1
EXHIBIT 10.24
CONVERSION AGREEMENT
THIS CONVERSION AGREEMENT (the "Agreement") is made effective as of the
15th day of February, 2000, by and between HORIZON PERSONAL COMMUNICATIONS,
INC., an Ohio corporation (the "Company" and as more fully defined below), and
FIRST UNION INVESTORS, INC., a North Carolina corporation ("FUI").
WITNESSETH:
WHEREAS, the Company and FUI are parties to the certain Bridge Note
Purchase Agreement dated as of the date hereof (the "Purchase Agreement")
pursuant to which the Purchaser (as defined below) purchased a 13% senior
subordinated bridge note from the Company (the "Note");
WHEREAS, the Company wishes to grant a conversion option to the
Purchaser whereby the Purchaser may, at its option, convert the Note (including
PIK Notes, if any) and accrued and unpaid interest thereon into the type and
kind of securities issued in an Equity Financing (as defined below); and
WHEREAS, in the event the Company redeems the Note with the proceeds of
any transaction other than an Equity Financing, then the Company wishes to grant
to the Purchaser a right of participation in subsequent Equity Financings;
NOW, THEREFORE, in consideration of the foregoing and the
representations, covenants and agreements contained herein, and certain other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, capitalized
terms used herein shall have the meaning given such terms below. Capitalized
terms used herein and not defined shall have the meanings set forth in the
Purchase Agreement.
"Aggregate Note Amount" shall have the meaning described in
Section 2(a).
"Allocable Portion" shall mean that sum equal to the amount
which the Note (including any PIK Notes) would have accreted to since
the date of original issuance (taking into account all principal,
accrued and unpaid interest and assuming the issuance of PIK Notes each
quarter, but not including any interest at the default rate under the
Note) but for the Company's redemption, in whole or in part, of the
Note.
"Business Day" means any day other than a Saturday, Sunday or
a day on which commercial banking institutions in Charlotte, North
Carolina are authorized or required by law or executive order to be
closed.
2
"Company" means Horizon Personal Communications, Inc., an Ohio
corporation; provided, however, that if, after the date hereof, Horizon
Telcom, Inc. ("Telcom") contributes a majority of the capital stock of
the Company to another entity in which Telcom will own a majority of
such entity's capital stock, and such entity (the "Holding Company")
engages in an Equity Financing, the term "Company" shall include the
Holding Company, and the rights and privileges granted to the Purchaser
pursuant to this Agreement will be applicable to the Holding Company's
Equity Financing.
"Equity Financing" or "Equity Financings" means the Company's
issuance for cash of any of its equity securities or any securities
convertible into or having the rights to purchase any equity securities
to any Person (including without limitation, a private or public
offering of securities); provided, however, that (a) any issuance to an
employee of the Company or its affiliates of stock options to purchase
shares of common stock (or any issuance of securities upon the exercise
of such options) under a bona fide stock option plan shall not be
deemed an "Equity Financing" so long as such issuance shall not result
in a Sale Transaction (as defined below) or (b) any issuance of
securities to Sprint Corporation or any of its affiliates ("Sprint") so
long as such issuance (i) is made in connection with a bona fide
agreement by the Company to obtain POPs from Sprint and (ii) does not
exceed an aggregate of 5% of the Company's outstanding common stock or
(c) any issuance of securities to Motorola, Inc. or any of its
affiliates ("Motorola") so long as such issuance (i) is made in
connection with a bona fide bridge credit facility with the Company and
(ii) does not exceed an aggregate of 5% of the Company's outstanding
common stock.
"Fully Diluted Shares Outstanding" shall mean at any time, the
number of outstanding shares of Common Stock of the Company, after
giving effect to (a) all shares of common stock actually outstanding at
the time of determination, (b) all shares of common stock issuable upon
the exercise of any option, warrant, conversion right or similar right
outstanding at the time of determination and all shares of common stock
authorized but not issued or reserved for issuance pursuant to
outstanding options under any stock plan approved by the board of
directors of the Company.
"Outstanding Common Stock" of the Company means, as of the
date of determination, the sum (without duplication) of the following:
(a) the number of shares of common stock then outstanding at the date
of determination; and (b) the number of shares of common stock then
issuable upon the exercise or conversion of convertible securities and
any warrants, options or other rights to subscribe for or purchase
common stock or convertible securities (but excluding any unvested
options and securities not then exercisable for or convertible into
common stock).
"Person" means any individual, firm, corporation, partnership,
limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency
or political subdivision thereof, or other entity of any kind and
includes any successor (by merger or otherwise) of such entity.
2
3
"Public Offering" means any offering by the Company of its
equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or any
comparable statement under any similar federal statute then in force.
"Purchaser" shall mean FUI and any affiliate thereof.
"Qualified Public Offering" means a firm commitment
underwritten Public Offering of shares of the Company's Common Stock in
which the aggregate price paid by the public for the shares shall be at
least $25 million (before payment of underwriters' discounts and
commissions).
SECTION 2. CONVERSION OPTION.
(a) Until February 14, 2001, if the Company shall
initiate any transaction or be a party to any agreement or
transaction resulting in any Equity Financing, then, as a
condition of the consummation of all such Equity Financings,
lawful, enforceable and adequate provision shall be made so
that the Purchaser shall be entitled to elect, at its option,
by written notice to the Company to convert the sum of the
unpaid principal amount of the Note (including PIK Notes, if
any) plus all accrued and unpaid interest thereon (the
"Aggregate Note Amount") into fully paid and non-assessable
securities of the identical price, type and kind of securities
received by the purchasers in such Equity Financings. The
number of securities to be received shall be determined by
dividing the Aggregate Note Amount by the identical per share
price being paid for the securities by the ultimate purchasers
in the Equity Financing. The above provisions of this Section
2(a) shall apply to all Equity Financings which occur on or
prior to February 14, 2001; provided, that if the Company has
initiated or become a party to any agreement or transaction
before February 14, 2001 which will result in an Equity
Financing being consummated after February 14, 2001, then this
Section 2(a) shall continue to apply until the consummation of
such Equity Financing; provided, however, upon the closing of
a Qualified Public Offering, the Aggregate Note Amount shall
be automatically converted into fully paid and non-assessable
securities of the identical price, type and kind of securities
received in the Qualified Public Offering. The Company shall
give written notice to the Purchaser no less than 20 days
prior to the closing of such Equity Financing. Such notice
shall contain all the material terms, including, but not
limited to, the price, quantity and rights of the applicable
security, of the Equity Financing.
(b) In order to exercise the conversion privilege, the
Purchaser of any note to be converted shall on or before the
10th day after receipt of the Company's notice of an Equity
Financing surrender such note, duly endorsed or assigned to
the Company or in blank at any office or agency of the
Company, accompanied by written notice to the Company at such
office or agency that the Purchaser elects to convert such
note or, if less than the entire principal amount thereof is
to be converted, the portion thereof to be converted. Notes
shall be deemed to have
3
4
been converted immediately prior to the close of business on
the day of surrender of such notes for conversion in
accordance with the foregoing provisions, and at such time the
rights of the Purchaser of such notes as Purchaser shall
cease, and the Person or Persons entitled to receive the
securities issuable upon conversion shall be treated for all
purposes as the record purchaser or purchasers of such
securities at such time. As promptly as practicable on or
after the conversion date, the Company shall issue and shall
deliver at such office or agency a certificate or certificates
for the number of full shares of securities issuable upon
conversion, together with payment in lieu of any fraction of a
share, as provided in Section 1(c). In the case of any note
that is converted in part only, upon such conversion the
Company shall execute a new note in aggregate principal amount
equal to the unconverted portion of the principal amount of
such note.
(c) No fractional shares of securities shall be issued
upon conversion of the note. If more than one note shall be
surrendered for conversion at one time by the same Purchaser,
the number of full shares that shall be issuable upon
conversion thereof shall be computed on the basis of the
aggregate principal amount of the notes (or, specified
portions thereof) so surrendered. Instead of any securities
that would otherwise be issuable upon conversion of any note
or notes (or, specified portions thereof), the Company shall
pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the per share purchase price of
a share of such securities.
(d) As a condition of the exercise of the conversion
right, the Purchaser shall execute and become a party to all
documents involved in such Equity Financing which are
reasonably acceptable to the Purchaser and are executed by
other purchasers in such Equity Financing (including, without
limitation, shareholder agreements, registration rights
agreements, purchase agreements, and, if such Equity Financing
is a Qualified Public Offering, a 180-day lock-up agreement).
SECTION 3. RIGHT TO INVEST IN EQUITY FINANCINGS.
(a) Right to Invest. In the event the Company redeems
all or any portion of the Note (or PIK Notes, if any) on or
before February 14, 2001, from the proceeds of a source of
funds other than an Equity Financing, and in the event the
Company conducts any Equity Financing during the 12 months
after the date of redemption, then the Company hereby agrees
to give prior written notice to the Purchaser and grants to
the Purchaser the option to purchase securities issued in such
Equity Financing with an aggregate purchase price equal to the
Allocable Portion, at the price and upon the same terms set
forth in such transaction. Such options shall be exercisable
by written notice to the Company for a period of 20 days from
the date of such offer and shall follow the procedures set
forth in Sections 2(b), 2(c) and 2(d). The closing of the
purchase of such securities by the Purchaser shall take place
concurrently with the closing of such Equity Financing.
4
5
(b) As a condition of the exercise of the rights under
this Section 3, the Purchaser shall execute and become a party
to all documents involved in such Equity Financing which are
reasonably acceptable to the Purchaser and are executed by the
other purchasers in such Equity Financing (including, without
limitation, shareholder agreements, registration rights
agreements, purchase agreements, etc.).
SECTION 4. MERGER OR SIMILAR TRANSACTION. If, on or before February 14,
2001, the Company shall merge, consolidate, exchange or close any similar
transaction with an unaffiliated entity which does not have a class of equity
securities registered under the Securities Exchange Act of 1934, as amended (the
"Acquiring Company"), in any such case where securities of the Acquiring Company
are being issued in exchange for, or otherwise in return for, all or
substantially all of the outstanding securities of the Company (a "Sale
Transaction"), the Purchaser shall have the right to convert all or a portion of
the outstanding principal and accrued interest on the Notes into shares of the
Class A common stock of the Company, in the manner set forth in Section 2 above.
The number of shares of the Class A common stock of the Company to be issued in
connection with such conversion shall be equal to the dollar amount of the Notes
to be converted, divided by the transaction per share value of a share of the
Company's Class A common stock in the Sale Transaction. The Purchaser shall
execute all documents reasonably required to be signed by the holders of the
Class A common stock in connection with the Sale Transaction. The Company shall
provide the Purchaser with written notice of the proposed Sale Transaction
within 20 days prior to the closing thereof. Such notice shall contain all the
material terms, including, but not limited to, the price, quantity and rights of
the applicable security, of the Equity Financing. If the Purchaser desires to
convert all or a portion of the Notes, it shall provide written notice to the
Company within 10 days after receipt of the Company's notice. Upon the closing
of the Sale Transaction, the Purchaser, shall have no other rights pursuant to
Sections 2 or 3 of this Agreement.
SECTION 5. ASSIGNABILITY; SUCCESSORS AND ASSIGNS. Neither the Company
nor the Purchaser may assign or transfer (by operation of law or otherwise) its
rights and obligations, in whole or in part, under this Agreement to any third
party without the prior written consent of the other party; provided, however,
that the Purchaser may assign such rights and obligations to an affiliate of the
Purchaser without obtaining such consent. The rights and obligations of the
Purchaser and the Company hereunder shall inure to the benefit of, and be
binding and enforceable upon, the respective successors, and permitted assigns
or transferees of the Purchaser and the Company.
SECTION 6. REMEDIES. The Company stipulates that the remedies at law of
the Purchaser in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Agreement are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
5
6
SECTION 7. NOTICES. Except as otherwise provided herein, any notices
hereunder shall be deemed to have been received (a) when delivered, if
personally delivered or sent via facsimile, or (b) one day following delivery to
a nationally recognized overnight courier or (c) on the third business day
following the date on which the piece of mail containing such communication is
posted, if sent by certified or registered mail, return receipt requested, in
each case addressed to the principal office of the Company, Attention:
President.
SECTION 8. MISCELLANEOUS. This Agreement and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both the Company and the Purchaser. This Agreement shall be construed
and enforced in accordance with, and governed by the laws of, the State of North
Carolina. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement. The headings in this Agreement are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
SECTION 9. COMPLIANCE WITH LAWS. The exercise by the Purchaser of its
rights hereunder shall be subject to compliance with applicable securities laws
(including without limitation Section 5 of the Securities Act of 1933, as
amended, as it relates to the integration of offerings) and the rules and
regulations of self-regulatory organizations (including without limitation, the
National Association of Securities Dealers, including those governing
underwriters' compensation, free writing and withholding). If, at the time of
the proposed exercise of any of the Purchaser's rights hereunder, the exercise
of such rights would violate any of such laws or regulations, the parties agree
to modify this Agreement and use their respective best efforts to preserve the
economic benefits provided by this Agreement, and the Company shall compensate
the Purchaser in such a way as to realize the benefit of its rights hereunder;
provided, however, that if the violation is based on the amount of the economic
benefit to be received, an appropriate adjustment in such amount shall be agreed
to by the parties.
SECTION 10. PROTECTIVE PROVISION. The Company agrees to not permit any
entity which is controlled by the Company or by the Holding Company to
consummate an initial public offering of capital stock pursuant to the
Securities Act of 1933, as amended, without providing the Purchaser the option
to realize the benefit of its rights hereunder.
6
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
HORIZON PERSONAL COMMUNICATIONS, INC.,
an Ohio corporation
By:
------------------------------------
Name:
Title:
FIRST UNION INVESTORS, INC.,
a North Carolina corporation
By:
------------------------------------
Name:
Title:
