EXHIBIT 4.2
INVESTOR RIGHTS AGREEMENT
Dated as of June 30, 1999
By and Among
FIRSTCOM CORPORATION
and
SFG-N INC.
and
XXXXXXXX X. NORTHLAND
and
XXXXXXX X. XXXX XX
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT dated as of June 30, 1999 by and
among FIRSTCOM CORPORATION, a Texas corporation (the "Company"), SFG-N INC., a
Delaware corporation (the "Investor"), Xxxxxxxx X. Northland ("Northland") and
Xxxxxxx X. Xxxx XX ("Xxxx").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Securities Purchase
Agreement dated as of the date hereof between the Company and the Investor (the
"Securities Purchase Agreement"), the Investor desires to subscribe for, and the
Company desires to issue, 1,250,000 shares of Series A Convertible Preferred
Stock, par value $ 0.001 per share (the "Preferred Stock"), of the Company which
shall constitute 100% of the issued and outstanding Preferred Stock of the
Company; and
WHEREAS, on or prior to the execution and delivery of this
Agreement and the Securities Purchase Agreement, the Company shall have filed
with the Secretary of State of the State of Texas, a certificate of designation
setting forth the rights and obligations relating to the Preferred Stock (the
"Certificate of Designation") including without limitation, provisions relating
to the conversion of the Preferred Stock into the Common Stock, par value $0.001
per share (the "Common Stock"), of the Company; and
WHEREAS, the Parties hereto believe it to be in their best
interests to set forth their rights and obligations in connection with the
transfer or public offering of the Preferred Stock or any shares of Common Stock
into which the Preferred Stock is converted or any Common Stock issued pursuant
to the terms of this Agreement (the "Converted Common Stock") and certain other
matters relating to the investment by the Investor in the Company.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
-----------
ss. 1.1. DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Additional Shares" has the meaning given to it in Section
5.3.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof, from time to time.
"Board" means the Board of Directors of the Company.
"Board Observer" has the meaning given to it in Section 6.1.
"Certificate of Designation" has the meaning given to it in
the second recital clause.
"Closing Date" has the meaning given to it in the Securities
Purchase Agreement.
"Commission" means, at any time, the Securities and Exchange
Commission or any other Federal agency then administering the Securities Act and
other Federal securities laws.
"Common Stock" has the meaning given to it in the second
recital clause.
"Common Stock Percentage" means that percentage of the Common
Stock of the Company which is held by the Investor (or would be held by the
Investor if the Preferred Stock was converted into Common Stock) immediately
prior to the issue, sale or exchange of the Offered Securities, all determined
on the basis that all convertible or exchangeable securities (including the
Preferred Stock) shall be deemed to be converted and/or exchanged, all warrants,
options and similar securities shall be deemed to be exercised and all other
obligations of any type to issue Common Stock or securities convertible or
exercisable into Common Stock shall be deemed to have been performed in
accordance with their terms (it being understood that to the extent any such
convertible or exchangeable securities or warrants, options or similar
securities have any type of floating conversion ratio or floating exercise
price, then for purposes of determining the amount of Common Stock which would
be issued upon the conversion, exchange or exercise thereof, the conversion or
exercise price shall be deemed to be the lowest such conversion or exercise
price resulting in the maximum number of securities which may be issued).
"Company" has the meaning given to it in the preamble to this
Agreement.
"Converted Common Stock" has the meaning given to it in the
third recital clause.
"Excluded Securities" has the meaning given to it in Section
3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Final Registration Date" means March 31, 2000, unless (i) a
Strategic Investment is consummated prior to March 31, 2000 and (ii) the
Preferred Shares have not been converted to Converted Common Shares before
December 31, 1999, in which case the Final Registration Date means August 31,
2000.
"Xxxx" has the meaning given to it in the preamble to this
Agreement.
"Incidental Registration" has the meaning set forth in Section
4.3(a) of this Agreement.
"Investor" has the meaning given to it in the preamble to this
Agreement.
"LAIF" means AIG-GE Capital Latin American Infrastructure Fund
L.P.
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"NASDAQ" means the National Association of Securities Dealers,
Inc. Automatic Quotation System.
"Northland" has the meaning given to it in the preamble to
this Agreement.
"Notice of Acceptance" has the meaning given to it in Section
2.1(b).
"Offer" has the meaning given to it in Section 2.1(a).
"Offer Period" has the meaning given to it in Section 2.1(a).
"Offered Securities" means (A) shares of Common Stock, (B)
shares of Preferred Stock (C) any other equity security of the Company, (D) any
debt security of the Company which by its terms is convertible into or
exchangeable for any equity security of the Company or has an equity kicker or
other participation rights, (E) any security of the Company that is a
combination of debt and equity or (F) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Company; provided that Offered Securities shall not include
(i) any security that is issued in a public offering that is registered under
the Securities Act, (ii) any Common Stock or options to acquire shares of Common
Stock granted pursuant to incentive plans approved by the Board to employees,
directors or consultants of the Company or any security issued upon exercise of
any such options or (iii) the Teleductos Common Stock.
"Original Issue Date" has the meaning given to it in the
Certificate of Designation.
"Over-Subscribing Tag-Along Stockholders" has the meaning
given to it in Section 5.3.
"Participation Notice" has the meaning given to it in Section
6.4(b).
"Party" means a party to this Agreement and any references to
a Party includes its heirs, executors, administrators, successors and permitted
assigns.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Private Transaction" shall mean the sale, transfer or
exchange of shares in a transaction other than (i) a public offering of shares
or (ii) on a national securities exchange or through NASDAQ, whether pursuant to
Rule 144 of the Securities Act or otherwise.
"Preferred Stock" has the meaning given to it in the first
recital clause.
"Registrable Securities" means (i) the Converted Common Stock
and (ii) any securities issued or issuable with respect to the Converted Common
Stock by way of conversion,
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exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, or (B) such securities shall
have been sold in accordance with Rule 144 (or any successor provision) under
the Securities Act.
"Registration" means the Shelf Registration and each Incidental Registration.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Article IV, inclusive, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depositary Trust Company,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), and fees and disbursements of counsel for the
Company and its independent certified public accountants (including the expenses
of any management review, cold comfort letters or any special audits required by
or incident to such performance and compliance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, fees and expenses of other Persons retained by the Company
and reasonable fees and expenses of one counsel (excluding local counsel) for
holders of Registrable Securities (other than fees and expenses of counsel in
connection with an Incidental Registration), selected by the holders of a
majority of the Registrable Securities to be included in such Registration; but
not including any underwriting fees, discounts or commissions attributable to
the sale of Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Securities Purchase Agreement" has the meaning given to it in
the first recital clause.
"Series A Conversion Price" has the meaning given to it in the
Certificate of Designation.
"Shelf Registration" has the meaning set forth in Section
4.2(a) of this Agreement.
"Strategic Investment" has the meaning given to it in the
Certificate of Designation.
"Strategic Investment Date" has the meaning given to it in
Section 6.4(a).
"Strategic Investment Notice" has the meaning given to it in
Section 6.4(a).
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"Subsidiaries" has the meaning given to it in the Securities
Purchase Agreement.
"Tag-Along Allotment" has the meaning given to it in Section
5.1.
"Tag-Along Notice" has the meaning given to it in Section 5.3.
"Tag-Along Rights" has the meaning given to it in Section 5.2.
"Tag-Along Sale" has the meaning given to it in Section 5.1.
"Tag-Along Sale Date" has the meaning given to it in Section
5.2.
"Tag-Along Sale Notice" has the meaning given to it in Section
5.2.
"Tag-Along Stockholders" has the meaning given to it in
Section 5.1.
"Teleductos Common Stock" means the Common Stock issuable upon
the conversion of the indebtedness evidenced by promissory notes issued to the
stockholders of Teleductos Occidente, Ltda. in connection with the acquisition
of such company.
"25% Holder" has the meaning given to it in the Certificate of
Designation.
ARTICLE II
PURCHASE RIGHTS
---------------
ss. 2.1. PURCHASE RIGHTS. (a) Subject to Section 2.2, the
Company shall not issue, sell or exchange, or agree to issue, sell or exchange,
any Offered Securities unless the Company shall have first offered to sell to
the Investor such amount of Offered Securities required to enable the Investor
to maintain the Investor's Common Stock Percentage, at a price and on such other
terms as shall have been specified by the Company in writing delivered to the
Investor (the "Offer"), which Offer by its terms shall remain open for a period
of 45 business days from the date it is delivered by the Company (the "Offer
Period").
(b) Notice of the Investor's intention to accept, in whole or
in part, an Offer shall be evidenced by a writing signed by the Investor and
delivered to the Company prior to the end of the Offer Period, setting forth
such portion of the Offered Securities as such Investor elects to purchase (the
"Notice of Acceptance"). Within 30 days after receipt by the Company of such
Notice of Acceptance, the Company shall sell and the Investor shall purchase the
Offered Securities in respect of which such Investor's Notice of Acceptance was
delivered, upon the terms and conditions of the Offer; provided, however, that
the Investor shall not be required to purchase any Offered Securities prior to
the consummation of the issue, sale or exchange of the Offered Securities giving
rise to the rights in Section 2.1(a).
(c) In the event the Company materially amends the terms of
the Offer at any time, the Offer Period shall be extended for a period of not
less than 10 business days.
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(d) In the event that a Notice of Acceptance is not given by
the Investor in respect of all the Offered Securities, the Company shall have 90
days from the expiration of the Offer Period to sell all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given to any
other Person(s), but only upon terms and conditions which are no more favorable
to such other Person(s) or less favorable, in the aggregate, to the Company than
those set forth in the Offer.
(e) In each case, any Offered Securities not purchased by the
Investor in accordance with this Section 2.1 or by other Persons in accordance
with Section 2.1(d) may not be sold or otherwise disposed of until they are
again offered to the Investor under the procedures specified in this Section
2.1.
ss. 2.2. DURATION OF PURCHASE RIGHTS. The rights of the
Investor set forth in Section 2.1 shall not apply to any Strategic Investment
consummated within nine months of the Closing Date. The rights of the Investor
set forth in Section 2.1 shall expire upon the fifth anniversary of the Closing
Date; provided, however, that nothing in this Section 2.2 shall prejudice the
right of the Investor to deliver a Notice of Acceptance with respect to, and
purchase any Offered Securities in connection with, an Offer delivered prior to
such date.
ARTICLE III
ANTI-DILUTION RIGHTS
--------------------
ss. 3.1. ANTI-DILUTION RIGHTS. (a) Subject to Section 3.2, if
the Company issues shares of Common Stock for a consideration per share less
than the Series A Conversion Price as determined prior to such issuance,
regardless of whether Preferred Stock is outstanding or not, the Company shall
issue additional shares of Common Stock to the holders of Converted Common Stock
in an amount equal to the Adjustment Amount for each share of Common Stock held
by the Investor in accordance with the following formula:
A = T - 1
-----
O + P
-
M
where:
A = the Adjustment Amount.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares of Common Stock.
P = the aggregate consideration received for the issuance
of such additional shares of Common Stock.
M = the Series A Conversion Price.
T = the number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares of Common Stock.
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The Adjustment Amount shall be determined and shares of Common
Stock shall be issued successively whenever any such issuance is made, and shall
become effective immediately after such issuance.
This Section 3.1(a) does not apply to any of the following
issuances: (i) the issuance of Common Stock upon the conversion, exercise or
exchange of any security convertible into or exercisable or exchangeable for
shares of Common Stock and any right, option or warrant to purchase shares of
Common Stock, outstanding on the date hereof or for which an issuance of shares
of Common Stock has been made pursuant to this Agreement; or (ii) the issuance
of such shares of Common Stock to employees, managers or directors of, or
consultants to, the Company pursuant to a plan adopted by the Board in good
faith including options and shares of Common Stock issued upon the exercise of
options or warrants hereafter issued to such Persons pursuant to any such plan;
or (iii) the issuance of Common Stock to a Strategic Investor in connection with
a Strategic Investment within nine months after the Original Issue Date;
provided that the average daily closing or last sale price per share of Common
Stock for the ninety (90) days immediately following such Strategic Investment,
as reported on a national securities exchange or NASDAQ, is greater than or
equal to $9.00 (the securities referred to in clauses (i), (ii) and (iii) being
referred to collectively as "Excluded Securities").
(b) Subject to Section 3.2, if the Company issues any options,
warrants or other securities convertible into or exchangeable or exercisable for
Common Stock for a consideration per share of Common Stock initially deliverable
upon conversion, exchange or exercise of such securities less than the Series A
Conversion Price as determined on the date of and immediately prior to such
issuance, regardless of whether Preferred Stock is outstanding or not, on the
date of issuance of such securities, the Company shall issue additional shares
of Common Stock to the holders of Converted Common Stock in an amount equal to
the Adjustment Amount for each share of Common Stock held by the Investor shall
be determined in accordance with the following formula:
A = O + D - 1
-------
O + P
-
M
where:
A = the Adjustment Amount.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
P = the sum of the aggregate consideration received for
the issuance of such securities and the aggregate
minimum consideration receivable by the Company for
issuance of Common Stock upon conversion or in
exchange for, or upon exercise of, such securities.
M = the Series A Conversion Price
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D = the maximum number of shares of Common Stock
deliverable upon conversion or in exchange for or
upon exercise of such securities at the initial
conversion, exchange or exercise rate.
The Adjustment Amount shall be determined and shares of Common
Stock shall be issued successively whenever any such issuance is made, and shall
become effective immediately after such issuance.
This Section 3.1(b) does not apply to the Excluded Securities.
ss. 3.2. LIMITS ON ANTI-DILUTION RIGHTS. Notwithstanding
anything to the contrary, the provisions of Section 3.1 shall not apply on or
after the fifth anniversary of the Original Issue Date.
ss. 3.3. CONSIDERATION RECEIVED. For purposes of any
computation respecting consideration received pursuant to this Article 3 the
manner of determination set forth in Subsection 5(d)(ii) of the Certificate of
Designation shall be followed.
ss. 3.4. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional shares of Common Stock in connection with any
Adjustment Amount. All shares of Common Stock held of record by the holders of
Converted Common Stock shall be taken into account in determining the number of
full shares of Common Stock which shall be issuable to the holders of Converted
Common Stock in connection with the Adjustment Amount. If any fraction of a
share of Common Stock would, except for the provisions of this Section 3.4, be
issuable to the holders of Converted Common Stock, the Company shall pay an
amount in cash equal to the fair market value of a share of Common Stock (as
determined in good faith by the Board), multiplied by such fraction, or issue a
full share of Common Stock in lieu thereof.
ARTICLE IV
PUBLIC OFFERING; PUBLIC OFFERING
PIGGYBACK RIGHTS; REGISTRATION RIGHTS
-------------------------------------
ss. 4.1. NO PUBLIC SALE. (a) The Investor shall not sell any
Preferred Stock or Converted Common Stock on any national securities exchange or
through NASDAQ other than in compliance with Section 4.2 or 4.3 for a period of
one year from the Closing Date.
(b) Until the later of the first anniversary of the Closing
Date and the date that the Shelf Registration becomes effective, neither
Northland nor Xxxx will, either directly or indirectly, sell an amount of Common
Stock exceeding in the aggregate the number of shares of Common Stock that such
individuals would be able to sell assuming, for such purpose, that (i) the
shares of Common Stock owned by either Northland and Xxxx were "restricted"
securities within the meaning of Rule 144(a)(3) of the Securities Act and (ii)
each of Northland and Xxxx were subject to the volume limitations governing the
sale by "affiliates" within the meaning of Rule 144(e) of the Securities Act;
PROVIDED, HOWEVER, that until the later of the first anniversary of the Closing
Date and the date that the Shelf Registration becomes effective each of
Northland and Xxxx shall continue to hold 30% or more of their respective Common
Stock holdings as of
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the Closing Date (assuming, for purposes of calculating such percentage, that
all warrants, options and similar securities held by either Northland or Xxxx
shall be deemed to be exercised).
ss. 4.2. SHELF REGISTRATION. (a) OBLIGATION TO FILE AND
MAINTAIN. On or prior to the Final Registration Date, the Company shall file a
registration statement covering all of the Registrable Securities and which
shall include a number of shares of Common Stock issuable upon the conversion of
all of the shares of Preferred Stock issued on a continuous or delayed basis in
the future (the "Shelf Registration"). The Shelf Registration shall be amended
from time to time to include a number of shares of Common Stock sufficient to
include all shares of Common Stock issuable upon exercise or conversion of all
Preferred Stock. The Shelf Registration shall be on an appropriate form and such
Registration and any form of prospectus included therein or prospectus
supplement relating thereto shall reflect such plan of distribution or method of
sale as the holders of Registrable Securities may from time to time notify the
Company, including (I) the sale of some or all of the Registrable Securities in
a public offering or, (II) if requested by any holder of Registrable Securities,
subject to receipt by the Company of such information (including information
relating to purchasers) as the Company reasonably may require, (i) a transaction
constituting an offering outside the United States which is exempt from the
registration requirements of the Securities Act in which any holder of
Registrable Securities undertakes to effect registration after the completion of
such offering in order to permit such shares to be freely tradable in the United
States, (ii) a transaction constituting a private placement under Section 4(2)
of the Securities Act in connection with which any holder of Registrable
Securities undertakes to effect a registration after the conclusion of such
placement to permit such shares to be freely tradable by the purchasers thereof,
or (iii) a transaction under Rule 144A of the Securities Act in connection with
which any holder of Registrable Securities undertakes to effect a registration
after the conclusion of such transaction to permit such shares to be freely
tradable by the purchasers thereof.
(b) TIME FOR FILING AND EFFECTIVENESS. The Company shall use
its best efforts to cause the Shelf Registration referred to in Section 4.2(a)
to become effective as promptly as practicable after filing thereon. The Company
shall keep the Shelf Registration filed pursuant to this Section 4.2
continuously effective until all Registrable Securities have been sold or until,
at the request of the Company, counsel to the Company advises that all
Registrable Securities may be freely resold by the holders thereof without
registration. During the period during which the Shelf Registration is
effective, the Company shall supplement or make amendments to the Shelf
Registration, if required by the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, or if requested by
the holder of Registrable Securities or an underwriter of Registrable
Securities, including to reflect any specific plan of distribution or method of
sale, and shall use its best efforts to have such supplements and amendments
declared effective, if required, as soon as practicable after filing.
(c) BLACK-OUT PERIODS OF THE HOLDERS OF REGISTRABLE
SECURITIES. Notwithstanding anything herein to the contrary, (i) the Company
shall have the right from time to time to require any holder of Registrable
Securities not to sell Registrable Securities pursuant to any Shelf Registration
or to suspend the effectiveness thereof during the period starting with the date
30 days prior to the Company's good faith estimate, as certified in writing by
an executive officer of the Company to the holders of Registrable Securities, of
the proposed date of filing of a
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registration statement or a preliminary prospectus supplement relating to an
underwritten public offering of equity securities of the Company for the account
of the Company, and ending on the date 120 days following the delivery of such
estimate and (ii) the Company shall be entitled to require the holders of
Registrable Securities not to sell Registrable Securities pursuant to any Shelf
Registration or to suspend the effectiveness thereof (but not for a period
exceeding 90 days) if the Company determines, based on the opinion of legal
counsel, that such offering or continued effectiveness would interfere with any
material financing, acquisition, disposition, corporate reorganization or other
material transaction involving the Company or any of its subsidiaries because
public disclosure thereof would be required prior to the time such disclosure
might otherwise be required. In any event, the Company shall not be entitled to
exercise the rights granted to the Company pursuant to this Section 4.2(c) more
than once in any one year period.
(d) BLACK-OUT PERIODS OF THE COMPANY. Subject to the
conditions of this Section 4.2(d), each holder of Registrable Securities shall
have the right to require the Company not to sell, and to use its best efforts
to cause any employee, director, agent or representative, who is also a holder
of common equity securities or securities convertible into common equity
securities of the Company not to sell, any equity securities of the Company or
any securities convertible into equity securities of the Company under any
registration statement or prospectus supplement, or to suspend the effectiveness
thereof, during the period starting with the date 30 days prior to such holders'
good faith estimate, as certified in writing by an executive officer of such
holder to the Company, of the proposed date of filing of a preliminary
prospectus supplement relating to a Shelf Registration filed pursuant to Section
4.2(a), pertaining to an underwritten offering of Registrable Securities, and
ending on the date 90 days following the date of filing of the final prospectus
supplement, but in no event on a date later than 90 days following the date of
filing of the preliminary prospectus supplement.
(e) PRIORITY ON SHELF REGISTRATIONS. If the managing
underwriter for any underwritten offering contemplated by this Section 4.2 shall
advise the Company in writing that, in such underwriter's opinion, the amount of
securities requested to be included in such Shelf Registration would adversely
affect the offering and sale (including pricing) of such securities then the
Company will include in such Shelf Registration, the number of securities that
the Company is so advised can be sold in such offering, in the following
priority:
(i) first, all Registrable Securities requested to be sold
pursuant to this Section 4.2;
(ii) second, securities proposed to be sold by the Company for
its own account; and
(iii) third, any other securities requested to be included in
such Registration in such manner as the Company may determine.
(f) NOTICE. The Company shall give each holder of Registrable
Securities prompt notice in the event that the Company has suspended sales of
Registrable Securities under Section 4.2(c).
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(g) SELECTION OF UNDERWRITERS. Any and all underwriters or
other agents involved in any sale of Registrable Securities pursuant to a Shelf
Registration shall include one or more underwriting firms of nationally
recognized standing selected by the Company which underwriting firms must be
reasonably satisfactory to the Investor in its sole discretion.
(h) EXPENSES. All Registration Expenses incurred in connection
with any Shelf Registration shall be borne by the Company.
ss. 4.3. INCIDENTAL REGISTRATIONS. (a) NOTIFICATION AND
INCLUSION. If the Company proposes to register for its own account or the
account of any other securityholder, any equity securities of the Company or any
securities convertible into equity securities of the Company under the
Securities Act (other than pursuant to a registration on Form S-4 or Form S-8 or
any similar form or in connection with a proposal to register the Teleductos
Common Stock within 60 days of the Closing Date), the Company shall, at each
such time after the date hereof, promptly give notice to each holder of
Registrable Securities (the "Company Notice") of such registration and of such
holder's rights under this Section 4.3(a). Upon the written request of any
holder of Registrable Securities given within 10 business days after receipt of
a Company Notice by such holder of Registrable Securities, the Company shall
include in such proposed registration such Registrable Securities as such
holders shall request and shall use its best efforts to cause a registration
statement covering all of the Registrable Securities that such holders have
requested to be registered to become effective under the Securities Act (an
"Incidental Registration").
(b) PRIORITY ON INCIDENTAL REGISTRATION. If an Incidental
Registration pursuant to this Section 4.3 involves an underwritten offering and
the managing underwriter of such underwritten offering shall advise the Company
in writing that, in such underwriter's opinion, the amount of securities
requested to be included in such Incidental Registration, would adversely affect
the offering and sale (including price) of such securities, then the Company
will include in such Incidental Registration, the number of securities that the
Company is so advised can be sold in such offering, in the following priority:
(A) Prior to the consummation of a Strategic Investment:
(i) first, all the securities of the Company which
the Company proposes to sell for its own account;
(ii) second, all Registrable Securities requested to
be sold pursuant to this Section 4.3; and
(iii) third, any other securities requested to be
included in such Registration, in such manner as the Company
may determine.
(B) Following the consummation of a Strategic Investment:
(i) first, all the securities of the Company which
the Company proposes to sell for its own account;
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(ii) second, all Registrable Securities requested to
be sold pursuant to this Section 4.3 and any Securities
requested to be sold by Northland or Xxxx, determined on a PRO
RATA basis; and
(iii) third, any other securities requested to be
included in such Registration, in such manner as the Company
may determine.
(c) EXPENSES. All Registration Expenses incurred in connection
with any Incidental Registration shall be borne by the Company.
ss. 4.4. REGISTRATION PROCEDURES. In connection with the
filing of any registration statement as provided in Section 4.2 or 4.3 of this
Agreement, the Company shall use its best efforts to effect the Registration and
sale of Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto, the Company will as expeditiously as
possible:
(a) prepare and file with the Commission the requisite
registration statement (including a prospectus therein) to effect such
Registration and use its best efforts to cause such registration
statement to become effective, provided that before filing such
registration statement or any amendments or supplements thereto, the
Company will furnish to the counsel selected by the holders of
Registrable Securities copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel
before any such filing is made, and the Company will comply with any
reasonable request made by such counsel to make changes in any
information contained in such documents relating to such holders, and
upon filing such documents, the Company shall promptly notify in
writing such counsel of the receipt by the Company of any comments by
the Commission with respect to such registration statement or
prospectus or any amendment or supplement thereto or any request by the
Commission for the amending or supplementing thereof or for additional
information with respect thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such Registration and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until, in the case of
Section 4.2, the termination of the period during which the Shelf
Registration is required to be kept effective, or, in the case of
Section 4.3, the earlier of such time as all of such securities have
been disposed of and the date which is 180 days after the date of
initial effectiveness of such registration statement;
(c) furnish to each holder of Registrable Securities included
in a Registration hereunder and the underwriter or underwriters, if
any, without charge, at least one signed copy of the registration
statement and any post-effective amendments thereto, and upon request,
such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of
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copies of the prospectus contained in such registration statements
(including each preliminary prospectus, complete prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, including documents
incorporated by reference, as such holders and the underwriters may
request (it being understood that the Company consents to the use of
the prospectus and any amendment or supplement thereto by each holder
of Registrable Securities covered by such registration statement and
the underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any amendment
or supplement thereto);
(d) register or qualify all Registrable Securities under such
other securities or blue sky laws of such jurisdictions as the holders
of Registrable Securities shall request, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and take any other action which may be necessary or
advisable to enable such holders to consummate the disposition in such
jurisdictions of the securities owned by such holders, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this paragraph be obligated to be
so qualified, or to consent to general service of process in any such
jurisdiction, or to subject the Company to any material tax in any such
jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
government authority as may be necessary to enable such holder to
consummate the disposition of such Registrable Securities;
(f) furnish to each holder of Registrable Securities included
in a Registration hereunder a signed counterpart, addressed to such
holders (and the underwriters, if any), of (i) an opinion of counsel
for the Company, dated the effective date of such registration
statement (and, if such Registration includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to the
holders of Registrable Securities, and (ii) a "cold comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of
such financial statements, all as are customarily covered in opinions
of issuer's counsel and in accountants' "cold comfort" letters
delivered to the underwriters in underwritten public offerings of
securities;
(g) immediately notify each holder of Registrable Securities
included in a registration statement hereunder at any time when the
Company becomes aware that a prospectus relating thereto is required to
be delivered under the Securities Act, upon discovery that, or upon the
discovery of the happening of any event as a result of which
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the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of such
holders promptly prepare and furnish to such holders a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
(h) comply or continue to comply in all material respects with
the Securities Act and the Exchange Act and with all applicable
policies, rules and regulations of the Commission, as announced from
time to time, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act, and not file any amendment or
supplement to such registration statement or prospectus to which the
Investor shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act, having been furnished with a
copy thereof at least five business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) list all Registrable Securities covered by such
registration statement on any securities exchange on which any shares
of Common Stock are then listed;
(k) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under such Registration,
and enable such securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or
such holders may request;
(l) enter into such agreements (including underwriting
agreements in customary form) and take such other actions as the
Investor shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities; and
(m) cause its employees and personnel to use their best
efforts to support the marketing of the Registrable Securities
(including, without limitation, the participation in "road shows," at
the request of the underwriters or the holders of Registrable
Securities).
ss. 4.5. REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any Registration, the Company will enter into a customary
underwriting agreement with such
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underwriters for such offering, which shall contain such representations and
warranties by the Company and such other terms as are customarily contained in
agreements of this type, including indemnities to the effect and to the extent
provided in Section 4.7 hereof. Each holder of Registrable Securities may be a
party to such underwriting agreement and may, at its option, require that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
holders. The Company will use its best efforts to ensure that the holders of
Registrable Securities included in an underwritten registration hereunder shall
not be required to (i) make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder and such holder's intended method of
distribution and (ii) undertake any indemnification or contribution obligations
to the Company or the underwriters with respect thereto, except such
indemnification or contribution obligations otherwise provided in Section 4.7
hereof.
ss. 4.6. PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of any registration statement under the
Securities Act, the Company will give one representative of the holders of
Registrable Securities, its underwriters, if any, and their respective counsel,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of the holders of Registrable Securities, such underwriters and
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
ss. 4.7. INDEMNIFICATIon. (a) INDEMNIFICATION BY THE COMPANY.
In the event of any registration of any Registrable Securities of the Company
under the Securities Act, the Company will, and hereby does, indemnify and hold
harmless the holders of such securities, their officers, directors, members,
employees, agents, representatives, stockholders and general and limited
partners and each Person who controls such holder (within the meaning of the
Securities Act and Exchange Act) against any losses, claims, damages,
liabilities, costs and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof), joint or several, insofar as such losses,
claims, damages, liabilities, costs and expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of, are based
upon or are incurred in connection with, any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or 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 under
which they were made, not misleading, and the Company will reimburse such
indemnified persons for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceedings; provided, however, that the Company shall not be liable
to a holder of Registrable Securities in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof), costs or expense arises out of, is based upon or are
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incurred in connection with, an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such holder of Registrable Securities specifically stating
that it is for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
each holder of Registrable Securities and shall survive the transfer of such
securities by such holders.
(b) INDEMNIFICATION BY THE HOLDER OF REGISTRABLE SECURITIES.
The Company may require, as a condition to including any Registrable Securities
in any registration statement pursuant to Section 4.2 or Section 4.3, that the
Company shall have received an undertaking satisfactory to it from each holder
of Registrable Securities to indemnify and hold harmless (in the same manner and
to the same extent as set forth in paragraph (a) of this Section 4.7) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act with respect to any untrue statement or alleged untrue statement
of a material fact in or omission or alleged omission to state a material fact
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holders specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by the holders of Registrable
Securities; provided, however, that the obligation to indemnify will be
individual, not joint and several, for each holder and will be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 4.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 4.7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
receive such notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation and the
indemnifying party shall not, without the consent of the indemnified party,
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consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, a release from all liability in
respect of such claim or litigation provided by the claimant or plaintiff to
such indemnified party.
(d) CONTRIBUTION. If, for any reason, the foregoing indemnity
is unavailable, or is insufficient to hold harmless an indemnified party, then
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such expenses, losses, damages, liabilities or
expenses, (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other (determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
the proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other, but also the relative fault of the indemnifying party on the one hand
and the indemnified party on the other, as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no holder of Registrable
Securities shall be required to contribute any amount in excess of the amount
such holder would have been required to pay to an indemnified party if the
indemnity under Section 4.7(b) was available. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any indemnifying party
who was not guilty of such fraudulent misrepresentation. The obligation of any
Person to contribute pursuant to this Section 4.7 shall be several and not
joint.
ss. 4.8. RULE 144. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Registrable Securities to the public without
registration, the Company shall:
(a) use its best efforts to facilitate the sale of the
Registrable Securities to the public, without registration under the
Securities Act, pursuant to Rule 144;
(b) make and keep public information available, as those terms
are understood and defined in Rule 144 at all times;
(c) use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied
with such requirements of this section, to the holders of Registrable Securities
upon any such holder's request.
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ARTICLE V
TAG-ALONG RIGHTS
----------------
ss. 5.1. RIGHT TO PARTICIPATE IN SALE. (a) Subject to Section
5.5, if (i) prior to the consummation of a Strategic Investment, either
Northland or Xxxx; (ii) following the consummation of a Strategic Investment,
any of the Investor, Northland or Xxxx; or (iii) following the consummation of a
Strategic Investment, the Strategic Investor, propose to enter into an agreement
to sell or otherwise dispose of for value (such sale or other disposition for
value being referred to as a "Tag Along Sale") any shares of Common Stock in a
Private Transaction then (x) in the case of clause (i), Northland or Xxxx shall
afford the Investor; (y) in the case of clause (ii), the Investor, Northland or
Xxxx shall afford to each other; and (z) in the case of clause (iii), the
Strategic Investor shall afford the Investor the opportunity to participate
proportionately in such Tag-Along Sale (the Person(s) being afforded the
opportunity to participate proportionately in such Tag-Along Sale being referred
to as the "Tag-Along Stockholders") in accordance with this Article 5.
(b) The number of shares of Common Stock that each Tag-Along
Stockholder will be entitled to include in such Tag-Along Sale (the "Tag-Along
Allotment") shall be determined by multiplying (i) the number of shares of
Common Stock held by such Tag-Along Stockholder immediately prior to the
consummation of the Tag-Along Sale Date (including shares of Common Stock
issuable upon the conversion of the Preferred Stock) by (ii) a fraction, the
numerator of which shall equal the number of shares of Common Stock of the
Company proposed to be sold or otherwise disposed of pursuant to the Tag-Along
Sale and the denominator of which shall equal the total number of shares of
Common Stock that are beneficially owned by (a) the Party proposing the
Tag-Along Sale and (b) any other holder of shares of Common Stock that had the
right to "tag-along" in the Tag-Along Sale (including shares of Common Stock
issuable upon the conversion of the Preferred Stock) on the day immediately
prior to the consummation of the Tag-Along Sale Date; provided, however, that in
negotiating a Tag-Along Sale, the Party proposing the Tag-Along Sale shall
provide (i) that the only representations, warranties or covenants which any
Tag-Along Stockholder shall be required to make in connection with any Tag-Along
Sale are representations and warranties with respect to its own ownership of the
Common Stock to be sold by it and its ability to convey title thereto free and
clear of liens, encumbrances or adverse claims, its due organization, its due
authorization, execution and delivery of the definitive purchase agreement (if
applicable), enforceability of such purchase agreement against it and no
conflicts of it with such purchase agreement, and (ii) that the liability of the
Tag-Along Stockholder with respect to any representation and warranty made in
connection with any Tag-Along Sale is the several liability of such Tag-Along
Stockholder (and not joint with any other person) and that such liability is
limited to the amount of proceeds actually received by such Tag-Along
Stockholder; provided, however, that the foregoing shall not limit the
obligations of such Tag-Along Stockholder, and such Tag-Along Stockholder hereby
expressly agrees to be bound by and be subject to, any escrow or other holdback
arrangement (on a PRO RATA basis based on the number of shares of Common Stock
sold by such Tag-Along Stockholder in proportion to all shares of Common Stock
sold in such Tag-Along Sale) provided for in the agreement relating to the
Tag-Along Sale.
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ss. 5.2. SALE NOTICE. The Party proposing the Tag-Along Sale
shall provide each Tag-Along Stockholder and the Company with written notice
(the "Tag-Along Sale Notice") not less than 30 days prior to the proposed date
of the Tag-Along Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice
shall be accompanied by a copy of any agreement relating to the Tag-Along Sale
(if available) and shall set forth: (i) the name and address of each proposed
purchaser of shares of Common Stock in the Tag-Along Sale; (ii) the number of
shares of Common Stock proposed to be sold; (iii) the proposed amount and form
of consideration to be paid for such shares of Common Stock and the terms and
conditions of payment offered by each proposed purchaser; (iv) the aggregate
number of shares of Common Stock held of record by the Party proposing the
Tag-Along Sale as of the close of business on the day immediately preceding the
date of the Tag-Along Notice (the "Tag-Along Notice Date"); (v) the Tag-Along
Stockholder's Tag-Along Allotment assuming the Stockholder elected to sell the
maximum number of shares of Common Stock possible; (vi) confirmation that the
proposed purchaser has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase shares of Common Stock from any Tag-Along
Stockholder in accordance with the terms hereof; and (vi) the Tag-Along Sale
Date.
ss. 5.3. TAG-ALONG NOTICE. Any Tag-Along Stockholder wishing
to participate in the Tag-Along Sale shall provide written notice (the
"Tag-Along Notice") to the Party proposing the Tag-Along Sale no less than 15
days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the
number of shares of Common Stock that such Tag-Along Stockholder elects to
include in the Tag-Along Sale, which shall not exceed such Tag-Along
Stockholder's Tag-Along Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Common Stock held by such Tag-Along
Stockholder as of the day immediately preceding the Tag-Along Notice Date, if
any, that such Tag-Along Stockholder desires to include in the Tag-Along Sale
("Additional Shares") in the event that there is any under subscription for
Tag-Along Allotments by the Tag-Along Stockholders. If such is the case, the
unsubscribed Tag-Along Allotments shall be allocated to the Tag-Along
Stockholders specifying Additional Shares, respectively (the "Over-Subscribing
Tag-Along Stockholders"), which allocation shall be on a PRO RATA basis among
all such Over-Subscribing Tag-Along Stockholders in accordance with the number
of Additional Shares specified by such Over-Subscribing Tag-Along Stockholders
in their Tag-Along Notice. The Tag-Along Notice given by any Tag-Along
Stockholder shall constitute such Tag-Along Stockholder's binding agreement to
sell the shares of Common Stock specified in the Tag-Along Notice on the terms
and conditions applicable to the Tag-Along Sale; provided, however, that in the
event that there is any material change in the material terms and conditions of
such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not
limited to, any decrease in the purchase price that occurs other than pursuant
to an adjustment mechanism set forth in the agreement relating to the Tag-Along
Sale) after such Tag-Along Stockholder gives it Tag-Along Notice, then,
notwithstanding anything herein to the contrary, the Tag-Along Stockholder shall
have the right to withdraw from participation in the Tag-Along Sale with respect
to all of its shares of Common Stock affected thereby. If the proposed purchases
does not consummate the purchase of all of the shares of Common Stock requested
to be included in the Tag-Along Sale by any Tag-Along Stockholder on the same
terms and conditions applicable to the Party proposing the Tag-Along Sale
(except as otherwise provided herein), then the Party proposing the Tag-Along
Sale shall not
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consummate the Tag-Along Sale of any of its shares of Common Stock to such
purchaser, unless the shares of the Party proposing the Tag-Along Sale and the
Tag-Along Stockholders are reduced or limited PRO RATA in proportion to the
respective number of shares of Common Stock actually sold in any such Tag-Along
Sale and all other times and conditions of the Tag-Along Sale are the same for
the Party proposing the Tag-Along Sale and the Tag-Along Stockholders, subject
to the provisions set forth in Section 5.1.
If a Tag-Along Notice from any Tag-Along Stockholder is not
received by the Party proposing the Tag-Along Sale prior to the 15 day period
specified above, the Party proposing the Tag-Along Sale shall have the right to
consummate the Tag-Along Sale without the participation of such Tag-Along
Stockholder, but only on terms and conditions which are no more favorable in any
material respect to the Party proposing the Tag-Along Sale (and in any event, at
no greater a purchase price) than as stated in the Tag-Along Sale Notice and
only if such Tag-Along Sale occurs on a date within 90 days of the Tag-Along
Sale Date. If such Tag-Along Sale does not occur within such 90 day period, the
shares of Common Stock that were to be subject to such Tag-Along Sale thereafter
shall continue to be subject to all of the restrictions contained in this
Agreement.
ss. 5.4. DELIVERY OF CERTIFICATES. On the Tag-Along Sale Date,
each Tag-Along Stockholder shall deliver a certificate or certificates for the
shares of Common Stock to be sold in connection with the Tag-Along Sale, duly
endorsed for transfer with signatures guaranteed, to the purchaser in the manner
and at the address indicated in the Tag-Along Notice against delivery of
immediately available funds in the amount of the purchase price for such shares
of Common Stock.
ss. 5.5. EXEMPT TRANSFERS. The provisions of this Article 5
shall not apply:
(i) to any sale or other disposition to any corporation
or business entity a majority of the capital stock or other ownership interests
of which are owned by the Person proposing the sale or other disposition;
(ii) to any sale or other disposition contemplated by
Section 6.4;
(iii) to any sale or transfer by an individual as a
gift or gifts during such individual's lifetime to such individual's spouse,
children, grandchildren or a trust or other legal entity for the benefit of any
such individual or any of the foregoing; provided, however that such individual
retains voting control of the Common Stock so transferred;
(iv) to any sale or other disposition (a) pursuant to
and in accordance with the terms of any merger, consolidation, reclassification
of shares or capital reorganization of the Person effecting the sale or other
disposition, or (b) pursuant to a sale of all or substantially all of the stock
or assets of such Person; and
(v) to any sale or other disposition to LAIF made by
the Investor.
A sale or other disposition for value shall be exempt from the
provisions of this Section 5 if any one of the above listed exemptions in
applicable.
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ss. 5.6. NO WAIVER. Any election in any instance by a
Stockholder not to exercise its rights to participate in a Tag-Along Sale under
this Article 5 shall not constitute a waiver of such rights with respect to any
other proposed sale of shares of Common Stock which would trigger such rights.
ARTICLE VI
OTHER AGREEMENTS
----------------
ss. 6.1. BOARD OBSERVER. (a) For so long as the Preferred
Stock and Converted Common Stock represent more than 2.0% of the outstanding
Common Stock of the Company determined on the basis that all convertible or
exchangeable securities (including the Preferred Stock) shall be deemed to be
converted and/or exchanged, the Investor shall have the right to designate an
individual who will be an observer (who will be a representative of either the
Investor or LAIF), and shall be entitled to be present, at each meeting of the
Board and each committee of the Board (the "Board Observer").
(b) The Board Observer will have the right to attend each
meeting of the Board and to attend each meeting of each committee of the Board.
Any such attendance may be by teleconference. No meeting of the Board or any
committee thereof may be conducted by teleconference if all participants therein
cannot hear all other participants. The Company shall provide the Board Observer
with (i) copies of all actions taken by written consent of the Board and/or any
committee thereof promptly after the execution thereof and copies of all minutes
of meetings of the Board and/or any committee thereof or the stockholders
promptly after they are prepared, (ii) simultaneously with any distribution to
directors of the Company or any members of any committee of the Board, copies of
all materials that are distributed to such directors or members (including
requests for actions by written consent) and (iii) to the extent possible using
its best efforts, written notice at least one week prior to any meeting of the
Board or any committee of the Board that such Board Observer is entitled to
attend, provided, HOWEVER, that, in any case, the Board Observer shall receive
notice of any meeting of the Board or any committee of the Board that such Board
Observer is entitled to attend no later than any director of the Company. The
Investor shall, and shall use its reasonable best efforts to cause the Board
Observer and LAIF to, hold in confidence (unless compelled to disclose by
judicial or administrative process or by other requirements of law) all
confidential documents and information concerning the Company received by the
Board Observer in his or her capacity as such and reported to the Investor and
LAIF. The Investor shall, and shall use its reasonable best efforts to cause the
Board Observer and LAIF to, refrain from using any information concerning the
Company received by the Board Observer in his or her capacity as such and
reported to the Investor and LAIF for any purpose other than the evaluation of
any investment in the Company.
(c) The Company shall reimburse the Board Observer for all
out-of-pocket expenses incurred in connection with or relating to any meeting of
the Board or any committee thereof.
ss. 6.2. ACCESS AND DISCLOSURE. In connection with the
possible purchase by AIG-GE Capital Latin American Infrastructure Fund L.P.
("LAIF") of up to 50.0% of the Preferred Stock from the Investor, the Company
agrees that for a period of 30 days after the Closing Date it
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shall cause its Subsidiaries to, upon reasonable notice and during normal
business hours, afford LAIF and its employees, accountants, agents and
representatives reasonable access to their books and records and those of their
respective Subsidiaries in order that LAIF may have the opportunity to make such
investigations as it shall desire of the affairs of such Subsidiaries.
ss. 6.3. STRATEGIC INVESTOR BOUND. The Company agrees that it
shall be a condition of any Strategic Investment that the Strategic Investor
agree to be bound by the provisions of this Agreement applicable to the
Strategic Investor
ss. 6.4. PARTICIPATION IN STRATEGIC INVESTMENT. (a)
NOTIFICATION AND INCLUSION. Other than in connection with a Strategic Investment
the consummation of which occurs within nine months of the Closing Date, the
Company shall provide the Investor with written notice (the "Strategic
Investment Notice") not less than 30 days prior to the proposed date of the
consummation of the Strategic Investment (the "Strategic Investment Date"). The
Strategic Investment Notice shall be accompanied by a copy of any purchase
agreement relating to the Strategic Investment (if available) and shall set
forth: (i) the name and address of the proposed Strategic Investor; (ii) the
number of shares of Common Stock proposed to be issued; (iii) the proposed
amount and form of consideration to be paid for such shares of Common Stock and
the terms and conditions of payment offered; (iv) confirmation that the proposed
Strategic Investor has been informed of the rights provided for herein and has
agreed to purchase shares of Common Stock from the Investor in accordance with
the terms hereof in priority to any Common Shares to be issued by the Company;
and (v) the Strategic Investment Date. The Company agrees that in negotiating
the Strategic Investment it shall ensure that the documentation relating to the
Strategic Investment shall provide (i) that the only representations, warranties
or covenants which the Investor shall be required to make in connection with a
sale contemplated herein are representations and warranties with respect to its
own ownership of the Common Stock to be sold by it and its ability to convey
title thereto free and clear of liens, encumbrances or adverse claims, its due
organization, its due authorization, execution and delivery of the definitive
purchase agreement (if applicable), enforceability of such purchase agreement
against it and no conflicts of it with such purchase agreement, and (ii) that
the liability of the Investor with respect to any representation and warranty
made in connection with any sale contemplated herein is limited to the amount of
proceeds actually received by the Investor.
(b) NOTICE OF PARTICIPATION. The Investor shall provide
written notice (the "Participation Notice") to the Company of its desire to sell
Common Stock to the Strategic Investor no less than 15 days prior to the
Strategic Investment Date. The Participation Notice shall set forth the number
of shares of Common Stock that the Investor elects to include in the sale to the
Strategic Investor. The Participation Notice shall constitute the Investor's
binding agreement to sell the shares of Common Stock specified in the
Participation Notice on the terms and conditions applicable to the Strategic
Investment; provided, however, that in the event that there is any material
change in the material terms and conditions of such Strategic Investment
applicable to the Investor (including, but not limited to, any decrease in the
purchase price that occurs other than pursuant to an adjustment mechanism set
forth in the agreement relating to the Strategic Investment) after the Investor
gives its Participation Notice, then, notwithstanding anything herein to the
contrary, the Investor shall have the right to withdraw from participation in
the Strategic Investment with respect to all of its shares of Common Stock
affected thereby.
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(c) FAILURE TO DELIVER PARTICIPATION NOTICE. If a
Participation Notice is not received by the Company prior to the 15 day period
specified above, the Company shall have the right to consummate the Strategic
Investment without the participation of the Investor, but only on terms and
conditions which are no more favorable in any material respect to the Investor
(and in any event, at no greater a purchase price) than as stated in the
Strategic Investment Notice and only if such Strategic Investment is consummated
on a date within 90 days of the Strategic Investment Date.
(d) DELIVERY OF CERTIFICATES. On the Strategic Investment
Date, the Investor shall deliver a certificate or certificates for the shares of
Common Stock to be sold in connection with the Strategic Investment, duly
endorsed for transfer with signatures guaranteed, to the Strategic Investor in
the manner and at the address indicated in the Strategic Investment Notice
against delivery of immediately available funds in the amount of the purchase
price for such shares of Common Stock.
ARTICLE VII
MISCELLANEOUS
-------------
ss.7.1 GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of New York applicable to agreements executed and to be performed
solely within such State.
ss.7.2 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.
ss.7.3 NOTICES. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to the Company:
FirstCom Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxx XX
Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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With a copy to:
Xxxxx & XxXxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and if to the Investor:
c/o GE Capital Services
Structured Finance Group, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Portfolio - Operations
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to its counsel,
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and if to Northland and/or to Xxxx, to such individual "care
of" the Company at the address set forth above for the
Company.
or such other address or number as shall be furnished in writing by any such
Party, and such notice or communication shall be deemed to have been given upon
automatic confirmation of receipt by the receiving machine if sent by
telecopier, upon delivery if delivered in person, and upon mailing if mailed.
ss.7.4 PARTIES IN INTEREST. The Company may not transfer,
assign or pledge any of its rights in, or otherwise grant any rights to any
Person in, this Agreement. Each of Northland and Xxxx may transfer any of his
rights hereunder in whole or in part pursuant to a Private Transaction. The
Investor may transfer any of its rights hereunder in whole or in part pursuant
to a Private Transaction except for the rights set out in Section 6.1 which may
not be transferred and the rights set out in Article II and Article III which
may only be transferred to a 25% Holder. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
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ss.7.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
ss.7.6 ENTIRE AGREEMENT. This Agreement, the Certificate of
Designation and the Securities Purchase Agreement, including the exhibits,
schedules, and other documents referred to herein and therein which form a part
hereof and thereof, and the Side Letter dated June 30, 1999 between the Company,
the Investor and LAIF contain the entire understanding of the parties hereto
with respect to the subject matter contained herein and therein. This Agreement,
the Certificate of Designation and the Securities Purchase Agreement supersede
all prior agreements and understandings between the Parties with respect to such
subject matter.
ss.7.7 AMENDMENTS. This Agreement may not be changed orally,
but only by an agreement in writing signed by the Parties hereto.
ss.7.8 SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.7.9 THIRD PARTY BENEFICIARIES. Each Party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the Parties hereto (and, in the case of
the Investor, its transferees) and those Persons entitled to indemnification
pursuant to Article IV hereof.
ss.7.10 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 Southern District Court 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. Each Party hereby further irrevocably waives any claim that
any such courts lack jurisdiction over such Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or the
transactions contemplated hereby brought in any of the aforesaid courts, that
any such court lacks jurisdiction over such Party. Each Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Party, at its address for notices set forth in Section 7.3, such service to
become effective 10 days after such mailing. Each Party hereby irrevocably
waives any objection to such service of process and further irrevocably waives
and agrees not to plead or claim in any action or proceeding commenced hereunder
or under any other documents contemplated hereby that service of process was in
any way invalid or ineffective. 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 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.
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(b) To the fullest extent permitted by applicable law, each of
the Parties hereto hereby irrevocably waives the objection which it may not or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any of the Courts referred to in Section 7.10(a) and hereby further
irrevocably waives and agrees not to plead or 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.
* * * * *
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IN WITNESS WHEREOF the Investor has signed this Investor
Rights Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, and each of Northland and
Xxxx have signed this Agreement in their individual capacities all as of the day
and year first above written.
FIRSTCOM CORPORATION
By:
----------------------------------------
Name:
Title:
SFG-N INC.
By:
----------------------------------------
Name:
Title:
------------------------------------------
XXXXXXXX X. NORTHLAND
------------------------------------------
XXXXXXX X. XXXX XX
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