EXHIBIT 4.2
RECAPITALIZATION AGREEMENT
An agreement made as of this _____ day of __________, 1998 by and among
BankVest Capital Corp., a Massachusetts corporation (the "Company"), Primus
Capital Fund III Limited Partnership, an Ohio limited partnership ("Primus"),
PNC Venture Corp., a Delaware corporation ("PNC"), Whitney Subordinated Debt
Fund, L.P. ("WSDF") and those stockholders of the Company listed on Exhibit A
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hereto (the "Stockholders").
WHEREAS, the signatories hereto are parties to, subject to, or enjoy the
benefits of, certain agreements, securities, and instruments more particularly
set forth on Exhibit B hereto (collectively, the "Related Agreements"); and
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WHEREAS, the parties propose to effect a certain "Plan of Recapitalization
and Reclassification" by filing of a certain amendment (the "Articles
Amendment") to the Amended and Restated Articles of Organization of the Company
(the "Restated Articles") which Articles Amendment is attached as Exhibit C, and
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by the taking of certain additional corporate action more particularly described
in the votes of the Board of Directors of the Company contained in the Unanimous
Written Consent to Action annexed hereto as Exhibit D; and
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WHEREAS, the parties wish to evidence and record their various agreements
in furtherance of the Plan of Recapitalization and Reclassification;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, IT IS AGREED:
1. Recitations.
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1.1. Initial Public Offering. The parties acknowledge that the
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Company presently is preparing for its initial public offering of its
securities, an underwritten offering registered on Form S-1 covering up to that
number of shares of its Common Stock (as hereinafter defined) equal in amount to
the maximum aggregate offering price of $___________ (the "Maximum Aggregate
Offering Price") (the "Initial Public Offering").
1.2. Articles Amendment. The parties acknowledge that pursuant to the
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Articles Amendment, as of a date immediately before the date upon which the
Company anticipates that its Initial Public Offering shall be declared effective
by the Securities and Exchange Commission (which shall be a date at least one
business day prior to the date on which the Company effects the Registration of
its Common Stock, as hereinafter defined, pursuant to Section 12 of the
Securities Exchange Act of 1934), the following recapitalization and
reclassification of the securities of the Company shall occur in the following
sequence:
1.2.1. There shall be authorized 25,000,000 shares of a newly
reclassified and redesignated class of common stock, par value $1.00 per share,
of the Company ("Common Stock"). The Company shall reclassify and redesignate
its authorized shares of Class A Common Stock, par value $1.00 per share, into
shares of
Common Stock. Each issued and outstanding share of Class A Common Stock
thereupon shall be automatically reclassified and redesignated into one share of
Common Stock.
1.2.2. There shall be authorized 2,000,000 shares of a newly
reclassified and redesignated class of non-voting common stock, par value $1.00
per share, of the Company ("Non-Voting Common Stock"). The Company shall
reclassify and redesignate its authorized shares of Class B Common Stock, par
value $1.00 per share, into shares of Non-Voting Common Stock. Each issued and
outstanding share of Class B Common Stock, if any, thereupon shall be
automatically reclassified and redesignated into one share of Non-Voting Common
Stock.
1.2.3. All 30,000 issued and outstanding shares of Class A
Preferred Stock of the Company shall be converted automatically and without
necessity of further action into 480,000 shares/*/ of newly-constituted Common
Stock, and the Class A Preferred Stock shall be eliminated as an authorized
class of shares of the Company.
1.2.4. All 30,000 issued and outstanding shares of Class B
Preferred Stock of the Company shall be converted automatically and without
necessity of further action into 480,000 shares* of newly-constituted Non-Voting
Common Stock, and the Class B Preferred Stock shall be eliminated as an
authorized class of shares of the Company.
1.2.5. All 37,500 issued and outstanding shares of Class C
Preferred Stock of the Company shall be converted automatically and without
necessity of further action into 348,837 shares* of newly-constituted Common
Stock, and the Class C Preferred Stock shall be eliminated as an authorized
class of shares of the Company.
1.2.6. All 37,500 issued and outstanding shares of Class D
Preferred Stock of the Company shall be converted automatically and without
necessity of further action into 348,837 shares* of newly-constituted Non-Voting
Common Stock, and the Class D Preferred Stock shall be eliminated as an
authorized class of shares of the Company.
1.2.7. Without limiting the generality of the effect of the
Articles Amendment, the parties further acknowledge that the Plan of
Recapitalization and Reclassification shall render null and void the Certificate
of Designation (as defined in Exhibit B).
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1.2.8. Notwithstanding anything herein to the contrary, all
certificates representing shares of Class A Common Stock, which are issued and
outstanding subsequent to the effectiveness of the recapitalization and
reclassification, shall be deemed to be certificates representing the applicable
number of shares of Common Stock subject to the recapitalization and
reclassification, and such original certificates may be surrendered and
exchanged at the closing of the Initial Public Offering or any time thereafter
for such new certificates of Common Stock. Likewise, all certificates
representing shares of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and Class D Preferred Stock which are issued and outstanding
subsequent to
___________________________
/*/ Prior to giving effect to the stock split described in Section 1.3 hereof.
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the effectiveness of the recapitalization and reclassification, shall be deemed
to be certificates representing the applicable number of shares of Common Stock
and Non-Voting Common Stock as designated in Sections 1.2.3 through 1.2.6
hereof, subject to the recapitalization and reclassification, and such original
certificates may be surrendered and exchanged at the closing of the Initial
Public Offering or any time thereafter for such new certificates of Common Stock
and Non-Voting Common Stock, as applicable.
1.3. Split. The parties further acknowledge that pursuant to the
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resolutions of the Board of Directors of the Company annexed hereto as
Exhibit D, inter alia on the same date specified in Section 1.2 above and
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immediately after the transactions therein specified, the Company shall effect a
3 for 2 stock split of each share of the Common Stock and the Non-Voting Common
Stock of the Company, in the form of a stock dividend.
2. Consent.
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2.1 Recapitalization. Primus, PNC, WSDF and the Stockholders: Consent
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to the Plan of Recapitalization and Reclassification as more particularly
described in Sections 1.2 and 1.3 above; and waive any violation by the Company
of, or non-compliance on the part of the Company under each and all of the
Related Agreements which might arise by reason of the effectuation of the Plan
of Recapitalization and Reclassification.
2.2 Underwriters. Primus, PNC, WSDF and the Stockholders consent to
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the engagement by the Company of Piper Jaffray Inc., CIBC Oppenheimer Corp. and
Friedman, Billings, Ramsey & Co., Inc., as underwriters for the Initial Public
Offering.
2.3 Use of Name of WSDF. WSDF consents to the use of its name in the
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Registration Statement on Form S-1, in the Prospectus and in any other related
document or instrument prepared in connection with the Initial Public Offering.
3. Related Transactions.
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In addition to the transactions contemplated in Section 1 above, upon
the "Closing Date" (hereinafter defined) of the Initial Public Offering the
following transactions shall occur.
3.1 Dividend. The Company shall pay to each holder of Class A
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Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and Class D
Preferred Stock of the Company, who is a record holder of such shares prior to
the effectiveness of the recapitalization and reclassification, as of the date
of the first closing under the Underwriting Agreement for the Initial Public
Offering ("Closing Date"), a sum in cash, or by certified or bank cashier's
check, equal to the dividend that would have been payable thereon, to the extent
cumulated and theretofore unpaid, as of the Closing Date (and as if the said
shares of preferred stock had continued to be authorized and issued, and had
been held by such holder until such Closing Date).
3.2. Note Repaid. The Company shall pay the Subordinated Note (as
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defined in Exhibit B), together with interest in full, in cash or by certified
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or bank cashier's
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check or by wire transfer, and WSDF shall contemporaneously return the original
Subordinated Note to the Company so that same may be marked "paid and canceled."
4. Additional Agreements.
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In addition to undertaking the actions and performing the agreements above
set forth, the parties agree:
4.1. Lock-Up. Pursuant to lock-up agreements, each substantially in
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the form of Exhibit G annexed hereto, Primus, PNC and WSDF severally agree,
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among other things, for a period of 180 days after the date of the final
Prospectus for the Initial Public Offering, not to sell any securities of the
Company owned by them, unless same have been included for registration in the
Initial Public Offering, and each hereby agrees to sign such other and further
documentation, including without implied limitation any so-called lock-up
letter, as shall be reasonably requested by the underwriters of the Company in
order to further evidence such agreement.
4.2. Purchase Agreement. The Company, Primus and PNC agree that the
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Primus PNC Purchase Agreement (as defined in Exhibit B) shall terminate on the
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effective date of the Initial Public Offering, provided however that the
warranties and representations and covenants of the parties thereto as set forth
in Paragraph 3H, all of Section 5 and Paragraphs 7A and 7C thereof shall
survive such termination to the extent expressly provided therein and, to the
extent not expressly so provided therein, to the extent provided by law. Each of
the parties to the said agreement acknowledges and agrees that each of the
others has fully and completely performed all of its obligations thereunder or,
to the extent any such obligations have not been so fully performed, that any
such obligations are waived.
4.3 Second Purchase Agreement. The Company, Primus and PNC agree
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that the Second Primus PNC Purchase Agreement (as defined in Exhibit B) shall
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terminate on the effective date of the Initial Public Offering, provided however
that the warranties and representations and covenants of the parties thereto as
set forth in Paragraph 3H, all of Section 5 and Paragraphs 7A and 7C thereof
shall survive such termination to the extent expressly provided therein and, to
the extent provided by law. Each of the parties to the said agreement
acknowledges and agrees that each of the others has fully and completely
performed all of its obligations thereunder or, to the extent any such
obligations have not been so fully performed, that any such obligations are
waived.
4.4. Stockholders Agreement. Except for Paragraph 5 thereof, relating
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to certain lock-up arrangements among certain stockholders who are parties to
the Stockholders Agreement, the Company, Primus, PNC, WSDF and the Stockholders
agree that the Stockholders Agreement (as defined in Exhibit B) shall terminate
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on the effective date of the Initial Public Offering. Such Paragraph 5 shall
survive in accordance with the original terms of the Stockholders Agreement.
Each of the parties to the said agreement acknowledges and agrees that each of
the others has fully and completely performed all of its obligations thereunder
or, to the extent any such obligations have not been so fully performed, that
any such obligations are waived.
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4.5. Registration Rights Agreement. The Company, Primus, PNC and WSDF
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agree that the Registration Rights Agreement (as defined in Exhibit B) shall
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remain in full force and effect in accordance with its terms, provided: such
agreement shall not be deemed violated by the Plan of Recapitalization and
Reclassification or any of the actions of the Company contemplated hereunder;
each of Primus, PNC and WSDF hereby waives any registration rights it may have
with respect to a registration on Form S-8 of shares issued under the 1995
Company Stock Option Plan, as amended by the Board of Directors to date. In
addition, the Company, Primus, PNC and WSDF hereby agree that paragraph 3(a) of
the Registration Rights Agreement is hereby deleted and the following is
inserted in lieu thereof:
"(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the 180-day period beginning on the effective date of the
Company's initial public offering of Common Stock (except as part of
such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree."
4.6. Primus Warrant; PNC Warrant. The Company and Primus agree that
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the Primus Warrant (as defined in Exhibit B) shall remain in full force and
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effect in accordance with its terms, except that same shall be exercisable in
shares of the Company's newly constituted Common Stock, and shall be adjusted in
accordance with its terms, including with respect of the stock split described
in Section 2 above. The Company and PNC agree that the PNC Warrant (as defined
in Exhibit B) shall remain in full force and effect in accordance with its
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terms, except that it shall be exercisable in shares of the Company's newly
constituted Non-Voting Common Stock, and shall be adjusted in respect of the
stock split described in Section 2 above. Whenever any reference is made in
either of such Warrants to a definition contained in an instrument which is
being terminated herein, each provision of each such instrument as so referred
shall be (unless contrary to the intent and purposes hereof) deemed incorporated
by reference into such Warrant and shall thereby survive as a provision of such
Warrant.
4.7. WSDF Purchase Agreement. The Company and WSDF agree that the
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Securities Purchase Agreement (as defined in Exhibit B) be and the same is
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terminated effective on the effective date of the Initial Public Offering,
provided however that the warranties and representations of the parties thereto
as set forth in Articles 5 and 6 thereof shall survive such termination to the
extent expressly set forth therein and, to the extent not so expressly provided
therein, to the extent provided by law. Each of the parties to the said
agreement acknowledges and agrees that the other has fully and completely
performed all of its obligations thereunder, or that to the extent any such
obligations have not been so performed, any obligation to perform the same is
waived.
4.8. Vested Warrant. The Company and WSDF agree that the Vested
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Warrant (as defined in Exhibit B) shall remain in full force and effect in
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accordance with its terms, except that same shall be exercisable in shares of
the Company's newly constituted Common Stock, and shall be adjusted in
accordance with its terms, including with respect to the stock split described
in Section 2 above. Whenever any reference is
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made in such Vested Warrant to a definition contained in an instrument which is
being terminated herein, each provision of each such instrument as so referenced
shall be (unless contrary to the intent and purpose hereof) deemed incorporated
by reference into the Vested Warrant and shall thereby survive as a provision of
such Vested Warrant.
4.9. Vesting Warrant. The Company and WSDF agree that the Vesting
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Warrant (as defined in Exhibit B) be and the same hereby is terminated effective
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on the effective date of the Initial Public Offering, and WSDF hereby
acknowledges that all obligations of the Company to it thereunder will have been
satisfied.
4.10. Put Agreement. The Company and WSDF agree that the Put Agreement
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(as defined in Exhibit B) be and the same hereby is terminated effective on the
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effective date of the Initial Public Offering, provided however that the
warranties and representations of the parties thereto as set forth therein shall
survive such termination to the extent expressly provided therein and, to the
extent not so expressly provided therein, to the extent provided by law. Each of
the parties to the said agreement acknowledges and agrees that the other has
fully and completely performed its obligations thereunder, or that to the extent
any such obligations have not been so performed, such obligation to perform the
same is waived.
4.11 Consent and Waiver. Primus, PNC and WSDF hereby consent to the
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increase in the number of shares subject to issuance under the 1995 Stock Option
Pool from 600,000 shares currently to 1,100,000 (post-split) as provided in
Exhibit D hereto.
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5. Unified Agreement.
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The parties express their intention that the provisions hereof
constitute a unified agreement, and that although certain events shall occur on
different dates it is the intention of the parties that none of the transactions
be given permanent effect unless all of the transactions herein specified shall
become effective. Consequently, in the event that there is no closing of the
Initial Public Offering on or before June 30, 1999, then the parties (unless
they otherwise unanimously agree) intend that this Agreement shall become null
and void, and of no further force or effect (except that such nullification
shall not limit any right of enforcement of, or for damages in connection with
any breach of this agreement on the part of any party). In the event that this
Agreement shall terminate as herein specified and certain partial performances
hereunder shall have been completed by the parties hereto (by way of example
only, if there shall have been an effective date but not a closing date under
the Initial Public Offering, such that the transactions contemplated by the
Articles Amendment shall have been effected), the parties severally covenant and
agree to take any and all action, including without implied limitation any and
all necessary votes of stockholders, and to file any and all instruments and
documents, including without implied limitation such amendments to or
restatements of the Articles of Organization of the Company as on file with the
Secretary of The Commonwealth of Massachusetts, as shall be necessary,
appropriate or, upon the reasonable request of any party hereto, desirable in
order to restore all parties to their respective rights and obligations
immediately prior to the effectiveness of the Recapitalization. Without implied
limitation, such action may include the re-establishment of the capital
structure of the Company as in effect prior to the Articles Amendment, the
rescission of the
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exchange of any Company securities in connection with the Plan of Reorganization
and Recapitalization, and the repayment of any dividends theretofore paid.
6. Voting Agreement; Proxy.
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Each of Primus, PNC, WSDF and the Stockholders severally agrees that, in
the event and to the extent it holds securities of the Company which entitle it,
pursuant to the present Articles of Organization of the Company or pursuant to
applicable Massachusetts law, to vote upon the authorization of the Articles
Amendment or to vote upon any other matter relative to the Plan of
Reorganization and Reclassification, for and in consideration of the like
covenants and undertakings herein contained, each and all of said parties shall
vote affirmatively for the authorization of the Restated Articles, and for the
authorization of all other transactions on the part of the Company herein
contemplated, at any meeting of stockholders or securities holders of the
Company, or any class thereof, or pursuant to any written consent to any action
in lieu of any such meeting. Each and any such parties further acknowledge that
any notice of any meeting at which the Plan of Recapitalization and
Reclassification would or might be considered by securities holders of the
Company shall provide a notice of the rights of dissenting stock holders for an
appraisal of their shares pursuant to Sections 76 and 86-98 of Chapter 156B of
the General Laws of The Commonwealth of Massachusetts, substantially in the form
annexed as Exhibit E. Each of the parties hereto irrevocably agrees to and does
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hereby waive its rights of appraisal, if any, whether arising under said
statutory sections or otherwise, and agrees to execute any and all documents
requested by the Company further to evidence such waiver or their respective
consents to the Plan of Recapitalization and Reclassification. In furtherance
of the within voting agreement of security holders of the Company, each of
Primus, PNC and WSDF agrees to and does hereby constitute Paul S. Gass and
Charles W. Cross or either of them as their duly designated proxy and attorney
in fact, in order to effectuate the provisions of this Section 6, and has
executed and does hereby deliver the several proxies annexed hereto as Exhibits
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F-1 through F-3. Each of Primus, PNC and WSDF does hereby further declare that
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its respective proxy is coupled with an interest and is irrevocable.
Notwithstanding anything herein to the contrary, nothing herein shall be
interpreted to mean that Primus, PNC and WSDF are acting in concert as a group
in connection with the voting arrangement described hereunder.
7. Miscellaneous.
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7.1. Binding. This Agreement shall be binding upon the parties hereto
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and their respective successors, assigns, heirs and legal representatives.
7.2. Applicable Law. This Agreement shall be subject to the laws of
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The Commonwealth of Massachusetts without regard to principles of conflict of
law.
7.3. Further Action. The parties agree from time to time upon
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reasonable request to restate such of the Related Agreements as shall survive
the execution and performance hereof, so as to include requisite cross-
references and so as to eliminate references to terminated or superseded
agreements and instruments, and further to take such other action as may be
reasonably requested by any party hereto further to evidence the provisions
hereof.
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7.4. Headings. Headings are included herein for convenience, do not
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form a part of this Agreement, and are not admissible as to construction.
7.5. Entire. This instrument is the entire expression of the
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agreement of the parties with respect to its subject matter, and supersedes all
prior understandings, agreements or representations in such regard.
7.6. Specific Enforcement. The parties acknowledge the unique nature
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of the provisions hereof, and agree that damages in event of breach would be
both difficult to calculate and an inadequate remedy. Consequently, in the event
of breach, and in addition to recovering any provable damages and reimbursement
of any legal fees, the injured party shall be entitled to equitable relief,
including specific performance.
7.7 No Third Party Rights. No person or entity not signatory shall
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have any rights as a third party beneficiary under this Agreement, or to enforce
the provisions hereof on behalf of any signatory hereto.
[The Remainder of this Page is Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
contract under seal as of the date first above written.
BANKVEST CAPITAL CORP. WHITNEY SUBORDINATED DEBT FUND, L.P.
By:____________________________ By:_________________________________________
Its:___________________________ Its:________________________________________
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners III
Limited Partnership, its general partner
By: Primus Venture Partners, Inc.
its general partner
By:_________________________________________
Its:________________________________________
PNC VENTURE CORP.
By:_________________________________________
Its:________________________________________
EXISTING STOCKHOLDERS
____________________________________________
Paul S. Gass
____________________________________________
John P. Colton
____________________________________________
James D. Gerson
____________________________________________
Kellie D. Jacques
____________________________________________
Michael P. Karman
____________________________________________
Cathy F. Sutton
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EXHIBIT A
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PAUL S. GASS
JOHN P. COLTON
JAMES D. GERSON
KELLIE D. JACQUES
MICHAEL P. KARMAN
CATHY F. SUTTON
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EXHIBIT B
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1. Purchase Agreement by and among BankVest Capital Corp., Primus Capital Fund
III Limited Partnership and PNC Venture Corp. dated as of May 30, 1996, as
amended by First Amendment to and Waiver of Certain Provisions to Purchase
Agreement, dated as of February 28, 1997 and the Second Amendment to and
Waiver of Certain Provisions to Purchase Agreement, dated as of May 28,
1998 (collectively, "Primus PNC Purchase Agreement");
2. Amended and Restated Stockholders Agreement by and among the Company,
Primus, PNC, and the Stockholders dated as of May 28, 1998 (the
"Stockholders Agreement");
3. BankVest Capital Corp. Amended and Restated Registration Rights Agreement
by and among the Company, Primus, PNC and WSDF dated as of February 28,
1997, as amended by the First Amendment to Amended and Restated
Registration Rights Agreement, dated as of May 28, 1998 (collectively, the
"Registration Rights Agreement");
4. BankVest Capital Corp. Stock Purchase Warrant dated as of May 30, 1996,
Certificate No. WA-1, granted by the Company to Primus as amended by Stock
Purchase Warrant dated as of May 22, 1997, Certificate No. WA-1(AR)
("Primus Warrant");
5. BankVest Capital Corp. Stock Purchase Warrant dated as of May 30, 1996,
Certificate No. WB-1, granted by the Company to PNC as amended by Stock
Purchase Warrant dated as of May 22, 1997, Certificate No. WB-1(AR) ("PNC
Warrant").
6. Certificate of Vote of Directors Establishing a Series of Class of Stock
dated May 29, 1996 and filed with the Secretary of the Commonwealth of
Massachusetts ("Certificate of Designation").
7. Securities Purchase Agreement by and between the Company and WSDF dated as
of February 28, 1997 (the "Securities Purchase Agreement");
8. BankVest Capital Corp. 10.101% Subordinated Promissory Note issued by the
Company to WSDF due February 27, 2005 dated February 28, 1997 (the
"Subordinated Note");
9. BankVest Capital Corp. Common Stock Purchase Warrant granted to WSDF, dated
February 28, 1997, No. VDW-1 (the "Vested Warrant");
10. BankVest Capital Corp. Common Stock Purchase Warrant granted to WSDF, dated
February 28, 1997, No. VGW-1 (the "Vesting Warrant"); and
11. Put and Call Agreement by and between the Company and WSDF dated as of
February 28, 1997 (the "Put Agreement").
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12. Purchase Agreement by and among BankVest Capital Corp., Primus Capital
Funds III Limited Partnership and PNC Venture Corp. dated May 28, 1998
("Second Primus PNC Purchase Agreement").
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