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EX-10.4
Convertible Preferred Stock Purchase Agreement
SUPERSHUTTLE INTERNATIONAL, INC.
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of September 24, 1987 among Super-Shuttle
International, Inc., a Delaware corporation (the "Company"), and the persons and
entities listed on the Schedule of Purchasers attached hereto as Exhibit A (the
"Purchasers").
SECTION 1
Authorization and Sale of Preferred Stock
1.1 Authorization. The Company will authorize the sale and issuance of up
to 83,505 shares (the "Shares") of its Convertible Preferred Stock ("Preferred"
or "Preferred Stock"), having the rights, privileges and preferences as set
forth in the Certificate of Designations, (the "Certificate") in the form
attached to this Agreement as Exhibit B.
1.2 Sale of Preferred. Subject to the terms and conditions hereof, the
Company will severally issue and sell to each of such Purchasers and the
Purchasers will severally buy from the Company the total number of shares of
Preferred specified opposite such Purchaser's name in column 2 of the Schedule
of Purchasers, at the aggregate purchase price set forth in column 3 of the
Schedule of Purchasers. The Company's agreements with each of the Purchasers are
separate agreements, and the sales of the Preferred to each of the Purchasers
are separate sales.
SECTION 2
Closing Dates; Delivery
2.1 Closing Dates. The closing of the purchase and sale of the Preferred
hereunder shall be held at the offices of Mitchell, Silberberg & Knupp, 11377
West Olympic Boulevard, Los Angeles, CA at 2:00 p.m., local time, on September
24, 1987 (the "Closing") or at such other time and place upon which the Company
and the Purchasers shall agree (the date of the Closing is hereinafter referred
to as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to each Purchaser a
certificate or certificates, registered in such Purchaser's name set forth on
the Schedule of Purchasers, representing the number of Shares designated in
column 2 of the Schedule
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of Purchasers to be purchased by such Purchaser, against payment of the purchase
price therefor, by cashier's check payable to the Company or wire transfer per
the Company's instructions.
SECTION 3
Representations and Warranties of the Company
Except as set forth on Exhibit C attached hereto, the Company represents
and warrants to the Purchasers as follows:
3.1 Organization and Standing; Articles and By-Laws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is qualified to do business as a foreign corporation
in every jurisdiction where such qualification is required by applicable law,
except where the failure to be so qualified would not have a material adverse
affect on the Company's business as now conducted or as now proposed to be
conducted. The Company has furnished the Purchaser's special counsel with copies
of its Certificate of Incorporation and By-Laws, as amended. Said copies are
true, correct and complete and contain all amendments through the Closing Date.
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement, to sell and issue the Shares hereunder, to issue the Common Stock
issuable upon conversion of the Preferred and to carry out and perform its
obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company consists or
will, upon the filing of the Certificate, consist of 4,000,000 shares of Common
Stock, 3,000,000 shares of which are designated Class A Common Stock (herein
"Common Shares"), of which 990,285 shares are issued and outstanding as of the
Closing Date, and 1,000,000 shares of which are designated Class B Common Stock
("Class B Common"), none of which has been issued, and 1,000,000 shares of
Preferred Stock, 100,000 shares of which have been (or will be by the Closing
Date) designated "Convertible Preferred Stock,"
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none of which has been issued prior to the Closing. The outstanding shares have
been duly authorized and validly issued, and are fully paid and nonassessable.
Options to purchase an aggregate of 234,000 shares of Common Shares are issued
and outstanding. Warrants to purchase an aggregate of up to 178,890 shares of
Common Shares are issued and outstanding and up to an additional 250,000 shares
of Common Shares are issuable upon conversion of outstanding convertible notes.
The Company has reserved 83,505 shares of Preferred for issuance hereunder,
83,505 shares of its Common Shares for issuance upon conversion of the
Preferred, 673,890 shares of Common Shares for issuance upon the exercise of
outstanding options and warrants or options which may be granted under the
Company's non-qualified stock option plan, and upon conversion of outstanding
debt, and up to 86,900 shares of its Common Shares for issuance to employees,
consultants, or directors under stock plans or arrangements approved by the
Board of Directors. The Preferred shall have the rights, preferences, privileges
and restrictions set forth in the Certificate. Except as set forth above, there
are no options, warrants or other rights to purchase or acquire any of the
Company's authorized and unissued capital stock or other securities of the
Company. A list of all holders of the outstanding capital stock and other
securities of the Company, including, without limitation all convertible debt,
options, warrants and other rights, and, in the case of convertible debt,
options, warrants or other convertible securities, a table showing the exercise
price, term and number of shares issuable upon conversion or exercise thereof,
is attached hereto as Exhibit D.
3.5 Authorization. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Preferred (and the Common Shares issuable upon
conversion of the Preferred) and the performance of all of the Company's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Company, shall constitute a valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as the indemnification provisions of Section 8.11 hereof may be limited
by principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Shares, when issued in compliance with the provisions of this Agreement,
will be validly issued, fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Certificate; the Common Shares
issuable upon conversion of the Shares has been duly and validly reserved and,
when issued in compliance with the provisions of this Agreement and the
Certificate, will be validly issued, fully paid and nonasses-
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sable; and the Shares and such Common Shares will be free of any liens or
encumbrances, assuming the Purchasers take the shares with no notice thereof,
other than any liens or encumbrances created by or imposed upon the holders;
provided, however, that the Shares (and the Common Shares issuable upon
conversion thereof) may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein. The Shares are not subject
to any preemptive rights or rights of first refusal.
3.6 Financial Statements. The Company has delivered to each Purchaser the
attached financial statements for SuperShuttle, Inc. for the year ended and as
of September 30, 1986 and the ten-month period and the month ended and as of
July 31, 1987 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (other than for accompanying
notes) and subject to changes for year-end audit adjustments. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company, as of the dates, and during the periods, indicated
therein. Since July 31, 1987, there has not been any change in the assets,
liabilities, financial condition or operations of the Company, from that
reflected in the Financial Statements except for changes in the ordinary course
of business which have not been, either in any case or in the aggregate,
materially adverse.
3.7 Material Liabilities. To the best of its knowledge, the Company has no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except (i) the liabilities and obligations set forth in the
Financial Statements, (ii) liabilities and obligations which have been incurred
subsequent to July 31, 1987 in the ordinary course of business which have not
been, either in any case or in the aggregate, materially adverse, and (iii)
liabilities and obligations under a lease for its principal offices and leases
for equipment, and liabilities and obligations under sales, procurement and
other contracts and arrangements entered into in the normal course of business.
3.8 Title to Properties and Assets; Liens, etc. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business, and (iii) those listed on Exhibit C.
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3.9 Compliance with Other Instruments, None Burdensome, etc. The Company is
not in violation of any term of its Certificate of Incorporation or By-Laws, or
in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and to the best of its knowledge is not in violation of any order, statute, rule
or regulation applicable to the Company where such violation would materially
and adversely affect the Company. The execution, delivery and performance of and
compliance with this Agreement, and the issuance of the Preferred and the Common
Shares issuable upon conversion of the Preferred, have not resulted and will not
result in any material violation of, or conflict with, or constitute a material
default under, the Company's Certificate of Incorportion or By-laws or any of
its agreements (or, to the best of the Company's knowledge, any agreement
binding upon any officer, director or affiliate of the Company) nor result in
the creation of, any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company; and there is no such violation or
default which materially and adversely affects the business of the Company or
any of its properties or assets.
3.10 Litigation, etc. There are no actions, suits, proceedings or
investigations pending against the Company, its properties or any officer,
director or affiliate of the Company before any court or governmental agency
(nor, to the best of the Company's knowledge, is there any reasonable basis
therefor or threat thereof).
3.11 Employees. To the best of the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company.
3.12 Registration Rights. Except as set forth in this Agreement and
pursuant to the Registration Rights Agreement dated October 14, 1985 by and
among the Company, Wilmington Cab Company of California, Mitchell S. Rouse,
Erwin Tomash, as Trustee of the Erwin and Adele Tomash Family Trust, David Abel,
Chester I. Lappen, Lawrence Goodman, as Trustee of the Goodman Community
Property Trust, and David Jacobs (the "Original Registration Rights Agreement"),
the Company is not under any contractual obligation to register (as defined in
Section 8.2 below) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.13 Governmental Consent, etc. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or
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the offer, sale or issuance of the Preferred (and the Common Shares issuable
upon conversion of the Preferred), or the consummation of any other transaction
contemplated hereby, or the conduct of the Company's business as currently
contemplated, except (a) filing of the Certificate in the office of the Delaware
Secretary of State (b) qualification (or taking such action as may be necessary
to secure an exemption from qualification, if available) of the offer and sale
of the Preferred (and the Common Shares issuable upon conversion of the
Preferred) under the California Corporate Securities Law of 1968, as amended,
and other applicable Blue Sky laws, which filings and qualifications, if
required, will be accomplished in a timely manner.
3.14 Offering. Subject to the accuracy of the Purchasers' representations
in Section 4 hereof, the offer, sale and issuance of the Preferred to be issued
in conformity with the terms of this Agreement, and the issuance of the Common
Shares to be issued upon conversion of the Preferred, constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act").
3.15 Brokers or Finders; Other Offers. The Company has not incurred, and
will not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
3.16 Airport Consent. The Company has the proper and necessary authority to
conduct business in each airport facility identified on Exhibit C. This Section
3.16 is not intended to limit in any way the scope of Section 3.13 hereof.
3.17 Material Agreements. Attached hereto as Exhibit E is a list of all
agreements, contracts, indebtedness, liabilities, and other obligations to which
the Company is a party or by which it is bound and which either (i) involve or
may involve obligations on behalf of any party thereto in excess of $50,000, or
(ii) include as a party thereto any officer, director, key employee or principal
shareholder of the Company, or any individual or entity affiliated with any
officer, director, key employee or principal shareholder of the Company.
3.18 Governmental Litigation. There is no litigation pending or threatened
against the Company, nor any material complaints with state, city, or private
entities governing airport ground transportation areas for the airports the
Company and its franchise currently serve, This Section 3.18 is not intended to
limit in any way the scope of Section 3.10 hereof.
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3.19 Disclosure. To the best of the Company's knowledge, this Agreement
with the Exhibits hereto and the Company's Business Plan dated September, 1987,
when taken as a whole, does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein not misleading in light of the circumstances under which they
were made. The Business Plan and the financial projections contained in the
Business Plan were prepared in good faith; however, the Company does not warrant
that it will achieve the financial projections set forth in the Business Plan.
SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of the Shares as follows:
4.1 Experience. It has substantial experience in evaluating and investing
in private placement transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 Investment. It is acquiring the Preferred and the underlying Common
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for sale in connection with, any distribution thereof. It
understands that the Preferred to be purchased and the underlying Common Shares
have not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 Rule 144. It acknowledges that the Preferred and the underlying Common
Shares are subject to restrictions on transfer and must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of
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shares being sold during any three-month period not exceeding specified
limitations.
4.4 No Public Market. It understands that no public market now exists for
any of the securities issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Company's securities.
4.5 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and the
opportunity to review the Company's facilities and Business Plan.
4.6 Authorization. This Agreement when executed and delivered by such
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of Section 8.11 hereof may be limited by principles
of public policy, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and the
execution and performance of this Agreement will not violate the agreements
under which the non-individual Purchasers were formed or result in any material
breach in any agreement or obligation by which the Purchasers are bound.
4.7 Brokers or Finders. The Company has not, and will not, incur, directly
or indirectly, as a result of any action taken by such Purchaser, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement. Lambda III, L.P., will be paying a fee to
Bradford W. Allen equal to one percent of the total amount invested pursuant to
this Agreement by Lambda III, L.P., and Lambda C.F.D. '87, L.P., but such
payment shall in no way limit the proceeds to the Company hereunder or be an
obligation of the Company in any way.
4.8 Securities Law Compliance. Each of the Purchasers is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act of
1933, as amended. Each Purchaser which is not an individual represents that is
was not formed for the specific purpose of making this investment. Each
Purchaser's principal place of business, or residence in the case of an
individual purchaser, is as set forth on Exhibit A attached hereto.
SECTION 5
Conditions to Closing of Purchasers
The Purchasers' obligations to purchase the Shares at the Closing are, at
the option of the Purchasers, subject to the fulfillment of the following
conditions:
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5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
5.3 Opinion of Company's Counsel. The Purchasers shall have received from
Mitchell, Silberberg & Knupp, counsel to the Company, an opinion addressed to
them, dated the Closing Date, in a form acceptable to the Purchasers and their
special counsel.
5.4 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company in the form of Exhibit F hereto,
executed by the Executive Vice President of the Company, dated the Closing Date,
and certifying, among other things, to the fulfillment of the conditions
specified in Sections 5.1 and 5,2 of this Agreement.
5.5 Blue Sky. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Preferred and the Common
Shares issuable upon conversion of the Preferred.
5.6 Certificate of Designations. The Certificate shall have been filed with
the Delaware Secretary of State.
5.7 Legal Matters. All material matters of a legal nature which pertain to
this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by special counsel to the Purchasers.
5.8 Minimum Investment. The Purchasers at the Closing shall purchase shares
of Preferred having an aggregate purchase price of not less than $1,000,000.00.
5.9 Non-Compete Agreements. Mitchell S. Rouse, David Jacobs and James
Zebrowski shall have entered into agreements not to compete with the Company in
forms satisfactory to the Purchasers.
5.10 Board of Directors. The Board of Directors of the Company on the
Closing Date shall consist of at least eight properly authorized members.
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SECTION 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Shares at the Closing Date
is, at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 Representations. The representations made by the Purchasers in Section
4 thereof shall be true and correct when made, and shall be true and correct on
the Closing Date.
6.2 Blue Sky. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Preferred and the Common
Shares issuable upon conversion of the Preferred.
6.3 Certificate of Designations. The Certificate shall have been filed with
the Delaware Secretary of State.
6.4 Legal Matters. All material matters of a legal nature which pertain to
this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
6.5 Minimum Investment. The Purchasers at the Closing shall purchase shares
of Preferred having an aggregate purchase price of not less than $1,000,000.00.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports to
each Purchaser for so long as such Purchaser is a holder of any shares of
Preferred or Common Shares issued upon conversion of the Preferred:
(a) As soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of
changes in financial position of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures
for the previous
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fiscal year (or, at the election of the Company, setting forth in
comparative form the budgeted figures for the fiscal year then reported),
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) As soon as practicable after the end of each month (beginning
September 1987), and in any event within 45 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of
each such period, and consolidated statements of income and consolidated
statements of changes in financial condition of the Company and its
subsidiaries for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles (other
than for accompanying notes), subject to changes resulting from year-end
audit adjustments, all in reasonable detail, signed and certified as
accurate by the President or Chief Financial Officer of the Company and
accompanied by a qualitative summary prepared by such individual of the
highlights of the financials and the business for the month.
7.2 Additional Information. As long as a Purchaser holds shares of
Preferred and/or Common Shares issued upon conversion of the Preferred, the
Company will deliver or provide to such Purchaser (i) prior to the beginning of
each fiscal year, an annual budget and business plan, including projected income
statements, cash flow figures and balance sheet information, on a monthly basis
for the ensuing fiscal year, together with a qualitative description of the
Company's plan prepared by the President; (ii) promptly (but in no event more
than thirty days) after the discovery of any default of the Company's material
obligations pursuant to this Agreement, or any other materially adverse event or
circumstance affecting the business or operations of the Company, a statement
outlining such default or event and the Company's proposed response thereto;
(iii) with reasonable promptness, copies of all annual federal income tax
returns and all filings made with the Securities and Exchange Commission; and
(iv) with reasonable promptness, such other information and data, including
access to books, records, officers and accountants, with respect to the Company
and its subsidiaries as any such holder may from time to time reasonably
request; provided, however, that the Company shall not be obligated to provide
any information pursuant to this Section 7.2 that it considers in good faith to
be a trade secret or to contain confidential or classified information.
7.3 Assignment of Rights to Financial Information. The rights granted
pursuant to Sections 7.1 and 7.2 may not be assigned or otherwise conveyed by
any Purchaser or by any subsequent transferee of any such rights without the
prior written consent of the Company (which consent shall not be unreasonably
withheld); provided, how-
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ever, that any Purchaser may assign to any transferee, other than a competitor
of the Company, after giving notice to the Company, the rights granted pursuant
to Section 7.1 and 7.2 to (i) a transferee who acquires at least 5,000 shares of
Preferred and/or Common Shares issued upon conversion of the Preferred,
appropriately adjusted for recapitalizations, stock splits, stock dividends and
the like ("Recapitalizations"), or (ii) any constituent partner of a Purchaser.
7.4 Termination of Financial Information. The covenants set forth in
Sections 7.1. and 7.2 shall terminate and be of no further force or effect at
such time as the Company is required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended.
7.5 Insurance. From and after the Closing, the Company shall maintain key
man insurance (or a binder with respect thereto) in the amount of $500,000.00 on
each of David Jacobs and James Zebrowski, and $1,000,000 on Mitchell S. Rouse,
with the Company as the sole named beneficiary under each such policy.
7.6 Board of Directors. As of the Closing Date, Frank R. Kline, Jr., will
be a duly authorized and appointed member of the Board of Directors of the
Company. At no time after the Closing Date shall more than four members of the
Board of Directors be current or former employees or officers of the Company or
of any affiliate of the Company, or members of the families of any such
individuals ("Inside Directors") (hereinafter, members of the Board of Directors
that are not Inside Directors shall be termed "Outside Directors"). The
following individuals shall constitute Outside Directors as of the Closing Date:
Erwin Tomash, David Abel, Chester I. Lappen and Frank R. Kline, Jr.
7.7 Change of Business Direction. Without the prior written consent of at
least a majority of the Outside Directors of the Company, which consent shall
have been obtained without any special consideration having been rendered to any
such Outside Director or any affiliate of such director ("Outside Board
Consent"), the Company shall not enter into any activity or business unrelated
to transportation services.
7.8 Rouse Stock Issuances. The Company shall not issue any shares of
capital stock or any options, warrants or other rights to purchase such shares
to any member of the Rouse family or any affiliate of such individual unless
Outside Board Consent has been obtained and the securities are issued and sold
at a price which is determined to be fair (to the Company) either (a) by a third
party (such as an investment banker or nationally recognized accounting firm)
mutually agreed upon by both the Company and a majority of the holders of the
Registrable Securities (as defined below) or (b) by a majority
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of the disinterested members of the Board of Directors and by holders of a
majority of the disinterested shares of outstanding capital stock of the
Company.
7.9 Executive Salaries. The annual salary (including bonuses) paid to
Mitchell S. Rouse, David Jacobs and James Zebrowski shall not be increased at a
rate of greater than fifteen percent (15%) per annum without Outside Board
Consent, and in no event shall the salary level (excluding bonuses) of any such
individuals exceed $200,000.
7.10 Termination of Covenants. The covenants set forth in Sections 7.5,
7.6, 7.7, 7.8 and 7.9 shall terminate and shall be of no further force or effect
at such time as the Company has completed a firm commitment underwritten public
offering of its securities pursuant to the Securities Act of 1933, as amended.
SECTION 8
Restrictions on Transferability of Securities;
Compliance with Securities Act; Registration Rights
8.1 Restrictions of Transferability. The Preferred and the Conversion Stock
(as defined below) shall not be sold, assigned, transferred or pledged except
upon the conditions specified in this Section 8, which conditions are intended
to ensure compliance with the provisions of the Securities Act. Each Purchaser
will cause any proposed purchaser, assignee, transferee, or pledgee of the
Preferred or such Common Shares held by a Purchaser to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 8.
8.2 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Shares issued or issuable pursuant
to conversion of the Preferred.
"Holder" shall mean any Purchaser holding Registrable Securities
(including Preferred) and any person holding Registrable Securities to whom
the rights under this Section 8 have been transferred in accordance with
Section 8.14 hereof.
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"Initiating Holders" shall mean any Purchasers or transferees of
Purchasers under Section 8.14 hereof who in the aggregate are Holders of
greater than 30% of the Registrable Securities.
"Registrable Securities" means (i) the Conversion Stock; and (ii) any
Common Shares of the Company issued or issuable in respect of the
Conversion Stock or other securities issued or issuable pursuant to the
conversion of the Preferred upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Shares otherwise issued
or issuable with respect to the Preferred, provided, however, that shares
of Common Shares or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a
broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold or are available for sale in the
opinion of counsel to the Company in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so
that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred by the Company in complying with Sections 8.5, 8.6
and 8.7 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company) and the reasonable
fees and disbursements of one counsel for all Holders participating in the
registration.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth above, all fees and
disbursements of counsel for any Holder.
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"Other Registrable Securities" shall mean securities of the same class
as the Registrable Securities for which the Company has received a request
for registration under Section 8.5(a) hereof, held by holders who have
contractual rights to participate in such registration.
8.3 Restrictive Legend. Each certificate representing (i) the Preferred,
(ii) the Conversion Stock and (iii) any other securities issued in respect of
the Preferred or the Conversion Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 8.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
Each Purchaser and Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred or the
Common Shares in order to implement the restrictions on transfer established in
this Section 8.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 8.4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership or (ii) in transactions
involving the distribution without consideration of Restricted Securities by any
of the Purchasers to any of its partners, or retired partners, or to the estate
of any of its partners or retired partners; provided that any such transfer or
transaction is effected in accordance with applicable state and federal
securities laws), unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense by either
(i) an unqualified written opinion of legal counsel who shall, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be ef-
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fected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear, except if such transfer is made pursuant to Rule
144, the appropriate restrictive legend set forth in Section 8.3 above, except
that such certificate shall not bear such restrictive legend if in the opinion
of counsel for such holder and the Company such legend is not required in order
to establish compliance with any provision of the Securities Act.
8.5 Requested Registration.
(a) Request for Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to not less than 25,000 shares
(appropriately adjusted for stock splits, recapitalizations, and the like) of
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company;
Provided, however, that it is understood and agreed that holders of Other
Registrable Securities may participate in such registration in proportion, as
nearly as practicable, to the respective amounts of securities held by the
Holders and such holders at the time of filing the registration statement; and
Provided further, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification, or compliance
pursuant to this Section 8.5:
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(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to January 1, 1989;
(C) During the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date ninety
(90) days immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(D) After the Company has effected one such registration pursuant to
this Section 8.5(a), and such registration has been declared or ordered
effective (provided that, if prior to the effectiveness of a registration
statement, the number of Holders participating or the number of shares of
Registrable Securities would not be sufficient to initiate a registration
pursuant to this Section 8.5(a), the Company may withdraw its registration
statement and, unless such insufficiency resulted from shares of
Registrable Securities being withdrawn as a result of a materially adverse
event or circumstance relating to the Company which was not known to the
Initiating Holders at the time of their request for demand registration,
the Company will be deemed to have satisfied its obligation to register
Registrable Securities for purposes of this Section 8.5(a)(ii)(D); and
provided further that, if the Holders that join in a registration under
this Section 8.5(a) are unable to sell all of the Registrable Securities
sought to be registered by them due to the participation of other holders
having contractual rights to participate (other than Holders), then the
Company shall be obligated to effect one additional registration if so
requested, and if in such registration the participating Holders are again
unable to sell all of the Registrable Securities sought to be registered
for the same reason, the Company shall be obligated to effect yet another
final registration under this Section 8.5(a), if so requested);
(E) If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors it would be seriously detrimental to the Company or
its shareholders for a registration statement to be filed in the near
future, then the Company's obligation to use its best efforts to register,
qualify
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or comply under this Section 8.5 shall be deferred for a period not to
exceed 90 days from the date of receipt of written request from the
Initiating Holders.
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to Section 8.5
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as part of the notice given pursuant to Section 8.5(a)(i)
(provided that it is understood that in no event shall the Company be obligated
to find any such underwriter). In such event, the right of any Holder to
registration pursuant to Section 8.5 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 8.5, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders, but subject to the Company's
reasonable approval. Notwithstanding any other provision of this Section 8.5, if
the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all holders of Registrable
Securities and holders of Other Registrable Securities and the number of shares
of Registrable Securities and Other Registrable Securities that may be included
in the registration and underwriting shall be allocated among all holders
thereof in proportion, as nearly as practicable, to the respective aggregate
amounts of Registrable Securities and Other Registrable Securities held by such
holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
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8.6 Company Registration.
(a) Notice of Registration. If at any time or from time to time the Company
shall determine to register any of its securities, either for its own account or
the account of a security holder or holders, other than (i) in connection with
the Company's initial public offering, or (ii) a registration relating solely to
employee benefit plans, or (iii) a registration relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 20 days after receipt of such written notice from the
Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives notice is
or a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
8.6(a)(i). In such event the right of any Holder to registration pursuant to
Section 8.6 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 8.6, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration. The Company shall so advise all Holders and other holders
distributing their securities through such underwriting and the number of shares
of Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among all Holders and such
other holders (provided that such other holders have contractual rights to
participate in such registration) in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities and other securities held by
such Holders and such other holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or holder to the nearest 100 shares. If any Holder or holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the managing underwriter.
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(c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 8.6
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
8.7 Registration on Form S-3.
(a) If any Holder or Holders holding in the aggregate not less than 30% of
the then outstanding Registrable Securities request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 (or any successor form to Form S-3), the
Company shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 8.7 in any six (6)
month period. The substantive provisions of Section 8.5(b) (including those
provisions with respect to the rights of holders of Other Registrable
Securities) shall be applicable to each registration initiated under this
Section 8.7.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 8.7: (i) in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or compliance unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act; (ii) if the Company, within ten (10) days of
the receipt of the request of the initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than with
respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date ninety (90) days immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish
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to such Holder a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for registration statements to be
filed in the near future, then the Company's obligation to use its best efforts
to file a registration statement shall be deferred for a period not to exceed 90
days from the receipt of the request to file such registration by such Holder.
8.8 Limitations on Subsequent Registration Rights. From and after the
Closing Date, the Company shall not, without first obtaining the written
approval of holders of a majority of the Common Shares issued or issuable upon
conversion of the Preferred, enter into any agreement granting any holder or
prospective holder of any securities of the Company registration rights with
respect to such securities unless such new registration rights, including
standoff obligations, are subordinate to the registration rights granted to
Holders hereunder. This Section 8.8 shall be of no further force or effect from
and after the date on which none of the Purchasers own securities of the Company
that are treated as Registrable Securities pursuant to Section 8.2 hereof.
8.9 Expenses of Registration. All Registration Expenses incurred in
connection with (i) all registrations pursuant to Section 8.5 (limited to one
registration, except as expressly provided in the parenthetical in Section
8.5(a)(ii)(D)), (ii) all registrations pursuant to Section 8.6 and (iii) all S-3
registrations pursuant to Section 8.7, shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered on
behalf of the Holders and all other Registration Expenses shall be borne by the
Holders of such securities pro rata on the basis of the number of shares so
registered.
8.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 8,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one
hundred eighty (180) days or until the distribution described in the
Registration Statement has been completed;
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents
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as such underwriters may reasonably request in order to facilitate the
public offering of such securities.
8.11 Indemnification.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 8, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein
or the preparation thereby.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising Out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular
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or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or the preparation thereby. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited in an amount equal to the initial public offering price of the shares
sold by such Holder, unless such liability arises out of or is based on willful
conduct by such Holder.
(c) Each party entitled to indemnification under this Section 8.11 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 8 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 8.
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8.13 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Shares of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934,
as amended.
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any
time after it has become subject to such reporting requirements);
(c) So long as a Purchaser owns any Restricted Securities to furnish
to the Purchaser forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the
general public), and of the Securities Act and the Securities Exchange Act
of 1934 (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as
a Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Purchaser to sell any such
securities without registration.
8.14 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Purchasers under Sections 8.5, 8.6 and 8.7 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a
Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, and (ii) such assignee or transferee
acquires at least 5,000 shares of Preferred and/or Common Shares issued upon
conversion thereof (appropriately adjusted for stock splits and
recapitalizations). Notwithstanding the foregoing, the rights to cause the
Company to register securities may be assigned to any constituent partner of a
Purchaser, without compliance with item (ii) above, provided written notice
thereof is promptly given to the Company.
8.15 Standoff Agreement. Each Holder agrees, so long as such Holder holds
at least five percent (5%) of the Company's outstanding voting equity
securities, in connection with the Company's initial
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public offering of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred twenty (120) days) from the effective date of such registration as may
be requested by the underwriters; provided, that the officers and directors of
the Company who own stock of the Company also agree to such restrictions.
SECTION 9
Purchasers' Right of First Refusal
9.1 Right of First Refusal. The Company hereby grants to Purchasers
(provided such Purchasers are then current holders of shares of the Preferred or
other equity securities issued in exchange for or upon conversion of the
Preferred) the right to purchase a pro rata share of securities (hereinafter the
"Preemptive Securities"), which are of the same type, class and series as the
New Securities (as defined in Section 9.1(a)), in the event the Company sells
New Securities. The amount of Preemptive Shares which each Purchaser may
purchase shall be equal to the number of New Securities to be sold and issued by
the Company multiplied by a fraction, the numerator of which is the sum of the
number of shares of Common Shares then held by each Purchaser and the number of
shares of Common Shares issuable upon conversion of the Preferred then held by
such Purchaser and the denominator of which is the sum of the total number of
shares of Common Shares then outstanding and the number of shares of Common
Shares issuable upon conversion of the then outstanding Preferred.
(a) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company including Common Shares and Preferred Stock
(however designated), whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Shares or Preferred Stock and
securities of any type whatsoever that are, or may become, convertible into said
shares of Common Shares or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Preferred purchased under this Agreement,
including Common Shares issuable upon conversion of the Preferred, and
securities issued to the Purchasers or their successors and assigns pursuant to
this Section 9.1, (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation, (iv) up to 86,900 shares
of the Company's
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Common Shares or options convertible into such number of shares issued to
employees, officers and directors of, and consultants, customers, and vendors
to, the Company, pursuant to any arrangement approved by the Board of Directors
of the Company, (v) up to 662,890 shares of the Company's Common Shares issued
upon the exercise of warrants or the conversion of debt issued and outstanding
on or before the Closing Date, or upon the exercise of options, (vi) stock
issued pursuant to any rights or agreements granted after the date hereof
including without limitation convertible securities, options and warrants,
provided that the rights of first refusal established by this Section 9.1 apply
with respect to the initial sale or grant by the Company of such rights or
agreements, (vii) securities issued to Union Venture Corporation or its
successors and assigns pursuant to Section 6.2 of the Purchase Agreement dated
as of July 3, 1986 by and between the Company and Union Venture Corporation or
to Stanchart Equities, Inc. or its successors and assigns pursuant to Section
6.2 of the Purchase Agreement dated as of September 1, 1987 by and among the
Company and Stanchart Equities, Inc., or (viii) stock issued in connection with
any stock split, stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser twenty (20) days prior written notice
of its intention, describing the type of New Securities, and the price and terms
upon which the Company proposes to issue the same. Each Purchaser (provided such
Purchaser is then a current holder of shares of the Preferred or other equity
securities issued in exchange for or upon conversion of the Preferred) shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase up to their respective pro rata shares of the Preemptive Securities for
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of Preemptive Securities to be
purchased.
(c) If any Purchaser fails to agree to purchase Preemptive Securities
within said twenty (20)-day period, it shall be deemed to have waived said right
with respect to the New Securities then being offered by the Company, provided
that the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within sixty (60) days from the date of said agreement) to
sell the New Securities at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within sixty (60) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities, without again offering the rights described in this Section
9. The Company shall have no obligation to consummate the sale of Preemptive
Securities to Purchasers in
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the event the Company does not consummate the sale of New Securities as
described in the notice given Purchasers pursuant to Section 9.1(b) hereof.
(d) The rights granted under this Section 9 shall expire upon the closing
of a Public Offering (as defined in Section 10.1(d)) below.
(e) The rights granted under this Section 9 are not assignable except by a
Purchaser to any wholly-owned subsidiary or constituent partner of such
Purchaser who acquires at least 5,000 Shares (appropriately adjusted for stock
splits, recapitalizations and the like).
SECTION 10
Right of Co-Sale
Mitchell S. Rouse and Wilmington Cab Company of California ("Wilmington
Cab") (hereinafter, individually, a "Management Shareholder") each hereby agrees
as follows:
10.1 Right of Co-Sale.
(a) In the event a Management Shareholder proposes to sell or otherwise
transfer any of his shares of the Company's Common Shares (or equity securities
issued in exchange therefor or as a dividend thereon), the Management
Shareholder will notify each Purchaser, provided such Purchaser is then a
current holder of shares of the Preferred or other equity securities issued in
exchange for or upon conversion of such Preferred (a "Co-Selling Party"), in
writing at least thirty (30) days in advance of such proposed sale (specifying
the number of shares or equity securities to be sold, the date of sale, the
sales price, the proposed purchaser and other terms of sale) and will permit
each Co-Selling Party (at such Co-Selling Party's option) to participate in such
sale and to sell the number of shares or equity securities each Co-Selling Party
desires to sell together with the number of shares and equity securities of the
Company which the Management Shareholder desires to sell, subject to the
following limitations. If the total number of shares or equity securities to be
sold in such transaction does not allow the Management Shareholder and each
Co-Selling Party to sell all the shares and equity securities each such party
desires to sell, then each participating Co-Selling Party ("Participating
Co-Selling Party") shall be entitled to sell his or its pro rata share of the
total number of shares or equity securities to be sold, and the Management
Shareholder will be entitled to sell only the number of shares or equity
securities of such total which are not to be sold by the Participating
Co-Selling Parties. A pro rata share for purposes of this right of Co-Sale is
the ratio that the sum of the number of shares of Common Shares then held by
each Purchaser and the number of shares of Common Shares issuable upon
conversion of the Preferred
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then held by such Purchaser bears to the sum of the total number of shares of
Common Shares then outstanding and the number of shares of Common Shares
issuable upon conversion of the then outstanding Preferred.
(b) Within ten (10) days after receipt of the Management Shareholder's
notice, each Co-Selling Party shall notify the Management Shareholder in writing
of the number of shares which it desires to sell, if any. The Management
Shareholder shall keep each Participating Co-Selling Party fully informed of the
progress of such sale and shall use his best efforts to assist each
Participating Co-Selling Party in completing such sale, provided that nothing
herein shall obligate any Participating Co-Selling Party to complete such sale
after giving notice of intention to participate if the Participating Co-Selling
Party elects not to do so.
(c) In the event the proposed purchaser in any transaction giving rise to a
right of co-sale pursuant to this Section 10.1 chooses for any reason not to
consummate the purchase of the shares or equity securities of the Management
Shareholder and the Participating Co-Sellinq Parties on substantially the terms
set forth in the written notice and as provided in Section 10.l(a), then the
Management Shareholder agrees to provide prompt written notice to each
Co-Selling Party. Each Co-Selling Party shall have the right for ten (10) days
from the date of receipt of any such notice to purchase its proportionate share
of the shares or equity securities which the Management Shareholder originally
intended to sell to the proposed purchaser on the terms and at the price set
forth in the original written notice. For purposes of this Section 10.1(c), a
proportionate share is the ratio that the sum of the number of shares of Common
Shares then held by the Co-Selling Party and the number of shares of Common
Shares issuable upon conversion of the Preferred then held by such Co-Selling
Party bears to the sum of the total number of shares of then outstanding shares
of Common Shares issued upon prior conversions of Preferred Stock and the number
of shares of Common Shares issuable upon conversion of the then outstanding
Preferred Stock.
(d) The right of co-sale described in Sections lO.l(a) and (b), and the
right of purchase described in Section lO.l(c), shall expire upon the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Shares of the Company for the account of the
Company to the public at an initial offering price per share (prior to
underwriting commissions and offering expenses) of not less than $19.76 per
share (appropriately adjusted for splits and the like) and an aggregate initial
offering price to the public of not less than $7,500,000 (a "Public Offering").
The rights set forth in Sections 10.l(a), (b) and (c) shall not apply to
proposed transfers (i) pursuant to an effective registration statement under the
Securi-
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ties Act, or in connection with any acquisition or reorganization of the
Company, (ii) by operation of law, (iii) by Wilmington Cab of up to 35,000
shares of Common Shares to John Goss and up to 20,000 shares of Common Stock to
James Zebrowski, (iv) which does not result in a change of the beneficial
ownership of the shares, (v) to a Management Shareholder's successors (by merger
or acquisition), ancestors, descendents or spouse (or a trust for their
benefit), or (vi) made pursuant to Rule 144 under the Securities Act after the
closing of the first firm commitment underwritten public offering of the
Company's securities pursuant to an effective registration statement under the
Securities Act.
SECTION 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all respects by the
internal laws of the State of California.
11.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
11.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase the Preferred
shall not be assignable without the consent of the Company.
11.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no Party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of a majority of the Common Shares issued or
issuable upon conversion of the Preferred may, with the Company's prior written
consent, waive, modify or amend on behalf of all holders, any provisions hereof.
11.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address set forth in
Exhibit A, or at such other
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address as such Purchaser shall have furnished to the Company in writing, or (b)
if to any other holder of any Shares, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Shares who has so furnished an address to the Company, or (c) if to the Company,
one copy should be sent to its address set forth on the cover page of this
Agreement and addressed to the attention of the President, or at such other
address as the Company shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
11.6 Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any holder of any
Shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
11.7 Specific Performance. Each party's obligation under this Agreement is
unique. If any party should default in its obligations under this Agreement, the
parties each acknowledge damages would be inadequate and difficult to compute;
accordingly, the nondefaulting party, in addition to other available rights or
remedies, may sue in equity for specific performance, and the parties each
expressly waive the defense that a remedy in damages will be adequate.
11.8 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF TEE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS
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AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
11.9 Expenses. The Company shall bear the reasonable fees and expenses of
Wilson, Sonsini, Goodrich & Rosati, P.C., special counsel to the Purchasers,
incurred with respect to this Agreement and the transactions contemplated
hereby, up to a maximum of $20,000.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.11 Severability. In the event that any provision of this Agreement is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
11.12 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
"MANAGEMENT SHAREHOLDERS"' "COMPANY"
(As to Section 10 only) SUPERSHUTTLE INTERNATIONAL, INC.
a Delaware corporation
/s/ Mitchell S. Rouse By: /s/ M S Rouse
- ------------------------------- -----------------------------------
Mitchell S. Rouse Mitchell S. Rouse, President
Wilmington Cab Company of
California
By: /s/ [ILLEGIBLE]
-------------------------------
Title: President
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"PURCHASERS"
--------------------------------------
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: V.P. Lambda Capital Corp.
--------------------------------
General Partner
--------------------------------------
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: V.P. Lambda Capital Corp.
--------------------------------
General Partner
for Lambdac FD '87 LP
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
95RDC-664
9/18/87
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"PURCHASERS"
--------------------------------------
By: /s/ Bradford W. Allen
-----------------------------------
Title: BRADFORD W. ALLEN
--------------------------------
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
95RDC-664
9/18/87
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EXHIBIT A
Schedule of Purchasers
Number of Shares of
Convertible Purchase
Name and Address Preferred Stock Price
---------------- --------------- -----
Lambda III, L.P. 78,741 $1,000,010.70
c/o Drexel Burnham Lambert
Incorporated
Attn: Frank R. Kline, Jr.
55 Broad Street
New York, NY 10004
Lambda CFD '87, L.P. 3,937 49,999.90
c/o Drexel Burnham Lambert
Incorporated
Attn: Alexa Mahnkeri
55 Broad Street
New York, NY 10004
Mr. Bradford W. Allen 827 10,502.90
2956 Rounsevel Terrace
Laguna Beach, CA 92651
Totals ------ -------------
83,505 $1,060,513.50
95RDC-664 Ex.A
9/18/87