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EXHIBIT 3
LOCK-UP AGREEMENT
This Lock-up Agreement, dated as of October 8, 1999, is by and among
PentaStar Communications, Inc. (the "Company"), ▇▇▇▇▇▇▇▇▇ Securities, Inc. (the
"Representative"), BACE Investments, LLC ("BACE"), Black Diamond Capital, LLC
("Black Diamond"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇;"
BACE, Black Diamond, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ being collectively referred to
hereinafter as the "Founding Shareholders").
WHEREAS, on or about March 17, 1999, the Company entered into a lock-up
agreement with BACE (the "Prior Lock-up Agreement"); and
WHEREAS, on March 31, 1999, the Company entered into stock purchase
agreements ("Stock Purchase Agreements") together with addendums ("Addendums")
thereto, with Black Diamond, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ (collectively, the "Stock
Purchase Agreements and Addendums"); and
WHEREAS, as a result of discussions with various state securities
administrators concerning the lock-up provisions of the Prior Lock-up Agreement
and the Stock Purchase Agreements and Addendums, the parties have determined to
enter into this Lock-up Agreement, which shall supercede in its entirety the
Prior Lock-up Agreement and the Addendums to the Stock Purchase Agreements; and
WHEREAS, the Representative has agreed to become a party to this
Lock-up Agreement such that the Representative shall have an enforceable
interest hereunder;
NOW THEREFORE, in consideration of the mutual agreements and covenants
of the parties herein contained, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by all of the
parties hereto, the parties agree as follows:
1. The following shares of Common Stock of the Company that are owned
by the Founding Shareholders shall be subject to the terms of this Agreement:
NUMBER OF SHARES SUBJECT
FOUNDING SHAREHOLDER TO LOCK-UP AGREEMENT
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BACE Investments, LLC........................ 1,674,800
Black Diamond Capital, LLC................... 732,419
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇............................ 469,499
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇............................. 219,100
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Total........................................ 3,095,818
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Such 3,095,818 shares of Common Stock of the Company owned by the
Founding Shareholders are hereinafter referred to as the "Shares."
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2. Except as otherwise provided herein, the Founding Shareholders agree
that they shall not transfer, sell, pledge, hypothecate, encumber, contract to
sell, grant any option for the sale of, grant any security interest in, or
otherwise sell or dispose of any of the Shares which shall expressly include (i)
any stock dividends issued by the Company and attributable to the Shares during
the term hereof, and (ii) any shares of capital stock of the Company issued or
issuable as a result of stock splits, for a period of three years from the
effective date (the "Effective Date") of the Company's Registration Statement on
Form SB-2 (SEC File No. 333-85281). Moreover, the Company shall not recognize
any attempted transfer, sale, pledge, hypothecation or encumbrance of the Shares
for a period of three years from the Effective Date except as otherwise provided
herein.
3. Provided that the Shares remain subject to the terms hereof
following any transfer authorized in this Paragraph 3, the Founders may transfer
the Shares (i) by gift to family members, not more remote than first cousins,
(ii) to trusts, limited partnerships or other estate planning entities of which
the transferring Founder is the beneficiary for estate planning purposes, (iii)
any charitable organization that qualifies for receipt of charitable
contributions under Section 170(c) of the Internal Revenue Code of 1986, as
amended, (iv) by any method or transaction approved by majority of the
shareholders of the Company other than the Founders, or (v) among or between any
Founders or Founder that is a party hereto.
4. After the expiration of 24 months from the Effective Date, each
Founder shall have released to him and shall be eligible to sell in accordance
with applicable federal and state securities laws 33.33% of such Founder's
Shares, or an aggregate total of 1,031,836 Shares. Upon the expiration of 36
months from the Effective Date, each Founder shall be eligible to sell an
additional 16.67% of such Founder's Shares, or an aggregate of 516,073 Shares.
The remaining 1,547,909 Shares shall be eligible for sale by the Founders only
upon the earlier to occur of (i) a Transaction (hereinafter defined), or (ii)
five years after the completion of the public offering. A "Transaction" shall be
defined to include a bonafide tender offer, offer to merge or acquisition of the
Company's equity securities by an unaffiliated purchaser, effected pursuant to a
vote in favor of such Transaction by a majority of the shareholders under which
(i) if the Transaction occurs within 24 months of the Effective Date, the public
shareholders of the Company shall receive cash, or securities that are listed or
to be listed, or qualified in all respects for listing, on the New York Stock
Exchange, the American Stock Exchange, or The Nasdaq National Market(R), such
cash or securities to be equal in value to at least two times the public
offering price per share of Common Stock upon consummation of the Transaction,
or (ii) if the transaction occurs more than 24 months after the Effective Date,
the public shareholders of the Company will receive cash or securities in value
equal to 1.5 times the public offering price per share of Common Stock upon
consummation of the Transaction.
5. Notwithstanding any other language to the contrary set forth
elsewhere herein, this Lock-up Agreement and the restrictions set forth herein
shall automatically be released if (i) for 60 consecutive trading days
commencing at least 90 days after the Effective Date, the Company's securities
trade in a public market at a price of not less than 150% of the offering price
per share of the Company's Common Stock, (ii) for 90 consecutive trading days
commencing at least 12 months after the Effective Date, the Company's securities
trade in a public market at a price of not less than 110% of the offering
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price per share of Common Stock, (iii) for any fiscal year ending after the
Effective Date, the Company has earnings per share of at least (a) 5% of the
public offering price per share of Common Stock for that fiscal year, (b) 4% of
the public offering price per share of Common Stock for that fiscal year and for
the prior fiscal year, calculated independently, whether or not such prior
fiscal year ended after the Effective Date, or (c) 3% of the public offering
price per share of Common Stock for that fiscal year and for each of the two
prior fiscal years, calculated independently, whether or not such prior fiscal
years ended after the Effective Date, or (iv) the securities become "covered
securities" as that term is defined in subsection 18(b)(1)(a) of the Securities
Act of 1933.
6. In the event that the Shares become subject to release from the
terms hereof in accordance with paragraph 4(i) or paragraph 5 above, the Shares
shall be automatically released from this Agreement and any restrictive legend
placed on certificates representing the Shares may be removed upon the Company
filing with the Arizona Corporation Commission, Texas State Securities Board,
Missouri Securities Division of the Office of Secretary of State and the
Securities Division of the Department of Financial Institutions of the State of
Washington (collectively, the "State Securities Commissions"), any one of the
following: (i) if subject to release under paragraph 5(i), 5(ii) or 5(iv) above,
a written representation from the Company and a majority of the Founders
indicating compliance therewith, (ii) if subject to release under paragraph
5(iii) above, a written representation from the Company and a majority of the
Founders indicating compliance with such subsection accompanied by financial
statements, prepared in accordance with generally accepted accounting principles
and audited and reported upon by an independent certified public accountant,
that indicate compliance therewith, (iii) if subject to release under paragraph
4(i), a written representation from the Company and a majority of the Founders
indicating compliance with such subsection accompanied by any offering
materials, proxy statements or similar documents relating to the specified
Transaction. The Shares may also be transferred by will or pursuant to the laws
of descent and distribution or by court order, in which event the Company shall
furnish to the State Securities Commissions a certified copy of an order issued
by a court of competent jurisdiction that orders the release or transfer of the
Shares, a certified copy of an instrument of distribution filed by a court of
competent jurisdiction, or a written representation from the Company and the
personal representatives or executors of the estate of a deceased Founder
stating that the Shares were transferred pursuant to a will or the laws of
descent or distribution.
7. During the term of this Lock-up Agreement, the Founders shall
continue to have all voting and other rights to which they are entitled by
ownership of the Shares. In the event a Founder sells any of the Shares in
violation of this Agreement, any profits realized by such selling Founder shall
inure to and be recoverable by the Company.
8. The Representative shall not agree or permit the waiver or
modification of any of the terms of this Lock-up Agreement. In addition, the
Company's Registration Statement, as amended, shall include disclosure providing
that the Representative will not waive, shorten or otherwise modify the transfer
restrictions agreed to by the parties hereto.
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IN WITNESS WHEREOF, and based upon which the Representative shall
undertake the public offering of the Company's Common Stock, the parties have
executed this Lock-Up Agreement to be effective on the date specified above.
THE COMPANY: THE REPRESENTATIVE:
PENTASTAR COMMUNICATIONS, INC. ▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
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Title: President Title: President
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THE FOUNDERS:
BACE INVESTMENTS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Managing Member
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BLACK DIAMOND CAPITAL, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Managing Member
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By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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