EXHIBIT 10.8
SHAREHOLDERS' AGREEMENT
by and among
UBIQUITEL HOLDINGS, INC.
DLJ MERCHANT BANKING PARTNERS II, L.P.
and
THE SEVERAL SHAREHOLDERS NAMED IN SCHEDULE I
dated as of February 16, 2000
EXHIBIT 10.8
TABLE OF CONTENTS
SECTION 1. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. METHODOLOGY FOR CALCULATIONS.. . . . . . . . . . . . . . . . . . . 5
SECTION 3. CORPORATE GOVERNANCE.. . . . . . . . . . . . . . . . . . . . . . . 5
3.5. BOARD OF DIRECTORS.. . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. VACANCIES; REMOVAL.. . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. QUORUM.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. COMMITTEES OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . 6
3.5. DIRECTORS' INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . 7
3.6. NO EXPANSION OF DUTIES . . . . . . . . . . . . . . . . . . . . . . 7
3.7. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8. APPOINTMENT OF SENIOR OFFICERS . . . . . . . . . . . . . . . . . . 8
SECTION 4. [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. TAG-ALONG RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6. PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7. PUT RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 8. RIGHTS OF FIRST OFFER. . . . . . . . . . . . . . . . . . . . . . .11
SECTION 9. BRING-ALONG RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 10. [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . .15
SECTION 11. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . .15
SECTION 12. CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.1. PROTECTION OF INVESTORS. . . . . . . . . . . . . . . . . . . . . .16
12.2. ADDITIONAL ISSUANCES . . . . . . . . . . . . . . . . . . . . . . .16
12.3. ACCESS TO RECORDS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.4. FINANCIAL REPORTS. . . . . . . . . . . . . . . . . . . . . . . . .16
12.5. SYSTEM OF ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . .18
12.6. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . .18
12.7. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
12.8. LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . .18
12.9. DISCLOSURE OF INVESTMENT . . . . . . . . . . . . . . . . . . . . .18
12.10. UNDERWRITTEN OFFERING-RELATED LOCK-UP OF SHARES. . . . . . . . . .19
SECTION 13. RESERVATION OF COMMON STOCK; CONVERSION. . . . . . . . . . . . . .19
SECTION 14. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 15. SPECIFIC PERFORMANCE; INJUNCTION.. . . . . . . . . . . . . . . . .20
SECTION 16. NO INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . . . . . . .20
SECTION 17. FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 18. DURATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 19. LEGENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 20. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 21. GOVERNING LAW, WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . .22
SECTION 22. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . .22
SECTION 23. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 24. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
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SECTION 25. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 26. NOUNS AND PRONOUNS . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 27. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 28. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 29. NO PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . .24
SCHEDULE I - List of Shareholders
SCHEDULE II - Security holdings of each Shareholder
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EXHIBIT 10.8
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of
February 16, 2000, by and among UBIQUITEL HOLDINGS, INC., a Delaware corporation
(the "COMPANY"), DLJ MERCHANT BANKING PARTNERS II, L.P., a Delaware limited
partnership ("DLJ" and, together with its permitted assigns, the "INVESTORS"),
and the signatories listed on SCHEDULE I hereto.
WITNESSETH:
WHEREAS, the Company and DLJ are parties to that certain
Preferred Stock Purchase Agreement, dated as of February 16, 2000 (the
"PURCHASE AGREEMENT"), pursuant to which the Company has issued to DLJ, and
DLJ has purchased from the Company, shares of a newly created class of 7%
Senior Pay-in-Kind Convertible Preferred Stock (the "PREFERRED STOCK"); and
WHEREAS, the Purchase Agreement contemplates that the parties
hereto will enter into this Agreement and the parties hereto deem it to be in
their best interests to establish and set forth their agreement with respect to
certain rights and obligations associated with ownership of Shares (as defined
below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. CERTAIN DEFINITIONS.
(a) As used herein, the following terms shall have the
following meanings:
"AFFILIATE" shall mean (i) with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, or (ii) with respect to any
individual, shall also mean the spouse, child (including a stepchild or an
adopted child), grandchildren, parent, brother, sister or other BONA FIDE estate
planning recipient thereof or any spouse of any of the foregoing, and each trust
created for the exclusive benefit of any one or more of them. Notwithstanding
the foregoing, neither the Company nor any Person controlled by the Company
shall be deemed to be an Affiliate of any Shareholder for purposes of this
Agreement.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall mean, with respect to any Senior Officer, such
Senior Officer's:
(i) conviction of, or plea of guilty or nolo contendre
to, any felony or any crime involving fraud, dishonesty or moral turpitude;
(ii) gross negligence or willful misconduct that is
likely to bring the reputation of the Company into disrepute;
(iii) drug or alcohol abuse;
(iv) fraud, misappropriation, embezzlement, or other act
of material misconduct against the Company or any of its Affiliates;
(v) failure to follow substantive written directions or
resolutions of the Board;
(vi) willful and knowing violation of any rules or
regulations of any government or regulatory authority; or
(vii) substantial breach of any fiduciary duty owed to the
Company.
"CLOSING DATE" shall mean February 24, 2000.
"COMMON STOCK" shall mean any common stock of the Company of any
class or series whether now or hereafter authorized, and any stock into which
such common stock may be exchanged, reclassified, recapitalized, converted or
otherwise.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants and
other securities and obligations convertible into, or exchangeable or
exercisable for, at any time or upon the occurrence of any event or contingency
and without regard to any vesting or other conditions to which such securities
may be subject, shares of Common Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934,
as amended.
"GROUP" shall mean two or more Persons who agree to act together
for the purpose of acquiring, holding, voting or disposing of Shares.
"IPO" shall mean BONA FIDE underwritten public offering of Common
Stock in a Public Sale pursuant to an effective registration statement filed
under the Securities Act.
"KEY SHAREHOLDERS" shall mean and include any person who is (i) a
holder of Shares, and (ii) is (x) a director (other than an Investor Designee),
or (y) a Senior Officer or (z) an employee or consultant of the Company or a
Subsidiary, who acquires from the Company at least one-half of one percent of
Shares in the aggregate of the then outstanding Shares (on either a primary or
fully diluted basis).
"MAJORITY OF INVESTORS" shall mean, at any time of determination,
Investors holding a majority of all Shares held at that time by all Investors.
"NON-INVESTOR SHAREHOLDER" shall mean a Shareholder who is not
an Investor.
"OTHER SHAREHOLDERS" shall mean, in connection with any
transaction involving a Selling Shareholder, the Shareholders other than the
Selling Shareholder.
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"PERSON" shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, other entity or government or any
agency or political subdivisions thereof.
"PRIVATE SALE" shall mean a Sale that is not a Public Sale.
"PUBLIC SALE" shall mean a Sale (i) pursuant to a BONA FIDE
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act or (ii) pursuant to Rule 144 under the Securities
Act.
"QUALIFIED IPO" shall mean an IPO (i) resulting in at least
$50,000,000 of gross aggregate proceeds to the Company before deducting
underwriting discounts and commissions and offering expenses, and (ii) upon
consummation of which the Company's Common Stock is listed on a national
securities exchange in the United States or the Nasdaq National Market.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELL" shall mean, as to any Shares, to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily, including the
assignment or transfer of voting rights attaching to such Shares (if any); the
terms Sale, Selling and Sold shall have meanings correlative to the foregoing.
"SELLING SHAREHOLDERS" shall mean any Shareholders who Sell or
propose to Sell any Shares of the Company.
"SENIOR OFFICER" shall mean any of the individuals who hold any of
the following positions or their functional equivalents irrespective of actual
title held in the Company: (A) Chairman; (B) Vice-Chairman; (C) Chief Executive
Officer; (D) President; (E) Chief Financial Officer; (F) Chief Operating
Officer; and (G) Executive Vice President.
"SHAREHOLDERS" shall mean the parties to this Agreement (other
than the Company) and any other Person who executes, and agrees to be bound by
the terms of, this Agreement.
"SHARES" shall mean any shares of (i) Common Stock or (ii) Common
Stock Equivalents, in each case, whether owned or outstanding on the date hereof
or hereafter.
"SUBSIDIARY" shall mean with respect to the Company, any company,
partnership or other entity (i) of which at least a majority of the shares of
capital stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other similar managing body of such
company, partnership or other entity are at the time owned or controlled,
directly or indirectly, by the Company or (ii) the management of which is
otherwise controlled, directly or indirectly, through one or more intermediaries
by the Company.
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(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
All or Nothing Sale 8(a)
Buyer 9(a)
Commission 12.4(b)
Compensation Committee 3.4(a)
Competing Businesses 3.6
Confidants 14(a)
Confidential Information 14(a)
Equity Security 6(a)
Exempt Securities 6(d)
Exit Sale 9(a)
First Offer Shares 8(b)
Investor Designee 3.1(c)
Issuance 6(a)
Issue 6(a)
Litigation 22
Management Letter 12.4(b)
Material Adverse Effect 12.4(g)
Offered Securities 6(a)
Oversubscribed Shareholder 8(b)
Permitted Nominee 8(a)
Preemptive Holder 6(a)
Preemptive Offer 6(a)
Proportionate Percentage 8(b)
Pro Rate Share 6(a)
Put 7(a)
Put Price 7(a)
Quarterly Financials 12.4(b)
Refused Shares 8(b)
Remaining Shares 8(b)
Sale Period 8(c)
Section 5 Acceptance Period 5(a)(i)
Section 5 Notice 5(a)(i)
Section 5 Offer 5(a)(i)
Section 5 Purchaser 5(a)(i)
Section 5 Seller 5(a)(i)
Section 6 Notice of Acceptance 6(b)
Section 6 Offer Notice 6(a)
Section 8(a) Acceptance Notice 8(a)
Section 8(a) Acceptance Period 8(a)
Section 8(b) Acceptance Period 8(b)
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Section 8 Offer 8(a)
Section 8 Offer Notice 8(a)
Section 9 Closing Date 9(b)
Section 9 Notice 9(a)
Subject Shares 8(a)
METHODOLOGY FOR CALCULATIONS. For purposes of this Agreement, the
Sale of shares of a Common Stock Equivalent shall be treated as the Sale of the
shares of Common Stock into which such shares of the Common Stock Equivalent can
be converted, exchanged or exercised. Except as otherwise provided in this
Agreement, for purposes of all calculations under this Agreement (including,
without limitation, calculations to determine the ownership of Common Stock of
any Shareholder), all shares of Preferred Stock, but no other Common Stock
Equivalents, shall be treated as having been converted, exchanged or exercised
into or for shares of Common Stock.
SECTION 3. CORPORATE GOVERNANCE.
3.1. BOARD OF DIRECTORS.
(a) The Board shall have overall responsibility for managing
and supervising the management of the business and affairs of the Company, and
the power and authority of the directors shall be subject only to such
restrictions as are imposed by this Agreement and by applicable law.
(b) The maximum number of members of the Board shall be six.
(c) The Majority of Investors shall have the right to nominate
one person (the "INVESTOR DESIGNEE") to serve as a director on the Board. The
Parties to this Agreement agree to take any and all action as may be necessary
to elect the Investor Designee to the Board as of the date hereof.
(d) At each meeting of Shareholders at which the election of
members of the Board is on the agenda, the Company shall recommend to
Shareholders the election of the Investor Designee as a director and each
Shareholder shall vote all of the voting securities of the Company over which
such Person has voting control so as to effect the provisions of this Section 3.
3.2. VACANCIES; REMOVAL.
(a) Subject to paragraph (b) of this Section 3.2, each director
of the Company shall hold office until his or her death or resignation or until
his or her successor shall have been duly elected and qualified. If the
Investor Designee shall cease to serve as a director of the Company for any
reason, the vacancy resulting thereby shall be filled by another director
nominated by the Majority of Investors.
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(b) Each Shareholder in its capacity as a holder of Shares
agrees that it shall not vote in favor of a resolution in respect of the removal
of an Investor Designee unless that resolution has been put forward by an
Investor, and the removal of that director has been recommended by the Majority
of Investors. Any Investor shall have the right to call a meeting of
Shareholders to put forward a resolution of the Shareholders removing any
director designated by it, with or without cause, at any time.
3.3. QUORUM.
(a) Subject to paragraphs (b) and (c) below, a quorum for
meetings of the Board shall be a majority of the total of the whole Board of
which one shall be the Investor Designee.
(b) If at a meeting of directors a quorum is not present, the
directors may adjourn the meeting to a fixed time and place (provided they shall
give written notice of such time and place to each director not in attendance).
At the meeting immediately following the adjourned meeting, the directors
present at such meeting shall constitute a quorum; PROVIDED, HOWEVER, that
unless a full quorum is present as provided in paragraph (a) above, the
directors present at such meeting may not transact any business except as
specifically set forth in the notice of meeting.
(c) The Company agrees that (i) each director shall be provided
written notice of the meetings of the Board, including adjourned meetings, at
least 48 hours before such meetings, unless such notice is waived in any manner,
with attendance at such meetings constituting valid waiver (other than
attendance for the express purpose of objecting to the manner in which the
meeting was called), and (ii) the Investor Designee shall be provided with an
opportunity to participate in each meeting of the Board by means of a conference
telephone or similar communications equipment.
3.4. COMMITTEES OF THE COMPANY.
(a) On or before the date hereof, the Board shall establish a
compensation committee (the "COMPENSATION COMMITTEE") comprised of three
directors, one of whom shall be the Investor Designee as long as an Investor
Designee continues to serve on the Board, and two of whom shall be designated by
the Company, and which committee will have the exclusive authority to make
recommendations to the Board with respect to all aspects of compensation and
other benefits, including stock options or other equity based compensation, of
the Senior Officers of the Company.
(b) Without limiting paragraphs (a) or (b) above, the Company
shall, at the request of any Investor, cause the Investor Designee to be
appointed or elected in each case to each of the other committees of the Board.
If any director serving on any committee shall cease to serve as a director of
the Company for any reason or otherwise is unable to fulfill his or her duties
on any such committee, he or she shall be succeeded by another director
designated in accordance with the provisions of Section 3.1 by the party
initially designating the director.
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3.5. DIRECTORS' INDEMNIFICATION.
(a) The Company shall obtain by March 31, 2000 and cause to be
maintained in effect, with financially sound insurers, a policy of directors'
and officers' liability insurance in an amount of at least $5,000,000 and upon
such terms as are reasonably acceptable to the Majority of Investors.
(b) The Company's Certificate of Incorporation, or By-Laws, or
both, shall to the fullest extent permitted by law provide for indemnification
of, and advancement of expenses to, and limitation of the personal liability of,
the directors of the Company or such other person or persons, if any, who,
pursuant to a provision of such Certificate of Incorporation, exercise or
perform any of the powers or duties otherwise conferred or imposed upon such
directors, which provisions shall not be amended, repealed or otherwise modified
in any manner adverse to the directors until at least six years following the
date that the Investor is no longer entitled to designate directors pursuant to
this Section 3.
NO EXPANSION OF DUTIES. The parties acknowledge that the
Investors and their Affiliates have investments in other businesses similar to
and which may compete with the Company's business ("COMPETING BUSINESSES") and
reserve the right to make additional investments in other Competing Businesses
independent of their investments in the Company. By virtue of the Investors
holding Shares or by having persons designated by or affiliated with the
Investors serving on the Board or any Subsidiary's Board of Directors (or the
functional equivalent thereof in the case of non-corporate Subsidiaries) or
otherwise, no Investor or any of its Affiliates shall have any obligation to the
Company, any Subsidiary or any holder of Shares to refrain from competing with
the Company or any Subsidiary, making investments in Competing Businesses, or
otherwise engaging in any commercial activity, and none of the Company, any
Subsidiary or any holder of Shares (other than such Investor) shall have any
right with respect to any such investments or activities undertaken by such
Investor. Without limitation of the foregoing, the Investors and their
Affiliates may engage in or possess an interest in other business ventures of
any nature or description, independently or with others, similar or dissimilar
to the business of the Company or any Subsidiary, and none of the Company, any
Subsidiary or any holder of Shares (other than the Investors) shall have any
rights or expectancy by virtue of the Investors' relationships with the Company,
any Subsidiary, this Agreement or otherwise in and to such independent ventures
or the income of profits derived therefrom; and the pursuit of any such venture,
even if such investment is in a Competing Business, shall not be deemed wrongful
or improper. None of the Investors nor any of their Affiliates shall be
obligated to present any particular investment opportunity to the Company or any
Subsidiary even if such opportunity is of a character that, if presented to the
Company or a Subsidiary, could be taken by the Company or such Subsidiary, and
the Investors and their Affiliates shall continue to have the right to take for
their own respective account or to recommend to others any such particular
investment opportunity. Notwithstanding the foregoing, the Investors agree to
keep confidential any Confidential Information (as defined herein) in accordance
with Section 14 hereof.
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EXPENSES. The Company shall pay all reasonable travel expenses
and other out-of-pocket disbursements incurred by the directors to attend
meetings of the Board, or any Subsidiary board of directors or of any committees
thereof.
APPOINTMENT OF SENIOR OFFICERS. The Board shall have the sole and
absolute authority to elect, appoint or hire any Senior Officer of the Company.
SECTION 4. [Intentionally Deleted]
TAG-ALONG RIGHTS. Each Shareholder shall not, whether acting
alone or in concert with any Other Shareholders, in any transaction or series of
transactions, Sell any Shares to another Person or Group (other than to an
Investor), except in accordance with the following procedures:
(a) Any Shareholder or Shareholders proposing to Sell Shares
(for purposes of this Section, the "SECTION 5 SELLER") shall first deliver to
each Other Shareholder a written notice (the "SECTION 5 NOTICE"), which shall
specifically identify the proposed transferee (the "SECTION 5 PURCHASER"), the
amount and type of Shares proposed to be sold, the purchase price therefor, and
a summary of the other material terms and conditions of the proposed sale, and
shall contain an offer (the "SECTION 5 OFFER") by the Section 5 Purchaser to
each Other Shareholder, which shall be irrevocable for a period of ten days
after the delivery thereof (the "SECTION 5 ACCEPTANCE PERIOD") (and, to the
extent the Section 5 Offer is accepted during such ten day period, until the
closing of the Sale contemplated by the Section 5 Offer), to purchase an amount
of Shares of such Other Shareholder at the same price per share (and, in the
case of Common Stock Equivalents, such price per share multiplied by the number
of shares of Common Stock issuable upon the conversion, exchange or exercise of
such Common Stock Equivalent, subject to reduction, if appropriate, for the
amount per share of the exercise or purchase price (if any) to be paid by the
holder of such Common Stock Equivalent) to be paid to, and upon the same terms
and conditions as, the Section 5 Seller. A copy of the Section 5 Notice shall
promptly be sent to the Company. Notice of an Other Shareholder's intention to
accept a Section 5 Offer, in whole or in part, shall be evidenced by a writing
signed by such Other Shareholder and delivered to the Section 5 Purchaser as
specified in the Section 5 Notice and the Company prior to the end of the
Section 5 Acceptance Period, setting forth the number of Shares that such Other
Shareholder elects to Sell; PROVIDED, HOWEVER, that such Other Shareholder may
only sell up to that number of Shares (calculated in accordance with Section 2)
as shall equal the product of (x) a fraction, the numerator of which is the
number of Shares owned by the Other Shareholder as of the date of such proposed
sale and the denominator of which is the aggregate number of outstanding Shares
as of the date of such proposed sale, multiplied by (y) the aggregate number of
Shares proposed to be sold by the Section 5 Seller. The number of shares
proposed to be sold by the Section 5 Seller shall be reduced if and to the
extent necessary to provide for such sale of Shares by such Other Shareholders
electing to exercise their right to Sell Shares under this Section 5. If
effective acceptance by any Other Shareholders has been received pursuant to
this paragraph (a), then the Selling Shareholder shall not consummate such Sale
of Shares without participation of such Other Shareholders.
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(b) All Sales of Shares to the Section 5 Purchaser shall be
consummated contemporaneously at the offices of the Company on a mutually
satisfactory business day as soon as practicable, but in no event more than 15
days after the expiration of the Section 5 Acceptance Period, or, if later, the
fifth business day following the receipt of all regulatory approvals, if any
(including, without limitation, the expiration or termination of all waiting
periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, applicable to such Sales). The delivery of certificates or other
instruments evidencing such Shares duly endorsed for transfer shall be made on
such date against payment of the purchase price for such Shares.
(c) Notwithstanding the foregoing, the provisions of this
Section 5 shall not apply to sales or other transfers of Shares by a Shareholder
to its partners, stockholders, members, immediate family members, trusts for the
benefit of any of the foregoing, or any affiliate of such Shareholder.
SECTION 6. PREEMPTIVE RIGHTS.
(a) Except for Exempt Securities (as defined below), the
Company shall not issue, sell or exchange, or agree to issue, sell or exchange
(collectively, "ISSUE," and any issuance, sale or exchange resulting therefrom,
an "ISSUANCE") (i) any of the Company's capital stock, (ii) any Common Stock
Equivalent or (iii) any other equity security of the Company, including any
rights to subscribe for, purchase or otherwise acquire any capital stock or
other equity security of the Company (collectively, an "EQUITY SECURITY")
unless, in each case, the Company shall have first given written notice (the
"SECTION 6 OFFER NOTICE") to each Investor (a "PREEMPTIVE HOLDER") that shall
(a) state the Company's intention to sell Equity Securities, the amount to be
issued, sold or exchanged, the terms of such securities, the purchase price
therefor and a summary of the other material terms of the proposed Issuance and
(b) offer (a "PREEMPTIVE OFFER") to Issue to the Preemptive Holder such
Preemptive Holder's Pro Rata Share (as defined below) of such securities (with
respect to the Preemptive Holder, the "OFFERED SECURITIES") upon the terms and
subject to the conditions set forth in the Section 6 Offer Notice, which
Preemptive Offer by its terms shall remain open for a period of 15 days from the
date it is delivered by the Company to the Preemptive Holder (and, to the extent
the Preemptive Offer is accepted during such 15 day period, until the closing of
the Sales contemplated by the Preemptive Offer). "PRO RATA SHARE," for purposes
of this Section, shall mean the quotient obtained by dividing (i) the number of
Shares owned by that Preemptive Holder on the date of the Preemptive Offer, BY
(ii) the total number of Shares outstanding on the date of the Preemptive Offer.
(b) Notice of a Preemptive Holder's intention to accept a
Preemptive Offer, in whole or in part, shall be evidenced by a writing signed by
the Preemptive Holder and delivered to the Company prior to the end of the 15
day period of such Preemptive Offer (each, a "SECTION 6 NOTICE OF ACCEPTANCE"),
setting forth such portion of the Offered Securities that the Preemptive Holder
elects to purchase.
(c) (i) In the event that a Section 6 Notice of Acceptance
is not given by a Preemptive Holder accepting all of its Offered Securities, the
Company shall have 30 days
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following the earlier of (A) delivery of the Section 6 Notice of Acceptance
and (B) the expiration of the 15 day period referred to in clause (b) above
if no Section 6 Notice of Acceptance is delivered, to Issue all or any part
of such remaining Offered Securities not covered by the Section 6 Notice of
Acceptance to any other Person or Persons, but only upon terms and
conditions, including, without limitation, per Share price, payment terms and
dividend payment rates, interest rates, conversion ratios or similar terms,
if any, which are no more favorable, in the aggregate, to such other Person
or Persons or less favorable to the Company than those set forth in the
Preemptive Offer.
(ii) If the Company does not consummate the Issuance of
all or part of the remaining Offered Securities to such other Person or Persons
within the 30 day period referred to in clause (c) above, the right provided
hereunder shall be deemed to be revived and such securities shall not be offered
unless first reoffered to the Preemptive Holders in accordance with this Section
6.
(iii) The purchase by a Preemptive Holder of any Offered
Securities is subject in all cases to the execution and delivery by the Company
and such Preemptive Holder of a purchase agreement relating to such Offered
Securities in form and substance similar in all material respects to the extent
applicable to that executed and delivered between the Company and such other
persons. All Issuances of Shares to the Preemptive Holders pursuant to this
Section 6 shall be consummated contemporaneously at the offices of the Company
(or such other place as is mutually agreed upon by the parties) on the later of
(A) a business day not less than 15 or more than 60 days after the end of the 15
day period referred to in clause (b) above, and (B) the fifth business day
following the receipt of all regulatory or third party consents and approvals,
if any, applicable to such Sales, or at such other time and/or place as the
parties to such Sales may agree. The delivery of certificates or other
instruments evidencing such Shares duly endorsed for transfer shall be made on
such date against payment of the purchase price for such Shares.
(d) As used herein, "EXEMPT SECURITIES" shall mean: (i) any
Equity Securities issuable or issued to employees, directors and consultants of
the Company pursuant to any employee benefit plans, and which issuances have
been approved in accordance with Section 10, and where the primary purpose of
such issuance is not to raise additional equity capital for the Company; (ii)
Equity Securities issued or issuable as direct consideration for the acquisition
by the Company of another business entity or in connection with a merger of any
business entity with or into the Company; or (iii) the issuance of any Common
Stock upon conversion, exercise or exchange of any Common Stock Equivalent
outstanding on the Closing Date.
SECTION 7. PUT RIGHTS.
(a) In the event that, at any time following the fifth
anniversary of the Closing Date, the Company has not completed a Qualified IPO,
each Investor may, by written notice given to the Company, elect to cause the
Company to acquire from it all of the securities (the "PUT") held by it against
payment by the Company of the purchase price therefor (the "PUT PRICE"), which
Put Price per share of Preferred Stock shall be equal to the Liquidation
Preference
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(as defined in the Certificate of Designations); PROVIDED that, for purposes
of calculation the Liquidation Preference, (i) accreted and unpaid dividends
on the Preferred Stock shall be calculated through and including the date on
which the Company pays the Put Price pursuant hereto, and (ii) the amount
that would have been paid to the holders of the Preferred Stock in a
liquidation, dissolution or winding up of the Company if such Preferred Stock
had been converted in full into Common Stock shall be determined by an
investment banking firm of nationally recognized standing selected by the
Majority of Investors. Such investment banking firm shall have 30 days to
make such determination. In reaching such determination, such investment
banking firm shall base its appraisal solely upon the value of the entire
common equity (on a fully diluted basis) of the Company as of the date of
such determination and as an ongoing business (without giving effect to any
discount relating to the fact that such shares are not publicly tradeable),
multiplied by the percentage of the entire common equity of the Company
represented by the shares to be acquired by it upon exercise of the Put.
Upon receipt of such valuation, the Company shall have 20 days to object to
such valuation by providing notice of such objection to the Investor. If the
Company shall so object, the Company shall have the right to engage an
investment banking firm of nationally recognized standing to perform a
valuation of such shares on the basis described above. Such valuation shall
be completed within 30 days after receipt of such notice by the Company. If,
upon completion of such valuation by the second investment banking firm, the
two investment banking firms are able to agree upon a valuation, such
agreed-upon value shall be utilized for purposes of determining the
Liquidation Preference. If, at the expiration of such 30-day period, the two
investment banking firms are unable to agree upon a valuation, then the
Company and the Majority of Investors shall engage a third investment banking
firm of nationally recognized standing, who shall perform a valuation of such
shares on the basis described above and shall, within a period of 30 days
after the date of its engagement, select the valuation determined by either
the investment banking firm engaged by the Company or the investment banking
firm engaged by the Investors, and such valuation shall be utilized for
purposes of determining the Liquidation Preference. Any and all expenses
incurred as a result of such evaluations shall be borne by the Company.
(b) Notwithstanding paragraph (a) of this Section 7, if the
exercise of the Put would cause a default under any of the Company's bank
financing documents, credit agreements or other debt instruments, the Investor
shall not have the Put right described in Section 7(a) above, and in lieu
thereof the Board shall (i) as promptly as possible, market the Company with a
view towards the reorganization or acquisition of the Company in a transaction
that would allow the Investor to exercise the Put, and (ii) use its best
efforts, consistent with its fiduciary duty, to consummate such a transaction as
promptly as possible.
RIGHTS OF FIRST OFFER. Each Shareholder shall not Sell any Shares
to another Person or Group, except in accordance with the following procedures:
(a) The Selling Shareholder shall first deliver to the Company
and each of the Other Shareholders a written notice (a "SECTION 8 OFFER
NOTICE"), which shall (i) state the Selling Shareholder's intention to sell
Shares to one or more Persons (with no obligation to identify or theretofore
have identified the name of such Person or Persons or to have negotiated a
transaction with respect to the Sale of such Shares), the amount and type of
Shares to be sold (the "SUBJECT
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SHARES"), the purchase price therefor and a summary of the other material
terms of the proposed Sale, and (ii) offer the Company and the Other
Shareholders the option to acquire all or a portion of such Subject Shares
upon the same terms and subject to the same conditions of the proposed Sale
as set forth in the Section 8 Offer Notice (the "SECTION 8 OFFER"), PROVIDED
that such Section 8 Offer may require that it must be accepted by the Company
and the Other Shareholders on an all or nothing basis (an "ALL OR NOTHING
SALE"). The Section 8 Offer shall remain open and irrevocable for the
periods set forth below (and, to the extent the Section 8 Offer is accepted
during such periods, until the consummation of the Sale contemplated by the
Section 8 Offer). The Company shall have the right and option, but not the
obligation, for a period of 30 days after delivery of the Section 8 Offer
Notice (the "SECTION 8(a) ACCEPTANCE PERIOD"), to accept all or any part of
the Subject Shares at the purchase price and on the terms stated in the
Section 8 Offer Notice on its own behalf or on behalf of a nominee of the
Company that has been approved for such purposes in writing by the Majority
of Investors (a "PERMITTED NOMINEE"); PROVIDED, HOWEVER, that, if the Section
8 Offer contemplates an All or Nothing Sale and only a part of the Subject
Shares is accepted by the Company (or its Permitted Nominee) during the
Section 8(a) Acceptance Period, such acceptance shall be subject to the
acceptance of the Other Shareholders, pursuant to Section 8(b), of the
remaining Subject Shares. Notice of the Company's intention to accept a
Section 8 Offer, in whole or in part, shall be evidenced by a writing signed
by the Company (the "SECTION 8(a) ACCEPTANCE NOTICE") and delivered to the
Selling Shareholder and Other Shareholders prior to the end of the Section 8
Acceptance Period, setting forth the number and type of Shares that the
Company elects to acquire.
(b) If the Company or its Permitted Nominee, as the case may
be, (i) shall fail to accept all of the Subject Shares offered for sale pursuant
to the Section 8 Offer, (ii) shall reject in writing the Section 8 Offer, or
(iii) shall fail to respond to a Section 8 Offer Notice prior to the expiration
of the Section 8(a) Acceptance Period, then, upon the earlier of the expiration
of the Section 8(a) Acceptance Period, the giving of the Section 8(a) Acceptance
Notice and the giving of written notice of rejection by the Company, each Other
Shareholder shall have the right and option, for a period of 15 days thereafter
(the "SECTION 8(b) ACCEPTANCE PERIOD"), to accept all or any part of the Subject
Shares so offered and not accepted by the Company or its Permitted Nominee, as
the case may be (the "REFUSED SHARES") at the purchase price and on the terms
stated in the Section 8 Notice; PROVIDED, HOWEVER, that, if the Section 8 Offer
contemplates an All or Nothing Sale, the Other Shareholders, in the aggregate,
may accept, during the Section 8(b) Acceptance Period, the Subject Shares which,
when taken together with the Subject Shares accepted by the Company pursuant to
Section 8(a), if any, constitute all, but not less than all, of the Subject
Shares, at the purchase price and on the terms stated in the Section 8 Offer
Notice. Such acceptance shall be made by delivering a written notice to the
Company and the Selling Shareholder within the Section 8(b) Acceptance Period
specifying the maximum number of Shares such Other Shareholder will purchase
(the "FIRST OFFER SHARES"). If, upon the expiration of the Section 8(b)
Acceptance Period, the aggregate amount of First Offer Shares exceeds the
amount of Refused Shares, the Refused Shares shall be allocated among the Other
Shareholders as follows: (i) first, each Other Shareholder shall be entitled
to purchase no more than its Proportionate Percentage (as defined below) of
Refused Shares; (ii) second, if any of the Other Shareholders offered to
purchase less than its Proportionate Percentage in its acceptance notice so that
Refused Shares have not been allocated for purchase pursuant to (i) above (the
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"REMAINING SHARES"), each Other Shareholder (an "OVERSUBSCRIBED SHAREHOLDER")
that had offered to purchase a number of Refused Shares in excess of the amount
of Shares allocated for purchase to it in accordance with previous allocations
of such Refused Shares, shall be entitled to purchase an amount of Remaining
Shares equal to no more than its Proportionate Percentage (treating only
Oversubscribed Shareholders as Shareholders for these purposes) of the Remaining
Shares; and (iii) third, the process set forth in (ii) above shall be repeated
with respect to any Refused Shares not allocated for purchase until all Refused
Shares are allocated for purchase. For purposes of this Agreement,
"PROPORTIONATE PERCENTAGE" shall mean, as to each Other Shareholder, the
quotient obtained (expressed as a percentage) by dividing (A) the number of
Shares owned by such Other Shareholder on the first day of the Section 8(b)
Acceptance Period by (B) the aggregate number of Shares owned on the first day
of the Section 8(b) Acceptance Period by all Other Shareholders who exercise
their option to purchase Refused Shares.
(c) If complete effective acceptance shall not be received
pursuant to Sections 8(a) and 8(b) above with respect to all of the Subject
Shares offered for sale pursuant to the Section 8 Offer Notice, then the Selling
Shareholder may (subject to complying with the provisions of Section 5 hereof)
Sell all or any portion of the Subject Shares so offered for sale and not so
accepted, at a price not less than the purchase price, and on terms not more
favorable, in the aggregate, to the purchaser thereof than the terms stated in
the Section 8 Offer Notice at any time within 90 days after the expiration of
the Section 8(b) Acceptance Period (the "'SALE PERIOD"); PROVIDED, HOWEVER,
that, if the Section 8 Offer contemplates an All or Nothing Sale and only a part
of the Subject Shares has been accepted by the Company (or its Permitted
Nominee) and the Other Shareholders following the expiration of the Section 8(b)
Acceptance Period, the Selling Shareholder may Sell all, but not less than all,
of the Subject Shares held by such Selling Shareholder. To the extent the
Selling Shareholder Sells all or any portion of the Subject Shares so offered
for sale during the Sale Period, the Selling Shareholder shall promptly notify
the Company, and the Company shall promptly notify the Other Shareholders, as to
(i) the number of Shares, if any, that the Selling Shareholder then owns, (ii)
the number of Shares that the Selling Shareholder has sold, (iii) the terms and
conditions of such Sale and (iv) the name of the beneficial and record
purchasers of any Shares sold. In the event that all of the Shares are not sold
by the Selling Shareholder during the Sale Period, the right of the Selling
Shareholder to Sell such unsold Shares shall expire and the obligations of this
Section 8 shall be reinstated; PROVIDED, HOWEVER, that, in the event that the
Selling Shareholder determines, at any time during the Sale Period, that the
sale of all of the Shares on the terms set forth in the Section 8 Offer Notice
is impractical, the Selling Shareholder may terminate the attempt to Sell the
Subject Shares as provided in this Section 8(c) by written notice to all
Shareholders that are a party to this Agreement and reinstate the procedures
provided in this Section 8 without waiting for the expiration of the Sale
Period.
(d) All Sales of Subject Shares to the Company (or its
Permitted Nominee) and/or the Other Shareholders subject to any one Section 8
Offer Notice shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 15 days
after the expiration of the Section 8(b) Acceptance Period or (ii) the fifth
business day following the receipt of all regulatory approvals, if any,
applicable to such sales, or at such other time and/or place as the parties to
such sales may agree. The delivery of
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certificates or other instruments evidencing such Subject Shares duly
endorsed for transfer and accompanied by stock powers shall be made on such
date against payment of the purchase price for such Subject Shares.
(e) The requirements of this Section 8 shall not apply to any
sale pursuant to Section 9 hereof.
BRING-ALONG RIGHTS. (a) If the Non-Investor Shareholders
collectively propose to Sell to any Person or Group of Persons (collectively, a
"BUYER"), in a bona fide arm's-length transaction or series of transactions,
including by way of a purchase agreement, tender offer, merger or other business
combination transaction or otherwise, all of the Shares held by them at a price
per Share of more than 100% of the Initial Per Share Price (any such transaction
being referred to herein as an "EXIT SALE"), then the Non-Investor Shareholders
may elect to require the Investors to Sell all Shares beneficially owned by each
of them concurrently with such Exit Sale to such Buyer at the purchase price per
share (and, in the case of Common Share Equivalents, such purchase price per
share multiplied by the number of Common Shares issuable upon the conversion,
exchange or exercise of such Common Share Equivalent subject to reduction, if
appropriate, for the amount per share of the exercise or purchase price (if any)
of such Common Share Equivalent), including any fees and the value of any other
consideration received by such Selling Shareholders in connection with the Exit
Sale, and upon the same terms and conditions, of the Exit Sale.
(b) The rights set forth in Section 9(a) shall be exercised by
giving written notice (the "SECTION 9 NOTICE") to each Other Shareholder setting
forth in detail the terms of the proposed Sale and the proposed closing date of
the Exit Sale, which proposed date (the "SECTION 9 CLOSING DATE") shall be the
later of (i) a business day not less than 15 or more than 60 days after such
Section 9 Notice is delivered to the Other Shareholders or (ii) the fifth
business day following the receipt of all regulatory or third party consents and
approvals, if any, applicable to such Sale.
(c) Each Other Shareholder shall (i) take all such actions,
including, without limitation, voting in favor of such proposed Sale and waiving
any appraisal, dissenter or similar rights under applicable law, as may be
requested by the Selling Shareholders to carry out the purposes of this Section
9, and (ii) execute all documents reasonably requested by the Selling
Shareholders containing such terms and conditions, including, without
limitation, representations and warranties with respect to (x) matters of title
to such Other Shareholder's securities and (y) the due authorization (or
capacity) and due and valid execution and delivery by such Other Shareholder of
documentation in respect of the Exit Sale, as those executed by the Selling
Shareholders; PROVIDED, HOWEVER, such Other Shareholder shall not be required to
make any other representations and warranties and shall not be required to join
in any indemnity other than with respect to such Other Shareholder's specific
representations and warranties described above, or be a party to any non-compete
or similar provision.
(d) All Sales of Shares to the Buyer pursuant to this Section 9
shall be consummated contemporaneously at the offices of the Company (or such
other place as is
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mutually agreed upon by the parties in advance) on the Section 9 Closing
Date. The delivery of certificates or other instruments evidencing the Sale
of such Shares, duly endorsed for transfer, shall be made on such date
against payment of the purchase price for such Shares. The Selling
Shareholders shall bear all of the costs and expenses incurred solely in
connection with an Exit Sale to the extent such costs are incurred for the
benefit of all Shareholders and are not otherwise paid by the Company or the
Buyer.
(e) Notwithstanding anything to the contrary contained herein,
any Sale of Shares pursuant to an Exit Sale shall be exempt from the provisions
of Section 8 hereof.
(f) Notwithstanding the foregoing, the provisions of this
Section 9 shall not apply to sales or other transfers of Shares by a Shareholder
to its partners, stockholders, members, immediate family members, trusts for the
benefit of any of the foregoing, or any affiliate of such Shareholder.
SECTION 10. [Intentionally Deleted]
SECTION 11. REPRESENTATIONS AND WARRANTIES.
(a) Each of the parties hereto represents and warrants to the
other parties hereto as follows:
(i) It has full power and authority to execute, deliver
and perform its obligations under this Agreement;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding obligation of
it, enforceable against it in accordance with its terms except to the extent
that enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally;
(iii) The execution, delivery and performance of this
Agreement by it does not (A) violate, conflict with, or constitute a breach of
or default under its organizational documents, if any, or any material agreement
to which it is a party or by which it is bound or (B) violate any law,
regulation, order, writ, judgment, injunction or decree applicable to it;
(iv) No consent or approval of, or filing with, any
governmental or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby (except those which have
been made or obtained); and
(v) It is not a party to any contract or agreement that
is inconsistent with the rights of any party hereunder or otherwise conflicts
with the provisions hereof.
(b) Each of the Shareholders, severally and not jointly,
further represents and warrants that SCHEDULE II hereto sets forth a list of all
securities of the Company (including, without limitation, capital stock,
convertible securities, notes and debentures) held of record or beneficially
owned by it immediately after the Closing Date.
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SECTION 12. CERTAIN COVENANTS.
PROTECTION OF INVESTORS. The Company and the Shareholders each
agree that all of the following provisions of this Section 12 are for the
exclusive benefit, protection and enjoyment of the Investors and their permitted
successors and assigns, and may only be enforced or remedied by the Investors
and their permitted successors and assigns.
ADDITIONAL ISSUANCES The Company agrees that, anything contained
herein to the contrary notwithstanding, (i) any Person to which Shares are
issued in a Private Sale after the date hereof and who after giving effect to
such Issuance, would own more than 1% in the aggregate of the then total
outstanding Shares or voting power (on either a primary or fully diluted basis),
or (ii) any Person to which Shares are issued and who is or becomes a Key
Shareholder of the Company, shall upon consummation of, and as a condition to,
such Issuance execute, and agree to be bound by the terms of, this Agreement and
shall thereafter be deemed a Shareholder for all purposes of this Agreement.
ACCESS TO RECORDS. From and after the Closing Date and so long as
any Investor continues to hold any shares of Preferred Stock or Common Stock,
the Company shall, and shall cause each of its Subsidiaries to, allow each
Investor and its employees, counsel and other authorized representatives once
annually to access, during normal business hours, upon reasonable advance
notice, with due regard to its ongoing operations, all of its books, records and
properties, and all of its officers and employees for any reasonable purpose
whatsoever.
FINANCIAL REPORTS. From and after the Closing Date and provided
the Investor holds any shares of Preferred Stock or Common Stock, the Company
agrees to furnish to each Investor the following:
(a) Within 15 days after the end of each fiscal month, (i)
internal monthly financial and operating statements for such month prepared by
the Company under the direction of a Senior Officer of the Company.
(b) Within 30 days after the end of each quarterly fiscal
period, (i) unaudited balance sheets and an income statement as of the end of
such period, together with statements of retained earnings and cash flow for
such period ("QUARTERLY FINANCIALS") and a letter or memorandum discussing the
summary financial information for such period and setting forth a comparison by
reasonable categories of such financial information to the comparable figures
for the prior year and a reasonable explanation of any differences (a
"MANAGEMENT LETTER") (with the Management's Discussion and Analysis of Financial
Condition and Results of Operation section of any Form 10-Q or Form 10-K or
similar document filed with the Securities and Exchange Commission (the
"COMMISSION") for such quarter being sufficient to satisfy this requirement),
plus (ii) a statement certified by the Chief Financial Officer of the Company,
certifying that the financial position and results of operations of the Company
for such period as presented in the Quarterly Financials are presented fairly
and have been prepared in accordance with GAAP (subject to normal year-end
adjustments and the absence of footnotes) consistently applied.
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(c) Within 90 days (or such lesser period as is either (x)
required under applicable laws for similar disclosure to any securityholders of
the Company or (y) in which similar disclosure is provided to other financing
sources of the Company, including, without limitation, any banks) after the end
of each fiscal year, commencing with the first fiscal year ending after the
Closing Date, (i) audited balance sheets and an income statement as of the end
of such fiscal year, together with statements of retained earnings and cash flow
for such fiscal year, all in reasonable detail and certified by a recognized
national firm of independent accountants selected by the Board as presenting
fairly the financial position and results of operations of the Company and as
having been prepared in accordance with GAAP consistently applied, including
their opinion thereon, (ii) the accounting firm's management letter and (iii) a
Management Letter (with the Management's Discussion and Analysis of Financial
Condition and Results of Operation section of any Form 10-Q or Form 10-K or
similar document filed with the Commission for such quarter being sufficient to
satisfy this requirement).
(d) Promptly upon becoming available, (i) copies of all
financial statements, reports, press releases, notices, proxy statements and
other documents sent by the Company to its shareholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Company with any securities regulatory agency or any securities exchange and
(ii) any other financial or other information available to management of the
Company as the Investor shall have reasonably requested on a timely basis.
(e) If for any period the Company shall have any Subsidiary or
Subsidiaries whose accounts are consolidated with those of the Company, then, in
respect of such period, the financial statements and information delivered
pursuant to the foregoing paragraphs (a), (b) and (c) of this Section 12.4 shall
be the consolidated and consolidating financial statements of the Company and
all such consolidated Subsidiaries.
(f) At least 30 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly basis for
the Company for such fiscal year (displaying anticipated statements of income
and cash flows and balance sheets), and promptly upon preparation thereof any
other significant budgets prepared by the Company and any revisions of such
annual or other budgets, and, if requested by any Investor within 30 days after
any monthly period in which there is a material adverse deviation from the
annual budget, a statement explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto.
(g) Promptly (but in any event within seven business days)
after the discovery or receipt of notice of (i) any default under any material
agreement to which the Company and/or any of its Subsidiaries is a party, which
default could have a material adverse effect on the condition (financial or
otherwise), operations, properties, prospects, results of operations, business,
assets, or liabilities of the Company, any Subsidiary, or the industry in which
the Company and the Subsidiaries conduct or propose to conduct their business (a
"MATERIAL ADVERSE EFFECT"), (ii) any other event that could reasonably be
expected to have a Material Adverse Effect (including, without limitation, the
filing of any material litigation against the Company or any of its Subsidiaries
or the existence of any dispute with any Person which involves a reasonable
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likelihood of such litigation being commenced) a statement describing the
foregoing in reasonable detail.
(h) Promptly, any information or financial data the Company
provides to its lenders or other sources of financing, which, if certified by an
officer of the Company, shall be certified to the Investors on no less favorable
terms.
SYSTEM OF ACCOUNTING. The books of account and other financial
and corporate records of the Company and its Subsidiaries shall be maintained in
accordance with good business and accounting practices and the financial
condition of the Company shall be accurately reflected in the financial
statements referred to in this Section 12.
COMPLIANCE WITH LAWS. The Company shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules, regulations and
orders except where failure to comply would not have a Material Adverse Effect.
INSURANCE. The Company shall, and shall cause each of its
Subsidiaries to, keep its assets and those of its Subsidiaries which are of an
insurable character, if any, insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and other hazards and risks
and liability to Persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated.
LICENSES AND PERMITS. The Company shall, and shall cause each of
its Subsidiaries to, use its best efforts to obtain all federal, state and local
governmental licenses, permits, authorizations, consents, waivers, certificates
and approvals material to and necessary in the conduct of their business.
DISCLOSURE OF INVESTMENT. The Company, on the one hand, and each
Investor, on the other hand, agrees that it will not use in advertising or
publicity the name of any party hereto, or any partner or employee of such party
hereto or any of its respective affiliates, or any trade name, trademark, trade
device, service xxxx, symbol or any abbreviation, contraction or simulation
thereof owned by the other party hereto or any of its respective affiliates, in
either case without the prior written consent of such party (except as such
release or announcement may be required by applicable securities law or the
rules or regulations of the Commission, in which case the party required to make
the release or announcement shall make reasonable best efforts to allow each
other party reasonable time to comment on such release or announcement in
advance of such issuance). From and after the date hereof, neither the Company
nor any of its Subsidiaries will represent, directly or indirectly, that any
product or any service provided by the Company has been approved or endorsed by
any Investor without the prior written consent of such Investor. The Company
and the Investors further agree that, from the date hereof through the Closing
Date, no public release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior consent of the Company and
the Investors (which consent shall not be unreasonably withheld), except as such
release or announcement may be required by applicable securities law or the
rules or regulations of the Commission, in which case the party required to make
the release or announcement shall make reasonable best efforts to
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allow each other party reasonable time to comment on such release or
announcement in advance of such issuance.
12.10. UNDERWRITTEN OFFERING-RELATED LOCK-UP OF SHARES.
If requested in writing by the managing underwriter(s), if any, of
the first IPO by the Company of equity securities (or securities convertible
into or exchangeable for equity securities) of the Company, each Shareholder
holding Shares agrees not to effect any Sale or distribution, including, without
limitation, any sale pursuant Rule 144 under the Securities Act, of Shares
(other than as part of such underwritten public offering) during the time period
requested by the managing underwriter(s), if any, not to exceed 180 days. This
Section 12.10 does not apply to any subsequent IPO.
RESERVATION OF COMMON STOCK; CONVERSION. The Company shall at all
times reserve and keep available out of its authorized but unissued capital (i)
sufficient shares of Common Stock to permit conversion of all outstanding shares
of Preferred Stock and (ii) sufficient shares of Preferred Stock to satisfy the
Company's obligation to issue additional shares of Preferred Stock to the
Investors in accordance with the terms of the Purchase Agreement and the
Certificate of Designations. The Company represents, warrants and agrees that
all shares of Common Stock and Preferred Stock that are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens, encumbrances and charges. The Company shall take all such
actions as may be necessary, including adoption of amendments to the Certificate
of Incorporation, to assure that all such Common Stock may be so issued without
violation of any applicable law or governmental regulation or the Certificate of
Incorporation of the Company or any requirements of any securities exchange
(including, without limitation, the Nasdaq National Market) upon which such
Common Stock may be listed (except for official notice of issuance which shall
be immediately transmitted by the Company upon issuance).
SECTION 14. CONFIDENTIALITY.
(a) Each Investor and each of the other Shareholders severally
(the "CONFIDANTS") recognize that certain non-public, confidential, proprietary
information ("CONFIDENTIAL INFORMATION") may be furnished orally or in writing
to the Confidants by, or at the direction of, the Company. The Confidants agree
not to disclose any Confidential Information to any Person except to a Person
who is advised of the Confidant's obligations under this Section 16 and who is
(i) a partner, managing director, director, officer or employee of a Confidant
or a Confidant's Affiliate who is involved in the Confidant's investment in the
Company, who is consulted with respect to such investment, or who a Confidant
determines otherwise needs to know such information, or (ii) a Person acting as
an advisor to a Confidant in connection with such investment, except with the
consent of the Company or pursuant to a subpoena, civil investigative demand (or
similar process), order, statute, rule or other legal requirement promulgated or
imposed by a court or by a judicial, regulatory, self-regulatory or legislative
body, organization, agency or committee or otherwise in connection with any
judicial or administrative proceeding (including, in response to oral questions,
interrogatories or requests for
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information or documents) in which a Confidant or its Affiliate is involved.
The Confidants acknowledge that the United States securities laws prohibit
any person who is in possession of material, non-public information regarding
an issuer from purchasing or selling securities of such issuer or from
communicating such information to any, other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
(b) If Confidential Information is to be disclosed pursuant to
the foregoing paragraph, the Confidant will, to the extent practicable, promptly
notify, the Company thereof and cooperate with the Company to the extent legally
permissible if it should seek to obtain an order or other reliable assurance
that confidential treatment will be accorded to designated portions of the
Confidential Information. The Confidants shall be entitled to periodic
reimbursement from the Company for expenses incurred by it or any Affiliate,
including the fees and expenses of counsel, in connection with any action taken
pursuant to this paragraph.
(c) Information will not be deemed Confidential Information if
it (i) was already available to, or in the possession of, the Confidant prior to
its disclosure by, or at the direction of, the Company, (ii) is or becomes
available in the public domain on or after the date hereof (other than as a
result of a disclosure by any Confidant or any of its advisors), or (iii) is
acquired from a person who is not known by a Confidant to be in breach of an
obligation of confidentiality to the Company.
SECTION 15. SPECIFIC PERFORMANCE; INJUNCTION.
(a) The parties agree that it is impossible to determine the
monetary damages that would accrue to the Company or any Shareholder or his
personal representative by reason of the failure of any Other Shareholder or the
Company to perform any of his or its obligations under this Agreement requiring
the performance of an act other than the payment of money only. Each
Shareholder shall be entitled to enforce its rights under this Agreement
specifically and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that each party
may in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
(b) In the event of a breach or threatened breach by a
Shareholder of any of the provisions of this Agreement, the Company, and the
remaining Shareholders shall be entitled to an injunction restraining such
Shareholder from any such breach. The availability of these remedies shall not
prohibit the Company from pursuing any other remedies for such breach or
threatened breach, including the recovery of damages from the Shareholder.
NO INCONSISTENT AGREEMENTS. Neither the Company nor any
Shareholder shall take any action or enter into any agreement which is
inconsistent with the rights of any party hereunder or otherwise conflicts with
the provisions hereof.
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SECTION 17. FURTHER ASSURANCES.
(a) At any time or from time to time after the date hereof, the
parties agree to cooperate with each other, and at the request of any other
party, to execute and deliver any further instruments or documents and to take
all such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the transactions contemplated hereby
and to otherwise carry out the intent of the parties hereunder.
(b) At any time or from time to time, the parties agree to take
all action, including, without limitation, voting to approve any amendment to
the Certificate of Designations, or the By-Laws of the Company required to
increase the authorized number of shares of Common Stock or Preferred Stock, if
necessary, to permit the issuance of all Shares contemplated under the Purchase
Agreement, and the conversion of all outstanding shares of Preferred Stock.
DURATION OF AGREEMENT. The rights and obligations of a
Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer holds any Shares. This Agreement shall terminate upon the
consummation of a Qualified IPO except that the terms of Section 4, Sections
12.1, 12.5, 12.6, 12.7, 12.8, 12.9, 12.10, and Sections 13 through Section 29
(inclusive) shall survive until by their respective terms, they are no longer
operative.
LEGENDS. Each certificate representing Shares shall bear a legend
containing the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN THE SHAREHOLDERS' AGREEMENT,
DATED AS OF FEBRUARY 16, 2000, BY THE COMPANY AND
THE PARTIES THERETO, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE COMPANY.
The requirement that the above securities legend be placed upon
certificates evidencing any such securities shall cease and terminate upon the
earliest of the following events: (i) when such Shares are transferred in an
IPO; (ii) when such Shares are transferred pursuant to Rule 144 under the
Securities Act; or (iii) when such Shares are transferred in any other
transaction if the seller delivers to the Company an opinion of its counsel,
which counsel and opinion shall be reasonably satisfactory to the Company to the
effect that such legend is no
-21-
longer necessary in order to protect the Company against a violation by it of
the Securities Act upon any sale or other disposition of such Shares without
registration thereunder. The requirement that the above legend regarding the
Shareholder Agreement be placed upon certificates evidencing any such
securities shall cease and terminate upon the termination of this Agreement.
Upon the occurrence of any event requiring the removal of a legend hereunder,
the Company, upon the surrender of certificates containing such legend,
shall, at its own expense, deliver to the holder of any such Shares as to
which the requirement for such legend shall have terminated, one or more new
certificates evidencing such Shares not bearing such legend.
SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement. In the event that pursuant
to any regulatory authority or regulation, the Company is required to make any
revisions or modifications to any provision of this Agreement, the parties agree
to enter into good faith negotiations and make revisions or modifications, to
the extent possible, that are in compliance with such regulation or the rules of
such regulatory authority, and which are designed to accomplish the purposes of
such provision to be revised or modified.
GOVERNING LAW, WAIVER OF JURY TRIAL. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive Jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("LITIGATION") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by facsimile or registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York and of
the United States of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY
LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors,
assigns, heirs and personal representatives. No Shareholder shall have the
right to assign its rights and obligations under this Agreement without the
consent of the other Shareholders. No Shareholder shall have the right to
assign its rights under Section 3 or 6 of this Agreement without the consent of
the
-22-
Company and the Investor. Upon any such assignment, such assignee shall
have and be able to exercise all rights of the assigning Shareholder. The
parties acknowledge that, subject to compliance with applicable securities laws,
each Investor may transfer and assign all or a part of its rights and
obligations under this Agreement (including, for the avoidance of doubt, under
Section 3 or 6) to one or more other parties without the consent of the Company
or any other Shareholder. Upon any such assignment, the assignee shall become
an Investor for purposes of this Agreement and shall have and be able to
exercise all rights of an Investor hereunder.
NOTICES. All notices, requests, consents and other communications
hereunder to any party, shall be deemed to be sufficient if contained in a
written instrument delivered in Person or by telecopy, nationally recognized
overnight courier or first class registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by such
party to the other parties:
(a) if to the Company, to:
UbiquiTel Holdings, Inc.
0 Xxxx Xxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Xxxxxxxxx Traurig P.A.
0000 Xxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxx X. Xxxxx
(b) if to an Investor, to:
x/x XXX Merchant Banking Partners II, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxx
Xxx Xxxxx
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
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Fax: (000) 000-0000
Attention: Xxx X. Xxxxxxxxxxx
(c) if to any other Shareholder, to the notice information set forth
in SCHEDULE I hereto.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
AMENDMENTS. Unless otherwise set forth in this Agreement,
the terms and provisions of this Agreement may be modified or amended, or any of
the provisions hereof waived, temporarily or permanently, pursuant to the
written consent of the parties hereto.
HEADINGS. The headings of the Sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
NOUNS AND PRONOUNS. Whenever the context requires, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
ENTIRE AGREEMENT. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and understandings
with respect thereto.
COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
NO PARTNERSHIP. The obligations of each of the parties to
this Agreement are several and not Joint. Nothing in this Agreement shall imply
or be deemed to imply a partnership, joint venture or other relationship between
the parties.
-24-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
UBIQUITEL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
FOUNDERS:
-------------------------------------
XXXXXX X. XXXXXX
-------------------------------------
XXXXX XXXXXXX
-------------------------------------
XXXX X. JUDGE
THE XXXXXX GROUP, INC.
By:
--------------------------------
Name:
Title:
U.S. BANCORP
By:
--------------------------------
Name:
Title:
-25-
SERIES A PREFERRED SHAREHOLDERS:
BROOKWOOD UBIQUITEL INVESTORS, LLC
By:
--------------------------------
Name:
Title:
LANCASTER INVESTMENT PARTNERS
By:
--------------------------------
Name:
Title:
-------------------------------------
XXXXXXX X. XXXXXX
-------------------------------------
XXXXXX XXXXXXXXX
-------------------------------------
XXXXXXX X. XXXXXXX, XX.
XXXXXX PARTNERS L.P.
By:
By:
--------------------------------
Name:
Title:
BALLYSHANNON PARTNERS L.P.
By:
-26-
By:
--------------------------------
Name:
Title:
-------------------------------------
XXXXX XXXXXX
CBT WIRELESS INVESTMENTS, LLC
By:
--------------------------------
Name:
Title:
SPECTRASITE COMMUNICATIONS
By:
--------------------------------
Name:
Title:
-------------------------------------
XXXX XXXXXXXX
-------------------------------------
XXXXX XXXXXXXX
NEW VENTURES, LLC
By:
--------------------------------
Name:
Title:
-27-
-------------------------------------
XXXXXX X. XXXXXX
MEZZANINE FINANCING:
BET ASSOCIATES, L.P.
By:
By:
------------------------------
Name:
Title:
PARIBAS NORTH AMERICA, INC.
By:
------------------------------
Name:
Title:
INVESTOR:
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.,
ITS GENERAL PARTNER
By:
------------------------------
Name:
Title:
-28-
