES SHALL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
8. Covenants of VANTAS and RSI. VANTAS hereby covenants for the
benefit of the Employee that it shall take all such necessary action to adopt
the long term incentive program (the "Program") substantially in the form
described on Schedule B to this Agreement no later than February 28, 2000. RSI
hereby covenants for the benefit of the Employee that it shall recommend to the
individuals nominated by RSI and who are serving on the VANTAS board of
directors that they vote in favor of the adoption of the Program.
9. Miscellaneous.
(a) This Agreement contains, and is intended as, a complete
statement of all of the terms of the arrangements and understandings among the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings among the parties with respect to those
matters.
(b) This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of New York without regard to its
principles of conflicts of law. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New York, New York. In the event of any dispute
- 5 -
<PAGE>
as to the terms of this Agreement, the prevailing party in any litigation or
other proceeding shall be entitled to its reasonable attorneys' fees, costs and
expenses in connection therewith.
(c) All notices and other communications under this Agreement shall
be in writing and shall be hand delivered, mailed by registered or certified
mail, return receipt requested (with a copy simultaneously by ordinary mail), or
recognized overnight delivery service to the parties at the following addresses
(or to such other address as a party may have specified by notice given to the
other parties pursuant to this provision):
If to RSI, to:
Reckson Service Industries, Inc.
10 East 50th Street
New York, New York 10022
Attention: Jason M. Barnett, Esq.
Stephen M. Rathkopf, Esq.
with a copy to:
Herrick, Feinstein LLP
Two Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
If to VANTAS, to:
VANTAS Incorporated
90 Park Avenue
New York, New York 10016
Attention: Steven M. Cooperman, Esq.
If to the Employee, to:
Alan M. Langer
Strawberry Lane
Irvington, New York 10533
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five (5) business days after being deposited in
the mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
- 6 -
<PAGE>
(d) No provision of this Agreement may be amended or modified except
by an instrument or instruments in writing signed by the parties hereto. The
failure of a party at any time or times to require performance of any provision
hereof shall in no manner be deemed to affect the party's right at a later time
to enforce the same. No waiver by any party of the breach of any term contained
in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such breach or of the breach of any other term or provision of this
Agreement.
(e) This Agreement shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns. The rights and obligations of any party hereto may not be assigned or
transferred without the prior written consent of the other parties hereto.
(f) From and after the date hereof, each of the parties hereto
agrees to execute and deliver such further documents and instruments and to do
such other acts and things any of them, as the case may be, may reasonably
request in order to effectuate the transactions contemplated by this Agreement.
(g) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires.
(h) Nothing contained in this Agreement shall enlarge, restrict or
otherwise modify the respective rights and obligations of the Employee and
VANTAS under the Employment Agreement.
(i) Time shall be of the essence with respect to all notices
required to be given, all payments and other deliveries required to be made and
all conditions required to be satisfied under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY OMITTED;
SIGNATURE PAGE TO FOLLOW]
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
VANTAS INCORPORATED
By: /s/ David W. Beale
----------------------------------------
Name: David W. Beale
Title: President
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Jason Barnett
----------------------------------------
Name: Jason Barnett
Title: Executive Vice President
By: /s/ Alan M. Langer
----------------------------------------
Name: Alan M. Langer
- 8 -
AGREEMENT
Agreement dated as of October 29, 1999 ("Agreement") among Mitchell
Barry Knecht, an individual residing at 90 Short Hills Road, Short Hills, New
Jersey 07078 (the "Employee"), Reckson Service Industries, Inc., a Delaware
corporation ("RSI"), and VANTAS Incorporated, a Nevada corporation ("VANTAS").
Unless otherwise defined, capitalized terms used herein shall have the meaning
ascribed to such terms in the Stockholders' Agreement (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Employee is a stockholder of VANTAS and party to a
Fifth Amended and Restated Stockholders' Agreement dated as of July 29, 1999
(the "Stockholders' Agreement") by and among VANTAS and the other
Securityholders identified therein;
WHEREAS, the Employee is an "at will" employee of VANTAS;
WHEREAS, the Employee has requested that RSI and VANTAS enter into
this Agreement in order to encourage the Employee to maintain his equity
position in, and continue his employment with, VANTAS; and
WHEREAS, each of RSI and VANTAS is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of VANTAS Equity Securities.
(a) Schedule A to this Agreement sets forth the number of (i) shares
of Common Stock and Preferred Stock (the "Outstanding Shares"), (ii) shares of
Common Stock issuable under Warrants (the "Warrant Shares") and (iii) shares of
Common Stock issuable under vested and unvested Options granted under the VANTAS
1996 Stock Option Plan beneficially owned (as such term is defined under Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) by the
Employee as of October 14, 1999 (collectively, the "Employee Securities"). The
Employee hereby represents to RSI that the information set forth on Schedule A
to this Agreement is true, correct and complete. The Employee hereby further
represents and warrants to RSI that he has not made any Transfer of any of his
Shares, Warrants or Options to a Permitted Transferee or otherwise.
(b) The Employee hereby acknowledges that in the event he shall
Transfer any of the Employee Securities to one or more Permitted Transferees,
the Employee Securities so Transferred shall continue to be subject to the terms
and conditions of this Agreement. The Employee hereby covenants, for the benefit
of RSI and VANTAS, that he shall cause each of his
<PAGE>
Permitted Transferees to take all such action as shall be necessary in order to
enable the Employee to fully perform his obligations with respect to the
Employee Securities hereunder.
2. Exchange Transaction.
(a) At the Exchange Closing (as hereinafter defined), RSI shall
issue the RSI Shares (as hereinafter defined) to the Employee in exchange (the
"Exchange Transaction") for the Exchange Securities (as hereinafter defined).
For purposes of this Agreement, the term "Exchange Securities" means that number
(which if not a whole number shall be rounded up to the nearest whole number) of
Option Shares (as hereinafter defined) equal to the product obtained by
multiplying (i) the number of shares of the Employee Securities by (ii) thirty
percent (30%); provided, however, that in the event the number of Option Shares
is insufficient to constitute all of the Exchange Securities, the balance (but
only the balance) of the Exchange Securities shall be comprised of Outstanding
Shares. For purposes of this Agreement, the term "Option Shares" means shares of
Common Stock issued as a result of the exercise, at or prior to the effective
time of the Exchange Closing, of Options included within the Employee
Securities. For purposes of this Agreement, the term "RSI Shares" means that
number (which if not a whole number shall be rounded up to the nearest whole
number) of shares of RSI's common stock, $0.01 par value per share ("RSI Common
Stock"), equal to the quotient obtained by dividing (i) the Exchange Amount (as
hereinafter defined) by (ii) $19.00. For purposes of this Agreement, the term
"Exchange Amount" means thirty percent (30%) of the sum of the (i) product
obtained by multiplying (A) $8.00 by (B) the number of Outstanding Shares and
Option Shares and (ii) difference between the (A) product obtained by
multiplying (1) $8.00 by (2) the number of Warrant Shares and shares of Common
Stock issuable under Options included within the Employee Securities, if any,
which have not been exercised at or prior to the effective time of the Exchange
Closing and (B) aggregate exercise price of the Warrants included within the
Employee Securities and Options, if any, included within the Employee Securities
which have not been exercised at or prior to the effective time of the Exchange
Closing. The Employee hereby acknowledges that in order to receive the RSI
Shares at the Exchange Closing, he must first take all necessary action
(including, without limitation, delivery of the exercise price therefor and all
required exercise documentation to VANTAS) to exercise all or a portion of his
Options included within the Employee Securities at or prior to the effective
time of the Exchange Closing.
(b) Subject to the closing of the purchase of the equity securities
of VANTAS covered by the Transfer Offer (as such term is defined in the
Stockholders' Agreement) made by Cahill, Warnock Strategic Partners Fund L.P.,
Strategic Associates L.P. and David L. Warnock, the closing (the "Exchange
Closing") for the Exchange Transaction shall be held at the offices of Herrick,
Feinstein LLP, 2 Park Avenue, New York, New York 10016 at 11:00 a.m. (New York
City time) on such date (which shall in no event be later than December 31,
1999) as shall be designated in writing by RSI to the Employee. At the Exchange
Closing, RSI shall deliver to the Employee the stock certificate evidencing the
RSI Shares registered in the name of the Employee, which shares shall have been
duly authorized and validly issued, and shall be fully paid and non-assessable
and free of preemptive rights. At the Exchange Closing, the Employee shall
deliver to RSI the stock
- 2 -
<PAGE>
certificate(s) evidencing the Exchange Securities, duly endorsed in blank or
accompanied by stock powers duly executed in blank in proper form for transfer
and with all required stock transfer stamps attached, free and clear of any
title defect, objection, security interest, pledge, encumbrance, mortgage, lien,
charge, claim, option, preferential arrangement or restriction of any kind,
including, but not limited to, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership
(collectively, "Liens"), other than those Liens, if any, existing under the
Stockholders' Agreement. At the Exchange Closing, VANTAS, subject to (i) the
proviso contained in Section 3(a) hereof and (ii) Section 3(c) hereof, shall
deliver to the Employee a check payable to the order of the Employee in an
amount equal to the Additional Compensation (as hereinafter defined).
(c) In connection with each registration statement filed by RSI
under the Securities Act of 1933, as amended (the "Securities Act"), after the
date of the Exchange Closing registering a secondary offering ("Offering") of
equity securities of RSI, RSI shall use commercially reasonable efforts to
afford the Employee "piggy back" registration rights with respect to the RSI
Shares issued to the Employee pursuant to this Agreement. Notwithstanding the
foregoing, in connection with each such Offering effected pursuant to the terms
of a registration rights or underwriting agreement ("Offering Agreement"), RSI
shall not be obligated to provide the aforesaid "piggy back" registration rights
unless the Employee shall have entered into a registration rights or
underwriting agreement with RSI containing terms and conditions similar to those
contained in the Offering Agreement.
3. Additional Compensation.
(a) In connection with the Employee's receipt of the Exchange
Securities at the Exchange Closing, VANTAS shall make a cash payment (the
"Additional Compensation") to the Employee, in the manner provided for in
Section 2(b) hereof, in an amount that after reduction for federal, state and
local personal income taxes owed by the Employee with respect to the Additional
Compensation is sufficient to pay the federal, state and local personal income
taxes of the Employee arising from his (i) exercise of the Options underlying
the Option Shares and (ii) receipt of the Exchange Securities; provided,
however, that VANTAS' obligation to pay the Additional Compensation is expressly
conditioned upon the Employee having demonstrated to VANTAS' reasonable
satisfaction (prior to the date of the Exchange Closing) the basis for the
calculation of the Additional Compensation. In the event that the Employee shall
receive a refund ("Refund") from any federal, state or local taxing authority on
account of the taxes associated with the Additional Compensation, the Employee
shall promptly remit the full amount of such Refund to VANTAS and, following
VANTAS' receipt thereof, the amount of the Additional Compensation for all
purposes of this Agreement shall be reduced by the amount of such Refund.
(b) In the event that either the (i) employment of the Employee is
terminated for "cause" as such term is defined in the VANTAS 1999 Stock Option
Plan or (ii) Employee voluntarily terminates his employment, in either case,
prior to the second anniversary of the date of the Exchange Closing (each a
"Repayment Event"), then the Employee shall be obligated to repay
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<PAGE>
the Additional Compensation to VANTAS within ninety (90) days after the date of
the Repayment Event. The Employee's obligation to repay the Additional
Compensation pursuant to this Section 3(b) shall be recourse only to the VANTAS
equity securities owned by the Employee and his Permitted Transferees on the
date of the occurrence of the Repayment Event and any proceeds realized from the
sale of any VANTAS equity securities pursuant to any long term incentive program
hereafter adopted by VANTAS, unless the Employee has transferred such securities
in violation of the Company's policy governing the Employee's right to transfer
such securities or in contravention of any agreement between the Employee and
the Company or RSI, in which event(s) the Employee's obligation to repay the
Additional Compensation shall be full personal recourse against the Employee.
(c) To secure the prompt payment to VANTAS of the Additional
Compensation in the event that a Repayment Event shall occur, the Employee
shall, at the Exchange Closing, execute and deliver to VANTAS UCC-1 financing
statements and a pledge agreement, in each case in form and substance
satisfactory to VANTAS, pursuant to which the Employee shall pledge and
otherwise grant to VANTAS a security interest in all of his right, title and
interest in the Employee Securities (other than the Exchange Securities).
Concurrently with the Employee's execution and delivery of the aforesaid pledge
agreement, the Employee shall also deliver to VANTAS the certificates and other
instruments representing the Employee Securities (other than the Exchange
Securities) required to be pledged thereunder.
4. Accredited Investor. Each of the Employee and RSI represents and
warrants to the other that he or it, as the case may be (i) is an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act); (ii) has requested and received all information he or it, as
the case may be, considers necessary or appropriate for deciding whether to
engage in the Exchange Transaction; (iii) has such knowledge and experience in
financial or business matters that he or it, as the case may be, is capable of
evaluating the merits and risks of engaging in the Exchange Transaction; (iv)
has the ability to protect his or its, as the case may be, own interests in the
Exchange Transaction; and (v) is financially capable of bearing the total loss
of his or its, as the case may be, investment in any securities acquired
pursuant to the Exchange Transaction. Each of the Employee and RSI shall not
transfer or otherwise dispose of any of the securities subject to the Exchange
Transaction, except in accordance with applicable federal and state securities
laws or the rules and regulations promulgated thereunder.
5. Adjustments. In the event of any change in the number of shares
representing the shares of RSI Common Stock or any of the Employee Securities by
reason of any stock dividend, stock split, subdivision, merger,
recapitalization, consolidation, reorganization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
RSI or VANTAS (including, without limitation, the declaration or payment of an
extraordinary dividend of securities) which would have the effect of increasing
or decreasing the number of shares comprising the RSI Common Stock or the
Employee Securities, the number and kind of the shares subject to the Exchange
Transaction and the valuation and consideration payable in respect of such
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<PAGE>
shares shall be appropriately adjusted to restore to the parties hereto their
rights and privileges under this Agreement.
6. Specific Performance. The Employee recognizes and acknowledges
that the market for the Shares of VANTAS is limited and that, accordingly, in
the event of a breach or default by the Employee of the terms and conditions of
this Agreement involving any of the Employee Securities, the damages to RSI may
be impossible to ascertain and RSI will not have an adequate remedy at law. In
the event of any such breach or default, RSI shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction, either at law or
in equity, to enforce the specific performance of the terms and conditions of
this Agreement, to enjoin further violations of the provisions of this Agreement
and/or to obtain damages. Such remedies shall however be cumulative and not
exclusive and shall be in addition to any other remedies which RSI may have
under this Agreement or at law.
7. Legend. Each certificate, instrument or agreement representing
Employee Securities shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN AN AGREEMENT DATED AS OF OCTOBER 29, 1999, A COPY OF WHICH
MAY BE OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES SHALL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
8. Covenants of VANTAS and RSI. VANTAS hereby covenants for the
benefit of the Employee that it shall take all such necessary action to adopt
the long term incentive program (the "Program") substantially in the form
described on Schedule B to this Agreement no later than February 28, 2000. RSI
hereby covenants for the benefit of the Employee that it shall recommend to the
individuals nominated by RSI and who are serving on the VANTAS board of
directors that they vote in favor of the adoption of the Program.
9. Miscellaneous.
(a) This Agreement contains, and is intended as, a complete
statement of all of the terms of the arrangements and understandings among the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings among the parties with respect to those
matters.
(b) This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of New York without regard to its
principles of conflicts of law. All actions and proceedings arising out of, or
relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New York, New York. In the event of any dispute
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<PAGE>
as to the terms of this Agreement, the prevailing party in any litigation or
other proceeding shall be entitled to its reasonable attorneys' fees, costs and
expenses in connection therewith.
(c) All notices and other communications under this Agreement shall
be in writing and shall be hand delivered, mailed by registered or certified
mail, return receipt requested (with a copy simultaneously by ordinary mail), or
recognized overnight delivery service to the parties at the following addresses
(or to such other address as a party may have specified by notice given to the
other parties pursuant to this provision):
If to RSI, to:
Reckson Service Industries, Inc.
10 East 50th Street
New York, New York 10022
Attention: Jason M. Barnett, Esq.
Stephen M. Rathkopf, Esq.
with a copy to:
Herrick, Feinstein LLP
Two Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner, Esq.
If to VANTAS, to:
VANTAS Incorporated
90 Park Avenue
New York, New York 10016
Attention: Steven M. Cooperman, Esq.
If to the Employee, to the Employee's
address contained in the preamble of this Agreement.
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five (5) business days after being deposited in
the mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
(d) No provision of this Agreement may be amended or modified except
by an instrument or instruments in writing signed by the parties hereto. The
failure of a party at any time or times to require performance of any provision
hereof shall in no manner be deemed to affect the party's right at a later time
to enforce the same. No waiver by any party of the breach of any term
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<PAGE>
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such breach or of the breach of any other term or provision of this
Agreement.
(e) This Agreement shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns. The rights and obligations of any party hereto may not be assigned or
transferred without the prior written consent of the other parties hereto.
(f) From and after the date hereof, each of the parties hereto
agrees to execute and deliver such further documents and instruments and to do
such other acts and things any of them, as the case may be, may reasonably
request in order to effectuate the transactions contemplated by this Agreement.
(g) Any word or term used in this Agreement in any form shall be
masculine, feminine, neuter, singular or plural, as proper reading requires.
(h) Nothing contained in this Agreement shall confer upon the
Employee any right to continue to render services to VANTAS or affect the right
of VANTAS to terminate the employment of the Employee at any time with or
without cause, reason or justification. The Employee hereby acknowledges for the
benefit of VANTAS the "at will" nature of its employment with VANTAS.
(i) Time shall be of the essence with respect to all notices
required to be given, all payments and other deliveries required to be made and
all conditions required to be satisfied under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY OMITTED;
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
VANTAS INCORPORATED
By: /s/ David W. Beale
----------------------------------------
Name: David W. Beale
Title: President
RECKSON SERVICE INDUSTRIES, INC.
By: /s/ Jason Barnett
----------------------------------------
Name: Jason Barnett
Title: Executive Vice President
By: /s/ Mitchell Barry Knecht
----------------------------------------
Name: Mitchell Barry Knecht
- 8 -
PROMISSORY NOTE
AND PLEDGE AGREEMENT
$950,000.00
August 4, 1998
New York, New York
David W. Beale ("Maker") promises to pay on August 4, 2001 (the
"Maturity Date"), to the order of ALLIANCE National Incorporated at 90 Park
Avenue, Suite 3100, New York, New York 10016 ("Payee"), the principal amount of
NINE HUNDRED FIFTY THOUSAND DOLLARS ($950,000.00).
This Note shall accrue interest on the principal amount hereof at a
rate of 5.48% per annum, calculated on the basis of a 365 day year. Maker shall
pay accrued interest annually on August 4 of each year and on the Maturity Date.
This Note may be prepaid in whole or in part without premium or
penalty at any time and from time to time at the option of the Maker. Any
prepayments shall be applied first to accrued and unpaid interest, and then to
outstanding principal.
The rights, duties and obligations of (a) Maker under this Note may
not be assigned without the prior consent of Payee and (b) Payee under this Note
may be assigned without the prior consent of Maker.
In order to secure (i) the due and punctual payment of all monetary
obligations hereunder of Maker to Payee and any reasonable costs and expenses
(including, but not limited to, all legal fees and expenses) of collection or
enforcement of any such obligations and (ii) the due and punctual payment of any
costs and expenses incurred in connection with the realization of the security
for which this Note provides and any reasonable costs and expenses (including,
but not limited to, all legal fees and expenses) incurred in connection with any
proceedings to which this Note may give rise (collectively referred to herein as
"Liabilities"), Maker hereby transfers, assigns, grants, bestows, sells, conveys
and pledges to Payee a first security interest in the Collateral (as herein
defined), which security interest shall remain in full force and effect until
all of the Liabilities shall have been paid in full to Payee.
For purposes of this Note, "Collateral" shall mean all of Maker's
right, title and interest in and to 200,000 shares of Series B Convertible
Preferred Stock, par value $.01 per share, represented by stock certificate
number PB-041, that Maker owns in Payee; and all proceeds and products thereof
(as the foregoing terms are defined in the Uniform Commercial Code as in effect
in the State of New York). Concurrently with the Maker's execution and delivery
of this Note, Maker has (a) duly executed in blank a stock power required by the
pledge of the Collateral hereunder; (b) delivered the stock certificate
representing the Collateral to Payee to be held by Payee pending the payment in
full of this Note; and (c) irrevocably appointed Payee as Maker's
attorney-
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<PAGE>
in-fact to complete the stock power to realize upon the Collateral upon
nonpayment of principal or interest under this Note, with such appointment being
coupled with an interest.
Except as contemplated by this Note, Maker shall not encumber or
grant a security interest in any of the Collateral, without the prior written
consent of Payee, and Maker hereby represents that he has not done so heretofore
and, other than the grant of the security interest contemplated hereby, the
Collateral pledged by him hereunder is, and will be, owned by him free and clear
of all liens and encumbrances.
This Note shall be governed by, and construed in accordance with the
internal laws of the State of New York without giving effect to the conflict of
laws provisions thereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note and
Pledge Agreement as of the date first above written.
/s/ David W. Beale
----------------------------------------
David W. Beale
ALLIANCE NATIONAL INCORPORATED
1999 STOCK OPTION PLAN
<PAGE>
ALLIANCE NATIONAL INCORPORATED
1999 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSES
1.1 Establishment and Effective Date. Alliance National Incorporated, a
Nevada corporation (the "Corporation"), hereby establishes a stock option plan
to be known as the "Alliance National Incorporated 1999 Stock Option Plan" (the
"Plan"). The Plan shall become effective as of May 7, 1999, subject to the
approval of the stockholders of the Corporation (which is to be obtained within
twelve (12) months before or after the effective date of the Plan). Upon
approval of the Plan by the Compensation Committee of the Board of Directors of
the Corporation (the "Committee"), awards may be made directly by the Board of
Directors of the Corporation (the "Board") or under its supervision, through the
agency of its Committee. In the event that such stockholder approval is not
obtained within twelve (12) months before or after the effective date of the
Plan, any awards made hereunder shall be canceled and all rights of employees,
directors and consultants with respect to such awards shall thereupon
automatically cease. Such shares shall not be counted in determining whether
such approval is granted.
1.2 Purposes. The purposes of the Plan are (i) to encourage and enable
employees, directors and consultants (subject to such requirements as may be
prescribed by either the Board or the Committee) of the Corporation, its
subsidiaries and its affiliates to acquire a proprietary interest in the growth
and performance of the Corporation, (ii) to generate an increased incentive for
employees, directors and consultants to contribute to the Corporation's future
success and prosperity (as well as the success and prosperity of its
subsidiaries and affiliates), thus enhancing the value of the Corporation for
the benefit of its stockholders, and (iii) to enhance the ability of the
Corporation, its subsidiaries and its affiliates to attract and retain
employees, directors and consultants who are essential to the progress, growth
and profitability of the Corporation, its subsidiaries and its affiliates, in
each case through the ownership of the Corporation's $.01 per share par value
class A common stock ("Class A Common Stock"), and certain other rights relating
to the Class A Common Stock.
ARTICLE 2
AWARDS
2.1 Form of Awards. Awards under the Plan shall take the form of options
granted to eligible employees, directors and consultants of the Corporation and
its subsidiaries ("Optionees") to acquire Class A Common Stock. Awards under the
Plan may be granted in either or both of the following forms: (i) incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") and the terms
of Sections 5.2 and 5.5 of this Plan; and (ii) non-qualified stock options
("Non-qualified Stock
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Options") (unless otherwise indicated, references in the Plan to "Options" shall
include both Incentive Stock Options and Non-qualified Stock Options).
2.2 Maximum Shares Available; Maximum Annual Awards. The maximum aggregate
number of shares of Class A Common Stock available for award under the Plan
(pursuant to the granting of Options) shall be 2,851,000, subject to adjustment
in the event of any transaction described in Article 8 hereof. The total number
of shares issuable upon exercise of all outstanding Options shall not exceed a
number of shares which is equal to thirty percent (30%) of the then outstanding
shares of common stock and preferred stock of the Corporation. If, on the date
of grant of any Options hereunder, the Class A Common Stock or any other class
of common equity securities of the Corporation is required to be registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), then the maximum number of shares subject to options that may be
granted to any employee during any calendar year under the Plan (the "162(m)
Maximum") shall be 500,000 shares, subject to adjustment in the event of any
transaction described in Article 8. Shares of Class A Common Stock issued under
the Plan (pursuant to the granting of Options) may be either authorized but
unissued shares or issued shares reacquired by the Corporation. In the event
that prior to the end of the period during which Options may be granted under
the Plan, any Option under the Plan expires unexercised or is terminated,
surrendered or canceled without being exercised in whole or in part for any
reason, then such unexercised shares shall be available for subsequent awards
under the Plan upon such terms and conditions as the Committee may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award, either
the Board or the Committee shall have the right, in its sole discretion, to
require Optionees to return to the Corporation awards previously granted under
the Plan. Subject to the provisions of the Plan, such new award shall be upon
such terms and conditions as are specified by the Board or the Committee, as the
case may be, at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 Board; Committee. Awards shall be determined, and the Plan shall be
administered under the supervision of, the Board, which may exercise its powers
directly or, to the extent herein provided, through the Committee. The Committee
may be appointed from time to time by the Board, and shall consist solely of two
or more persons, each of whom shall qualify as (i) a "Non-Employee Director", as
that term is defined in subparagraph (b)(3)(i)of Rule 16b-3 ("Rule 16b-3")
promulgated under the 1934 Act, and (ii) an "outside director", within the
meaning of Section 162(m) of the Code and the Treasury Regulations promulgated
thereunder.
3.2 Powers of the Board and the Committee. Subject to the express
provisions of the Plan, the Board and the Committee shall have the power and
authority: (i) to grant Options and to determine the purchase price of the
shares of Class A Common Stock covered by each
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Option (the "Option Shares"), the term of each Option, the number of Option
Shares to be covered by each Option, the time or times at which each Option
shall become exercisable and the duration of the exercise period applicable to
each Option; (ii) to designate Options as Incentive Stock Options or
Non-qualified Stock Options; (iii) to determine the employees, directors and
consultants to whom, and the time or times at which, Options shall be granted or
made; and (iv) to take all other actions contemplated to be taken by the Board
or the Committee, as the case may be, under the Plan, including, but not limited
to, authorizing any written agreement relating to any award made hereunder (an
"Option Agreement"), as well as any amendment thereto.
3.3 Delegation. The Board and the Committee each may delegate to one or
more of its respective members or to any other person or persons such
ministerial duties as it may deem advisable; provided, however, that neither the
Board nor the Committee may delegate any of its responsibilities hereunder to
any person who is not both a "Non-Employee Director", as that term is defined in
subparagraph (b)(3)(i) of Rule 16b-3, and an "outside director", within the
meaning of Section 162(m) of the Code. The Board and the Committee may also
employ attorneys, consultants, accountants or other professional advisors and
shall be entitled to rely upon the advice, opinions or valuations of any such
advisors.
3.4 Interpretations. The Board and the Committee shall each have
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Board or the Committee in good faith shall be final
and binding upon the Corporation, all employees, directors and consultants who
have received awards under the Plan and all other interested persons.
3.5 Liability; Indemnification. No member of the Board or the Committee,
nor any person to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's articles of incorporation and by-laws, as amended
from time to time, or under any agreement between any such member and the
Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all employees, directors and consultants of the
Corporation or any of its subsidiaries or affiliates (subject to such
requirements as may be prescribed by the Board or the Committee). In determining
the employees, directors and consultants to whom awards shall be granted and the
number of Option Shares to be covered by each award, the Board or the Committee,
as the case may be, shall take into account the nature of the services rendered
by such employees, directors and consultants, their present and potential
contributions to the success of the Corporation,
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its subsidiaries and its affiliates and such other factors as the Board or the
Committee, as the case may be, in its sole discretion shall deem relevant.
ARTICLE 5
OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of Option Shares. Options shall be granted in such form and upon such
terms and conditions, as the Board or the Committee, as the case may be, shall
from time to time determine.
5.2 Exercise Price. The purchase price per Option Share under each Option
(the "Exercise Price") shall be determined by the Board or the Committee, as the
case may be, (subject to adjustment as provided in Article 8). The exercise
price per Option Share in the case of Incentive Stock Options shall not be less
than the Market Price (as defined below) of the Option Share on the date of
grant. The exercise price per Option Share in the case of Non-qualified Stock
Options issued to Optionees working or resident in the State of California shall
not be less than 85% of the Market Price of the Option Share on the date of
grant. In the case of Options granted to any Optionee owning (actually or
constructively under Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Corporation or of a
subsidiary (a "10% Stockholder"), the exercise price shall not be less than 110%
of the Market Price of the Option Share on the date of grant.
5.3 Exercise and Payment.
(a) Options which are vested in accordance with Section 5.4 hereof
or an outstanding option agreement may be exercised in whole or in part. Shares
of Class A Common Stock purchased upon the exercise of Options shall be paid for
at the time of purchase. To exercise vested Options, in whole or in part, the
Optionee shall deliver to the Corporation, at its principal executive offices in
New York City (or such other office of the Corporation in the United States as
the Corporation may designate by notice in writing to the Optionee) an executed
Stock Purchase Agreement (as defined below) or, at the Board or Committee's sole
discretion, an exercise letter, accompanied by payment as follows (or by any
combination of the following), in the sole discretion of the Board or Committee:
(i) in United States currency by delivery of a certified or bank check or wire
transfer of federal funds payable to the order of the Corporation, (ii) by
surrender of a number of Mature Shares (as defined below) held by the optionee
exercising the Option equal to the quotient obtained by dividing (A) the
aggregate purchase price payable with respect to the Options then being
exercised by (B) the Market Price (as defined below) on the date of exercise or
(iii) if the Corporation has established a program for the cashless exercise of
Options through a broker or other similar arrangements or programs, then in
accordance with the terms and conditions of such programs and arrangements. Any
shares so delivered shall be valued at their Market Price (as defined below) on
the date of exercise. Upon the Corporation's receipt of the required documents
and full payment for the Option Shares, the Optionee shall be deemed to be the
holder of record of the Option Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the
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Corporation shall then be closed or that certificates representing such Option
Shares shall not then be actually delivered to the Optionee, and the Corporation
shall, as promptly as practicable, and in any event within five (5) business
days thereafter, execute or cause to be executed and delivered to the Optionee,
or as the Optionee may direct, a certificate or certificates representing the
aggregate number of Option Shares for which Options are exercised. Each stock
certificate so delivered shall be in such denomination as may be requested by
the Optionee. If Options shall have been exercised only in part, the Corporation
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Optionee an amended or revised Option Agreement evidencing the
portion of the Option which remains exercisable. The Corporation shall pay all
expenses, stock transfer taxes, if any, and other charges payable in connection
with the preparation, execution and delivery of stock certificates pursuant to
this Section 5.3, except that, in case such stock certificates shall be
registered in a name or names other than the name of the Optionee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
execution and delivery of such stock certificate or certificates shall be paid
by the Optionee to the Corporation at the time.
(b) "Mature Shares" shall mean shares of Class A Common Stock owned
by the optionee for a period of at least six consecutive months prior to the
exercise of the Option(s) in question.
(c) "Market Price" shall mean, at the date of determination for any
security (including, without limitation, the Class A Common Stock), the average
of the closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any
day such security is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which Market Price is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the Market Price shall be the fair value thereof
determined by the Board in its good faith discretion. In no event shall the
Market Price of a share of stock subject to an Incentive Stock Option be less
than the fair market value as determined for purposes of Section 422(b)(4) of
the Code.
(d) "Stock Purchase Agreement" shall mean an agreement, in such form
as shall be provided by the Committee from time to time, setting forth the terms
under which the Optionee acquires and holds the shares acquired pursuant to the
excise of an Option, including (i) a representation to the Corporation that the
exercise of the Option is for investment only and not with a view to
distribution of the shares acquired thereby, (ii) subjecting the shares acquired
pursuant to the Option to a right of repurchase by the Corporation in the event
the Optionee's employment is terminated prior to a public offering of the class
of the Corporation's securities held pursuant to the exercise of the Option and
(iii) such other terms as the Committee deems appropriate.
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5.4 Vesting. Options granted to Optionees shall vest, and shall become
exercisable for the first time, in accordance with the following:
(a) Except as provided in the Stock Option Agreement between the
Corporation and Optionee, Options will vest to the extent of one third (1/3)
thereof on the first anniversary of their date of grant, and an additional one
third (1/3) thereof on each subsequent anniversary of the date of grant,
provided the Optionee is employed by the Corporation or a subsidiary on such
date, so that Options shall vest ratably over a three-year period commencing
with the date of grant; provided, however, that Options may become 100% vested
at any time or during any period established by the Board or Committee. In the
case Optionees working or resident in the State of California who are not
officers or directors of or consultants to the Corporation, Options shall in any
event vest at the rate of at least 20% per year over the five (5) year period
beginning on the date of grant.
(b) If the Corporation is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the
Corporation's assets or otherwise (an "Acquisition"), the Committee shall in its
sole discretion as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substitution on an equitable basis for
the shares then subject to such Options the consideration payable with respect
to the outstanding shares of Class A Common Stock in connection with the
Acquisition; (ii) upon written notice to the Optionees, provide that all Options
shall become immediately exercisable and must be exercised within 60 days of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options (including those that are not yet exercisable) in exchange
for a cash payment or other consideration equal to the excess of the Market
Price of the shares subject to such Options over the exercise price thereof.
(c) Options granted to any non-management director of the
Corporation shall become 100% vested at such time as such director ceases to be
a director of the Corporation, except if such director is removed from the Board
with cause (as defined with respect to Optionees in Section 7.2 below.)
(d) Options held by an Optionee who is an employee of or consultant
to the Corporation at the time of his or her death shall vest immediately upon
the death of such Optionee.
5.5 Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision thereto, and any regulations
promulgated thereunder and the Plan shall be interpreted accordingly. The
aggregate Market Price (determined at the time of grant of the Incentive Stock
Option) of the Option Shares with respect to which the Incentive Stock Options
become exercisable for the first time by an optionee in any calendar year (under
all plans of the Corporation and its subsidiaries) shall not exceed $100,000.
Any Option grant that exceeds such amount shall be granted as Non-qualified
Stock Options. No grant of an Incentive Stock Option shall be made under the
Plan more than ten (10) years after the effective date of the Plan, nor shall
any Incentive Stock
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Option be exercisable after the expiration of ten (10) years from the date such
Option is granted, or 5 years from the date the Option is granted in the case of
a 10% Stockholder (as defined in Section 5.2).
5.6 Conversion of Incentive Stock Options. The Committee, at the written
request of any Optionee, may in its discretion, take such actions as may be
necessary to convert such Optionee's Incentive Stock Options (or any portions
thereof) that have not been exercised on the date of conversion into
Non-qualified Stock Options at any time prior to the expiration of such
Incentive Stock Options. At the time of such conversion, the Committee may
impose such conditions on the exercise of the resulting Non-qualified Stock
Options, consistent with this Plan, as the Committee in its discretion may
determine. Nothing in the Plan shall be deemed to give any Optionee the right to
have such Optionee's Incentive Stock Options converted into Non-qualified Stock
Options.
ARTICLE 6
LEGENDS; NONTRANSFERABILITY OF OPTIONS
6.1 Legends. All certificates evidencing shares of Class A Common Stock
acquired pursuant to the exercise of an Option granted hereunder shall bear any
legend required by the Committee or any securities exchange upon which shares of
Class A Common Stock may, at the time of such exercise, be listed, and, prior to
an initial public offering, the following additional legend on the face thereof:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered,
sold or transferred only if registered pursuant to the provisions of such
laws, or if in the opinion of counsel satisfactory to the Corporation, an
exemption from such registration is available."
6.2 Nontransferability of Options. No Option may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option shall be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of an
Option not specifically permitted herein shall be null and void and without
effect. An Option may be exercised only by the Optionee during his or her
lifetime, or following his or her death pursuant to Section 7.1 hereof.
ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
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7.1 General Rule. Except as otherwise expressly provided in the Option
Agreement relating to any Option or as otherwise expressly determined by the
Board or the Committee, as the case may be, in its sole discretion, in the event
that an Optionee ceases to be an employee, director or consultant of the
Corporation, its subsidiaries or affiliates (a "Terminated Person") for any
reason (including, but not limited to death or retirement), any Options which
were held by such Terminated Person on the date on which he or she ceased to be
an employee, director or consultant (the "Termination Date") and which were
vested and exercisable (including those options that became vested and
exercisable pursuant to Section 5.4(d)) on such date shall continue to be
exercisable in accordance with their terms for at least six (6) months from the
date of termination of employment with the Corporation (after which such Options
shall expire), but all Options not vested and exercisable on the Terminated
Person's Termination Date shall immediately terminate and be forfeited. Options
shall not be affected by any change of employment so long as the recipient
continues to be employed by either the Corporation or a subsidiary or affiliate.
For purposes of the Plan, an employment relationship shall be deemed to exist
between an individual and the Corporation or any of its subsidiaries if, at the
time of the determination, the individual was an employee of such Corporation
for purposes of Section 422(a) of the Code. As a result, an individual on
military, sick leave or other bona fide leave of absence shall continue to be
considered an employee for purposes of the Plan during such leave if the period
of the leave does not exceed 90 days, or, if longer, so long as the individual's
right to reemployment with the Corporation or any of its subsidiaries is
guaranteed either by statute or by contract. If the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed by statute or
by contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave. Any vested and exercisable Options which were held
by such Terminated Person at the date of death and which were otherwise
exercisable on such date (including those options that became vested and
exercisable pursuant to Section 5.4(d) shall be exercisable by the beneficiary
designated by the Terminated Person for such purpose (the "Designated
Beneficiary"), or if no Designated Beneficiary shall be appointed or if the
Designated Beneficiary shall predecease the Terminated Person, by the Terminated
Person's personal representatives, heirs or legatees.
7.2 Termination for Cause. Notwithstanding the provisions of Section 7.1
and except as expressly determined by the Committee in its sole discretion, an
Optionee's vested and unvested Options shall be forfeited upon an employee's
termination of employment or a director's removal from the Board or any board of
directors of a subsidiary or affiliate of the Corporation, if the Optionee's
termination was for "cause". For purposes of this Section 7.2, the term "cause"
shall mean any one (or more) of the following: (i) the Optionees commission of
any fraud, misappropriation or misconduct which causes demonstrable injury to
the Corporation or a subsidiary or affiliate; or (ii) an act of dishonesty by
the Optionee resulting or intended to result, directly or indirectly, in gain or
personal enrichment at the material expense of the Corporation or a subsidiary
or affiliate. It shall be within the sole discretion of the Committee to
determine whether an employee's termination was for one of the foregoing
reasons, and its decision shall be final and conclusive, unless, in the case of
an employment agreement between the employee and the Corporation, another means
of resolution is expressly provided.
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ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
8.1 Subdivision or Combination of Class A Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Class A Common Stock into a greater number
of shares, the Exercise Price of all Options granted under this Plan in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Option Shares with respect to which any such Options granted hereunder
may be exercised shall be proportionately increased, and, conversely, in case
the outstanding shares of Class A Common Stock shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Option Shares
with respect to which such any Options granted hereunder may be exercised shall
be proportionately decreased.
8.2 Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Class A Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Class A Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each recipient of Options shall
thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the Option Shares immediately
theretofore receivable upon the exercise of such Options, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Class A Common Stock equal to the
number of Option Shares immediately theretofore receivable upon exercise of such
Options had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Optionee to the end that the provisions hereof (including
without limitation provisions for adjustments of the applicable Exercise Price
and the number of Option Shares subject to Options) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of Options granted hereunder.
8.3 Reservation of Rights. Except as provided in this Section 8, no holder
of Options shall have any rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class, and any issue by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
Option Shares subject to any Option or the Exercise Price of the Option. The
grant of Options shall not affect in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
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ARTICLE 9
TERM; AMENDMENT AND TERMINATION
No Option shall be granted under the Plan after the earlier of (i) ten
(10) years from the effective date of the Plan, (ii) ten (10) years from the
date the Plan is approved by the Corporation's stockholders, or (iii) the
termination of the Plan pursuant to this Article 9. However, unless otherwise
expressly provided in the Plan or in an Option Agreement required pursuant to
Article 10, any Option theretofore granted may extend beyond such date, and any
authority of the Board or the Committee to amend, alter, suspend, discontinue or
terminate any such Option, or to waive any conditions or rights under any such
Option and the authority of the Board to amend the Plan, shall extend beyond
such date. The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) increase the aggregate number of Option Shares
which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modification that may result from adjustments authorized by Article 8 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
Options granted prior to such termination. Except as provided in an Option
Agreement, no suspension, termination, modification or amendment of the Plan
may, without the consent of the Optionee to whom Options shall theretofore have
been granted, materially adversely affect the rights of such Optionee under such
Options.
ARTICLE 10
OPTION AGREEMENT
Each award of Options shall be evidenced by an Option Agreement containing
such restrictions, terms and conditions, if any, as the Board or the Committee,
as the case may be, may require.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Tax Withholding. The Corporation shall have the right to require
Optionees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
the Plan are to be made to an Optionee in cash, such payments shall be net of
any amounts sufficient to satisfy all Federal, state and local withholding tax
requirements. The Committee may, in its sole discretion, permit an Optionee to
satisfy his or her tax withholding obligations either by (i) surrendering Class
A Common Stock owned by the Optionee or (ii)
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having the Corporation withhold shares of Class A Common Stock, or other
compensation, otherwise deliverable or payable to the Optionee. Shares of Class
A Common Stock surrendered or withheld shall be valued at their Market Price as
of the date on which income is required to be recognized for income tax
purposes.
11.2 Securities Laws. Each Option granted under the Plan shall be subject
to the requirement that, if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of the shares of
Class A Common Stock issuable or transferable upon exercise thereof upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option or the issue,
transfer, or purchase of the Option Shares thereunder, such Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Board, provided that the Corporation shall have no
obligation to pursue any such listing, registration, qualification, consent, or
approval.
11.3 Compliance with Section 16(b). In the case of Optionees who are or
may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of Rule 16b-3
so that such persons will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the 1934 Act and will not be subjected to
liability thereunder. If any provision of the Plan or any Option would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to Optionees who are or may be
subject to Section 16 of the 1934 Act.
11.4 No Right to Employment. Nothing in the Plan or in any Option
Agreement, nor the grant of any Option, shall confer upon any Optionee any right
to continue in the employ of the Corporation or a subsidiary or affiliate or to
be entitled to any remuneration or benefits not set forth in the Plan or such
Option Agreement or interfere with or limit the right of the Corporation or a
subsidiary or affiliate to modify the terms of or terminate such Optionee's
employment or services for the Corporation at any time.
11.5 No Right as a Stockholder. Except as provided in Section 5.3(a)
hereof, no Optionee or other person shall have any of the rights of a
stockholder of the Corporation with respect to shares subject to an Option until
the issuance of a stock certificate to him or her for such shares. Except as
provided in Article 8 hereof, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or 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 an Optionee of an award
which has not yet vested, the Optionee shall have the rights of a stockholder of
the Corporation if and only to the extent provided in the applicable Option
Agreement.
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11.6 Notices. Notices required or permitted to be given under the Plan
shall be sufficiently given if in writing and personally delivered to the
Optionee or sent by regular mail or overnight courier addressed (a) to the
Optionee at the Optionee's address as set forth in the books and records of the
Corporation or its subsidiaries or affiliates, or (b) to the Corporation or the
Committee at the principal office of the Corporation clearly marked "Attention:
Compensation Committee."
11.7 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.8 Governing Law. To the extent not preempted by Federal law, the Plan
and all Option Agreements shall be construed in accordance with and governed by
the law of the State of New York.
11.9 Information to Optionees. Optionees under the Plan shall receive
financial statements annually regarding the Corporation during the period the
Options are outstanding.
11.10 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 Option Agreements and Stock Purchase Agreements, as to (i) the persons
to receive awards under the Plan, (ii) the terms and provisions of awards under
the Plan, and (iii) the treatment of leaves of absence pursuant to Section 7.1
hereof.
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Exhibit 10.11
ALLIANCE NATIONAL INCORPORATED
1996 STOCK OPTION PLAN
<PAGE>
ALLIANCE NATIONAL INCORPORATED
1996 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSES
1.1 Establishment and Effective Date. Alliance National Incorporated, a
Nevada corporation (the "Corporation"), hereby establishes a stock option plan
to be known as the "Alliance National Incorporated 1996 Stock Option Plan" (the
"Plan"). The Plan shall become effective as of November 15, 1996, subject to the
approval of the stockholders of the Corporation (which is to be obtained within
twelve (12) months from the effective date of the Plan). Upon approval of the
Plan by the Board of Directors of the Corporation (the "Board"), awards may be
made directly by the Board or under its supervision, through the agency of its
Compensation Committee (the "Committee"), as provided herein. In the event that
such stockholder approval is not obtained, any awards made hereunder shall be
canceled and all rights of employees, directors and consultants with respect to
such awards shall thereupon automatically cease.
1.2 Purposes. The purposes of the Plan are (i) to encourage and enable key
employees, directors and consultants (subject to such requirements as may be
prescribed by either the Board or the Committee) of the Corporation, its
subsidiaries and its affiliates to acquire a proprietary interest in the growth
and performance of the Corporation, (ii) to generate an increased incentive for
key employees, directors and consultants to contribute to the Corporation's
future success and prosperity (as well as the success and prosperity of its
subsidiaries and affiliates), thus enhancing the value of the Corporation for
the benefit of its stockholders, and (iii) to enhance the ability of the
Corporation, its subsidiaries and its affiliates to attract and retain key
employees, directors and consultants who are essential to the progress, growth
and profitability of the Corporation, its subsidiaries and its affiliates, in
each case through the ownership of the Corporation's $.01 per share par value
common stock ("Common Stock"), and certain other rights relating to the Common
Stock.
ARTICLE 2
AWARDS
2.1 Form of Awards. Awards under the Plan shall take the form of options
to acquire Common Stock, which options are not intended to be classified as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2.2 Maximum Shares Available; Maximum Annual Awards. The maximum aggregate
number of shares of Common Stock available for award under the Plan (pursuant to
the granting of Options), shall be 1,470,000, subject to adjustment pursuant to
Article 8 hereof. Shares
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of Common Stock issued under the Plan (pursuant to the granting of Options) may
be either authorized but unissued shares or issued shares reacquired by the
Corporation. In the event that prior to the end of the period during which
Options may be granted under the Plan, any Option under the Plan expires
unexercised or is terminated, surrendered or canceled without being exercised in
whole or in part for any reason, then such unexercised shares shall be available
for subsequent awards under the Plan upon such terms and conditions as the
Committee may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award, either
the Board or the Committee shall have the right, in its sole discretion, to
require employees to return to the Corporation awards previously granted under
the Plan. Subject to the provisions of the Plan, such new award shall be upon
such terms and conditions as are specified by the Board or the Committee, as the
case may be, at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 Board; Committee. Awards shall be determined, and the Plan shall be
administered under the supervision of, the Board, which may exercise its powers
directly or, to the extent herein provided, through the Committee. The Committee
may be appointed from time to time by the Board, and shall consist solely of two
or more persons, each of whom shall qualify as (i) a "Non-Employee Director", as
that term is defined in subparagraph (b)(3)(i) of Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and (ii) an "outside director", within the meaning of Section 162(m) of
the Code and the Treasury Regulations promulgated thereunder.
3.2 Powers of the Board and the Committee. Subject to the express
provisions of the Plan, the Board and the Committee shall have the power and
authority (i) to grant Options and to determine the purchase price of the shares
of Common Stock covered by each Option, the term of each Option, the number of
shares of Common Stock to be covered by each Option (the "Option Shares"), the
time or times at which each Option shall become exercisable and the duration of
the exercise period applicable to each Option; (ii) to determine the employees,
directors and consultants to whom, and the time or times at which, Options shall
be granted or made and; and (iii) to take all other actions contemplated to be
taken by the Board or the Committee, as the case may be, under the Plan,
including, but not limited to, authorizing any written agreement relating to any
award made hereunder, as well as any amendment thereto.
3.3 Delegation. The Board and the Committee each may delegate to one or
more of its respective members or to any other person or persons such
ministerial duties as it may deem advisable; provided, however, that neither the
Board nor the Committee may delegate any of its responsibilities hereunder to
any person who is not both a "Non-Employee Director", as that term is defined in
subparagraph (b)(3)(i) of Rule 16b-3, and an "outside director", within the
meaning of Section 162(m) of the Code. The Board and the Committee may also
employ attorneys, consultants, accountants or other professional advisors and
shall be entitled to rely upon the advice, opinions or valuations of any such
advisors.
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3.4 Interpretations. The Board and the Committee shall each have
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Board or the Committee in good faith shall be final
and binding upon the Corporation, all employees, directors and consultants who
have received awards under the Plan and all other interested persons.
3.5 Liability; Indemnification. No member of the Board or the Committee,
nor any person to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's articles of incorporation and by-laws, as amended
from time to time, or under any agreement between any such member and the
Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all employees, directors and consultants of the
Corporation or any of its subsidiaries or affiliates (subject to such
requirements as may be prescribed by the Board or the Committee). In determining
the employees, directors and consultants to whom awards shall be granted and the
number of shares of Common Stock to be covered by each award, the Board or the
Committee, as the case may be, shall take into account the nature of the
services rendered by such employees, directors and consultants, their present
and potential contributions to the success of the Corporation, its subsidiaries
and its affiliates and such other factors as the Board or the Committee, as the
case may be, in its sole discretion shall deem relevant.
ARTICLE 5
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, as the Board or the Committee, as the case may
be, shall from time to time determine.
5.2 Exercise Price. The purchase price per share of Common Stock under
each Option (the "Exercise Price") shall be determined by the Board or the
Committee, as the case may be, but in no case shall such Exercise Price be less
than $2.00 per share of Common Stock (subject to adjustment as provided in
Article 8).
5.3 Exercise and Payment.
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(a) Options which are vested in accordance with Section 5.4 hereof
may be exercised in whole or in part. To exercise vested Options, in whole or in
part, the optionee shall deliver to the Corporation, at its principal executive
offices in New York City (or such other office of the Corporation in the United
States as the Corporation may designate by notice in writing to the optionee),
(a) cash or a certified or official bank check, payable to the order of the
Corporation, in an amount equal to the then aggregate Exercise Price of the
Option shares being purchased, and (b) such documents or certificates as any
Option agreement between the Corporation and the optionee shall require which
shall specify the number of Options being exercised by the optionee.
Notwithstanding any provisions herein to the contrary, if the Market Price (as
hereinafter defined) of one share of Common Stock is greater than the Exercise
Price for one share of Common Stock (at the date of calculation), in lieu of
exercising an Option for cash, the optionee may elect to receive shares of
Common Stock equal to the value (as determined below) of the Option Shares for
which Options are then vested (or the portion thereof being exercised), in which
event the Corporation shall issue to the optionee that number of shares of
Common Stock computed using the following formula:
OS = OCS x (MP-EP)
-------------
MP
Where:
OS = equals the number of Option Shares to be issued to the optionee;
OCS = equals the number of shares of Common Stock then vested and
purchasable under the Option or, if only a portion of the Option
is being exercised, the portion of the Option being so exercised
(at the date of such calculation);
MP = equals the Market Price of one share of Common Stock (at the
date of such calculation);
EP = equals the per share Exercise Price (as adjusted to the date of
such calculation) of the Option.
Should the foregoing formula result in the issuance of a fractional share of
Common Stock, the Corporation may elect, in its discretion, either to issue such
fractional share, or to pay the Optionee the cash value (based upon its then
Market Price) of such fractional share. Upon the Corporation's receipt of the
required documents or certificates under any Option agreement with the optionee,
the optionee shall be deemed to be the holder of record of the Option Shares
issuable upon such exercise, notwithstanding that the stock transfer books of
the Corporation shall then be closed or that certificates representing such
Option Shares shall not then be actually delivered to the optionee, and the
Corporation shall, as promptly as practicable, and in any event within five (5)
business days thereafter, execute or cause to be executed and delivered to the
optionee, or as the optionee may direct, a certificate or certificates
representing the aggregate number of shares of Common Stock for which Options
are exercised. Each stock certificate so delivered shall be in such denomination
as may be requested by the optionee. If Options shall have been exercised only
in part, the Corporation
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shall, at the time of delivery of said stock certificate or certificates,
deliver to the optionee an amended or revised Option Agreement evidencing the
portion of Option which remains exercisable. The Corporation shall pay all
expenses, stock transfer taxes, if any, and other charges payable in connection
with the preparation, execution and delivery of stock certificates pursuant to
this Section 5.3, except that, in case such stock certificates shall be
registered in a name or names other than the name of the optionee, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
execution and delivery of such stock certificate or certificates shall be paid
by the optionee to the Corporation at the time.
(b) "Market Price" shall mean, at the date of determination for any
security (including, without limitation, the Common Stock), the average of the
closing prices of such security's sales on all securities exchanges on which
such security may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which Market Price is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the Market Price shall be the fair value thereof
determined by the board of directors of the Company, in its good faith
discretion.
5.4 Vesting. Options granted to employees, directors or consultants of the
Corporation, its subsidiaries or its affiliates shall vest, and shall become
exercisable for the first time, in accordance with the following:
(a) Except as provided in Section 5.4(b), below, Options will vest
to the extent of ten (10%) percent thereof on the first anniversary of their
date of grant, and an additional ten (10%) percent thereof on each subsequent
anniversary of the date of grant, so that Options shall vest ratably over a
ten-year period commencing with the date of grant.
(b) Notwithstanding the provisions of Section 5.4(a), above, in the
event of the occurrence of an "Acceleration Event" (as defined in subsection
5.4(c), below), the unvested portion of Options will vest on the faster of the
following two schedules: (i) ratably on the date of the Acceleration Event and
on each anniversary date of the Acceleration Event, with the last ratable
installment vesting on November 15, 2001; or (ii) such that not less than
one-third (1/3) of the total Options shall be vested upon the occurrence of the
Acceleration Event, one-third (1/3) shall be vested on the first anniversary
date thereof, and the balance shall be vested on the second anniversary thereof.
(c) For purposes of this Plan, an "Acceleration Event" shall mean a
Qualified Offering (as defined in, and as interpreted from time to time under,
the Corporation's Second Amended and Restated Stockholder's Agreement dated as
of February 15, 1997) of the Corporation's
5
<PAGE>
Common Stock at a price per share which produces, for the purchasers of the
Corporation's Series A Convertible Preferred Stock, par value $.01 per share
("Preferred Stock") between November 15, 1996 through January 14, 1997, an
internal rate of return on their investment of at least 25% per annum,
calculated by assuming that all such purchases of Preferred Stock had been made
on January 1, 1997.
(d) Options granted to any non-management director of the
Corporation shall become 100% vested at such time as such director ceases to be
a director of the Corporation, except if such director is removed from the Board
with cause.
(e) Options granted under this Plan shall become 100% vested upon
any Sale of the Company. "Sale of the Company" shall mean (i) consummation of a
merger or consolidation of the Corporation with or into another person that is
not a parent or subsidiary of the Corporation as a result of which those persons
who were stockholders of the Corporation immediately prior to such transaction
own, in the aggregate, less than a majority of the outstanding voting capital
stock of the surviving or resulting corporation, (ii) the consummation of the
sale or other disposition of a majority of the outstanding shares of voting
capital stock of the Corporation to a person that is not a parent or subsidiary
of the Corporation, or (iii) the consummation of the sale or other disposition
of all or substantially all of the Corporation's assets to a person that is not
a parent or subsidiary of the Corporation.
5.5 Rights as a Stockholder. Subject to Section 1.1, an optionee shall
have no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date a stock certificate
representing such shares is issued to such optionee. Except as otherwise
expressly provided in the Plan or by the Board or the Committee, no adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such stock certificate is issued.
ARTICLE 6
LEGENDS; NONTRANSFERABILITY OF OPTIONS
6.1 Legends. All certificates evidencing shares of Common Stock acquired
pursuant to the exercise of an Option granted hereunder shall bear the following
legend (and any additional legend required by any securities exchange upon which
shares of Common Stock may, at the time of such exercise, be listed) on the face
thereof:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered,
sold or transferred only if registered pursuant to the provisions of such
laws, or if in the opinion of counsel satisfactory to the Corporation, an
exemption from such registration is available."
6.2 Nontransferability of Options. No Option may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the
6
<PAGE>
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised only by the optionee during his or her lifetime, or following his or
her death pursuant to Section 7.3 hereof.
ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
7.1 General Rule. Except as otherwise expressly provided in the written
agreement relating to any Option or as otherwise expressly determined by the
Board or the Committee, as the case may be, in its sole discretion, in the event
that an optionee ceases to be an employee, director or consultant of the
Corporation, its subsidiaries or affiliates (a "Terminated Person") for any
reason (including, but not limited to death or retirement) any Options which
were held by such Terminated Person on the date on which he or she ceased to be
an employee, director or consultant (the "Termination Date") and which were
vested and exercisable on such date shall continue to be exercisable in
accordance with their terms, but all Options not vested and exercisable on the
Terminated Person's Termination Date shall immediately terminate and be
forfeited. Any vested and exercisable Options which were held by such Terminated
Person at the date of death and which were otherwise exercisable on such date
shall be exercisable by the beneficiary designated by the Terminated Person for
such purpose (the "Designated Beneficiary") or if no Designated Beneficiary
shall be appointed or if the Designated Beneficiary shall predecease the
Terminated Person, by the Terminated Person's personal representatives, heirs or
legatees.
7.2 Termination of Unvested Options. All Options which were not vested and
exercisable by a Terminated Person as of the Termination Date of such Terminated
Person shall terminate as of such date, except as expressly provided in the
written agreement relating to the Options or as otherwise expressly determined
by the Board or the Committee, as the case may be, in its sole discretion.
Options shall not be affected by any change of employment so long as the
recipient continues to be employed by either the Corporation or a subsidiary or
affiliate.
ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
8.1 Subdivision or Combination of Common Stock. In case the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price of all Options granted under this Plan in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
7
<PAGE>
8.2 Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each recipient of Options shall thereupon have
the right to receive, upon the basis and upon the terms and conditions specified
herein and in lieu of the Option Shares immediately theretofore receivable upon
the exercise of this Option, such shares of stock, securities or assets 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 Option Shares immediately
theretofore receivable upon exercise of this Option had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Optionee to the
end that the provisions hereof (including without limitation provisions for
adjustments of the applicable Exercise Price) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of Options granted hereunder.
8.3 Reservation of Rights. Except as provided in this Section 8, no holder
of Options shall have any rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class, and any issue by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
Option Shares subject to any Option or the Exercise Price of the Option. The
grant of Options shall not affect in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
8
<PAGE>
ARTICLE 9
TERM; AMENDMENT AND TERMINATION
No Option shall be granted under the Plan after the earlier of (i) ten
(10) years from the effective date of the Plan, or (ii) the termination of the
Plan pursuant to this Article 9. However, unless otherwise expressly provided in
the Plan or in an applicable written agreement required pursuant to Article 10,
any Option theretofore granted may extend beyond such date, and any authority of
the Board or the Committee to amend, alter, suspend, discontinue or terminate
any such Option, or to waive any conditions or rights under any such Option and
the authority of the Board to amend the Plan, shall extend beyond such date. The
Board may suspend, terminate, modify or amend the Plan, provided that any
amendment that would (i) materially increase the aggregate number of shares
which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modification that may result from adjustments authorized by Article 8 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
or consultant to whom an award shall theretofore have been granted, adversely
affect the rights of such employee or consultant under such award.
ARTICLE 10
WRITTEN AGREEMENT
Each award of Options shall be evidenced by a written agreement containing
such restrictions, terms and conditions, if any, as the Board or the Committee,
as the case may be, may require. In the event of any conflict between a written
agreement and the Plan, the terms of the Plan shall govern.
ARTICLE 11
MISCELLANEOUS PROVISIONS
9
<PAGE>
11.1 Tax Withholding. The Corporation shall have the right to require
employees and directors or their beneficiaries or legal representatives to remit
to the Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements, or to deduct from all payments under the Plan
amounts sufficient to satisfy all withholding tax requirements. Whenever
payments under the Plan are to be made to an employee or a director in cash,
such payments shall be net of any amounts sufficient to satisfy all Federal,
state and local withholding tax requirements. The Committee may, in its sole
discretion, permit an employee to satisfy his or her tax withholding obligations
either by (i) surrendering of Common Stock owned by the employee or (ii) having
the Corporation withhold from shares of Common Stock, or other compensation,
otherwise deliverable or payable to the employee. Shares of Common Stock
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for income tax purposes.
11.2 Securities Laws. Each Option granted under the Plan shall be subject
to the requirement that, if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of the shares of
Common Stock issuable or transferable upon exercise thereof upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issue, transfer, or purchase
of the shares of Common Stock thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board. The Board or the Committee, as the case may be, may, in
connection with the granting of any Option, require the individual to whom the
Option is to be granted to enter into an agreement with the Corporation stating
that as a condition precedent to each exercise of the Option, in whole or in
part, such individual shall if then required by the Corporation, represent to
the Corporation in writing that such exercise is for investment only and not
with a view to distribution, and also setting forth such other terms and
conditions as the Board or the Committee may prescribe.
11.3 Compliance with Section 16(b). In the case of employees who are or
may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of Rule 16b-3
so that such persons will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the 1934 Act and will not be subjected to
liability thereunder. If any provision of the Plan or any award would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to employees, directors or
consultants who are or may be subject to Section 16 of the 1934 Act.
11.4 Successors. The obligations of the Corporation under the Plan shall
be binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Board or the Committee, as the case may be, may, in its
discretion prior to the
10
<PAGE>
consummation of the transaction and subject to Article 9 hereof, cancel, offer
to purchase, exchange, adjust or modify any outstanding awards, at such time and
in such manner as the Board or the Committee, as the case may be, deems
appropriate and in accordance with applicable law.
11.5 General Creditor Status. Employees, directors and consultants shall
have no right, title, or interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any employee, consultant, beneficiary
or legal representative of such employee or consultant. To the extent that any
person acquires a right to receive payments from the Corporation under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Corporation. All payments to be made hereunder shall be paid from the
general funds of the Corporation and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
11.6 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
Option, shall confer upon any employee any right to continue in the employ of
the Corporation or a subsidiary or affiliate or to be entitled to any
remuneration or benefits not set forth in the Plan or such written agreement or
interfere with or limit the right of the Corporation or a subsidiary or
affiliate to modify the terms of or terminate such employee's employment at any
time. The preceding sentence shall be equally applicable with respect to
consultants of the Corporation or a subsidiary or affiliate.
11.7 Notices. Notices required or permitted to be given under the Plan
shall be sufficiently given if in writing and personally delivered to the
employee or consultant or sent by regular mail addressed (a) to the employee or
consultant at the employee's or consultant's address as set forth in the books
and records of the Corporation or its subsidiaries or affiliates, or (b) to the
Corporation or the Committee at the principal office of the Corporation clearly
marked "Attention: Compensation Committee."
11.8 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.9 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the law of the State of Nevada.
11
<PAGE>
FIRST AMENDMENT TO
ALLIANCE NATIONAL INCORPORATED
1996 STOCK OPTION PLAN
The ALLIANCE National Incorporated 1996 Stock Option Plan (the
"Plan"), established and effective as of November 15, 1996, pursuant to
resolutions of the Board of Directors of ALLIANCE National Incorporated adopted
by Action by Written Consent dated as of October 9, 1998, is hereby amended as
follows:
1. Section 2.2 of the Plan is amended to read as follows:
"2.2 Maximum Shares Available; Maximum Annual Awards. The
maximum aggregate number of shares of Common Stock available for
award under the Plan (pursuant to the granting of Options), shall be
1,445,750, subject to adjustment pursuant to Article 8 hereof.
Shares of Common Stock issued under the Plan (pursuant to the
granting of Options) may be either authorized but unissued shares or
issued shares reacquired by the Corporation. In the event that any
Option which has been granted under the Plan expires unexercised or
is terminated, surrendered or canceled without being exercised in
whole or in part for any reason, then such unexercised shares shall
not be available for subsequent awards under the Plan."
2. Section 5.4(c) of the Plan is hereby amended by inserting, after
the words "the Corporation's Second Amended and Restated Stockholder's Agreement
dated as of February 15, 1997," which appear in the second and third lines
thereof, the words ", as such agreement was in effect on February 15, 1997".
3. Except as set forth in this Amendment, the Plan remains in effect
without modification.
IN WITNESS WHEREOF, this Amendment has been executed as of October
9, 1998, by the Corporation's duly authorized officer.
ALLIANCE National Incorporated
By: /s/ David W. Beale
--------------------------------------
Name: David W. Beale
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule information has been extracted from the Registrant's
Condensed Consolidated Balance Sheet (non-classified) as of September 30, 1999
and the Condensed Consolidated Statement of Income for the nine months then
ended.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,695,314
<SECURITIES> 0
<RECEIVABLES> 9,990,182
<ALLOWANCES> 795,000
<INVENTORY> 0
<CURRENT-ASSETS> 53,766,888
<PP&E> 74,025,171
<DEPRECIATION> 11,112,355
<TOTAL-ASSETS> 321,258,050
<CURRENT-LIABILITIES> 33,019,026
<BONDS> 0
129,444,558
0
<COMMON> 49,019
<OTHER-SE> (2,971,159)
<TOTAL-LIABILITY-AND-EQUITY> 321,258,050
<SALES> 0
<TOTAL-REVENUES> 156,780,680
<CGS> 0
<TOTAL-COSTS> 127,067,973
<OTHER-EXPENSES> 18,822,827
<LOSS-PROVISION> 749,377
<INTEREST-EXPENSE> 7,133,228
<INCOME-PRETAX> 3,007,275
<INCOME-TAX> 2,195,000
<INCOME-CONTINUING> 812,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 812,275
<EPS-BASIC> (1.13)
<EPS-DILUTED> (1.13)
</TABLE>
