SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and entered into
as of the 2nd day of October, 1998 by and among Xxxxx X. Xxxxxxx ("Xxxxxxx"),
Xxxxxxx Corp., an Illinois Corporation ("Xxxxxxx Corp."), Xxxxxxx Xxxxxxx
("Xxxxxxx"), Xxxxxx Xxxxxxx ("Xxxxxx"), the Xxxxxxxx Xxxxxxx Xxxxxxx Foundation
(the "Foundation") (all of the foregoing parties are herein referred to as the
"Xxxxxxx Parties"), Jordan X. Xxxxxx, individually and as joint tenant with
Xxxxxx X. Xxxxxx (in such capacities "Glazov"), Xxxxx X. Xxxx ("Xxxx"), Jo &
Co., an Indiana general partnership ("Jo & Co."), the Xxxxxx family trusts
identified on the signature pages hereto (the "Xxxxxx Trusts"), Access Financial
Group, Inc. ("Access"), Xxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxx Xxxx ("Xxxx"), and
U.S. RealTel, Inc., an Illinois corporation (the "Company"). The Xxxxxxx
Parties, Glazov, Xxxx, Xx & Co., the Xxxxxx Trusts, Access, Xxxxxxx and Xxxx are
herein referred to collectively as the "Shareholders," and also each referred to
individually as a "Shareholder."
RECITALS:
A. As of the date of execution hereof, (i) the Shareholders are the
record or beneficial owners of that number of shares of common stock, par value
$.001 per share, of the Company as set forth on Schedule A attached hereto, and
(ii) certain of the Shareholders hold warrants to purchase shares of common
stock of the Company, as described on Schedule B attached hereto.
B. The parties hereto believe it is in the best interests of the
Company and the Shareholders to set forth agreements among the parties hereto
regarding certain corporate matters relating to the Company, including, without
limitation, the election of directors of the Company, all on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
respective obligations of the parties hereto contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. MANAGEMENT OF THE COMPANY.
(a) During the term of this Agreement, each Shareholder hereby
agrees to vote all of his or its shares of common stock or other voting
securities of the Company, whether now owned or hereafter acquired
("Shares"), at each annual or special meeting of the shareholders of
the Company, or to execute appropriate consents in lieu of such
meetings, in favor of a Board of Directors comprised of not less than
five members, and in favor of the following persons to serve as
directors of the Company:
(i) one individual designated by Jordan X. Xxxxxx; or
in the event of his death or incapacity, his successor in
interest;
(ii) one individual designated by Xxxxx Xxxx or in
the event of his death or incapacity, his successor in
interest;
(iii) one individual designated by Xxxxx X. Xxxxxxx;
or in the event of his death or incapacity, his successor in
interest;
(iv) one individual designated by the Xxxxxx Trusts;
and
(v) one individual designated by Access.
If any vacancy shall occur in the Board of Directors, whether
as a result of the death, disability, or removal of any director or
otherwise, such director's replacement shall be designated by the party
or parties who, pursuant to the preceding paragraph, originally
designated such director. Each party hereto entitled to designate a
director or a replacement of a director pursuant to this Section 1(a)
shall also be entitled to instruct the Shareholders to remove such
director with or without cause and upon such instruction the
Shareholders shall act to remove such director and vote in favor of
such party's designee to fill the vacancy so created. Each shareholder
hereby agrees to vote or cause to be voted all Shares eligible to vote
thereon, and shall use its best efforts to cause its designee as
director (if any) to vote, so as to comply with this Section 1(a).
(b) Each Shareholder hereby agrees that during the Term (as
defined in Section 5) of this Agreement, such Shareholder shall vote
its Shares in support of the inclusion in the Company's By-Laws of a
provision stating that the following matters shall require the approval
of four of the five members of the Board of Directors of the Company
(or, if the Board of Directors is expanded to include more than five
members, 80% of such members):
(i) all compensation determinations (whether
compensation consists of cash or equity or a combination thereof) for
the Company's Chairman, President, Secretary and Treasurer, directors
and consultants except to the extent included in an Approved Plan (as
defined in Section 1(b)(iii) below);
(ii) all financing decisions, including debt and
equity financing;
(iii) incurrence of Company obligations exceeding
$75,000 in the aggregate with the same party and relating to the same
subject matter or having a term exceeding one year, other than (a)
obligations included in a business plan or budget approved by the Board
("Approved Plan"), (b) those leases, agency agreements, landlord
management contracts and other contracts executed in the ordinary
course of the Company's business as to which payment is funded by
subleases, licensees or contracting parties of the properties to which
leases or agreements pertain, and (c) employment agreements included in
an Approved Plan or which provide for total annual compensation of
$100,000 or less that are entered into with persons other than Xxxx,
Glazov and any other officer or director of the Company;
(iv) all board decisions concerning any merger,
consolidation, sale or purchase of stock or substantially all of the
assets of the Company or Public Company or of another company by the
Company and any options regarding same; and
(v) adoption of business plans and budgets (which
shall occur not less frequently than annually).
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2. RIGHT OF FIRST REFUSAL. The Company hereby agrees that if, during
the Term of this Agreement, it determines to issue or sell any shares
of its common stock, prior to effecting such issuance or sale, the
Company shall provide each of the Shareholders with: (i) fifteen days
prior notice of such proposed issuance or sale (which notice shall
state (a) the number of Shares to be issued or sold, (b) the price (or
other consideration) per share for such shares, and (c) all other terms
and conditions of the proposed issuance or sale); and (ii) an
opportunity to purchase that number of such shares, on the same terms
and conditions as third party purchasers (including, without
limitation, the same price per share), necessary to enable each
Shareholder to maintain his or its proportionate share of all of the
issued and outstanding shares of common stock of the Company on a
fully-diluted basis. Within fifteen days after delivery of such notice,
each Shareholder shall notify the Company whether such Shareholder
desires to exercise its right of first refusal and maintain its
proportionate interest in the issued and outstanding common stock of
the Company. In the event a Shareholder desires to exercise such right
of first refusal, such Shareholder shall be required to pay the
applicable consideration in cash or immediately available funds on the
closing date, which closing date shall not occur prior to the fifteenth
day following delivery to the Shareholders of the written notice
required by this Section 2. Notwithstanding anything herein to the
contrary, the right of first refusal granted pursuant to this Section 2
shall not apply to a sale or issuance of Common Stock:
(a) pursuant to a firm underwritten public offering
registered pursuant to the Securities Act of 1933, as amended;
(b) pursuant to the exercise of any options, warrants or
securities convertible into common stock of the Company currently
outstanding or hereafter issued with the approval of the Board of
Directors of the Company;
(c) to any officer, employee, director, consultant, supplier,
lessor, vendor, joint venture partner, lender or agent as compensation
or any similar purpose pursuant to any agreement approved by the Board
of Directors of the Company;
(d) as a dividend in respect of the outstanding shares
of common stock of the Company; or
(e) as consideration for the acquisition of all or any
substantial portion of the assets or all or any portion of the capital
stock of any other entity which is duly authorized by the Board of
Directors of the Company.
3. TAG-ALONG RIGHTS. In the event any Shareholder other than any of the
Xxxxxxx Parties enters into an agreement to sell, transfer or dispose
of any of his or its Shares (a "Proposed Transfer"), at least fifteen
days prior to consummation of the Proposed Transfer, such Shareholder
(the "Transferring Shareholder") shall provide each of the other
Shareholders other than the Xxxxxxx Parties: (i) written notice of the
Proposed Transfer (which notice shall state (a) the number of Shares to
be transferred, (b) the name and business address of the proposed
transferee, (c) whether or not the sale is for valuable
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consideration, and if so, the amount thereof, and (d) all other terms
and conditions of the Proposed Transfer); and (ii) an opportunity to
sell, transfer or dispose of their Shares, up to the "Maximum Tag-Along
Shares" (as such term is defined below), on comparable terms
(including, without limitation, the same price per share). Within ten
days after delivery of such notice, each Shareholder (other than the
Xxxxxxx Parties) shall notify the Transferring Shareholder whether such
Shareholder desires to participate in the Proposed Transfer and if so,
the number of Shares, up the Maximum Tag-Along Shares, which such
Shareholder desires to sell, transfer or dispose of in the Proposed
Transfer. In the event a Shareholder desires to participate in a
Proposed Transfer, such Shareholder shall be required to make, provide
or satisfy all of the same representations, warranties, covenants and
other obligations made, provided or satisfied by the Transferring
Shareholder in connection with the Proposed Transfer. For purposes
hereof, the term "Maximum Tag-Along Shares" shall mean, with respect to
any Shareholder desiring to tag-along and sell Shares with the
Transferring Shareholder (each, a "Tag-Along Shareholder"), the product
of (i) the total number of shares subject to the Proposed Transfer,
multiplied by (ii) the quotient of (a) the number of Shares owned by
the Tag-Along Shareholder, divided by (b) the sum of the number of
Shares owned by (x) the Tag-Along Shareholder and (y) the Transferring
Shareholder. The Transferring Shareholder may not consummate any
Proposed Transfer unless the Tag Along Shareholders are able to sell
the number of Shares (up to the Maximum Tag-Along Shares) which each of
them has elected to sell pursuant to this Section 3 strictly in
accordance with the terms specified in the notice of the Proposed
Transfer. Notwithstanding anything herein to the contrary, the
tag-along rights pursuant to this Section 3 shall not apply to any
transfer of any type which is:
(a) by any Shareholder who is a natural person, to such
Shareholder's Family Members (as defined below);
(b) by any Shareholder which is a trust, to the
beneficiaries of such trust; or
(c) pursuant to a public offering registered pursuant to the
Securities Act of 1933, as amended, or pursuant to Rule 144;
provided that any such transferee (other than pursuant to subsection
3(c) immediately above) shall take any Shares subject to the terms
hereof, and shall be deemed to be a Shareholder hereunder from and
after the acceptance of such Shares by such transferee.
For the purposes hereof, the term "Family Member" shall mean, with
respect to any individual, (i) such individual's parents, spouse,
children, siblings and grandchildren, (ii) any trust created for the
benefit of such individual or any of the persons specified in clause
(i) hereof, or (iii) any family partnership or limited liability
company in which the sole partners or members are such individual,
persons specified in clause (i) and/or trusts specified in clause (ii).
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4. REORGANIZATION, MERGER, CONSOLIDATION. This Agreement shall apply
and extend to the voting securities or interests of any corporation or other
entity into which the Company is merged or consolidated without regard to which
corporation or other entity is the survivor.
5. TERM. This Agreement shall become effective on the date hereof, and
shall continue in full force and effect (the "Term") for so long as the
Shareholders (and their permitted transferees) collectively own at least 30% of
the issued and outstanding shares of common stock of the Company or until four
of the five shareholders having the right to designate a director pursuant to
Section 1 hereof otherwise agree in writing; PROVIDED, HOWEVER that (i) the
designee appointed to the Board by Xxxxxxx (or his successor in interest) shall
not be entitled to vote on termination of Section 3 hereof, and notwithstanding
anything to the contrary contained herein, such provision shall remain in full
force and effect until specifically terminated by vote of the other four members
of the Board or until this Agreement is terminated in accordance with this
Section 5, (ii) the provisions of Section 1(a) hereof shall terminate and be of
no further force and effect at such time as the Shareholders (and their
permitted transferees) own less than 40% of the issued and outstanding shares of
common stock of the Company, and (iii) the provisions of Section 2 hereof shall
terminate and be of no further force and effect upon a "Qualified Public
Offering" (as such term is hereinafter defined). For purposes hereof, the term
"Qualified Public Offering" means an underwritten, registered public offering of
the common stock of the Company under the Securities Act of 1933, as amended,
which results in aggregate net proceeds to the Company of at least $10,000,000.
Furthermore, the parties hereto agree that to the extent that in connection with
any proposed Qualified Public Offering the underwriter believes that it is
necessary or advisable for the marketing thereof to amend certain of the
provisions hereof, the parties hereto will negotiate in good faith regarding
such proposed changes in order to facilitate such Qualified Public Offering.
6. SUBSEQUENT HOLDERS. Each Shareholder agrees that it will not
transfer any Shares unless the transferee agrees in writing to be bound by the
terms of this Agreement as if, and to the same extent, as an original signatory
hereto; provided, however, that there shall be no such obligation to the extent
that following such transfer the shares transferred would not constitute
Registrable Securities pursuant to and as defined in that certain Registration
Rights Agreement (the "RRA") of even date herewith between the parties hereto.
So long as (a) this Agreement is in effect and (b) any Shares constitute
Registrable Securities pursuant to and as defined in the RRA, all certificates
representing such Shares shall have imprinted on them a restrictive legend in
substantially the following form:
"The securities represented by this certificate are subject to the
terms of a certain Shareholders' Agreement, dated as of October 2,
1998. The Shareholders' Agreement contains certain restrictive
provisions relating to voting, and in certain cases, tag-along rights
in connection with any sale of these securities. A copy of the
Shareholders' Agreement is on file and may be inspected for any proper
purpose at the issuer's principal executive office."
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7. TERMINATION OF CERTAIN AGREEMENTS.
(a) The Operational Agreement dated July 28, 1997 by and among
Agile, LLC, an Illinois limited liability company which was a
predecessor to the Company, Xxxxxxx Corp., Xxxxx X. Xxxx, Glazov and
Xxxxxxx is hereby terminated and of no further force and effect.
(b) The terms contained herein supersede the terms set forth
in that certain Shareholders' Agreement dated November 3, 1997 by and
among Siegler, Glazov, the Xxxx Trusts and Xxxx (the "1997
Shareholders' Agreement"), and the terms of the 1997 Shareholders'
Agreement are hereby terminated and of no further force and effect.
8. BENEFIT. This Agreement shall be binding upon and inure to the
benefit of the Shareholders hereto and their respective successors and permitted
assigns and transferees. This Agreement is not assignable without the unanimous
written consent of all Shareholders.
9. MODIFICATION OR WAIVER. No change, modification or waiver of any
provision of this Agreement shall be valid or binding unless it is in writing
dated subsequent to the date hereof and signed by the Shareholders intended to
be bound. No waiver by the Shareholders hereto shall constitute a subsequent
waiver of the same or any other breach, term or condition.
10. SPECIFIC PERFORMANCE. The Shareholders hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, if any Shareholder shall institute any action or proceeding to
enforce the provisions hereof, any Shareholder against whom such action or
proceeding is brought hereby waives the claim or defense therein that there is
an adequate remedy at law, and such Shareholder shall not urge in any such
action or proceeding the claim or defense that such remedy at law exists. The
prevailing party in any such action shall be entitled to the payment or
reimbursement by the other party of all reasonable legal fees and costs.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been delivered (i)
when actually delivered by hand, (ii) two business days after mailed by first
class mail, postage prepaid, (iii) on the day transmitted by facsimile if
confirmation of transmission has been received, or (iv) one business day after
delivery to a nationally recognized overnight carrier service, as follows: (a)
if to the Holder, at the address of the Holder as shown on the registry books
maintained by the Company or the Company's transfer agent; and (b) if to the
Company, at U.S. RealTel, Inc., 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
/s/ Xxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxx
XXXXXXX CORP.,
By:/s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Its: President
------------------------------------------
/s/ Xxxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxx Xxxxxxx
XXXXXXXX XXXXXXXX XXXXXXX
FOUNDATION
By:/s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Its:
-------------------------------------------
/s/ Jordan X. Xxxxxx
-----------------------------------------------
Jordan X. Xxxxxx, individually and as
joint tenant with Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx, as joint tenant
with Jordan X. Xxxxxx
/s/ Xxxxx X. Xxxx
-----------------------------------------------
Xxxxx X. Xxxx
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JO & CO.
By:/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Its: Partner
------------------------------------------
XXXXXX X. XXXXXX TRUST --
GO XXXXXXXXXX FUND
By:/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx, as Trustee
XXXXXX X. XXXXXX TRUST --
XXXXX XXXXXX XX FUND
By:/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx, as Trustee
XXXXXX X. XXXXXX TRUST --
XXXXXX X. XXXXXX XX. FUND
By:/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx, as Trustee
XXXXXX X. XXXXXX TRUST --
XXXXX X. XXXXXX FUND
By:/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx, as Trustee
ACCESS FINANCIAL GROUP, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------------
Its: President, Capital Markets
-------------------------------------------
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/s/ Xxxx X. Xxxxxxx
----------------------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxx Xxxx
----------------------------------------------
Xxxxx Xxxx
U.S. REALTEL, INC.
By: /s/ Jordan X. Xxxxxx
--------------------------------------------
Its: President
-------------------------------------------
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EXHIBIT A
COMMON STOCK OWNERSHIP
----------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
CURRENTLY OWNED PERCENTAGE OF ISSUED
(NOT INCLUDING SHARES AND OUTSTANDING
ISSUABLE UPON EXERCISE COMMON STOCK ON A
NAME OF SHAREHOLDER OF WARRANTS/OPTIONS) FULLY-DILUTED BASIS*
----------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1,602,630 28.23%**
----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx 11,000 0.18%
----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 75,000 1.20%
----------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxx Xxxxxxx Foundation 20,895 0.33%
----------------------------------------------------------------------------------------------------------------------
Jordan X. Xxxxxx and Xxxxxx X. Xxxxxx, as 721,414 12.49%**
joint tenants
----------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxx 742,455 12.83%**
----------------------------------------------------------------------------------------------------------------------
Access Financial Group 21,250 3.33%
----------------------------------------------------------------------------------------------------------------------
Jo & Co 500,000 12.02%
----------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Trust -GO Xxxxxxxxxx Fund 62,500 1.47%
----------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Trust - Xxxxx Xxxxxx XX Fund 62,500 1.47%
----------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Trust - Xxxxxx X. Xxxxxx 62,500 1.47%
Jr. Fund
----------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Trust - Xxxxx X. Xxxxxx 62,500 1.47%
Trust
----------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 75,000 2.16%
----------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxx 37,500 0.88%
----------------------------------------------------------------------------------------------------------------------
* - Based upon (i) 5,219,895 shares of Common Stock outstanding and (ii)
1,024,826 shares of Common Stock issuable upon exercise of outstanding warrants
and options (which includes the warrants listed on Exhibit B, a warrant for
25,000 shares issued to Xxxx Xxxxx, a warrant for 1,000 shares issued to Xxxx
Xxxxxx and additional options, held by employees of the Company, exercisable to
purchase an aggregate of 88,888 shares of Common Stock); individual percentages
include shares owned and shares issuable upon the exercise of outstanding
options and warrants.
** - Includes an allocation of 1/2 of the warrant described in Footnote A to
Exhibit B to Xxxxx Xxxxxxx and 1/4 of such warrant to each of Jordan Glazov and
Xxxxx Xxxx.
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EXHIBIT B
WARRANT OWNERSHIP
Name of Holder Terms of Warrants
-------------- -----------------
Xxxxx X. Xxxxxxx 1) 43,750 shares @ $4.00 per share, expiring on
October 1, 2003
2) See footnote A, below
Jordan X. Xxxxxx 1) See footnote A, below
Xxxxx X. Xxxx 1) See footnote A, below
Jo & Co. 1) 17,543 shares @ $4.00 per share, expiring on
August 28, 2003
2) 233,333.33 shares @ $4.00 per share, expiring
on October 1, 2003
Xxxxxx X. Xxxxxx Trust - 1) 29,166.67 shares @ $4.00 per share, expiring
GO Xxxxxxxxxx Fund on October 1, 2003
Xxxxxx X. Xxxxxx Trust - 1) 29,166.67 shares @ $4.00 per share, expiring
Xxxxx Xxxxxx XX Fund on October 1, 2003
Xxxxxx X. Xxxxxx Trust - 1) 29, 166.67 shares @ $4.00 per share, expiring
Xxxxxx X. Xxxxxx Xx. Fund on October 1, 2003
Xxxxxx X. Xxxxxx Trust - 1) 29,166.67 shares @ $4.00 per share, expiring
Xxxxx X. Xxxxxx Fund on October 1, 2003
Xxxx X. Xxxxxxx 1) 35,000 shares @ $4.00 per share, expiring on
October 1, 2003
2) 25,000 shares @ $4.00 per share, expiring on
October 1, 2003
Xxxxx Xxxx 1) 17,500 shares @ $4.00 per share, expiring on
October 1, 2003
Access Financial Group, Inc. 1) 30,667 shares @ $5.25 per share, expiring on
October 1, 2003
2) 9,625 shares @ $4.00 per share, expiring on
October 1, 2003
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3) 54,375 shares @ $4.00 per share, expiring on
November 26, 2000
4) 92,262 shares @ $4.75 per share, expiring
on March 5, 2001.
FOOTNOTE A:
The Company has issued a warrant (the "Founder Warrant") to Xxxxx
Xxxxxxx, Xxxxx Xxxx and Xxxxxx Xxxxxx, which provides that the three
shareholders can acquire a total of 234,216 shares of Common Stock for an
aggregate exercise price of $450,000. This Warrant expires on August 20, 2000,
although the Company has the option to terminate the warrants at any time upon
forty-five days prior notice.
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