EXHIBIT 5
STOCKHOLDERS AGREEMENT
Dated as of May 10, 2000
By and Among
COMPUTER OUTSOURCING SERVICES, INC.,
DB CAPITAL INVESTORS, L.P.,
SANDLER CAPITAL PARTNERS V, L.P.,
SANDLER INTERNET PARTNERS, L.P.,
SANDLER CO-INVESTMENT PARTNERS, L.P.
THE MANAGEMENT STOCKHOLDERS
LISTED ON SCHEDULE A HERETO
and
THE NON-MANAGEMENT STOCKHOLDERS
LISTED ON SCHEDULE B HERETO
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STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 10, 2000,
by and among Computer Outsourcing Services, Inc., a Delaware corporation (the
"Company"), DB Capital Investors, L.P. ("DB Capital"), Sandler Capital Partners
V, L.P., Sandler Internet Partners, L.P., Sandler Co-Investment Partners, L.P.
(each individually, a "Sandler Entity," collectively the "Sandler Entities"),
the individuals listed on Schedule A hereto (each individually, a "Management
Stockholder" and, collectively, the "Management Stockholders") and each of the
Persons listed on Schedule B hereto (each, individually a "Non-Management
Stockholder" and, collectively, the "Non-Management Stockholders") (each of DB
Capital, each Sandler Entity, the Management Stockholders and the Non-Management
Stockholders is hereinafter referred to as a "Stockholder").
W I T N E S S E T H :
WHEREAS, the Management Stockholders own shares of Common Stock, $0.01
par value of the Company (the "Common Stock");
WHEREAS, pursuant to the terms of that certain Securities Purchase
Agreement dated as of April 7, 2000 (the "Securities Purchase Agreement") by and
between the Company, DB Capital and the Sandler Entities will acquire shares of
8% Series A Cumulative Convertible Participating Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"), together with Warrants (the
"Warrants") to purchase (the "Warrant Shares") Common Stock (the Series A
Preferred Stock, the Warrants, the Warrant Shares and the Common Stock are
referred to herein collectively as the "Securities");
WHEREAS, the Company and the Stockholders each desire to grant to the
others certain rights in connection with the Securities now or hereafter owned
by them as set forth herein and to assume certain obligations; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the transaction contemplated by the Securities
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, or controlled, by or under
direct or indirect common control with, such Person. For purposes of this
definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(b) "Applicable Law" means (a) any United States federal, state,
local or foreign law, statute, rule, regulation, order, writ, injunction,
judgment, decree or permit of any Governmental Authority and (b) any rule
or listing requirement of any applicable national stock exchange or listing
requirement of any national stock exchange or Commission recognized trading
market on which securities issued by the Company or any of the Subsidiaries
are listed or quoted.
(c) "Board of Directors" or "Board" means the Board of Directors
of the Company or any committee thereof duly authorized to act on behalf of
such Board.
(d) "Capital Stock" means, with respect to any Person, any and
all shares, interests, participations, rights in, or other equivalents
(however designated and whether voting and/or non-voting) of such Person's
capital stock, whether outstanding on the Closing Date or issued after the
Closing Date, and any and all rights (other than any evidence of
indebtedness), warrants or options exchangeable for or convertible into
such capital stock.
(e) "Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Capital Stock of the
Company or (b) the Company consolidates with, or merges with or into,
another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any
Person consolidates with, or merges with or into the Company, in any such
event pursuant to a transaction in which the holders of the outstanding
Voting Capital Stock of the Company immediately prior to such transaction
hold less than 50% of the outstanding Voting Capital Stock of the surviving
or transferee company or its parent company immediately after the
transaction or immediately after such transaction any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),
is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total Voting Capital
Stock of the surviving or transferee company or its parent company
immediately after the transaction as applicable or (c) during any
consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors (together with any new directors
whose election by the Board of Directors or whose nomination for election
by the stockholders of the Company was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office or (d) any transaction subject to
Rule 13e-3 under the Exchange Act if following such Rule 13e-3 transaction
a Person owns more than 50% of the total Voting Capital Stock of the
Company.
(f) "Closing Date" means May 10, 2000.
(g) "Commission" means the United States Securities and Exchange
Commission.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Governmental Authority" means (i) any foreign, Federal,
state or local court or governmental or regulatory agency or authority,
(ii) any arbitration board, tribunal or mediator and (iii) any national
stock exchange or Commission recognized trading market on which securities
issued by the Company or any of the Subsidiaries are listed or quoted.
(j) "Holder" means the Person in whose name any of the Securities
are registered.
(k) "Option Agreements" means each of those certain Option
Agreements dated as of the Closing Date between each of DB Capital and each
of the Sandler Entities, on the one hand, and Lonstein, on the other hand.
(l) "Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof, or other entity.
(m) "Registration Rights Agreement" means the Registration Rights
Agreement, to be dated as of the Closing Date to be entered into by and
between the Company, DB Capital Investors, L.P. and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
(n) "Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other equity interests
entitled (without regard to the occurrence of any contingency) to vote in
the election of directors or other managing authority thereof is at the
time owned or controlled, directly or indirectly, by such Person and its
Subsidiaries.
(o) "Voting Capital Stock" means with respect to any Person,
securities of any class or classes of Capital Stock in such Person
ordinarily entitling the holders thereof (whether at all times or at the
times that such class of Capital Stock has voting power by reason of the
happening of any contingency) to vote in the election of members of the
board of directors or comparable governing body of such Person.
ARTICLE II
TRANSFER OF SHARES
SECTION. 2.1 Restrictions. (a) No Stockholder shall sell, assign,
pledge, hypothecate, deposit in any voting trust, or in any manner, transfer or
dispose of any of the Securities or any right or interest therein, to any Person
(each such action, a "Transfer") except as permitted by this Agreement.
(b) From and after the date hereof, all share certificates
representing Securities held by any of the Stockholders shall bear a legend
which shall state as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS AGAINST TRANSFER SET FORTH IN A STOCKHOLDERS AGREEMENT
DATED AS OF MAY 10, 2000, AS MAY BE AMENDED FROM TIME TO TIME. A COPY
OF SUCH STOCKHOLDERS AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE
COMPANY LOCATED AT ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS.
(c) In addition to the legend required by Section 2.1(b) above, all
share certificates representing Securities held by any of the Stockholders shall
bear a legend which shall state as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS."
(d) Promptly upon execution and delivery of this Agreement, each
Stockholder shall deliver to the Secretary of the Company all certificates then
held by such Stockholder representing Securities which do not have such legends
affixed thereto as are required by Section 2.1 above. The Company shall cause
such legends to be affixed promptly to each of such certificates and such
certificates to be returned promptly to the registered Holder thereof. The
Company agrees that it will not cause or permit the Transfer of any Securities
to be made on its books unless the Transfer is permitted by this Agreement and
has been made in accordance with the terms hereof.
SECTION 2.2 Permitted Transfers. (a) Notwithstanding anything to the
contrary contained herein, a Stockholder may at any time effect any of the
following Transfers (each a "Permitted Transfer" and each transferee, a
"Permitted Transferee"):
(i) A Stockholder's Transfer of any or all Securities owned by
such Stockholder following such Stockholder's death by will or intestacy to
such Stockholder's legal representative, heir or legatee.
(ii) A Stockholder's Transfer of any or all Securities owned by
such Stockholder as a gift or gifts during such Stockholder's lifetime to
such Stockholder's spouse, children, grandchildren or a trust or other
legal entity for the benefit of any Stockholder or any of the foregoing,
provided that such Stockholder retains voting control of the Securities so
transferred.
(iii) With respect to the Management Stockholders prior to the
second anniversary of the date of this Agreement, any Transfer approved in
advance by the Board of Directors.
(iv) With respect to any Management Stockholder, a Transfer of
any or all Securities owned by such Management Stockholder (a) which occurs
after the second anniversary of the date of this Agreement and (b) is (i)
in any transaction in compliance with Rule 144 under the Securities Act or
any successor rule or regulation; provided, however, that, without the
consent of the Board of Directors of the Company, no Management Stockholder
shall Transfer an amount of Securities in any twelve month period which
exceeds the number of such Securities which such Management Stockholder
could permissibly sell under Rule 144(e)(1) under the Securities Act
(whether or not such Management Stockholder is then subject to Rule
144(e)(1)), (ii) in any transaction exempt from the registration
requirements of the Securities Act or (iii) pursuant to a registration
statement.
(v) With respect to any of DB Capital, any Sandler Entity or any
Non-Management Stockholder, a Transfer of any or all Securities owned by it
(a) to an Affiliate that has agreed in writing to be bound by the terms and
provisions of Section 2.1 and 2.2 to the same extent that such party would
be bound if it beneficially owned the Securities transferred to such
Affiliate or (b) (i) in any transaction in compliance with Rule 144 under
the Securities Act or any successor rule or regulation, (ii) in a
transaction exempt from the registration requirements of the Securities Act
or (iii) pursuant to a registration statement.
(vi) With respect to any Management Stockholder, any transfer to
any Person at any time after the date on which (x) the Company has
terminated the employment of such Management Stockholder other than for
cause or (y) such Management Stockholder has terminated his employment with
the Company for "good reason" as defined in such Management Stockholder's
employment agreement or consulting agreement with the Company (or if such
Management Stockholder does not have an employment or consulting agreement
with the Company or such employment agreement or consulting agreement does
not define "good reason", as "good reason" is defined in ▇▇▇▇ ▇▇▇▇▇▇▇▇'▇
("Lonstein") employment agreement with the Company).
(vii) A Transfer pursuant to a registered offering of securities
which is effected pursuant to rights granted to the transferring
Stockholder pursuant to the Registration Rights Agreement.
(viii) A Transfer by a Stockholder to the Company.
(ix) A Transfer by Lonstein to DB Capital or any Sandler Entity
pursuant to any Option Agreement.
(b) In any such Transfer referred to above in Section 2.2(a)(i), (ii)
or (ix), the Permitted Transferee shall receive and hold such Securities subject
to the provisions of this Agreement as if such Permitted Transferee were an
original signatory hereto and such Permitted Transferee shall be deemed to be a
party to this Agreement.
(c) Not later than ten (10) days before effecting any Transfer of
Securities, the Holder proposing to make such Transfer shall give notice to the
Company (with a copy to DB Capital and the Sandler Entities) of such proposed
Transfer, specifying the method of disposition and the amount of shares to be so
Transferred.
ARTICLE III
BOARD OF DIRECTORS OF THE COMPANY
SECTION 3.1 Board of Directors. (a) Each Stockholder agrees to vote
all of the Securities held by such Stockholder (to the extent all such
securities are entitled to vote) so as to elect and maintain a Board composed of
the following: (i) two people designated by Lonstein; provided that so long as
Lonstein is the Chief Executive Officer of the Company one such designee shall
be Lonstein, (ii) two people designated by DB Capital (the "DB Capital
Directors"), (iii) two people designated by the Sandler Entities (the "Sandler
Directors") and (iv) three additional directors, each of whom shall be
unaffiliated with the Company, designated by mutual consent of Lonstein, DB
Capital and Sandler; provided that, notwithstanding anything to the contrary
herein, if the Chief Executive Officer of the Company has not been designated as
a director of the Company pursuant to clause (i), (ii) or (iii) of this Section
3.1(a), then one of the persons designated as a director pursuant to this clause
(iv) shall be the Chief Executive Officer of the Company.
(b) In the event that any director designated by any Stockholder for
any reason ceases to serve as a director during his term of office, the
resulting vacancy on the Board shall be filled by a director designated by such
Stockholder.
SECTION 3.2 Election. Promptly upon the execution and delivery of this
Agreement, the Stockholders shall take all such action as may be necessary
(including, but not limited to, the removal of directors).
ARTICLE IV
CERTAIN DECISIONS
SECTION 4.1 Series A Preferred Stock Directors Approval. The following
acts, expenditures, decisions and obligations made or incurred by the Company
shall require the prior written approval of (x) the DB Capital Directors and (y)
the Sandler Directors:
(i) the hiring or termination of any senior officers of the
Company or any Subsidiary including, without limitation, with respect to
the Company and Infocrossing, Inc., the Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer, President or any officer
reporting directly to the President, or Chief Executive Officer and, with
respect to any other Subsidiary, the Chief Executive Officer, Chief
Operating Officer or President;
(ii) approval of the Company's annual business plan, operating
budget and capital budget;
(iii) any capital expenditure or series of related capital
expenditures by the Company or any Subsidiary to the extent (x) not
otherwise included in the approved annual capital budget or (y) such
expenditure or series of expenditures would cause, together with all other
capital expenditures to such time, the Company's capital budget to be
exceeded by $250,000 in the aggregate;
(iv) in a single transaction or series of related transactions,
the consolidation or merger with or into, or sale, assignment, transfer,
lease, conveyance or disposal of all or substantially all of the Company's
assets to, any Person; the agreement to any plan of recapitalization;
consent to, approval or recommendation of any tender offer for any class or
series of the Company's Capital Stock or consent to, approval or
recommendation of any Change of Control of, or action which is expected to
result in a Change of Control of, the Company; or adoption of a plan of
liquidation or the making of any payments in liquidation or with respect to
the winding up of the Company;
(v) the authorization or creation of, modification of the terms
of or, increase in the authorized amount of any class or series of equity
securities of the Company or the issuance or sale of any equity securities
or any equity securities which are convertible or exchangeable into or
exercisable for any equity securities of the Company, other than (i)
compensatory or incentive stock options (or any shares of Common Stock
issued upon the exercise thereof) issued pursuant to employee stock option
plans of the Company which have been approved by the Board of Directors of
the Company, (B) issuances of Common Stock to employees, officers,
directors and consultants of the Company, pursuant to employee benefit
plans approved by the Board of Directors of the Company, or (C) shares of
Common Stock issued upon (x) the conversion of the Series A Preferred Stock
or (y) the exercise of the Warrants.
(vi) the making, or permitting of any of the Subsidiaries to
make, any acquisition or divestiture in which the total consideration
exceeds $5,000,000;
(vii) incurring, guaranteeing or otherwise incurring or assuming
any obligations or any indebtedness for borrowed money or capitalized
leases (other than indebtedness of the Company to any of its wholly owned
Subsidiaries or of any Subsidiary of the Company to the Company or any
wholly owned Subsidiary of the Company) (other than trade payables in the
ordinary course of business) in excess of $2,500,000 in the aggregate;
(viii) entering into any transaction with (including, without
limitation, the purchase, lease or sale of any property of the rendering of
or contracting for any services) with any Affiliate (other than a wholly
owned Subsidiary) of the Company; provided, that the Company may issue
options or shares of Common Stock to Affiliates (other than wholly owned
Subsidiaries) of the Company to the extent such options or shares are
issued pursuant to the terms of employee benefit plans approved by the
Board of Directors of the Company; and
(ix) increasing the number of options, shares of Common Stock, or
other securities which may be granted under, or which are subject to or
underlie any employee benefits plan of the Company or any Subsidiary,
including, without limitation, any stock option plan, stock incentive plan,
restricted stock plan, stock appreciation rights plan, phantom stock plan
or other similar plan.
SECTION 4.2 Certain Actions. Each Stockholder hereby agrees to take
all such action as may be required to give effect to Section 4.1, including, but
not limited to, the adoption by the Board of Directors of the Company of
resolutions giving effect to such Section, and shall take all such action as may
be necessary (including the removal of directors) to cause any Person designated
by such Stockholder as a director pursuant to Article III hereof and cause such
resolutions to be adopted.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings (whether written or
oral) with respect thereto.
SECTION 5.2 Captions. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 5.3 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto
and each such executed counterpart shall be deemed to be an original instrument.
SECTION 5.4 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return-receipt requested and postage prepaid addressed as
follows:
If to the Company, to:
Computer Outsourcing Services, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to DB Capital, to:
c/o DB Capital Partners, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Director
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
White & Case LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Sandler Entities, to:
c/o Sandler Capital Management
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇, Managing Director
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to any of the Management Stockholders or Non-Management
Stockholders, to the addresses set forth on the books and records
of the Company.
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mail, as of the date so received.
SECTION 5.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company, the Stockholders and their
respective heirs, devisees, legal representatives, successors, permitted assigns
and other permitted transferees. The rights of a Stockholder under this
Agreement may not be assigned or otherwise conveyed by any Stockholder except in
connection with a Transfer of Shares which is in compliance with this Agreement.
SECTION 5.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
SECTION 5.7 Submission to Jurisdiction. (a) Each of the parties hereto
hereby irrevocablY acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York or in the United
States District Court for the Southern District of New York, as the party
bringing such action or proceeding may elect, and each of the parties hereto
hereby irrevocably submits to and accepts with regard to any such action or
proceeding, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Subject to Section
5.7(b), the foregoing shall not limit the rights of any party to serve process
in any other manner permitted by law. The foregoing consents to jurisdiction
shall not constitute general consents to service of process in the State of New
York for any purpose except as provided above and shall not be deemed to confer
rights on any Person other than the respective parties to this Agreement.
(b) Each of the parties hereto hereby waives any right it may have
under the laws of any jurisdiction to commence by publication any legal action
or proceeding with respect to this Agreement. To the fullest extent permitted by
Applicable Law, each of the parties hereto hereby irrevocably waives the
objection which it may now or hereafter have to the laying of the venue of any
suit, action or proceeding arising out of or relating to this Agreement in any
of the courts referred to in Section 5.7(a) and hereby further irrevocably
waives any claim that any such court is not a convenient forum for any such
suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors or assigns), be
enforced in any jurisdiction, to the extent permitted by Applicable Law.
(d) The parties hereto agree that the remedy at law for any breach of
this Agreement may be inadequate and that should any dispute arise concerning
the sale or disposition of any Shares or the voting thereof or any other similar
matter hereunder, this Agreement shall be enforceable in a court of equity by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative and nonexclusive, and shall be in addition to any other remedies
which the parties hereto may have.
(e) The parties hereto agree that the prevailing party or parties, as
the case may be, in any action, suit, arbitration or other proceeding arising
out of or with respect to this Agreement or the transactions contemplated hereby
shall be entitled to reimbursement of all costs of litigation, including
reasonable attorneys' fees, from the non-prevailing party. For purposes of this
Section 5.7(e), each of the "prevailing party" and the "non-prevailing party" in
any action, suit, arbitration or other proceeding shall be the party designated
as such by the court, arbitrator or other appropriate official presiding over
such action, suit, arbitration or other proceeding, such determination to be
made as a part of the judgment rendered thereby.
SECTION 5.8 Benefits Only to Parties. Nothing expressed by or
mentioned in this Agreement iS intended or shall be construed to give any
Person, other than the parties hereto and their respective successors or
permitted assigns, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained, this Agreement and
all conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of the parties hereto and their respective successors and
permitted assigns, and for the benefit of no other Person.
SECTION 5.9 Termination. This Agreement shall terminate upon the
happening of any one of the following events:
(a) the voluntary or involuntary dissolution of the Company;
(b) Each of DB Capital and the Sandler Entities ceasing to hold
at least 25% of the shares of Common Stock (calculated assuming the
conversion of the Series A Preferred Stock and the exercise of the
Warrants) held by DB Capital or the Sandler Entities, as the case may be,
on the date hereof.
SECTION 5.10 Sunset Provisions. (a) On the date on which Lonstein
ceases to hold at least 50% oF the shares of Common Stock (calculated assuming
the exercise of all vested in-the-money stock options) held by Lonstein on the
date hereof, then the number of persons whom Lonstein shall have the right to
designate to serve as directors of the Company under Section 3.1(a)(i) shall be
reduced to one. On the date on which Lonstein ceases to hold at least 25% of the
shares of Common Stock (calculated assuming the exercise of all vested
in-the-money stock options) held by Lonstein on the date hereof, Lonstein's
right to designate Persons to serve as directors of the Company under Section
3.1(a)(i) and 3.1(a)(iv) shall terminate as of such date.
(b) Upon the date on which DB Capital ceases to hold at least 25% of
the shares of Common Stock (calculated assuming the conversion of the Series A
Preferred Stock and the exercise of the Warrants) held by DB Capital on the date
hereof, then DB Capital's right to designate Persons to serve as directors of
the Company under Section 3.1(a)(ii) and 3.1(a)(iv) and DB Capital's right to
approve the actions specified under Section 4.1 shall terminate as of such date.
(c) Upon the date on which the Sandler Entities ceases to hold at
least 25% of the shares of Common Stock (calculated assuming the conversion of
the Series A Preferred Stock and the exercise of the Warrants) held by the
Sandler Entities on the date hereof, then the Sandler Entities' right to
designate Persons to serve as directors of the Company under Section 3.1(a)(iii)
and 3.1(a)(iv) and the Sandler Entities' right to approve the actions under
Section 4.1 shall terminate as of such date.
SECTION 5.11 Publicity. Except as otherwise required by Applicable
Laws, none of the parties heretO shall issue or cause to be issued any press
release or make or cause to be made any other public statement in each case
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of DB Capital, a majority
in interest of the Sandler Entities and the Company to the contents and the
manner of presentation and publication thereof.
SECTION 5.12 Amendments; Waivers. No provision of this Agreement may
be amended, modified or waiveD without approval of DB Capital, a majority in
interest of the Sandler Entities, the Company, 66-2/3% in interest of the
Management Stockholders (calculated based on ownership of Common Stock) and
66-2/3% in interest of the Non-Management Stockholders (calculated based on
ownership of Common Stock); provided that no such amendment or waiver of a
provision of this Agreement which adversely affects the rights of any
Stockholder in a manner that does not adversely affect all other Stockholders
equally may be made without such Stockholder's consent; provided that (x) the
Management Stockholders shall be considered as a group with the determination by
the holders of 66-2/3% of the outstanding shares of Common Stock held by the
Management Stockholders to be binding on all Management Stockholders and (y) the
Non-Management Stockholders shall be considered as a group with the
determination by the holders of 66-23% of the outstanding shares of Common Stock
held by the Non-Management Stockholders to be binding on all Non-Management
Stockholders; provided, further, that in no circumstances shall Article III or
Article IV be amended, modified, waived or repealed without the express written
consent of DB Capital and the Sandler Entities.
SECTION 5.13 No Inconsistent Agreements. Each Stockholder hereby
covenants and agrees that neitheR it nor any of its Affiliates shall enter into
any voting agreement or grant a proxy or power of attorney with respect to the
Securities it beneficially owns which is inconsistent with this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
COMPUTER OUTSOURCING SERVICES, INC.
By /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P.,
its general partner
By: DB Capital Partners, Inc.,
its general partner
By /s/▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/ ▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
SANDLER INTERNET PARTNERS, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/ ▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
SANDLER CO-INVESTMENT PARTNERS, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/ ▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
MANAGEMENT STOCKHOLDERS
/s/▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/▇▇▇ Loudati
--------------------------------
▇▇▇ Loudati
/s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
NON-MANAGEMENT STOCKHOLDERS
PRICE FAMILY LIMITED PARTNERS
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇, ▇.▇.
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
Schedule A
MANAGEMENT STOCKHOLDERS:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ Loudati
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Schedule B
NON-MANAGEMENT STOCKHOLDERS:
Price Family Limited Partners
▇▇▇▇▇▇, ▇.▇.
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS................................................1
SECTION 1.1 Certain Definitions......................................1
ARTICLE II TRANSFER OF SHARES................................................4
SECTION 2.1 Restrictions..............................................4
SECTION 2.2 Permitted Transfers.......................................4
ARTICLE III BOARD OF DIRECTORS OF THE COMPANY................................6
SECTION 3.1 Board of Directors........................................6
SECTION 3.2 Election..................................................6
ARTICLE IV CERTAIN DECISIONS.................................................7
SECTION 4.1 Series A Preferred Stock Directors Approval...............7
SECTION 4.2 Certain Actions...........................................8
ARTICLE V MISCELLANEOUS......................................................8
SECTION 5.1 Entire Agreement..........................................8
SECTION 5.2 Captions..................................................8
SECTION 5.3 Counterparts..............................................8
SECTION 5.4 Notices...................................................9
SECTION 5.5 Successors and Assigns...................................10
SECTION 5.6 GOVERNING LAW............................................10
SECTION 5.7 Submission to Jurisdiction...............................10
SECTION 5.8 Benefits Only to Parties.................................11
SECTION 5.9 Termination..............................................11
SECTION 5.10 Sunset Provisions.......................................11
SECTION 5.11 Publicity...............................................12
SECTION 5.12 Amendments; Waivers.....................................13
SECTION 5.13 No Inconsistent Agreements..............................13
SCHEDULE A - Management Stockholders
SCHEDULE B - Non-Management Stockholders