Exhibit 4.2
INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") dated as
of May 22, 1998, is entered into by and among Stratus Properties
Inc., a Delaware corporation (including its successors, the
"Company"), and Oly/Stratus Equities, L.P., a Texas limited
partnership ("Olympus").
NOW, THEREFORE, for and in consideration of the premises,
mutual covenants, and agreements contained herein and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
I.1 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Advice" shall have the meaning set forth in
Section 3.6.
"Affiliate" shall mean, with respect to any Person, any
Person who, directly or indirectly, controls, is controlled
by, or is under common control with that Person. For
purposes of this definition, "control" and "controlled by"
and when used with respect to any Person shall mean the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract, or otherwise, but shall not
be deemed to include, solely because of the ownership of the
voting securities of such Person, any Person who owns not
more than 25% of the ordinary voting power for the election
of directors or other governing body of such Person.
"Agreement" shall mean this Agreement, as may be
amended from time to time.
"Blockage Notice" shall have the meaning set forth in
Section 2.2.2(e).
"Blockage Period" shall have the meaning set forth in
Section 2.2.2(e).
"Board Designee" shall have the meaning set forth in
Section 2.1.1.
"Board of Directors" shall mean the board of directors
of the Company.
"Business Day" shall mean a day that is not a Legal
Holiday.
"Change of Control" shall mean the occurrence of one or
more of the following events: a majority of the Board of
Directors shall consist of persons who are not Continuing
Directors, or the acquisition by any person or group, of
related persons for
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purposes of Section 13(d) of the
Exchange Act (other than Olympus, any of its Affiliates, or
any of their respective officers or directors), of the
power, directly or indirectly, to vote or direct the voting
of securities having more than 30% of the ordinary voting
power for the election of directors of the Company.
"Common Stock" shall mean shares of the Common Stock,
$0.01 par value per share, of the Company, and any capital
stock into which such Common Stock thereafter may be
changed.
"Common Stock Equivalents" shall mean, without
duplication with any other Common Stock or Common Stock
Equivalents, any rights, warrants, options, convertible
securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or
convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into
Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event.
"Company" shall have the meaning set forth in the
introductory paragraph hereof.
"Continuing Director" shall mean, as of the date of
determination, any person who (i) was a member of the Board
of Directors on the date hereof, (ii) was nominated for
election or elected to the Board of Directors with the
affirmative vote of a majority of the Continuing Directors
who were members of the Board of Directors at the time of
such nomination or election, or (iii) is a Board Designee.
"Deferral Default" shall have the meaning set forth in
Section 2.2.2(d).
"Deferral Offering" shall have the meaning set forth in
Section 2.2.2(d).
"Deferral Registration Statement" shall have the
meaning set forth in Section 2.2.2(d).
"Demand Registration" shall have the meaning set forth
in Section 3.1.1.
"Demand Request" shall have the meaning set forth in
Section 3.1.1.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations
promulgated by the SEC thereunder.
"Excluded Registration" shall mean a registration under
the Securities Act of (i) securities pursuant to one or more
Demand Registrations pursuant to Section 3.1,
(ii) securities registered on Form S-8 or any similar
successor form, (iii) securities registered to effect the
acquisition of or combination with another Person, and (iv)
securities registered on Form S-4 or any similar successor
form solely to effect any exchange of outstanding
securities.
"Holder" shall mean (i) Oly/Stratus Equities, L.P.
(ii) any direct or indirect transferee of any such
securityholder who shall become a party to this Agreement
and
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entitled to the benefits of Articles III, IV, and V
pursuant to Section 7.4 hereof.
"Inspectors" shall have the meaning set forth in
Section 3.5(ix).
"Legal Holiday" shall have the meaning set forth in
Section 7.2.
"Material Adverse Effect" shall have the meaning set
forth in Section 3.1.4.
"NASD" shall mean the National Association of
Securities Dealers, Inc.
"Observer Designee" shall have the meaning set forth in
Section 2.1.2.
"Olympus" shall mean Oly/Stratus Equities, L.P., a
Texas limited partnership, and its permitted successors and
assigns.
"Optional Repurchase Event" shall have the meaning set
forth in Section 2.2.2(a).
"Person" or "person" shall mean any individual,
corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust,
unincorporated organization, or government or other agency
or political subdivision thereof.
"Preferred Stock" shall mean shares of the Series B
Participating Preferred Stock, $0.01 par value per share, of
the Company, and any capital stock (other than Common Stock
of the Company) into which such Preferred Stock thereafter
may be changed.
"Records" shall have the meaning set forth in
Section 3.5(ix).
"Redemption Notice" shall have the meaning set forth in
Section 2.2.2.
"Redemption Price" shall have the meaning set forth in
Section 2.2.2.
"Registrable Shares" shall mean at any time (a) the
Preferred Stock and (b) any shares of Common Stock issued or
issuable pursuant to (i) the redemption of the Preferred
Stock or (ii) the conversion of the obligations outstanding
under that certain Loan Agreement (as it may be amended and
in effect from time to time, the "Loan Agreement"), dated on
or about the date hereof, among the Company, Stratus
Ventures I Borrower L.L.C., and Oly Lender Stratus, L.P., in
each case owned by the Holders, whether owned on the date
hereof or acquired hereafter; provided, however, that
Registrable Shares shall not include any shares (x) the sale
of which has been registered pursuant to the Securities Act
and which shares have been sold pursuant to such
registration or (y) which have been sold pursuant to Rule
144 of the SEC under the Securities Act.
"Registration Expenses" shall have the meaning set
forth in Section 3.6.
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"Regulation D" shall mean Regulation D promulgated
under the Securities Act by the SEC.
"Repurchase Notice" shall have the meaning set forth in
Section 2.2.2(b).
"Repurchase Price" shall have the meaning set forth in
Section 2.2.2(a).
"Requesting Holder" shall have the meaning set forth in
Section 3.1.1(a).
"Required Filing Date" shall have the meaning set forth
in Section 3.1.1(b).
"Required Holders" shall mean Holders who then own
beneficially more than 50% of the aggregate number of shares
of Preferred Stock subject to this Agreement.
"SEC" shall mean the Securities and Exchange
Commission.
"Securities" shall mean the Preferred Stock and Common
Stock issued or issuable pursuant to (i) the redemption of
the Preferred Stock or (ii) the conversion of the
obligations outstanding under the Loan Agreement.
"Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated by the
SEC thereunder.
"Seller Affiliates" shall have the meaning set forth in
Section 3.8.1.
"Senior Dividend Stock" shall mean each class of
capital stock of the Company or series of preferred stock of
the Company created on or after the date hereof the terms of
which expressly provide that such class or series will rank
senior to the Preferred Stock as to dividends and on parity
with the Preferred Stock as to distributions upon
liquidation, winding-up and dissolution of the Company.
"Senior Nonmonetary Default" shall have the meaning set
forth in Section 2.2.2(e).
"Senior Payment Default" shall have the meaning set
forth in Section 2.2.2(e).
"Subsidiary" of any Person shall mean any Person a
majority of whose outstanding shares of capital stock or
other equity interests with voting power, under ordinary
circumstances, to elect directors or other governing body of
such Person, is at the time, directly or indirectly, owned
by such Person, by one or more subsidiaries of such Person
or by such Person and one or more subsidiaries of such
Person.
"Suspension Notice" shall have the meaning set forth in
Section 3.6.
"Transfer" shall mean any disposition of any Security
or any interest therein that would constitute a "sale"
thereof within the meaning of the Securities Act.
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"Transfer Notice" shall have the meaning set forth in
Section 5.3.
I.2 Rules of Construction. Unless the context otherwise
requires, all references to "Articles" and "Sections" contained
in this Agreement are, unless specifically indicated otherwise,
references to articles, sections, subsections and paragraphs of
this Agreement. Whenever in this Agreement the singular number
is used, the same shall include the plural where appropriate (and
vice versa), and words of any gender shall include each other
gender where appropriate. As used in this Agreement, the
following words or phrases shall have the meanings indicated:
(i) "or" shall mean "and/or"; (ii) "day" shall mean a calendar
day; (iii) "including" or "include" shall mean "including without
limitation"; and (iv) "law" or "laws" shall mean statutes,
regulations, rules, judicial orders and other legal
pronouncements having the effect of law. Whenever any provision
of this Agreement requires or permits a party to take or omit to
take any action, or make or omit to make any decision, unless the
context clearly requires otherwise, such provision shall be
interpreted to authorize an action taken or omitted, or a
decision made or omitted, by the party acting alone and in good
faith.
1.3 Other Definitions. Certain capitalized terms used in
this Agreement, but not defined in this Article I, shall have the
meanings set forth elsewhere in this Agreement.
ARTICLE II
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
II.1 Board of Directors.
II.1.1 Board Representation. Subject to Section
2.1.4, for so long as at least 50.1% of the shares of the
Preferred Stock outstanding on the date hereof remain
outstanding and beneficially owned by Olympus, Olympus shall
have the exclusive right to appoint the greater of one
director or 20% of the members of the Board of Directors.
Subject to Sections 2.1.3 and 2.1.4, on or promptly after
the date Olympus provides the Company with written notice of
Olympus' election to designate Board Designees pursuant to
this Section 2.1.1, the Company agrees to take all action
required to cause the Board of Directors to at all times
include those Board Designees elected by Olympus.
II.1.2 Observer Rights. For so long as at least
50.1% of the shares of Preferred Stock outstanding on the
date hereof remain outstanding and beneficially owned by
Olympus, if Olympus fails to designate directors or
terminates its right to designate directors pursuant to
Section 2.1.1, Olympus shall be entitled to, in lieu of
designating such Board Designees, have two designees attend
all meetings of the Board of Directors and each committee
thereof (each, an "Observer Designee"). In the event that
Olympus has designated any Observer Designee pursuant to
this Section 2.1.2, Olympus and each such Observer Designee
shall enter into a confidentiality agreement with the
Company in form and substance reasonably satisfactory to
each of Olympus and the Company. No Observer Designee shall
be entitled to vote on any matters presented to the Board of
Directors or to such committees. The Company shall give
written notice, including any proposed agenda to Olympus, of
each such meeting at the same time and in the same manner as
the members of the Board of Directors (or any committee
thereof) receive notice of such meetings. Olympus shall be
entitled to receive all written materials and
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other
information given to the directors of the Company in
connection with such meetings at the same time such
materials are given to such directors. If the Company
proposes to take action by written consent in lieu of a
meeting of the Board of Directors, the Company shall (i)
orally notify Olympus 72 hours in advance of the date such
consent is first proposed to be executed by the directors of
the Company, and (ii) give a copy of such consent to Olympus
at the same time as such materials are given to the members
of the Board of Directors, which in any case shall be at
least 24 hours prior to the date such consent is first
proposed to be executed by the directors of the Company.
Notwithstanding the foregoing provisions of this
Section 2.1.2, the Company reserves the right not to provide
information or to exclude Observer Designees from portions
of any meeting of the Board of Directors (or committee
thereof) if (i) delivery of such information or attendance
at such portion of any such meeting by the Observer
Designees would, in the opinion of counsel to the Company,
cause the Company to lose or waive the attorney-client
privilege between the Company and its counsel, or (ii) the
subject matter of such information or agenda of such portion
of any meeting is reasonably related to consideration of the
Company's relationship with Olympus or any of its Affiliates
or any transaction between the Company or any of its
Affiliates on the one hand, and Olympus or any of its
Affiliates on the other hand, and the delivery of such
information or attendance at any such portion of such
meeting would, in the opinion of counsel of the Company,
adversely affect the ability of the Company or its Affiliate
to negotiate in good-faith and on an arms-length basis with
Olympus or its Affiliate. In the event the Company
withholds information or excludes an Observer Designee from
a portion of any meeting of the Board of Directors pursuant
to the preceding sentence, the Company shall provide Olympus
with a written statement identifying the subject matter of
the information withheld or discussion from which the
Observer Designee was excluded (which notice need not
include any description of the legal advice rendered during
such meeting).
II.1.3 Vacancies. If, prior to his election to the
Board of Directors pursuant to Section 2.1.1, any Board
Designee shall be unable or unwilling to serve as a director
of the Company, Olympus shall be entitled to nominate a
replacement who shall then be a Board Designee for purposes
of this Section 2.1. If, following an election to the Board
of Directors pursuant to Section 2.1.1, any Board Designee
shall resign, be removed at the request of Olympus or be
unable to serve for any reason prior to the expiration of
his term as a director of the Company, Olympus shall, within
30 days of such event, notify the Board of Directors in
writing of a replacement Board Designee, and the Company
shall take all such actions as it is legally empowered to
take at the earlier of the next regularly scheduled regular
meeting of the Board of Directors or a special meeting
thereof to be called not later than 30 days after receipt of
notice of the replacement Board Designee for the purpose of
filling positions on the Board of Directors or in any
written consent executed in lieu of such a meeting to cause
the replacement Board Designee to be elected to the Board of
Directors. If Olympus requests that any Board Designee
designated by Olympus be removed as a director (with or
without cause) by written notice thereof to the Company,
then the Company shall take all actions permitted by its
certificate of incorporation and the General Corporation Law
of the State of Delaware that are necessary to effect such
removal upon such request.
II.1.4 Termination of Rights. The right of Olympus
to designate directors under
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Section 2.1.1 shall terminate
upon the first to occur of (i) the termination or expiration
of this Agreement or this Article II, (ii) such time as
Olympus elects in writing to terminate its rights under this
Article II, or (iii) such time as Olympus ceases to
beneficially own at least 50.1% of the shares of the
Preferred Stock outstanding on the date of this Agreement.
II.1.5 Costs and Expenses. The Company shall
reimburse any Board Designee or Observer Designee for all
reasonable out-of-pocket expenses incurred in connection
with his participation in meetings of the Board of Directors
(and committees thereof) of the Company on the same basis as
it reimburses its other directors.
II.2 Transactions Permitting Optional Redemption.
II.2.1 The Company agrees that, if the Company takes
any of the following actions, directly or indirectly,
without the prior written consent of Olympus, then Olympus
shall have the repurchase option described in Section 2.2.2:
(a) redeem, purchase, or otherwise acquire in one
transaction or in a series of related transactions an
amount of Common Stock greater than 10% of the
outstanding Common Stock;
(b) voluntarily liquidate or dissolve;
(c) grant or issue any capital stock, stock
option, or stock purchase right (other than those
granted to all holders of Common Stock on a pro rata
basis) to any officer, director, or employee of the
Company or any of its Subsidiaries, other than (i) for
compensation in amounts reasonably consistent with past
practice, (ii) Common Stock issued upon exercise or
conversion of any stock options outstanding on the date
of this Agreement, or (iii) Common Stock or stock
options granted in compliance with this clause (c);
(d) file a petition under any bankruptcy or
insolvency law, fail to contest the filing of any
involuntary petition under any bankruptcy or insolvency
law, or admit in writing its bankruptcy, insolvency, or
general inability to pay its debts;
(e) merge or consolidate with or into any person;
(f) sell, lease, exchange, or otherwise transfer,
in one transaction or in a series of related
transactions, assets of the Company having a book value
equal to or greater than 25% of the Company's total
assets as of the date of the most recently prepared
audited balance sheet of the Company other than in the
ordinary course of business;
(g) permit the occurrence of a Change of Control;
(h) issue any shares of Senior Dividend Stock in
excess of $10,000,000 aggregate liquidation preference;
or
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(i) agree to do any transaction prohibited by
subsections (a) through (h) of this Section 2.2.1
without such prior written consent.
II.2.2 (a) So long as any shares of Preferred Stock
remain outstanding and at least one owned by Olympus, upon
the occurrence of the occurrence of any of the following
actions or events (each, an "Optional Repurchase Event"),
Olympus shall be entitled, at its option, by written notice
to the Company in accordance with paragraph (b) of this
Section 2.2.2, to require the Company to repurchase all or a
portion of the shares of Preferred Stock held by Olympus, as
follows:
i) at any time following the date of this
Agreement, in the case of an occurrence of any of the
events or actions specified in subsections (a), (c),
(e), (f), (g) or (i) of Section 2.2.1 without the prior
written consent of Olympus, Olympus shall have the
right to require the Company to repurchase all or a
portion of the shares of Preferred Stock then held by
Olympus in an amount equal to $5.84 per share, plus an
amount equal to accrued and unpaid dividends thereon,
if any, to the date of repurchase;
ii) at any time on or after May 22, 2001,
Olympus shall have the right to require the Company to
repurchase all or a portion of the shares of Preferred
Stock then held by Olympus in an amount equal to the
Participation Price (as defined in the Certificate of
Designations governing the Preferred Stock) per share;
and
iii) at any time following the date of this
Agreement, in the case of an occurrence of any of the
events or actions specified in subsections (b), (d) or
(h) of Section 2.2.1 without the prior written consent
of Olympus, Olympus shall have the right to require the
Company to repurchase all or a portion of the shares of
Preferred Stock then held by Olympus in an amount equal
to the greater of (A) $5.84 per share, plus an amount
equal to accrued and unpaid dividends thereon, if any,
to the date of repurchase, and (B) the Participation
Price per share (the amount to be paid to Olympus to
repurchase the Preferred Stock described in subsections
i), ii) and iii) of this Section 2.2.2(a) is referred
to collectively herein as the "Repurchase Price").
(b) To exercise the optional repurchase right
described in this Section 2.2.2, Olympus shall deliver to
the Company (if an Optional Repurchase Event described in
subsections i) or iii) of Section 2.2.2(a) above, not later
than 30 days after Olympus receives notice of such
occurrence) a notice of repurchase ("Repurchase Notice"),
accompanied by the certificate for the shares of Preferred
Stock to be repurchased. Any Repurchase Notice shall state
(1) that Olympus is requiring the Company to repurchase
shares of Preferred Stock pursuant to this Section 2.2.2,
(2) the Optional Repurchase Event giving rise to such
repurchase, and (3) the number of shares of Preferred Stock
held by Olympus which are to be repurchased. In no event
later than 20 Business Days following receipt of such
Repurchase Notice by the Company, the Company shall, except
as provided in Section 2.2.2(c) and (d) below, make payment
in immediately available funds of the Repurchase Price to
Olympus as specified in the Repurchase Notice. Upon
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repurchase of less than all of the shares of Preferred Stock
evidenced by a particular certificate, promptly but in no
event later than ten Business Days after surrender of such
certificate to the Company, the Company shall issue a
replacement certificate for the shares of Preferred Stock
that have not been repurchased.
(c) Notwithstanding anything in this Agreement to
the contrary, the Company may, upon written notice to
Olympus within seventeen Business Days of the date of the
Repurchase Notice, elect to pay all or a portion of the
Repurchase Price for the Preferred Stock in Common Stock, by
delivering that number of whole shares of Common Stock to
Olympus equal to (x) the Repurchase Price per share, divided
by (y) the average Common Stock Price for the ten trading
days immediately preceding the Repurchase Notice, the result
of which is then multiplied by (z) the number of shares of
Preferred Stock to be so repurchased from Olympus by payment
in shares of Common Stock, and, in the case of any
fractional share of Common Stock, rounded to the nearest
number of whole shares; provided, however, that the Company
may only pay any Repurchase Price in shares of Common Stock
if, as of the date of delivery of such shares of Common
Stock, the Common Stock is then registered under Section
12(b) or 12(g) under the Exchange Act and listed on the New
York Stock Exchange or the American Stock Exchange, or
approved for quotation on the Nasdaq Stock Market's National
Market System.
(d) In the event of a repurchase of any or all of
the outstanding shares of Preferred Stock for which the
Company has elected to pay the Repurchase Price in whole or
in part in cash, the Company may, by written notice to
Olympus within eight Business Days of the Repurchase Notice,
elect to defer the repurchase of the Preferred Stock set
forth in the Repurchase Notice, solely with respect to the
portion of shares of Preferred Stock that the Company elects
to redeem in cash, for a period of no longer than 180 days
from the date of such written notice for the purpose of
effecting a public offering (the "Deferral Offering") by the
Company of shares of Common Stock; provided that (i) the
Company shall file with the SEC within 45 days of the date
of such Repurchase Notice a registration statement (the
"Deferral Registration Statement") under the Securities Act
with respect to such Deferral Offering, (ii) the Company
shall designate the use of proceeds to the Company from such
Deferral Offering in the prospectus forming a part of such
Deferral Registration Statement for the repurchase in cash
of the Preferred Stock in accordance with this Agreement,
and (iii) the Deferral Offering shall be consummated and the
date fixed for repurchase on or prior to 180 days following
the date of such Repurchase Notice. In the event that (x)
the Deferral Registration Statement is not filed within 45
days following the date of such Repurchase Notice or (y) the
Deferral Offering is not consummated within 180 days
following the date of such Repurchase Notice (each of (x)
and (y) being referred to herein as a "Deferral Default"),
the Company shall, within ten Business Days after such
Deferral Default, pay the Repurchase Price on all shares of
Preferred Stock called for repurchase in accordance with
this Section 2.2.2.
(e) The obligation of the Company to pay the
Repurchase Price in cash pursuant to an Optional Repurchase
Event shall be fully subordinated to the Company's Senior
Debt (as such term is defined in the Loan Agreement) in
accordance with the provisions of this Section 2.2.2(e).
The Company may not make any cash payments on
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account of the
Preferred Stock if there shall have occurred and be
continuing a default in the payment of principal of (or
premium, if any) or interest on any Specified Senior Debt
(as such term is defined in the Loan Agreement), the payment
of commitment or facility fees, letter of credit fees or
agency fees under any Specified Senior Debt, or payments
with respect to letter of credit reimbursement arrangements
with one or more lenders under the credit or other agreement
evidencing any Specified Senior Debt when due (a "Senior
Payment Default"). Following the occurrence of an event of
default (other than a Senior Payment Default) under any
Specified Senior Debt permitting the holders of such
Specified Senior Debt (or a trustee or agent on behalf
thereof) to accelerate the maturity thereof, or the
occurrence of an event which with the passage of time or the
giving of notice, or both, could become such an event of
default (a "Senior Nonmonetary Default") and, in each case,
following the giving of notice thereof to Parent in
accordance with the terms governing the relevant Specified
Senior Debt (a "Blockage Notice"), Parent may not make any
payments on account of the Payment Obligations for a period
(a "Blockage Period") commencing on the date the Company
receives the Blockage Notice, and ending on the earliest of
(i) 179 days after such date, (ii) the date, if any, on
which such Senior Nonmonetary Default is waived or otherwise
cured and (iii) the date, if any, on which such Blockage
Period shall have been terminated by written notice to the
Company from the holders of the relevant Specified Senior
Debt (or a trustee or agent on behalf thereof).
Upon any payment or distribution of assets of any kind
or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company,
whether voluntary or involuntary, or upon bankruptcy,
insolvency, receivership or other proceedings, then and in
such event, all principal, premium (if any) and interest and
all other amounts due or to become due upon all the
Company's Senior Debt shall first be paid in full before the
holders of the Preferred Stock shall be entitled to receive
or retain any assets so paid or distributed in respect of
the Preferred Stock; and, upon any such dissolution or
winding up or liquidation or reorganization, any payment or
distribution of assets of any kind or character, whether in
cash, property or securities, that the holders of the
Preferred Stock would be entitled to, except as otherwise
provided herein, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distributions, or by
the holders of the Preferred Stock if received by them,
directly and ratably to the holders of the Company's Senior
Debt, to the extent necessary to pay in full all the
Company's Senior Debt, after giving effect to any concurrent
payment or distribution to or for the holders of the
Company's Senior Debt, before any payment or distribution is
made to the holders of the Preferred Stock.
Each holder of shares of Preferred Stock hereby
irrevocably authorizes and empowers (without imposing any
obligation on) the holders of the Company's Senior Debt (or
any trustee or agent on behalf thereof), under the
circumstances set forth in the immediately preceding
paragraph, to demand, sue for, collect and receive every
such payment or distribution described therein and give
acquittance therefor, to file claims and proofs of claims in
any statutory or nonstatutory proceeding, to vote such the
Company's Senior Debt holder's ratable share of the full
amount of the Redemption Price on the Preferred Stock in its
sole discretion in connection with any resolution,
arrangement, plan of reorganization, compromise, settlement
or extension and to take all such other action
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(including,
without limitation, the right to participate in any
composition of creditors and the right to vote such the
Company's Senior Debt holders' ratable share of the
Redemption Price at creditors' meetings for the election of
trustees, acceptances of plans and otherwise), in the name
of the holder of the Preferred Stock, as such the Company's
Senior Debt holder or its representative may deem necessary
or desirable for the enforcement of these subordination
provisions.
If any payment or distribution of assets of any kind or
character, whether in cash, property or securities, shall be
collected or received by any holder of the Preferred Stock
and such holder shall not be permitted under the terms of
this instrument to receive or retain such payment or
distribution, such holder shall forthwith turn over the same
to the Company's Senior Debt holders for their ratable
benefit in the form received (except for the endorsement or
the assignment of such holder when necessary) and, until so
turned over, the same shall be held in trust by such holder
as the property and for the ratable benefit of the Company's
Senior Debt holders.
II.3 Other Activities of Olympus; Fiduciary Duties. It is
understood and accepted that Olympus and its Affiliates have
interests in other business ventures which may be in conflict
with the activities of the Company and its Subsidiaries and that,
subject to applicable law, nothing in this Agreement shall limit
the current or future business activities of Olympus whether or
not such activities are competitive with those of the Company or
its Subsidiaries. Nothing in this Agreement, express or implied,
shall relieve any officer or director of the Company, any of its
Subsidiaries, or Olympus, of any fiduciary or other duties or
obligations they may have to the Company or the stockholders of
the Company.
ARTICLE III
REGISTRATION RIGHTS
III.1 Demand Registration.
III.1.1 Request for Registration.
(a) Holders of an aggregate of at least twenty
percent (20%) of the total number of Registrable Shares
held by all Holders (the "Requesting Holders") may
request the Company, in writing (a "Demand Request"),
to effect the registration under the Securities Act of
all or part of its Registrable Shares (a "Demand
Registration"), provided, that the anticipated
aggregate gross proceeds to the Requesting Holders
therefrom would be at least $5,000,000.
(b) Each Demand Request shall specify the number
of Registrable Shares proposed to be sold. Subject to
Section 3.1.6, the Company shall file the Demand
Registration within 90 days after receiving a Demand
Request (the "Required Filing Date") and shall use its
best efforts to cause the same to be declared effective
by the SEC as promptly as practicable after such
filing; provided, however, that the Company need effect
only two Demand Registrations pursuant to Demand
Requests made under Section 3.1.1(a); provided,
further, that if any Registrable Shares requested to be
registered pursuant to a Demand Request
<Page 11>
made under
Section 3.1.1(a) are excluded from the applicable
Demand Registration pursuant to Section 3.1.4, and such
Demand Registration would otherwise be the last Demand
Registration permitted under this Section 3.1, the
Requesting Holders shall have the right, with respect
to each such exclusion, to request one additional
Demand Registration under Section 3.1.1(a).
III.1.2 Effective Registration and Expenses. A
registration will not count as a Demand Registration until
it has become effective (unless the Requesting Holders
withdraw all their Registrable Shares and the Company has
performed its obligations hereunder in all material
respects, in which case such demand will count as a Demand
Registration unless the Requesting Holders pay all
Registration Expenses in connection with such withdrawn
registration); provided, however, that if, after it has
become effective, an offering of Registrable Shares pursuant
to a registration is interfered with by any stop order,
injunction, or other order or requirement of the SEC or
other governmental agency or court, such registration will
be deemed not to have been effected and will not count as a
Demand Registration.
III.1.3 Selection of Underwriters. If the offering
of Registrable Shares pursuant to a Demand Registration is
to be in the form of a "firm commitment" underwritten
offering, the Requesting Holders shall select a nationally
recognized investment banking firm or firms to manage the
underwritten offering and provide timely notice to the
Company of such selection; provided, however, that such
selection shall be subject to the prior written consent of
the Company, which shall not be unreasonably withheld or
delayed.
III.1.4 Priority on Demand Registrations. If a
Demand Registration is to be accomplished through an
underwritten sale, no securities to be sold for the account
of any Person (including the Company) other than a
Requesting Holder shall be included in the Demand
Registration unless the managing underwriter shall advise
the Company and the Requesting Holders in writing that, in
its opinion, the inclusion of such securities will not
materially and adversely affect the price or success of the
offering (a "Material Adverse Effect"). In the event the
managing underwriter shall advise the Company and the
Requesting Holders that even after exclusion of all
securities of other Persons pursuant to the immediately
preceding sentence, the amount of Registrable Shares
proposed to be included in such Demand Registration by
Requesting Holders is sufficiently large to cause a Material
Adverse Effect, the Registrable Shares to be included in
such Demand Registration shall equal the number of shares
which the Requesting Holders are so advised can be sold in
such offering without a Material Adverse Effect and such
shares shall be allocated among the Requesting Holders pro
rata based upon the number of Registrable Shares requested
to be included in such registration by each such Requesting
Holder. In the event, however, the managing underwriter
advises the Company and such other Persons entitled to
participate therein that a portion of their securities may
be included in the Demand Registration without a Material
Adverse Effect, those securities shall be included in such
proportions as the Company and such other Persons may agree
among themselves.
III.1.5 Rights of Nonrequesting Holders. Upon
receipt of any Demand Request, the Company shall promptly
(but in any event within 10 days) give written notice of
such
<Page 12>
proposed Demand Registration to all other Holders, who
shall have the right, exercisable by written notice to the
Company within 20 days of their receipt of the Company's
notice, to elect to include in such Demand Registration such
portion of their Registrable Shares as they may request.
All Holders requesting to have their Registrable Shares
included in a Demand Registration in accordance with the
preceding sentence shall be deemed to be "Requesting
Holders" for purposes of this Section 3.1.
III.1.6 Deferral of Filing. Subject to Section 3.3,
the Company may defer the filing (but not the preparation)
of a registration statement required by Section 3.1 until a
date not later than 75 days after the Required Filing Date
(or, if longer, 75 days after the effective date of the
registration statement contemplated by clause (ii) of this
Section 3.1.6) if (i) at the time the Company receives the
Demand Request, the Company or any of its Subsidiaries are
engaged in confidential negotiations or other confidential
business activities, disclosure of which would be required
in such registration statement (but would not be required if
such registration statement were not filed), and the Board
of Directors determines in good faith that such disclosure
would be materially detrimental to the Company and its
stockholders, or (ii) prior to receiving the Demand Request,
the Board of Directors had determined to effect a registered
underwritten public offering of the Company's securities for
the Company's account and the Company had taken substantial
steps (including selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to
effect such offering. A deferral of the filing of a
registration statement pursuant to this Section 3.1.6 shall
be lifted, and the requested registration statement shall be
filed forthwith, if, in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or
other activities are disclosed or terminated, or, in the
case of a deferral pursuant to clause (ii) of the preceding
sentence, the proposed registration for the Company's
account is abandoned. In order to defer the filing of a
registration statement pursuant to this Section 3.1.6, the
Company shall promptly (but in any event within 15 days),
upon determining to seek such deferral, deliver to each
Requesting Holder a certificate signed by an executive
officer of the Company stating that the Company is deferring
such filing pursuant to this Section 3.1.6 and a general
statement of the reason for such deferral and an
approximation of the anticipated delay. After receiving
such certificate and (x), until 20 days after notification
from the Company that the deferral has been lifted or (y)
the end of the deferral period, whichever is earlier, the
holders of a majority of the Registrable Shares held by the
Requesting Holders may withdraw such Demand Request by
giving notice to the Company. If withdrawn, the Demand
Request shall be deemed not to have been made for all
purposes of this Agreement. The Company may defer the
filing of a particular registration statement pursuant to
this Section 3.1.6 only once.
<Page 13>
III.2 Piggyback Registrations.
III.2.1 Right to Piggyback. Each time the Company
proposes to register any of its equity securities (other
than pursuant to an Excluded Registration) under the
Securities Act for sale to the public (whether for the
account of the Company or the account of any securityholder
of the Company) and the form of registration statement to be
used permits the registration of Registrable Shares, the
Company shall give prompt written notice to each Holder of
Registrable Shares (which notice shall be given not less
than 30 days prior to the effective date of the Company's
registration statement), which notice shall offer each such
Holder the opportunity to include any or all of its
Registrable Shares in such registration statement, subject
to the limitations contained in Section 3.2.2. Each Holder
who desires to have its Registrable Shares included in such
registration statement shall so advise the Company in
writing (stating the number of shares desired to be
registered) within 20 days after the date of such notice
from the Company. Any Holder shall have the right to
withdraw such Holder's request for inclusion of such
Holder's Registrable Shares in any registration statement
pursuant to this Section 3.2.1 by giving written notice to
the Company of such withdrawal not less than five days prior
to the effective date of such registration statement.
Subject to Section 3.2.2, the Company shall include in such
registration statement all such Registrable Shares so
requested to be included therein; provided, however, that
the Company may at any time withdraw or cease proceeding
with any such registration if it shall at the same time
withdraw or cease proceeding with the registration of all
other equity securities originally proposed to be
registered.
III.2.2 Priority on Registrations.
(a) If the registration subject to this Section
3.2 is to be accomplished through an underwritten sale,
the Registrable Shares requested to be included in the
registration statement by any Holder differ from the
type of securities proposed to be registered by the
Company, and the managing underwriter advises the
Company in writing that, in its reasonable opinion, due
to such differences the inclusion of such Registrable
Shares would cause a Material Adverse Effect, then (i)
the number of such Holder's or Holders' Registrable
Shares to be included in the registration statement
shall be reduced to an amount which, in the reasonable
judgment of the managing underwriter, would eliminate
such Material Adverse Effect or (ii) if no such
reduction would, in the reasonable judgment of the
managing underwriter, eliminate such Material Adverse
Effect, then the Company shall have the right to
exclude all such Registrable Shares from such
registration statement provided no other securities of
such type are included and offered for the account of
any other Person in such registration statement. Any
partial reduction in the number of Registrable Shares
to be included in the registration statement pursuant
to clause (i) of the immediately preceding sentence
shall be effected pro rata based on the ratio which
such Holder's requested shares bears to the total
number of shares requested to be included in such
registration statement by all Persons (including
Requesting Holders) who have requested (pursuant to
contractual registration rights) to include, or who
otherwise have been permitted to include, their shares
in such registration statement.
<Page 14>
(b) If the registration subject to this Section
3.2 is to be accomplished through an underwritten sale,
the Registrable Shares requested to be included in the
registration statement are of the same type as the
securities being registered by the Company, and the
managing underwriter advises the Company in writing
that, in its reasonable opinion, the inclusion of such
Registrable Shares would cause a Material Adverse
Effect, the Company will be obligated to include in
such registration statement, as to each Requesting
Holder, only a portion of the shares such Holder has
requested be registered equal to the ratio which such
Holder's requested shares bears to the total number of
shares requested to be included in such registration
statement by all Persons (including Requesting Holders
but excluding the Company) who have requested (pursuant
to contractual registration rights) to include, or who
have been permitted to include their shares, in such
registration statement.
(c) If as a result of the provisions of this
Section 3.2.2 any Holder shall not be entitled to
include all Registrable Shares in a registration that
such Holder has requested to be so included, such
Holder may withdraw such Holder's request to include
Registrable Shares in such registration statement.
III.3 Information by Requesting Holders.
(a) No Person may participate in any registration
statement hereunder unless such Person (x) agrees to
sell such Person's Registrable Shares on the basis
provided in any underwriting arrangements approved by
the Company and, if a Demand Registration, a majority
of Registrable Shares held by the Requesting Holders
and (y) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting
agreements, and other documents, each in customary
form, reasonably required under the terms of such
underwriting arrangements; provided, however, that no
such Person shall be required to make any
representations or warranties in connection with any
such registration other than representations and
warranties as to (i) such Person's ownership of its
Registrable Shares to be sold or transferred free and
clear of all liens, claims, and encumbrances, (ii) such
Person's power and authority to effect such transfer,
and (iii) such matters pertaining to compliance with
securities laws as may be reasonably requested; further
provided, however, that the obligation of such Person
to indemnify pursuant to any such underwriting
arrangements shall be several, not joint and several,
among such Persons selling Registrable Shares, and the
liability of each such Person will be in proportion to,
and provided further that such liability will be
limited to, the net amount received by such Person from
the sale of its Registrable Shares pursuant to such
registration.
<Page 15>
III.4 Holdback Agreement. Unless the managing
underwriter otherwise agrees, each of the Company and the Holders
agrees (and the Company agrees to use its best efforts to cause
its Affiliates and other stockholders to agree) not to effect any
public sale (except, if applicable, as part of such underwritten
registration) or private offer or distribution of any Common
Stock or Common Stock Equivalents during the 10 Business Days
prior to the effectiveness under the Securities Act of any
underwritten registration and during such period after the
effectiveness under the Securities Act of any underwritten
registration (not to exceed 120 days) as the managing underwriter
may require.
III.5 Registration Procedures. Whenever any Holder has
requested that any Registrable Shares be registered pursuant to
this Agreement, the Company will use its best efforts to effect
the registration and the sale of such Registrable Shares in
accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(i) prepare and file with the SEC a registration
statement on any appropriate form under the Securities Act
with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become
effective;
(ii) prepare and file with the SEC such amendments,
post-effective amendments, and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration
statement effective for a period of not less than 60 days
(or such lesser period as is necessary for the underwriters
in an underwritten offering to sell unsold allotments) and
comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with
the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(iii) furnish to each seller of Registrable Shares
and the underwriters of the securities being registered such
number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary
prospectus), any documents incorporated by reference
therein, and such other documents as such seller or
underwriters may reasonably request in order to facilitate
the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters
(it being understood that, subject to Section 3.6, the
requirements of the Securities Act and applicable state
securities laws, the Company consents to the use of the
prospectus and any amendment or supplement thereto by each
seller and the underwriters in connection with the offering
and sale of the Registrable Shares covered by the
registration statement of which such prospectus, amendment,
or supplement is a part);
(iv) use its best efforts to register or qualify such
Registrable Shares under the securities or blue sky laws of
such jurisdictions as the managing underwriter reasonably
requests (or, in the event the registration statement does
not relate to an underwritten offering, as the holders of a
majority of such Registrable Shares may reasonably request);
use its best efforts to keep each such registration or
qualification (or exemption therefrom) effective during the
period in which such registration statement is required to
be kept effective; and do any and all other acts and things
which may be reasonably necessary or
<Page 16>
advisable to enable
each seller to consummate the disposition of the Registrable
Shares owned by such seller in such jurisdictions (provided,
however, that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this
subparagraph (iv) or (B) consent to general service of
process in any such jurisdiction);
(v) promptly notify each seller and each underwriter
and (if requested by any such Person) confirm such notice in
writing (A) when a prospectus or any prospectus supplement
or post-effective amendment has been filed and, with respect
to a registration statement or any post-effective amendment,
when the same has become effective, (B) of the issuance by
any state securities or other regulatory authority of any
order suspending the qualification or exemption from
qualification of any of the Registrable Shares under state
securities or "blue sky" laws or the initiation of any
proceedings for that purpose, and (C) of the happening of
any event which makes any statement made in an effective
registration statement or related prospectus untrue or which
requires the making of any changes in such registration
statement, prospectus, or documents so that they will not
contain any 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,
and, as promptly as practicable thereafter, prepare and file
with the SEC and furnish a supplement or amendment to such
prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such prospectus will
not contain any untrue statement of a material fact or omit
a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
(vi) make generally available to the Company's
securityholders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later
than 30 days after the end of the 12-month period beginning
with the first day of the Company's first fiscal quarter
commencing after the effective date of a registration
statement, which earnings statement shall cover such 12-
month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K, and 8-K under the Exchange
Act and otherwise complies with Rule 158 under the
Securities Act;
(vii) if requested by the managing underwriter or
any seller promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included
therein, including with respect to the Registrable Shares
being sold by such seller, the purchase price being paid
therefor by the underwriters and with respect to any other
terms of the underwritten offering of the Registrable Shares
to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective
amendment;
(viii) cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and
delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law)
representing securities sold under any registration
statement, and enable such securities to be in such
denominations and registered in such names as the managing
underwriter or such sellers may request and keep available
and make available to the Company's transfer agent prior to
the effectiveness of such registration statement a supply of
such certificates;
<Page 17>
(ix) promptly make available for inspection by any
seller, any underwriter participating in any disposition
pursuant to any registration statement, and any attorney,
accountant, or other agent or representative retained by any
such seller or underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the
"Records"), as shall be reasonably 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; provided,
however, that, unless the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is
ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, the Company shall not be required
to provide any information under this subparagraph (ix) if
(A) the Company believes, after consultation with counsel
for the Company, that to do so would cause the Company to
forfeit an attorney-client privilege that was applicable to
such information or (B) if either (1) the Company has
requested and been granted from the SEC confidential
treatment of such information contained in any filing with
the SEC or documents provided supplementally or otherwise or
(2) the Company reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors
in writing unless prior to furnishing any such information
with respect to clause (A) or (B) of this subparagraph (ix)
such Holder of Registrable Shares requesting such
information agrees to enter into a confidentiality agreement
in customary form and subject to customary exceptions; and
further provided, however, that each Holder of Registrable
Shares agrees that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its
expense, to undertake appropriate action and to prevent
disclosure of the Records deemed confidential;
(x) furnish to each seller and underwriter a signed
counterpart of (A) an opinion or opinions of counsel to the
Company, and (B) a comfort letter or comfort letters from
the Company's independent public accountants, each in
customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the
case may be, as the sellers or managing underwriter
reasonably requests;
(xi) cause the Registrable Shares included in any
registration statement to be (A) listed on each securities
exchange, if any, on which similar securities issued by the
Company are then listed, or if none are then listed, on
which the managing underwriter for such offering shall
request, or (B) authorized to be quoted and/or listed (to
the extent applicable) on the NASD Automated Quotation
System or The Nasdaq Stock Market's National Market if the
Registrable Shares so qualify;
(xii) provide a CUSIP number for the Registrable
Shares included in any registration statement not later than
the effective date of such registration statement;
(xiii) cooperate with each seller and each
underwriter participating in the disposition of such
Registrable Shares and their respective counsel in
connection with any filings required to be made with the
NASD;
(xiv) during the period when the prospectus is
required to be delivered under the
<Page 18>
Securities Act, promptly
file all documents required to be filed with the SEC
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act;
(xv) notify each underwriter and seller of Registrable
Shares promptly of any request by the SEC for the amending
or supplementing of such registration statement or
prospectus or for additional information;
(xvi) prepare and file with the SEC promptly any
amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Company
or the managing underwriter, is required in connection with
the distribution of the Registrable Shares;
(xvii) enter into such agreements (including
underwriting agreements in the managing underwriter's
customary form) as are customary in connection with an
underwritten registration; and
(xviii) advise each seller of such Registrable
Shares, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for such purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop
order should be issued.
III.6 Suspension of Dispositions. Each Holder agrees by
acquisition of any Registrable Shares that, upon receipt of any
notice (a "Suspension Notice") from the Company of the happening
of any event of the kind described in Section 3.5(v)(C) such
Holder will forthwith discontinue disposition of Registrable
Shares until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in
writing (the "Advice") by the Company that the use of the
prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company,
such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Shares current at the time
of receipt of such notice. In the event the Company shall give
any such notice, the period regarding the effectiveness of
registration statements set forth in Section 3.5(ii) shall be
extended by the number of days during the period from and
including the date of the giving of the Suspension Notice to and
including the date when each seller of Registrable Shares covered
by such registration statement shall have received the copies of
the supplemented or amended prospectus or the Advice. The
Company shall use its best efforts and take all such actions as
are reasonably necessary to render the Advice as promptly as
practicable.
III.7 Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Article III,
including all registration and filing fees, all fees and expenses
associated with filings required to be made with the NASD
(including, if applicable, the fees and expenses of any
"qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD), as may be required by the
rules and regulations of the NASD, fees and expenses of
compliance with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with
"blue sky" qualifications of the Registrable Shares), rating
agency fees, printing expenses (including expenses of printing
certificates for the
<Page 19>
Registrable Shares in a form eligible for
deposit with Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by a
holder of Registrable Shares), messenger and delivery expenses,
the Company's internal expenses (including, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection
with any listing of the Registrable Shares, fees and expenses of
counsel for the Company and its independent certified public
accountants (including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to
obtain such insurance), the fees and expenses of any special
experts retained by the Company in connection with such
registration, and the fees and expenses of other persons retained
by the Company and reasonable fees and expenses of one firm of
counsel for the sellers (which shall be selected by the holders
of a majority of the Registrable Shares being included in any
particular registration statement) (all such expenses being
herein called "Registration Expenses") will be borne by the
Company whether or not any registration statement becomes
effective; provided, however, that in no event shall Registration
Expenses include any underwriting discounts, commissions, or fees
or any broker-dealer charges attributable to the sale of the
Registrable Shares or any counsel (except as provided above),
accountants, or other persons retained or employed by the
Holders.
<Page 20>
III.8 Indemnification.
III.8.1 In the event of any registration of any
Registrable Shares under the Securities Act pursuant to this
Article III, the Company shall indemnify and reimburse, to
the fullest extent permitted by law, each seller of
Registrable Shares, and each of its employees, advisors,
agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning
of the Securities Act or the Exchange Act) and any agent or
investment advisor thereof (collectively, the "Seller
Affiliates") (A) against any and all losses, claims,
damages, liabilities, and expenses, joint or several
(including, attorneys' fees and disbursements except as
limited by Section 3.8.3) based upon, arising out of,
related to, or resulting from any untrue or alleged untrue
statement of a material fact contained in any registration
statement, prospectus (if used within the period during
which the Company is required to keep the registration
statement in which such prospectus is contained current
pursuant to the terms of this Agreement or the Securities
Act), or preliminary prospectus (if used prior to the
effective date of the registration statement) or any
amendment thereof or supplement thereto, or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, (B) against any and all loss, liability, claim,
damage, and expense whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation
or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon, arising out of, related to, or resulting from
any such untrue statement or omission or alleged untrue
statement or omission, and (C) against any and all costs and
expenses (including reasonable fees and disbursements of
counsel) as may be reasonably incurred in investigating,
preparing, or defending against any litigation,
investigation, or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based
upon, arising out of, related to, or resulting from any such
untrue statement or omission or alleged untrue statement or
omission, to the extent that any such expense or cost is not
paid under clause (A) or (B) of this Section 3.8.1; except
insofar as the same are made in reliance upon and in strict
conformity with information furnished in writing to the
Company by such seller or any Seller Affiliate for use
therein or arise from such seller's or any Seller
Affiliate's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements
thereto after the Company has furnished such seller or
Seller Affiliate with a sufficient number of copies of the
same. The reimbursements required by this Section 3.8.1
will be made by periodic payments during the course of the
investigation or defense, as and when bills are received or
expenses incurred.
III.8.2 In connection with any registration statement
in which a seller of Registrable Shares is participating,
each such seller will furnish to the Company in writing such
information and affidavits as the Company reasonably
requests for use in connection with any such registration
statement or prospectus and, to the fullest extent permitted
by law, each such seller will indemnify the Company and its
directors and officers and each Person who controls the
Company (within the meaning of the Securities Act or the
Exchange Act) against any and all losses, claims, damages,
liabilities, and expenses (including, reasonable attorneys'
fees and disbursements except as limited by Section 3.8.3)
resulting from any untrue statement or alleged untrue
statement of a
<Page 21>
material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any
amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged
omission is contained in any information or affidavit so
furnished in writing by such seller or any of its Seller
Affiliates specifically for inclusion in the registration
statement; provided, however, that the obligation to
indemnify will be several, not joint and several, among such
sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to,
and provided further that such liability will be limited to,
the net amount received by such seller from the sale of
Registrable Shares pursuant to such registration statement;
further provided, however, that such seller of Registrable
Shares shall not be liable in any such case to the extent
that prior to the filing of any such registration statement
or prospectus or amendment thereof or supplement thereto,
such seller has furnished in writing to the Company
information expressly for use in such registration statement
or prospectus or any amendment thereof or supplement thereto
which corrected or made not misleading information
previously furnished to the Company.
III.8.3 Any Person entitled to indemnification
hereunder will (A) give prompt written notice to the
indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give
such notice shall not limit the rights of such Person) and
(B) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the
indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense
of such claim, but the fees and expenses of such counsel
shall be at the expense of such person unless (X) the
indemnifying party has agreed to pay such fees or expenses,
(Y) the indemnifying party shall have failed to assume the
defense of such claim and employ counsel reasonably
satisfactory to such person or (Z) in the indemnified
party's reasonable judgment a conflict of interest between
the indemnified party and the indemnifying party may exist
into respect to such claims. If such defense is not assumed
by the indemnifying party as permitted hereunder, the
indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably
conditioned, delayed, or withheld). If such defense is
assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such
settlement or compromise contains a full and unconditional
release of the indemnified party or (2) the indemnified
party otherwise consents in writing. An indemnifying party
who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified
party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.
<Page 22>
III.8.4 Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by
Section 3.8.1 or 3.8.2 are unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses,
claims, damages, liabilities, or expenses (or actions in
respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
liabilities, or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and the indemnified party in
connection with the actions which resulted in the losses,
claims, damages, liabilities, or expenses as well as any
other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party
or indemnified party, and the parties' relative intent,
knowledge, access to information, and opportunity to correct
or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if
contribution pursuant to this Section 3.8.4 were determined
by pro rata allocation (even if the Holders or any
underwriters or all of them were treated as one person for
such purpose) or by any other method of allocation which
does not take account of the equitable considerations
referred to in this Section 3.8.4. The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages, liabilities, or expenses (or actions in
respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with
investigating or, except as provided in Section 3.8.3,
defending any such action or claim. Notwithstanding the
provisions of this Section 3.8.4, no Holder shall be
required to contribute an amount greater than the dollar
amount by which the net proceeds received by such Holder
with respect to the sale of any Registrable Shares exceeds
the amount of damages which such Holder has otherwise been
required to pay by reason of any and all untrue or alleged
untrue statements of material fact or omissions or alleged
omissions of material fact made in any registration
statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto related to such sale
of Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section
3.8.4 to contribute shall be several in proportion to the
amount of Registrable Shares registered by them and not
joint. If indemnification is available under this Section
3.7, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in Sections
3.8.1 and 3.8.2 without regard to the relative fault of such
indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 3.8.4
subject, in the case of the Holders, to the limited dollar
amounts set forth in Section 3.8.2.
III.8.5 The indemnification and contribution provided
for under this Agreement will remain in full force and
effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director, or
controlling Person of such indemnified party and will
survive the transfer of securities.
<Page 23>
III.9 Limitations on Future Registration Rights. The
Company shall not in the future grant any Person registration
rights in respect of Preferred Stock, Common Stock, or Common
Stock Equivalents more favorable than, or materially inconsistent
with, those granted to the Holders herein unless the Company
shall concurrently modify and amend this Agreement to provide to
the Holders the benefits of any such more favorable provisions.
III.10 Rule 144 Reporting. With a view to making
available to the Holders the benefits of certain rules and
regulations of the SEC that permit the sale of the shares of any
class or series of capital stock to the public without
registration, after the completion of any registration pursuant
to this Article III, the Company shall: (i) use its best efforts
to make and keep public information available, as those terms are
understood and defined in SEC Rule 144, or any successor
provision thereto, at all times, (ii) use its best efforts to
file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act, and (iii) so long as a Holder owns any shares
of any class or series of capital stock, to furnish to such
Holder forthwith upon its request a written statement by the
Company as to the Company's compliance with the reporting
requirements of Rule 144, the Securities Act, and the Exchange
Act.
ARTICLE IV
TRANSFERS OF SECURITIES
IV.1 Transfer and Exchange. Subject to the limitations
described in Article V hereof, when Securities are presented to
the Company with a request to register the transfer of such
Securities or to exchange such Securities for Securities of other
authorized denominations, the Company shall register the transfer
or make the exchange as requested if the requirements of this
Agreement for such transaction are met; provided, however, that
the Securities surrendered for transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder
thereof or its attorney and duly authorized in writing. No
service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable
in connection therewith.
IV.2 Replacement of Securities. If a mutilated Security is
surrendered to the Company or if the Holder of a Security claims
and submits an affidavit or other evidence, satisfactory to the
Company, to the effect that the Security has been lost,
destroyed, or wrongfully taken, the Company shall issue a
replacement Security if the Company's requirements are met. If
required by the Company, such securityholder must provide a lost
security affidavit and an indemnity bond, or other form of
indemnity, sufficient in the judgment of the Company to protect
the Company against any loss which may be suffered. The Company
may charge such securityholder for its reasonable out-of-pocket
expenses in replacing a Security which has been mutilated, lost,
destroyed, or wrongfully taken.
ARTICLE V
LIMITATION ON TRANSFERS
V.1 Restrictions on Transfer. The Securities shall not be
Transferred or otherwise conveyed, assigned, or hypothecated
before satisfaction of (i) the conditions specified in
<Page 24>
Sections 5.1, 5.2, and 5.3, which conditions are intended to
ensure compliance with the provisions of the Securities Act with
respect to the Transfer of any Security, and (ii) Article IV.
Any purported Transfer in violation of this Article V, and/or, if
applicable, Article IV shall be void ab initio and of no force or
effect. Other than Transfers to the public pursuant to an
effective registration statement or sales to the public pursuant
to Rule 144 under the Securities Act otherwise permitted
hereunder, each Holder will cause any proposed transferee of any
Security or any interest therein held by it to agree to take and
hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
V.2 Restrictive Legends.
V.2.1 Securities Act Legend. Except as otherwise
provided in Section 5.4, each Security held by a Holder, and
each Security issued to any subsequent transferee of such
Holder, shall be stamped or otherwise imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY"
LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT,
OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
V.2.2 Other Legends. Except as otherwise permitted
by the last sentence of Section 5.1, each Security issued to
each Holder or a subsequent transferee shall include a
legend in substantially the following form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER
AND OTHER TERMS AND CONDITIONS AS SET FORTH IN THE
INVESTORS RIGHTS AGREEMENT DATED AS OF MAY 22, 1998, A
COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
V.3 Notice of Proposed Transfers. Prior to any Transfer or
attempted Transfer of any Security, the Holder of such Security
shall (i) give five Business Days' prior written notice (a
"Transfer Notice") to the Company of such Holder's intention to
effect such Transfer, describing the manner and circumstances of
the proposed Transfer, and (ii) either (A) provide to the Company
an opinion reasonably satisfactory to the Company from counsel
who shall be reasonably satisfactory to the Company (or supply
such other evidence reasonably satisfactory to the Company) that
the proposed Transfer of such Security may be effected without
registration under the Securities Act, or (B) certify in writing
to the Company that the Holder reasonably believes the proposed
transferee is a "qualified institutional buyer" and that such
Holder has taken reasonable steps to make the proposed transferee
aware that such Holder may rely on Rule 144A under the Securities
Act in effecting such Transfer. After receipt of the Transfer
Notice and opinion (if required), the Company shall have five
Business Days to object to the transfer by
<Page 25>
written notice to such
Holder describing in reasonably detail the basis for the
objection, and in the absence of such notice, such Holder shall
thereupon be entitled to Transfer such Security in accordance
with the terms of the Transfer Notice. Each Security issued upon
such Transfer shall bear the restrictive legend set forth in
Section 5.2, unless in the opinion of such counsel such legend is
not required in order to ensure compliance with the Securities
Act.
V.4 Termination of Certain Restrictions. Notwithstanding
the foregoing provisions of this Article V, the restrictions
imposed by Section 5.2.1 upon the transferability of the
Securities and the legend requirements of Section 5.2.1 shall
terminate as to any Security (i) when and so long as such
Security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such Security may be transferred without
registration thereof under the Securities Act and that such
legend may be removed. Whenever the restrictions imposed by
Section 5.2 shall terminate as to any Security, the Holder
thereof shall be entitled to receive from the Company, at the
Company's expense, a new Security not bearing the restrictive
legend set forth in Section 5.2.
ARTICLE VI
TERMINATION
VI.1 Termination. The provisions of this Agreement shall
terminate on the earlier of (i) May 22, 2004, (ii) the first date
on which there ceases to be any Registrable Shares outstanding,
and (iii) the date upon which the Company and each Holder
mutually agree in writing to terminate this Agreement.
ARTICLE VII
MISCELLANEOUS
VII.1 Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, overnight courier,
by telecopier, or first class or certified mail, postage prepaid,
return receipt requested, addressed as follows (or at such other
address as may be substituted by notice given as herein provided
in accordance with this Section 7.1):
If to the Company:
Stratus Properties Inc.
98 San Jacinto Boulevard, Suite 2200
Austin, Texas 78701
Facsimile No.: (512) 478-5788
Attention: William H. Armstrong, III
With a copy to:
Stratus Properties Inc.
1615 Poydras
New Orleans, LA 70112
Facsimile No.: (504) 585-3513
Attention: John G. Amato
<Page 26>
If to any Holder, at its address listed on the signature
pages hereof.
Any notice or communication hereunder shall be deemed to
have been given or made as of the date so delivered, if
personally delivered or delivered by overnight courier; when
receipt is electronically confirmed, if telecopied; and three
calendar days after mailing if sent by registered or certified
mail (except that a notice of change of address shall not be
deemed to have been given until actually received by the
addressee). Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with
respect to other Holders. If a notice or communication is mailed
in the manner provided above, it is duly given, whether or not
the addressee receives it.
VII.2 Legal Holidays. A "Legal Holiday" used with
respect to a particular place of payment is a Saturday, a Sunday,
or a day on which banking institutions at such place are not
required to be open. If a payment date is a Legal Holiday at
such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest on
the amount of such payment shall accrue for the intervening
period.
VII.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.
VII.4 Successors and Assigns. This Agreement and the
rights and obligations hereunder shall not be assigned by the
Company or Olympus without the other party's prior written
consent; provided, however, that whether or not an express
assignment has been made pursuant to the provisions of this
Agreement, the provisions of Articles III, IV and V of this
Agreement that are applicable to the Holders as the holders of
any Securities are also for the benefit of, and enforceable by
and against, all subsequent holders of Securities, except as
otherwise expressly provided herein. This Agreement shall be
binding upon the Company, each Holder, and their respective
successors and assigns.
VII.5 Duplicate Originals. All parties may sign any
number of copies of this Agreement. Each signed copy shall be an
original, but all of them together shall represent the same
agreement.
VII.6 Severability. If any provision of this Agreement,
or the application of such provision to any person or
circumstance, shall be held invalid under the applicable law of
any jurisdiction, the remainder of this Agreement or the
application of such provision to other persons or circumstances
or in other jurisdictions shall not be affected thereby. Also,
if any provision of this Agreement is invalid or unenforceable
under any applicable law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such law. Any provision
hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other
provision hereof.
VII.7 No Waivers; Amendments.
<Page 27>
VII.7.1 No failure or delay on the part of the
Company or any Holder in exercising any right, power, or
remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise
thereof or the exercise of any other right, power, or
remedy. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to
the Company or any Holder at law, in equity, or otherwise.
VII.7.2 Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Company and the Required
Holders.
<Page 28>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
STRATUS PROPERTIES INC.
By: /s/ William H. Armstrong III
----------------------------
Name: William H. Armstrong III
Title: President
<Page 29>
[SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT]
OLY/STRATUS EQUITIES, L.P.
By: Oly Fund II GP Investments, L.P.,
its General Partner
By: Oly Real Estate Partners II,
L.P., its General Partner
By: Oly REP II, L.P., its
General Partner
By: Oly Fund II, LLC,
its General Partner
By: /s/ Hal R. Hall
---------------
Name: Hal R. Hall
Title: Vice President
Address: 200 Crescent Court, Suite 1650
Dallas, Texas 75201
Facsimile: (214) 740-7340
Attention: David D. Deniger
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Facsimile: (214) 746-7777
Attention: Robert C. Feldman
<Page 30>
INVESTORS RIGHTS AGREEMENT
STRATUS PROPERTIES INC.
____________________
Dated as of May 22, 1998
____________________
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions ....................................... 1
1.2 Rules of Construction ............................. 5
1.3 Other Definitions ................................. 6
ARTICLE II
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
2.1 Board of Directors ............................ 6
2.1.1 .......................... Board Representation 6
2.1.2 .................................Observer Rights 6
2.1.3 .......................................Vacancies 7
2.1.4 ...........................Termination of Rights 8
2.1.5 ..............................Costs and Expenses 8
2.2 Transactions Permitting Optional Redemption ....... 8
2.3 Other Activities of Olympus; Fiduciary Duties ..... 13
ARTICLE III
REGISTRATION RIGHTS
3.1 Demand Registration ............................... 13
3.1.1 ........................Request for Registration 13
3.1.2 .............Effective Registration and Expenses 14
3.1.3 .......................Selection of Underwriters 14
3.1.4 ................Priority on Demand Registrations 14
3.1.5 .................Rights of Nonrequesting Holders 15
3.1.6 ..............................Deferral of Filing 15
i
3.2 Piggyback Registrations ........................... 16
3.2.1 ..............................Right to Piggyback 16
3.2.2 .......................Priority on Registrations 17
3.3 Information by Requesting Holders ................. 18
3.4 Holdback Agreement ................................ 18
3.5 Registration Procedures ........................... 19
3.6 Suspension of Dispositions ........................ 23
3.7 Registration Expenses ............................. 23
3.8 Indemnification ................................... 24
3.9 Limitations on Future Registration Rights ......... 27
3.10 Rule 144 Reporting ................................ 27
ARTICLE IV
TRANSFERS OF SECURITIES
4.1 Transfer and Exchange ............................. 28
4.2 Replacement of Securities ......................... 28
ARTICLE V
LIMITATION ON TRANSFERS
5.1 Restrictions on Transfer .......................... 28
5.2 Restrictive Legends ............................... 29
5.2.1 ...........................Securities Act Legend 29
5.2.2 ...................................Other Legends 29
5.3 Notice of Proposed Transfers ...................... 29
5.4 Termination of Certain Restrictions ............... 30
ARTICLE VI
TERMINATION
6.1 Termination ....................................... 30
ii
ARTICLE VII
MISCELLANEOUS
7.1 Notices ........................................... 30
7.2 Legal Holidays .................................... 31
7.3 Governing Law ..................................... 31
7.4 Successors and Assigns ............................ 31
7.5 Duplicate Originals ............................... 32
7.6 Severability ...................................... 32
7.7 No Waivers; Amendments ............................ 32
iii