AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (the "Agreement"), dated as of the 1st day
of January, 1998, is by and among XXXXXXX X. AAB, a resident of Pittsford, New
York ("Aab"), MELRICH ASSOCIATES, L.P., a New York limited partnership
("Melrich"), XXXXXXX X. XXXXXXX, a resident of Charlotte, North Carolina
("Xxxxxxx"), and SUPER STAR ASSOCIATES LIMITED PARTNERSHIP, a North Carolina
limited partnership ("Super STAR") (Aab, Melrich, Xxxxxxx and Super STAR are
sometimes referred to individual as a "Shareholder", and sometimes referred to
collectively as the "Shareholders").
BACKGROUND:
A. US LEC Corp., a Delaware corporation (the "Corporation"), has
Seventeen Million Seventy-Five Thousand Two Hundred Seventy-Two (17,075,272)
shares of authorized Class B Common Stock, par value $.01 per share ("Class B
Common"), of which all but two of such shares are currently issued and
outstanding (as defined in Section 6, the "Shares").
B. The Shareholders own and hold of record the following shares of
Class B Common:
SHAREHOLDER NUMBER OF SHARES
Xxxxxxx X. Aab 8,721,770
Melrich Associates, L.P. 4,309,500
Xxxxxxx X. Xxxxxxx 294,000
Super STAR Associates
Limited Partnership 3,750,000
C. The Shareholders believe that it is in the best interests of the
Shareholders to make specific provisions concerning the disposition and
conversion of shares of Class B Common.
D. The Shareholders believe it is in the best interests of the
Shareholders to make specific provisions concerning the voting of the shares of
Class B Common.
Accordingly, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Shareholders do hereby agree as follows:
1. Voting of the Class B Common Shares. Each Shareholder hereby agrees
that he, she or it will, for as long as he, she or it holds shares of Class B
Common, vote all of his, hers or its shares of Class B Common (whether now owned
or hereafter acquired), whether for directors or for any other purpose, in the
same manner as Aab. Each Shareholder further agrees to give his, hers or its
irrevocable proxy to Aab, contemporaneous with the execution any delivery of
this Agreement
and hereafter from time to time at the request of Aab, by executing and
delivering to Aab an irrevocable proxy in the form of the proxy attached hereto
as Exhibit A. Aab agrees to vote the Shares to elect one (1) designee of Xxxxxxx
and one (1) designee of Aab as directors of the Corporation.
2. Offer Upon Elective Conversion. If any Shareholder desires to effect
an elective conversion of any shares of Class B Common (whether now owned or
hereafter acquired) into shares of Class A Common Stock of the Corporation
("Class A Common"), as provided for in the Certificate of Incorporation of the
Corporation, the Shareholder shall first submit to all other Shareholders a
written notice of the Shareholder's intent to convert his, her or its shares of
Class B Common into Class A Common, along with an offer to sell or exchange all
or part of the shares of Class B Common proposed to be converted, pursuant to
this Section 2 (the "Conversion Notice"). Each Conversion Notice shall
constitute dual, binding offers by the offering Shareholder to (A) sell all or
part of such shares of Class B Common for cash (the "Cash Offer") or (B)
exchange all or part of such shares of Class B Common for an equal number of
shares of Class A Common (the "Exchange Offer").
(a) The offered shares of Class B Common shall be allocated
among the other Shareholders on the basis of the percentage of shares
of Class B Common then owned by them (excluding shares of Class B
Common owned by the offering Shareholder). Each offeree Shareholder
shall have the right to purchase (by cash or exchange of shares of
Class A Common) all or part of his, her or its allocated shares of the
offered Shares.
(b) Within ten (10) days of delivery of the Conversion Notice,
each offeree Shareholder shall provide written notice to the offering
Shareholder and all other Shareholders of his, her or its election to
consider acceptance of either the Cash Offer or the Exchange Offer and,
if he, she or it intends to consider a Cash Offer, the expiration date
for the six month period referred to in subsection (c)(ii) below (if
applicable). An election by an offeree Shareholder to consider the Cash
Offer shall automatically terminate the Exchange Offer to such
Shareholder and an election by an offeree Shareholder to consider the
Exchange Offer shall automatically terminate the Cash Offer to such
Shareholder.
(c) For those offeree Shareholders electing to consider the
Cash Offer (the "Cash Offerees"), the Cash Offer shall continue to be a
binding offer of the offering Shareholder to sell until the later of,
(i) the expiration of thirty (30) days after delivery of the Conversion
Notice or (ii) 5:00 p.m. on the first business day subsequent to the
expiration of the six month period following consummation, by any Cash
Offeree, of any transaction treated as a nonexempt sale under Section
16(b) of the Securities Exchange Act of 1934, as amended (the later of
such times is referred to herein as the "Cash Offer Expiration Date").
If any Cash Offeree does not purchase all of his, her or its allocated
share of the offered shares of Class B Common on or before the Cash
Offer Expiration Date, the offering Shareholder shall give written
notice to the other Cash Offerees, and such other Cash Offerees shall
have an additional ten (10) days from the delivery of such notice to
elect to purchase such declined shares of Class B Common at the same
price and upon the same terms previously offered to the declining Cash
Offeree (and the Cash Offer shall continue to be a binding offer with
respect to such declined shares until the expiration of such additional
ten (10) day
2
period). Any such shares of Class B Common shall be allocated to the
remaining Cash Offeree(s) on the basis of the percentage of shares of
Class B Common owned by them (excluding shares of Class B Common owned
by the offering Shareholder, the declining Cash Offeree(s), and the
Exchange Offeree(s), as defined below).
(d) For those offeree Shareholders electing to consider the
Exchange Offer (the "Exchange Offerees"), the Exchange Offer shall
continue to be a binding offer of the offering Shareholder to exchange
shares of Class B Common for an equal number of shares of Class A
Common until the expiration of thirty (30) days after delivery of the
Conversion Notice (the "Exchange Offer Expiration Date"). If any
Exchange Offeree does not exchange all of his, her or its allocated
share of the offered shares of Class B Common on or before the Exchange
Offer Expiration Date, the offering Shareholder shall give written
notice to the other Exchange Offerees, and such other Exchange Offerees
shall have an additional ten (10) days from the delivery of such notice
to elect to acquire such declined shares of Class B Common upon the
same terms previously offered to the declining Exchange Offeree (and
the Exchange Offer shall continue to be a binding offer with respect to
such declined shares until the expiration of such additional ten (10)
day period). Any such shares of Class B Common shall be allocated to
the remaining Exchange Offeree(s) on the basis of the percentage of
shares of Class B Common owned by them (excluding shares of Class B
Common owned by the offering Shareholder, the declining Exchange
Offeree(s), and the Cash Offeree(s)).
(e) Purchase Price Payable by Cash Offerees. The cash purchase
price of each share of Class B Common for purposes of this Section 2
shall be the average of the closing prices of a share of Class A Common
for the ten (10) trading days immediately following the date on which
Conversion Notice is given by the offering Shareholder, as reported in
The Wall Street Journal or other reporting services acceptable to all
parties hereto. If at the time the purchase price is to be determined,
shares of the Class A Common are not publicly traded, the purchase
price shall be determined as follows:
(8 x EBITDA)
Per Share Purchase Price = .75 x ------------
(Total A&B)
Where EBITDA = The Corporation's
earnings before interest,
taxes, depreciation and
amortization as shown on,
for periods up to and
including December 31,
1999, the forecast for
calendar year 1999 in
existence at the time this
Agreement is signed, and
for all periods after
January 1, 2000, the most
recent consolidated year
end financial statements of
the Corporation.
and Total A&B = Total issued and
outstanding shares of the
Corporation's Class A
Common and Class B Common
at the time the purchase
price is determined.
3
(f) Terms of Purchase and Payment for Cash Offerees. If any
Cash Offeree elects to purchase shares of Class B Common in accordance
with this Section 2, the purchase must be consummated at the principal
office of the Corporation in the State of North Carolina on the last
day the Cash Offer remains binding (or at such other time and place as
may otherwise be acceptable to the selling Shareholder and the
purchasing Shareholder). Payment of the purchase price of the shares
shall be made at closing by wire transfer of immediately available
funds to an account designated by the selling Shareholder or by
certified check payable to the selling Shareholder. Upon tender of the
purchase price, the selling Shareholder shall deliver to the purchasing
Shareholder one or more certificates representing all shares of Class B
Common being purchased, duly endorsed over to the purchaser or
accompanied by duly executed stock powers. The Shareholders shall cause
the Corporation to cooperate with selling and purchasing Shareholders
in connection with such offers and closing, including, but not limited
to, providing appropriately denominated certificates on a timely basis.
If, pursuant to this Section 2, the Cash Offer Expiration Date
occurs on a date which is subsequent to the thirtieth (30th) day
subsequent to delivery of the Conversion Notice, then on the thirtieth
day subsequent to delivery of the Conversion Notice, the Cash Offerees
(other than those who have, prior to such date either purchased their
allocated share of the offered shares of Class B Common or have
notified the offering Shareholder of their decision not to purchase
their allocated share of the offered shares of Class B Common) shall
submit a non-refundable deposit (by wire transfer of immediately
available funds to an account designated by the offering Shareholder or
by certified check payable to the offering Shareholder) to the offering
Shareholder in an amount equal to twenty-five percent (25%) of the
purchase price of such Shareholder's share of offered shares of Class B
Common (not previously purchased or declined). In the event that a Cash
Offeree who has submitted a deposit does not purchase his, her or its
allocated shares of the offered shares of Class B Common on or before
the Cash Offer Expiration Date, his, her or its deposit shall be
forfeited.
(g) Terms of Closing for Exchange Offerees. If any Exchange
Offeree elects to accept the Exchange Offer in accordance with this
Section 2, the exchange must be consummated at the principal office of
the Corporation in the State of North Carolina on the last day on which
the Exchange Offer remains binding (or at such other time or place as
may otherwise be acceptable to the selling Shareholder and the
purchasing Shareholder). At the closing, the accepting Exchange
Offerees shall deliver to the selling Shareholder one or more
certificates representing all shares of Class A Common being exchanged,
duly endorsed over to the selling Shareholder or accompanied by duly
executed stock powers, and the selling Shareholder shall deliver to the
Exchange Offerees one or more certificates representing all shares of
Class B Common being exchanged, duly endorsed over to the accepting
Exchange Offerees or accompanied by duly executed stock powers. The
Shareholders shall cause the Corporation to cooperate with the
participating Shareholders in connection with such exchange and
closing, including, but not limited to, providing appropriately
denominated certificates on a timely basis.
4
3. Transfer of Shares of Class B Common. The Shareholders hereby agree
that, unless all of the other Shareholders give their written consent thereto,
no Shareholder shall make a voluntary transfer or otherwise dispose of (as
defined in Section 6(c) herein) any of his, her or its shares of Class B Common,
whether now owned or hereafter acquired, to any party other than another
Shareholder, except that such shares of Class B Common may be transferred to a
Permitted Transferee (as defined in Article IV of the Restated Certificate of
Incorporation of the Corporation), but only if, simultaneous with the transfer
of such shares of Class B Common, such Permitted Transferee becomes a signatory
to this Agreement as a "Shareholder" (by executing and delivering to all other
Shareholders a signature page by which he, she or it agrees without condition to
be bound by this Agreement as a "Shareholder," and provides an address for the
giving of notices, and executes and delivers to Aab an irrevocable proxy in
favor of Aab as required by Section 1 of this Agreement.
4. Divorce or Legal Separation of a Shareholder.
(a) Notwithstanding anything herein to the contrary, if a
spouse of a Shareholder has received shares of Class B Common as a
Permitted Transferee (as defined in Article IV of the Restated
Certificate of Incorporation of the Corporation) and such spouse is
subsequently no longer legally married to or is legally separated from
such Shareholder, then such Shareholder shall have an option to
purchase any or all of such Shares (by cash payment or exchange). The
option shall constitute a binding offer of the spouse to sell any or
all of the Shares to the Shareholder at the same price per share and
upon the same terms as is provided in Section 2 hereof, except that the
cash purchase price shall be determined based on the closing prices of
a share of Class A Common for the ten (10) trading days immediately
following the date of the legal separation or divorce of such spouse
and Shareholder and the option shall extend from the date of the
divorce or legal separation until the applicable expiration date
(excluding the additional ten day periods) provided in Section 2
(calculated by using the date of the divorce or legal separation rather
than the date of delivery of the Conversion Notice).
(b) If such Shareholder does not purchase all such Shares of
his or her spouse pursuant to the option described in (a), then (i)
such Shareholder shall give written notice (a "Divorce Notice") to all
other Shareholders, and (ii) the other Shareholders shall have an
option to acquire all or part of the declined Shares. This option shall
constitute a binding offer of such spouse to sell all or part of the
Shares to the other Shareholders at the same price per share and upon
the same terms as provided in Section 2 hereof, except that the cash
purchase price shall be determined based on the closing prices of a
share of Class A Common for the ten (10) trading days immediately
following the date of the legal separation or divorce of such spouse
and Shareholder. The option shall confer upon each such other
Shareholder the right to purchase (by cash payment or exchange) his,
her or its allocated share of the declined Shares (allocated pro rata
based on the Shares owned by all Shareholders other than the spouse and
the declining Shareholder), and shall extend, with regard to each
Shareholder, from the delivery of the Divorce Notice to such other
Shareholder until the applicable expiration date (including but not
limited to the additional ten day periods) provided in Section 2
(calculated by using the date of the delivery of the Divorce Notice
rather than the date of delivery of the Conversion Notice).
5
5. Endorsement on Stock Certificate. The Shareholders shall use their
best efforts to cause each certificate representing shares of Class B Common at
any time owned by any Shareholder to bear the following legend prominently
displayed thereon:
"THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER
HEREOF, ARE SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN
SHAREHOLDERS AGREEMENT DATED AS OF JANUARY 1, 1998, AS AMENDED FROM
TIME TO TIME, A COPY OF WHICH IS MAY BE OBTAINED FROM ANY SHAREHOLDER
OWNING SHARES OF CLASS B COMMON STOCK UPON REQUEST."
6. Certain Interpretations and Definitions. As used in this Agreement:
(a) "Shareholder" or "Shareholders" means shareholders of the
Corporation who are parties to this Agreement as provided on page 1
hereof, and any successor in interest or transferee of any Shares of
such Shareholder who purchased shares in accordance with this
Agreement.
(b) "Shares" means any outstanding shares of Class B Common
Stock of the Corporation now owned (as shown in the Recitals hereto) or
hereafter acquired by any Shareholder, any shares distributed with
respect to any such shares in a stock split, stock dividend or other
recapitalization or reorganization, and any other outstanding shares of
the Corporation that otherwise become subject to this Agreement by
written agreement of the parties.
(c) The terms "transfer", "dispose of" and/or "disposition",
when used with respect to shares, mean and include any sale,
assignment, transfer, conveyance, gift, encumbrance, pledge,
hypothecation, equitable distribution or other disposition of Shares
(whether voluntary, involuntary, or otherwise), including permitting a
levy or attachment on the Shares.
(d) An "involuntary" transfer or disposition of shares means
(i) a testamentary or intestate transfer or disposition made incident
to the death of a Shareholder, (ii) a transfer made in connection with
the divorce or separation of a Shareholder pursuant to a property
settlement agreement that is filed for public record, or (iii) a
transfer made pursuant to an order issued by a court of competent
jurisdiction in connection with the involuntary bankruptcy of, or the
appointment of a receiver for, a Shareholder.
(e) A "voluntary" transfer or disposition of Shares refers to
any transfer or disposition other than an involuntary transfer or
disposition.
7. Term. The term of this Agreement shall commence on the date hereof
and shall continue in effect for a period of ten (10) years. Thereafter, this
Agreement shall automatically renew for successive one (1) year terms all of the
Shareholders then holding Shares elect to terminate this Agreement as of the end
of the then current term (initial or renewal).
6
Notwithstanding the foregoing, Section 1 hereof shall be of no further force or
effect if at any time Aab ceases to own any Shares, and the last sentence of
Section 1 shall be of no further force or effect if at any time Xxxxxxx ceases
to own any Shares.
8. Notices. Any and all notices, consents, offers, acceptances or other
communications made hereunder must be in writing and shall be deemed given and
delivered when delivered personally or by courier service, provided evidence of
receipt is obtained, or three (3) days after mailing if mailed by registered or
certified mail, return receipt requested, postage prepaid, and addressed as
follows (or to such other address that the parties may from time to time
designate in a writing sent to all other parties of this Agreement in the manner
required by this Section 8, except that any such change of address notice shall
only be effective upon receipt):
(a) if to Xxxxxxx X. Aab:
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
(b) if to Melrich Associates L.P.:
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
(c) if to Xxxxxxx X. Xxxxxxx:
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
(d) if to Super STAR Associates Limited Partnership:
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
(e) A copy of any such correspondence shall also be sent to:
Xxxxx & Xxx Xxxxx, PLLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Xx.
9. Severability. If any such provision of this Agreement shall be
invalid or unenforceable for any reason, the other provisions shall continue to
be effective and binding and this Agreement shall be construed as if the invalid
or unenforceable provision were omitted. If any provision of this Agreement is
unenforceable after a certain period of years from the date hereof due to the
requirements of any state laws, the remainder of the Agreement shall remain
enforceable and binding in accordance with its terms.
7
10. Binding Effect. This Agreement shall be binding upon the
Shareholders, and their respective heirs, legal representatives, executors,
administrators, successors and permitted assigns. Any rights given or duties
imposed upon the estate of a deceased Shareholder shall inure to the benefit of
and be binding upon the legal representative of such deceased Shareholder's
estate in his or her fiduciary capacity.
11. Entire Agreement, Amendment, Waiver. This Agreement contains the
entire agreement of the parties hereto with respect to the subject matter
hereof, and supersedes any and all other agreements, either written or oral,
among the parties hereto regarding the same subject matter. The provisions of
this Agreement may be amended, modified or waived only as provided for herein or
on unanimous written consent of the Shareholders. A written waiver provided
pursuant to this Section 11 shall be effective only in the specific instance and
for the specific purpose for which given. No failure or delay on the part of any
Shareholder in the exercise of any right, power or privilege hereunder shall
operate as a waiver of any such right, power or privilege nor shall any such
failure or delay preclude any other or further exercise hereof.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
13. Captions. The captions herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Agreement nor any provisions hereof.
14. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Delaware.
15. Arbitration.
(a) Any dispute, controversy, difference or claim arising out
of, relating to or in connection with this Agreement, any transaction
hereunder, or the breach hereof shall be decided by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as otherwise agreed by
the parties. Any such arbitration shall be conducted on the earliest
possible date and conducted in Charlotte, North Carolina. The arbiter's
award shall be final and binding on the parties hereto and judgment
upon the award may be entered in any court having jurisdiction thereof.
Expenses in the arbitration shall be apportioned between the parties by
the arbiter. The arbitration award may include reasonable attorneys'
fees from the other party. No action, regardless of form, arising out
of this Agreement may be brought more than three (3) years after the
cause of action for such action has accrued.
(b) Notwithstanding subsection (a), either party may, if it
believes that it requires or is entitled to injunctive relief, file a
civil action in any court having jurisdiction seeking injunctive
relief. Any claim or demand for monetary damages shall, however, be
governed exclusively by the provisions for arbitration set forth in
subsection (a).
8
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the date first above written.
AAB
________________________________
Xxxxxxx X. Aab
MELRICH ASSOCIATES, L.P.
By: ______________________________
Xxxxxxx X. Aab, General Partner
XXXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxxx
SUPER STAR ASSOCIATES
LIMITED PARTNERSHIP
By:
-------------------------------------
Xxxxxxx X. Xxxxxxx, General Partner
9
EXHIBIT A
to
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
APPOINTMENT OF IRREVOCABLE PROXY
The undersigned shareholder of US LEC CORP., a Delaware corporation
(the "Corporation"), does hereby constitute and appoint XXXXXXX X. AAB ("Aab")
as its proxy with full power of substitution, for and on its behalf to attend
all meetings of shareholders of such Corporation and to act, vote and execute
consents with respect to all of its shares of Class B Common Stock of the
Corporation, as fully and to the same extent as the undersigned shareholder
might do itself. This proxy is irrevocable and is coupled with an interest,
having been executed in connection with that certain Amended and Restated
Shareholders Agreement dated as of January 1, 1998 to which Aab and the
undersigned are among the parties (the "Shareholders Agreement"). This
appointment of proxy shall continue in full force and effect as long as Aab and
the undersigned are parties to the Shareholders Agreement.
This the ____ day of , 1998.
-----------------------
By:
----------------------
Name:
--------------------
10
