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EXHIBIT 10.4
STOCKHOLDERS' AGREEMENT
AMONG
ALLIED RISER COMMUNICATIONS HOLDINGS, INC.,
EGI-ARC INVESTORS, L.L.C.,
TELECOM PARTNERS II, L.P.,
AND
EACH PERSON IDENTIFIED
ON
SCHEDULE 1 ATTACHED HERETO
November 5, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms 1
Section 1.2 Headings, etc. 4
ARTICLE II
TRANSFERS OF SECURITIES
Section 2.1 Limitation on Transfer 4
Section 2.2 Transfers by Financial Sponsors or Existing Stockholders 5
Section 2.3 Drag-Along Right 7
Section 2.4 Tag-Along Rights 8
Section 2.5 Financial Sponsor's Right of First Offer for Preferred Stock 8
Section 2.6 Conditions to Transfers 10
Section 2.7 Certain Other Transfers 10
Section 2.8 Effect of Permitted Transfer 11
Section 2.9 Tolling 11
ARTICLE III
GOVERNANCE OF THE COMPANY
Section 3.1 Board Nominees 11
Section 3.2 Removal; Replacement Directors 12
Section 3.3 Proxy 12
Section 3.4 Reimbursement of Expenses 12
ARTICLE IV
CERTAIN OTHER AGREEMENTS OF THE PARTIES
Section 4.1 Stock Certificate Legend 12
Section 4.2 Confidentiality 13
Section 4.3 D&O Insurance 14
Section 4.4 Stock Options 14
Section 4.5 Authorized Common Stock and Preferred Stock 15
Section 4.6 New Financial Sponsors 15
Section 4.7 Qualifying Recapitalization 15
Section 4.8 Amendment to Certificate of Incorporation 15
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ARTICLE V
MISCELLANEOUS
Section 5.1 Further Assurances 15
Section 5.2 Notices 15
Section 5.3 Amendments 17
Section 5.4 Additional Securities Subject to Agreement 17
Section 5.5 Inconsistent Agreements 18
Section 5.6 Successors, Assigns and Transferees 18
Section 5.7 Severability 18
Section 5.8 Counterparts 18
Section 5.9 Governing Law 18
Section 5.10 Consent to Jurisdiction and Service of Process;
Appointment of Agent for Service of Process 18
Section 5.11 Waiver of Jury Trial 18
Section 5.12 Entire Agreement; Nonwaiver 19
Section 5.13 Term; Termination 19
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT, dated as of November 5, 1998, is made and
entered into by and among ALLIED RISER COMMUNICATIONS HOLDINGS, INC., a Delaware
corporation (the "Company"), EGI-ARC INVESTORS, L.L.C., a Delaware limited
liability company ("EGI-ARC"), TELECOM PARTNERS II, L.P., a Delaware limited
partnership ("TP"), and together with EGI -- ARC and such other Persons (defined
below) designated as such pursuant to Section 4.6 below, the "Financial
Sponsors"), the existing stockholders of the Company, a list of which is
available upon request from the Company, (each, an "Existing Stockholder" and
collectively the "Existing Stockholders"), the employee stockholders of the
Company, a list of which is available upon request from the Company, (each, an
"Employee Stockholder", and collectively, the "Employee Stockholders"), and each
Person who may, pursuant hereto from time to time execute a counterpart hereof
as a stockholder of the Company.
WHEREAS, the parties own shares of the issued and outstanding common
stock of the Company, par value $.0001 per share (the "ARC Holdings Common
Stock") and shares of the Series A-1 and Series A-2 Company Preferred Stock
(collectively the "Preferred Stock"); and
WHEREAS, the parties desire to enter into certain agreements with
respect to the Equity Securities (as defined below) of the Company held now or
in the future by the parties and their respective transferees, and certain other
matters as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Section Defined Terms. As used in this Agreement, terms defined in the
heading and the recitals shall have their respective assigned meanings, and the
following capitalized terms shall have the meanings ascribed to them below:
(1) "Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with, such Person.
(2) "Agreement" shall mean this Stockholders' Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
(3) "Approved Sale" shall have the meaning set forth in Section 2.3(2).
(4) "ARC Holdings Common Stock Equivalents" shall mean any warrants, rights,
calls, options or other securities exercisable or exchangeable for or
convertible, directly or indirectly, into ARC Holdings Common Stock, but
excluding the Preferred Stock until conversion thereof into ARC Holdings Common
Stock. Where this Agreement calls for the determination of a number of ARC
Holdings Common Stock Equivalents, such determination shall equal the number of
shares of ARC Holdings Common Stock into or for
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which such ARC Holdings Common Stock Equivalents are exercisable, exchangeable
or convertible.
(5) "Board" shall mean the Board of Directors of the Company.
(6) "Buyout Notice" shall have the meaning set forth in Section 2.3(1).
(7) "Bylaws" shall mean the Bylaws of the Company as in effect on the date
hereof, as the same may be amended from time to time in accordance with terms
thereof and hereof.
(8) "Certificate of Incorporation" shall mean the Certificate of Incorporation
of the Company as in effect on the date hereof, as the same may be amended from
time to time in accordance with the terms thereof and hereof.
(9) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(10) "Confidential Information" shall mean any technical or business
information, knowledge, systems or other information furnished, in whatever form
or medium, or disclosed by one party to another (including, without limitation,
models, drawings, marketing plans, financial data and personnel statistics),
which is marked as confidential or proprietary, or, for information which is
orally disclosed, the disclosing party clearly indicates to the receiving party
at the time of disclosure the confidential or proprietary nature of the
information and confirms the confidential or proprietary nature in writing
within thirty (30) days after the disclosure. Any third-party information
furnished or disclosed with the consent of such third party and marked as or
stated to be confidential or proprietary shall be deemed Confidential
Information and shall be subject to the terms and conditions herein.
(11) "Control" "Controlled" and "Controls" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting interests or
capital stock, by contract or otherwise.
(12) "Equity Securities" shall mean (a) ARC Holdings Common Stock, ARC Holdings
Common Stock Equivalents and Preferred Stock, (b) any other equity securities
issued by the Company, whether now or hereafter authorized for issuance by the
Company's Certificate of Incorporation, (c) rights, options, or warrants to
subscribe for, purchase or otherwise acquire Common Stock or any securities
convertible, directly or indirectly, into ARC Holdings Common Stock, and (d) any
debt, hybrid or other securities issued by the Company which are convertible
into, exercisable for or exchangeable, directly or indirectly, for any other
Equity Securities, whether now or hereafter authorized for issuance by the
Company's Certificate of Incorporation.
(13) "First Legend" shall mean the legend described in Section 4.1 as the First
Legend.
(14) "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 or any similar federal law then in force.
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(15) "New Arc" shall have the meaning set forth in Section 2.3(2).
(16) "Offer" shave have the meaning set forth in Section 2.2.
(17) "Offered Securities" shall have the meanings set forth in Section 2.2(1)
and 2.3(1).
(18) "Offeror's Transfer Notice" shall have the meaning set forth in Section
2.2.
(19) "Permitted Transfer" shall have the meaning set forth in Section 2.9.
(20) "Person" shall mean any individual, corporation, partnership, limited
liability company, trust, joint stock company, business trust, unincorporated
association, joint venture, governmental authority or other entity of any nature
whatsoever.
(21) "Preferred Offered Securities" shall have the meaning set forth in Section
2.6.
(22) "Preferred Offeror's Transfer Notice" shall have the meaning set forth in
Section 2.6.
(23) "Preferred Stock Offeror" shall have the meaning set forth in Section 2.6.
(24) "Qualifying Public Offering" shall have the meaning ascribed to it in the
Certificate of Incorporation.
(25) "Second Legend" shall mean the legend described in Section 4.1 as the
Second Legend.
(26) "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
(27) "Selling Stockholder" shall have the meanings set forth in Section 2.3(1),
2.4 and 2.5, as applicable.
(28) "Stockholders" shall mean each of EGI-ARC, TP, the Existing Stockholders,
the Employee Stockholders and any transferee of any, or recipient of newly
issued, Equity Securities of the Company that agrees to be bound by the terms
hereof.
(29) "Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is as the time owned or Controlled by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a limited liability company, partnership, association or
other business entity, a majority of the membership, partnership, or other
similar, ownership interest thereof is at the time owned or Controlled, directly
or indirectly,
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by any Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a
majority ownership interest in a limited liability company, partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or shall be or Control any managing
director, managing member, or general partner of such limited liability company,
partnership, association or other business entity.
(30) "Third-Party Purchaser" shall have the meanings set forth in Sections 2.2,
2.3(1), 2.4 and 2.5, as applicable.
(31) "Transfer" shall mean any transfer, assignment, sale, pledge, hypothecation
or other disposition of Equity Securities, whether for cash, other securities or
other property and specifically including any share for share exchange;
provided, however, that the term "Transfer" shall not include any such action
with respect to Equity Securities (i) permitted pursuant to Section 2.7 hereof,
(ii) which constitutes a pledge thereof by a Financial Sponsor made pursuant to
a bona fide loan transaction where a security interest therein is created, (iii)
pledges of Equity Securities by any Existing Stockholder or any Employee
Stockholder pursuant to the Stockholders' Pledge Agreement, dated as of November
5, 1998, by and among the company, EGI-ARC (in its individual capacity and as
collateral agent), TP, certain of the Employee Stockholders and Existing
Stockholders, and the other parties thereto, as the same may be amended from
time to time (or actions taken by the collateral agent or any pledgee pursuant
to those agreements), or (iv) pursuant to a Qualifying Public Offering.
1.2 Section Headings, etc. The headings in this Agreement are included for
convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the Person may require.
ARTICLE II
TRANSFERS OF SECURITIES
2.1 Section Limitation on Transfer. From and after the date hereof and until
the consummation of a Qualifying Public Offering, all Stockholders party hereto
and the Company shall have the rights and obligations set forth in this Article
II. Except as provided in Sections 2.3, 2.4 and 2.7, Employee Stockholders may
not Transfer Equity Securities prior to a Qualifying Public Offering. Existing
Stockholders may Transfer Equity Securities only in accordance with the
provisions of this Agreement. Any attempt by a Stockholder to Transfer any
Equity Security in violation of any provision of this Agreement shall be null
and void ab initio, and the Company shall not register or effect any such
Transfer or permit such transferee to exercise or enjoy any rights with respect
thereto.
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2.2 Section Transfers by Financial Sponsors or Existing Stockholders.
(1) Company's Right of First Offer. Except as otherwise provided in Sections
2.3, 2.4, 2.5 and 2.7 hereof, in the event that a Financial Sponsor or other
Stockholder (other than an Employee Stockholder) (an "Offeror") desires to
Transfer any or all of its ARC Holdings Common Stock or ARC Holdings Common
Stock Equivalents (collectively, the "Offered Securities"), to any Person who is
not an Affiliate of the Offeror (a "Third-Party Purchaser"), such Offeror shall
first notify the Company and each of the Financial Sponsors (other than the
Offeror, if the Offeror shall be a Financial Sponsor) in writing of its desire
to Transfer Offered Securities, the number of Offered Securities and the
proposed cash purchase price and other terms of Transfer ("Offeror's Transfer
Notice"). Upon receipt of the Offeror's Transfer Notice, the Company shall have
a right to purchase (exercisable by written notice to the Offeror within 20 days
after receipt of the Offeror's Transfer Notice) all, and not less than all, of
the Offered Securities at the cash purchase price and the other terms specified
in the Offeror's Transfer Notice. Upon delivery of the Offeror's Transfer
Notice, the offer made therein to the Company and the Financial Sponsors shall
be irrevocable unless and until the rights to purchase provided for in this
Section 2.2(1) and Section 2.2(2) have been waived or shall have expired in
accordance with this Agreement. If the Company desires to purchase the Offered
Securities hereunder, the Company will give written notice thereof to the
Offeror and to the Financial Sponsors within 20 days following receipt of the
Offeror's Transfer Notice. The failure to respond within the time periods set
forth in this Section 2.2(1) shall be deemed to be a rejection of such offer
made pursuant to the Offeror's Transfer Notice.
(2) Financial Sponsor's Right of Second Offer.
(a) In the event that the Company has declined to purchase all of the Offered
Securities which it is entitled to purchase under Section 2.2(1) hereof and the
20 day period referred to in Section 2.2(1) has expired, then the Financial
Sponsors (other than the Offeror, if the Offeror shall be a Financial Sponsor)
shall have the second right to purchase all, and not less than all, of the
Offered Securities at the cash purchase price and the other terms specified in
the Offeror's Transfer Notice; provided, however, that the Financial Sponsors
may only exercise rights to purchase hereunder if the Company has not exercised
the rights afforded to the Company by Section 2.2(1) above; and, provided,
further, that the Financial Sponsors, pursuant to this Section 2.2(2) hereof,
may only purchase in the aggregate all, and not less than all, of the Offered
Securities.
(b) If the total number of Offered Securities that the Financial Sponsors desire
to purchase in the aggregate exceeds the aggregate number of Offered Securities
that are the subject of the Offeror's Transfer Notice, each Financial Sponsor
shall have the right to purchase a number of Offered Securities equal to the
product of (A) the aggregate number of Offered Securities that are the subject
of Offeror's Transfer Notice, multiplied by (B) a fraction, (x) the numerator of
which is equal to the number of shares of ARC Holdings Common Stock held by such
Financial Sponsor and (y) the denominator of which is the total number of shares
of ARC Holdings Common Stock held by the Financial Sponsors participating
herein; provided, however, that if a Financial Sponsor does not exercise all or
part of its right to purchase Offered Securities pursuant to this Section
2.2(2), then the other Financial Sponsors shall have the right to purchase all
or any part of the Offered Securities not purchased by such Financial Sponsors.
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(c) If any Financial Sponsor desires to purchase the Offered Securities
hereunder, such Financial Sponsor will give written notice thereof to the
Offeror and to the other Financial Sponsors, stating the number of Offered
Securities such Financial Sponsor desires to purchase, within 30 days following
receipt by the Financial Sponsor of the Offeror's Transfer Notice. The failure
by any Financial Sponsor to respond within the time periods set forth in this
Section 2.2(2) shall be deemed to be a rejection of such offer made pursuant to
the Offeror's Transfer Notice by such Financial Sponsor.
(d) All Financial Sponsors who agree to purchase Offered Securities pursuant to
this Section 2.2(2) will have the further right to purchase, within a 10-day
period following the expiration of the aggregate 30-day period set forth in
Sections 2.2(1) and 2.2(2), any Offered Securities remaining unpurchased at the
end of the expiration of such aggregate 30-day period set forth in Sections
2.2(1) and 2.2(2), in proportion to the amount purchased by each such Financial
Sponsor as a percentage of the total Offered Securities purchased by all such
Financial Sponsors, by giving written notice of such intention to purchase to
the Offeror and the Company and the other participating Financial Sponsors
within 10 days following the expiration of the aggregate 30-day period set forth
in Sections 2.2(1) and 2.2(2). Notwithstanding the foregoing, the Financial
Sponsors may mutually agree to allocate the available Offered Securities among
themselves in any proportion; provided, however, that under all circumstances
that in order to exercise the second right to purchase the Offered Securities
hereunder, all, and not less than all, of the Offered Securities are purchased
under this Section 2.2(2).
(3) In the event that the Company and/or Financial Sponsors do not exercise
their rights to purchase all, and not less than all, of the Offered Securities
pursuant to Section 2.2(1) or 2.2(2) hereof, the Offeror may Transfer all, but
not less than all, of the Offered Securities to the Third-Party Purchaser at a
cash price and on other terms no more favorable to the Offeror than those
specified in the Offeror's Transfer Notice anytime during the 90 day period
immediately following the expiration of the aggregate 30 or 40 day period, as
the case may be, provided in Sections 2.2(1) and 2.2(2) (or such longer period
as may be required to comply with the HSR Act). Any Offered Securities subject
to this Section 2.2 which are not transferred within the foregoing period shall
be subject to the provisions of this Section 2.2 again with respect to any
subsequent Transfer.
(4) The closing of the purchase of Offered Securities by the Company or the
Financial Sponsors shall be held at the principal office of the Company at 11:00
a.m., local time, no later than the twentieth (20th) business day after the
acceptance of the Offer to purchase of Offered Securities pursuant to Section
2.2(1) or Section 2.2(2), or at such time and place as the parties to the
transaction may agree. The sale of the Offered Securities to the Company or the
Financial Sponsors hereunder shall otherwise be on customary terms and
conditions (but in any event in accordance with the terms of the Offeror's
Transfer Notice).
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2.3 Section Drag-Along Right.
(1) In the event that Stockholders desiring to sell (a "Selling Stockholder")
Equity Securities representing 51% or more of the fully diluted Equity
Securities (assuming conversion of the Preferred Stock utilizing an enterprise
value for the Company based upon the proposed sales price set forth in the
Buyout Notice (as defined below)) to a Third-Party Purchaser, such Selling
Stockholders shall have the right to require all other Stockholders to sell a
proportionate amount (based on the proportion that the Equity Securities
proposed to be sold bears to the total amount of such Equity Securities held by
the Selling Stockholders assuming conversion of the Preferred Stock) of their
Equity Securities to such Third-Party Purchaser in connection with such sale on
the same terms as such Selling Stockholders shall sell such Equity Securities
and at a price per share equivalent to the price per share of Equity Securities
to be received by such Selling Stockholders in connection with such sale. Such
right shall be exercisable by written notice setting forth the price, terms and
conditions of such proposed sale, given by such Selling Stockholder (a "Buyout
Notice") to each Stockholder. The Buyout Notice shall state such Selling
Stockholders' proposal to effect the sale of Equity Securities of every party to
such Third-Party Purchaser and shall include the proportion of each Selling
Stockholders' total equity ownership represented thereby. Each Stockholder
agrees that, upon receipt of a Buyout Notice, such Stockholder shall be
obligated to sell a proportionate amount of its Equity Securities for its pro
rata portion (determined assuming exchange, conversion or exercise of all
outstanding Equity Securities) of the purchase price described in the Buyout
Notice and upon the other terms and conditions of such transaction (and
otherwise take all reasonably necessary action to cause consummation of the
proposed transaction, including voting such Equity Securities (and, in the case
of the Financial Sponsors, granting any necessary consent under their respective
Investment Agreements) in favor of such transaction); provided, however, that
each Stockholder shall be obligated as provided above in this Section 2.3 only
if each Existing Stockholder and Employee Stockholder receives consideration
having the same pro rata value as such Selling Stockholder receives for Equity
Securities exercisable or convertible for the same class of ARC Holdings Common
Stock (less equitable adjustments for differences in exercise prices, etc.
determined taking into account the assumed conversion referred to above) being
sold by such Selling Stockholder.
(2) If Stockholders holding 51% or more of the fully diluted Equity Securities
(assuming conversion of the Preferred Stock utilizing an enterprise value for
the Company based upon the proposed sales price set forth in the Buyout Notice)
desire to effect the sale of all or substantially all of the assets of the
Company or all of the equity securities or substantially all of the assets of
the Company's Subsidiary ("New ARC") and/or any Subsidiary, or a merger or
consolidation of the Company, New ARC and/or any Subsidiary (an "Approved
Sale"), then, so long as all of the Stockholders, and such Selling Stockholders
receive consideration having the same pro rata value for ARC Holdings Common
Stock of the same class and Equity Securities exercisable or convertible for the
same class of ARC Holdings Common Stock (less equitable adjustments for
differences in exercise prices, etc., determined taking into account the assumed
conversion referred to above) in connection therewith, each Stockholder agrees
to vote in favor thereof and will use its best efforts (including, in the case
of the Financial Sponsors, granting any necessary consent under their respective
Investment Agreements) to cooperate in the Approved Sale and will take all
necessary and desirable actions in connection with the
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consummation of the Approved Sale as are reasonably requested by the Selling
Stockholders.
2.4 Section Tag-Along Rights. At least ten (10) business days prior to the
Transfer (in one or a series of Transfers) by one or more Financial Sponsors to
a Third-Party Purchaser (other than a Financial Sponsor) of ARC Holdings Common
Stock representing 40% or more of the then outstanding ARC Holdings Common Stock
(other than pursuant to a public sale, or pursuant to Section 2.2 or 2.3 above),
each such Selling Stockholder shall deliver a written notice to each other party
to this Agreement, specifying in reasonable detail the identity of the
prospective transferee(s), the class and number of Selling Stockholder shares to
be Transferred, and the other material terms and conditions of such contemplated
Transfer. Each recipient of such notice (excluding the Company) may elect to
participate in such contemplated Transfer by delivering written notice to the
Selling Stockholders within five (5) business days after its receipt of the sale
notice. If any of the recipients of such notice elect to participate in such
Transfer, each of the parties who properly have elected to participate in such
sale shall be entitled to sell in such contemplated Transfer, at the same price
and on the same terms, a number of shares of ARC Holdings Common Stock equal to
the product of (x) the quotient determined by dividing the percentage of ARC
Holdings Common Stock owned by such Stockholder by the aggregate percentage of
ARC Holdings Common Stock owned by the Stockholders participating in such
contemplated Transfer and (y) the aggregate number of shares of ARC Holdings
Common Stock to be sold in such contemplated Transfer. Each Stockholder
Transferring ARC Holdings Common Stock pursuant to this Section shall pay its
pro rata share (based on the number of shares of ARC Holdings Common Stock to be
sold) of the expenses incurred by the Stockholders in connection with such
Transfer and shall take all necessary and desirable actions as directed by the
initial Selling Stockholder in connection with the consummation of such
Transfer, including without limitation executing the applicable purchase and
sale documents.
2.5 Section Financial Sponsor's Right of First Offer for Preferred Stock.
(1) In the event that the Financial Sponsors do not unanimously agree to permit
the Transfer of Preferred Stock among or between Financial Sponsors, then if a
Financial Sponsor (a "Preferred Stock Offeror") desires to Transfer any or all
of its Preferred Stock (collectively, the "Preferred Offered Securities"), to
any Third-Party Purchasers, such Preferred Stock Offeror shall first notify
Company and each of the Financial Sponsors (other than the Preferred Stock
Offeror) in writing of its desire to Transfer Preferred Offered Securities, the
number of Preferred Offered Securities and the proposed purchase price (whether
payable in cash, other securities or other property) and other terms of Transfer
("Preferred Stock Offeror's Transfer Notice"). Upon receipt of Preferred Stock
Offeror's Transfer Notice, the other Financial Sponsors shall have a right to
purchase (exercisable by written notice to Preferred Stock Offeror within 10
days after receipt of Preferred Stock Offeror's Transfer Notice) all, and not
less than all, of the Preferred Offered Securities at the purchase price (or the
cash equivalent thereof in the case of securities or other property) and the
other terms specified in Preferred Stock Offeror's Transfer Notice. Upon
delivery of the Preferred Stock Offer's Transfer Notice, the offer made therein
to the other Financial Sponsors shall be irrevocable unless and until the right
to purchase provided for in this Section 2.5 have been waived or shall have
expired in accordance with this Agreement.
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(2) If the total number of Preferred Offered Securities that the Financial
Sponsors desire to purchase in the aggregate exceeds the aggregate number of
Preferred Offered Securities that are the subject of Preferred Stock Offeror's
Transfer Notice, each Financial Sponsor shall have the right to purchase a
number of Preferred Offered Securities equal to the product of (A) the aggregate
number of Preferred Offered Securities that are the subject of Preferred Stock
Offeror's Transfer Notice, multiplied by (B) a fraction, (x) the numerator of
which is equal to the number of shares of Preferred Stock held by such Financial
Sponsor and (y) the denominator of which is total number of shares of Preferred
Stock held by the Financial Sponsors participating herein; provided, however,
that if a Financial Sponsor does not exercise all or part of its right to
purchase Preferred Offered Securities pursuant to this Section 2.5(2), then the
other Financial Sponsors shall have the right to purchase all or any part of the
Preferred Offered Securities not purchased by such Financial Sponsors.
(3) If any Financial Sponsor desires to purchase the Preferred Offered
Securities hereunder, such Financial Sponsor will give written notice thereof to
the Preferred Stock Offeror and to the other Financial Sponsors, stating the
number of Preferred Offered Securities such Financial Sponsor desires to
purchase, within 10 days following receipt by the Financial Sponsor of the
Preferred Stock Offeror's Transfer Notice. The failure by any Financial Sponsor
to respond within the time periods set forth in this Section 2.5 shall be deemed
to be a rejection of such offer made pursuant to the Preferred Stock Offeror's
Transfer Notice by such Financial Sponsor.
(4) All Financial Sponsors who agree to purchase Preferred Offered Securities
pursuant to this Section 2.5 will have the further right to purchase, within a
10-day period following the expiration of the 10-day period set forth in Section
2.5 any Preferred Offered Securities remaining unpurchased at the end of the
expiration of such 10-day period set forth in Section 2.5, in proportion to the
amount purchased by each such Financial Sponsor as a percentage of the total
Preferred Offered Securities purchased by all such Financial Sponsors, by giving
written notice of such intention to purchase to the Preferred Stock Offeror and
the other participating Financial Sponsors within 10 days following the
expiration of the 10-day period set forth in Section 2.5. Notwithstanding the
foregoing, the Financial Sponsors may mutually agree to allocate the available
Preferred Offered Securities among themselves in any proportion; provided,
however, that under all circumstances that in order to exercise the right to
purchase the Preferred Offered Securities hereunder all, and not less than all,
of the Preferred Offered Securities are purchased under this Section 2.5.
(5) In the event that Company and/or Financial Sponsors do not exercise their
rights to purchase all, and not less than all, of the Preferred Offered
Securities pursuant to Section 2.5 hereof, Preferred Stock Offeror may Transfer
all, but not less than all, of the Preferred Offered Securities to a
transferee(s) at a price (including the form of payment, e.g., cash, other
marketable Securities or other property) and on other terms no more favorable to
Preferred Stock Offeror than those specified in Preferred Stock Offeror's
Transfer Notice anytime during the 90 day period immediately following the
expiration of the 10 or 20 day period, as the case may be, provided in Sections
2.5 (or such longer period as may be required to comply with the HSR Act. Any
Preferred Offered Securities subject to this Section 2.5 which are not
transferred within the foregoing period shall be subject to the provisions of
this Section 2.5 again with respect to any subsequent Transfer.
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(6) The closing of the purchase of Preferred Offered Securities by the Financial
Sponsors shall be held at the principal office of the Company or at such other
location as the purchasing Financial Sponsors agree, at 11:00 a.m. local time,
no later than the twentieth (20th) business day after the acceptance of the
Preferred Offered Securities pursuant to this Section 2.5, or at such other time
as the parties may agree. The sale of the Preferred Offered Securities to the
Financial Sponsors hereunder shall otherwise be on customary terms and
conditions (but in any event in accordance with the terms of the Preferred Stock
Offeror's Transfer Notice).
2.6 Section Conditions to Transfers. In addition to all other terms and
conditions contained in this Agreement, and unless waived in writing by the
Financial Sponsors holding more than 50% of the ARC Holdings Common Stock held
by all Financial Sponsors, no Transfers of any Equity Securities of the Company
to which the provisions of Article II would apply shall be completed or
effective for any purpose (and, no new Equity Securities of the Company shall be
issued to any Person) unless prior thereto:
(1) The transferor shall have provided to the Company and each Financial Sponsor
(i) at least five (5) business days' prior notice of such Transfer, (ii) a
transferor's certificate delivered with such notice, containing a statement that
such Transfer is permitted under this Article II, together with such information
as is reasonably necessary for the recipient of such notice to determine whether
such Transfer is permitted under this Article II, and (iii) such other
information and documents as may be reasonably requested by the recipient of
such notice in order for it to make such determination.
(2) The transferee (or recipient of newly issued Equity Securities) of such
Equity Securities shall have executed and delivered to each recipient of such
notice an agreement satisfactory in form and substance to the Company and each
Financial Sponsor by which the transferee (or such recipient) shall become a
party to and be bound by all of the terms and provisions of this Agreement as if
such transferee (or such recipient) were the Transferor.
(3) If requested by the Company or any Financial Sponsor, the Company shall have
received a written opinion of counsel to the Company, at the transferring
Stockholder's expense, satisfactory in form and substance to the Company, to the
effect that (i) such Transfer would not violate the Securities Act or any state
securities or "blue sky" laws applicable to the Company or the Equity Securities
to be Transferred, (ii) such Transfer shall not impose liability or reporting
obligations on the Company or New ARC in any jurisdiction, whether domestic or
foreign, or result in the Company or New ARC becoming subject to the
jurisdiction of any court or governmental entity anywhere, other than the
states, courts and governmental entities in which the Company and/or New ARC are
then subject to such liability, reporting obligation or jurisdiction, and (iii)
such Transfer would not, individually or together with other concurrently
proposed Transfers, cause the Company to be regarded as an "investment company"
under the Investment Company Act of 1940, as amended.
2.7 Section Certain Other Transfers. Any Existing Stockholder and Employee
Stockholder who is an individual shall not be prohibited by this Agreement from
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Transferring unpledged Equity Securities to (i) such person's spouse, former
spouse, and descendants (whether natural or adopted), parents, and their
descendants and/or any spouse of the foregoing persons (collectively,
"Relatives") or (ii) the trustee, fiduciary or personal representative of such
person and any trust solely for the benefit of such person and/or such person's
Relatives; provided, however that any such Transfer must first comply with
Section 2.6. Each Financial Sponsor shall further be permitted to Transfer any
Equity Securities to any Affiliate or equity holder of such Financial Sponsor,
or to any other Financial Sponsor or Affiliate of any other Financial Sponsor,
subject only to Section 2.6 (and not to Sections 2.2, 2.3, 2.4 or 2.5 above);
provided, however, that in connection with any Transfer to any other Financial
Sponsor, all Financial Sponsors shall consent to such proposed Transfer.
2.8 Section Effect of Permitted Transfer. Upon consummation of any Transfer of
Equity Securities in accordance with the provisions of this Agreement (a
"Permitted Transfer"), the transferred Equity Securities shall continue to be
subject to all the provisions of this Agreement. No Transfer shall relieve the
transferor (or any of its Affiliates) of any of their obligations or liabilities
under this Agreement arising prior to the closing of the consummation of such
Permitted Transfer.
2.9 Section Tolling. All time periods specified in this Article II are subject
to reasonable extension for the purpose of complying with requirements of
applicable law or regulation
ARTICLE III
GOVERNANCE OF THE COMPANY
3.1 Section Board Nominees. The parties hereto shall take such action as shall
be necessary to establish and maintain the Board as a board of directors of no
fewer than seven (7) and no more than twelve (12) members (or such higher number
as is approved by holders of a majority of the outstanding shares of Preferred
Stock). For purposes of this Section and Sections 3.2 and 3.4, "Board" shall
also be deemed to refer to the board of directors or other governing body of any
direct or indirect Subsidiary. As long as either of EGI-ARC and TP hold Equity
Securities which, calculated on an "as converted" basis, represent 10% or more
of the ARC Holdings Common Stock, (1) each shall have the right, at its
discretion, to nominate three (3) Board members. Each of the Chief Executive
Officer of the Company, and the Chief Operating Officer of the Company
(following the retention thereof), shall also be nominated to the Board. The
Financial Sponsors shall also, in consultation with management members of the
Board, nominate three outside directors to the Board. All of the parties hereto
shall vote their shares in favor of the election of nominees for members of the
Board designated in accordance with this Section and shall use their best
efforts to cause the members so nominated to be elected as members of the Board.
In addition to the members of the Board nominated as provided above, Xxxx
Xxxxxxx shall be invited to serve as a non-voting advisory member of the
Company's board of directors, entitled to notice of, an opportunity to attend
and copies of materials provided to that board, except as the Board may
otherwise direct. Such invitation shall be extended to Xx. Xxxxxxx for a period
of one year from the date of this Agreement, subject to extension by the Board.
Notwithstanding anything to the contrary set forth in this Agreement, the
Financial Sponsors holding a majority of the outstanding Preferred Stock shall
have the right, and the other parties shall take all reasonable action
necessary, to increase the size of the Board and reallocate the rights to
designate nominees; provided, however, that no such modification shall (a)
reduce the number of Board seats available to
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members of management below two (2), (b) reduce the number of outside directors
below three (3), (c) alter the rights of EGI-ARC or TP set forth above without
that Person's consent, or (d) rescind the invitation extended to Xx. Xxxxxxx as
set forth above.
3.2 Section Removal; Replacement Directors. A member of the Board that is
nominated in the manner set forth in Section 3.1 may be removed in the sole
discretion of the Person(s) empowered to make such nomination, and each of the
parties hereto shall use its best efforts to cause the removal of such member of
the Board. In the event that any member of the Board nominated in the manner set
forth in Section 3.1 is unable to serve, or once having commenced to serve is
removed or withdrawn from the Board, such member's replacement shall be
nominated in the same manner, and by the same party, that the member that is
unable to serve, has withdrawn or is removed, was nominated by, or, in the case
of an officer of the Company, the nominee for such member's replacement shall be
the successor to such position. Each of the parties shall use its best efforts
to cause the election of such replacement member.
3.3 Section Proxy. If any of the Stockholders shall refuse to vote its shares
as provided in this Section 3 (or as required pursuant to and in furtherance of
the purposes of Sections 2.3(2), 4.5, and 4.7) at any meeting of stockholders of
the Company, or shall refuse to give its written consent in lieu of a meeting as
provided in this Section 3 (or in furtherance of the purposes of said Section
2.3(2), 4.5, and 4.7), thereupon, without further action by such Stockholder,
the holder of the largest number of shares of ARC Holdings Common Stock, in
consultation with all Financial Sponsors (the "Largest Holder") shall be, and
hereby is, irrevocably appointed the attorney-in-fact and proxy of such
Stockholder for the purpose of voting, and shall vote such shares at such
meeting as provided in this Article III or give such consent as provided in this
Article III, as the case may be. Such appointment is for an initial period of
nine (9) years, is coupled with an interest and shall survive the death,
incapacity, dissolution or bankruptcy of such Stockholder and shall extend to
its successors and assigns.
3.4 Section Reimbursement of Expenses. Each Director shall be reimbursed by the
Company for actual expenses incurred by such Director (or his representative in
the absence of such Director) in connection with attending meetings of the Board
or any committee thereof.
ARTICLE IV
CERTAIN OTHER AGREEMENTS OF THE PARTIES
4.1 Section Stock Certificate Legend. A copy of this Agreement shall be filed
with the Secretary of the Company and kept with the records of the Company. Each
certificate representing shares of ARC Holdings Common Stock or Preferred Stock
shall bear the following legends:
First Legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE
DISPOSED OF
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IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM THE ACT AND ALL
APPLICABLE STATE SECURITIES LAWS.
Second Legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF AND PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 5,
1998, AMONG ALLIED RISER COMMUNICATIONS HOLDINGS (THE "COMPANY") AND
THE STOCKHOLDERS NAMED THEREIN (AS SUCH AGREEMENT MAY BE SUPPLEMENTED,
MODIFIED, AMENDED OR RESTATED FROM TIME TO TIME, THE "STOCKHOLDERS
AGREEMENT") AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED (COLLECTIVELY "TRANSFERRED")
UNLESS AND UNTIL SUCH TRANSFER COMPLIES WITH THE STOCKHOLDERS
AGREEMENT, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE
COMPANY.
All of the parties hereto shall be bound by the requirements of such legends to
the extent that such legends are applicable. Upon request of any Stockholder who
is a party hereto, the Company shall remove the First Legend from the
certificate or issue to such Stockholder a replacement certificate without the
First Legend if, with such request, the Company shall have received an opinion
of counsel to such Stockholder reasonably acceptable to the Company and Largest
Holder to the effect that such legend is no longer necessary under the
Securities Act. All certificates representing shares of ARC Holdings Common
Stock and Preferred Stock shall be replaced, at the expense of the Company, with
certificates not bearing the Second Legend following the termination of this
Agreement at the expense of the Company, with certificates not bearing either of
the legends required by this Section 4.1 or upon the agreement of the Company
and Largest Holder that the Second Legend is no longer applicable.
4.2 Section Confidentiality.
(1) Nondisclosure. During the term of this Agreement and thereafter, each party
hereto agrees to hold all Confidential Information received by it in strictest
confidence. The receiving party shall not copy such Confidential Information
without permission. The receiving party shall not disclose such Confidential
Information to anyone except employees, consultants and subcontractors of the
receiving party to whom disclosure is necessary for the purposes set forth in
this Agreement. The receiving party shall appropriately notify each such
recipient that the disclosure is made in confidence and must be kept in
confidence in accordance with this Agreement. The obligations set forth herein
shall be satisfied by each party through the exercise of the same degree of care
used to restrict disclosure and use of its own information of like importance.
(2) Required Disclosure. If any party is requested to disclose any Confidential
Information of another party by any federal, state, local or foreign court or
legislative, executive or regulatory agency, such party will promptly notify the
disclosing party to permit it to seek a protective order or take other action
that the disclosing party in its discretion deems appropriate, and the receiving
party will cooperate in any such efforts to obtain a protective order or other
reasonable assurance that confidential treatment will be
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accorded such Confidential Information. If, in the absence of a protective
order, a receiving party is compelled as a matter of law to disclose any such
Confidential Information in any proceeding or pursuant to legal process, such
party may disclose to the person compelling disclosure only the part of such
Confidential Information as is required by law to be disclosed (in which case,
prior to such disclosure, such party will advise and, if requested by the
disclosing party consult with the disclosing party and its counsel as to such
disclosure and the nature and wording of such disclosure), and such receiving
party will use its reasonable best efforts to obtain confidential treatment
therefor.
(3) Return of Confidential Information. All copies of Confidential Information
in written, graphic or other tangible form shall be returned to the disclosing
party within sixty (60) days following termination of this Agreement or upon the
disclosing party's written request.
(4) Limitation. The obligations imposed in this Section 4.2 shall not apply to
any information that:
(1) is already in the possession of the receiving party (other than in
connection with due diligence attendant to such Person's investment in
the Company or any predecessor thereto), is independently developed by
the receiving party, or is or becomes publicly available through no
fault of the receiving party;
(2) is obtained by the receiving party from a third person who is
under no obligation of confidence to the party whose Confidential
Information is disclosed;
(3) is disclosed without restriction by the disclosing party; or
(4) is required to be disclosed by law, regulation, legal process or
order of any court or governmental body having jurisdiction.
(5) Indemnification. Each party shall indemnify each other party for any loss,
damage, liability, claims and expenses incurred, suffered or sustained by any of
them as a result of any breach by such party of this Section 4.2
(6) Survival. The requirements of use and confidentiality set forth in this
Section 4.2 shall survive the expiration, termination or cancellation of this
Agreement.
4.3 Section D&O Insurance. The Company hereby agrees to pay up to $50,000 per
year through the third anniversary of the effective date of this Agreement, for
application towards insurance premiums and deductibles for insurance coverage
obtained by the Company's Chief Financial Officer and designed to protect
officers and directors of predecessors to the Company for actual or alleged
actions and omissions prior to the date of this Agreement.
4.4 Section Stock Options. Promptly following the date of this Agreement, the
Company shall work to prepare and implement a stock option and/or ownership
plan, pursuant to which ARC Holdings could issue shares of ARC Holdings Common
Stock, constituting approximately 10% of its issued and outstanding common
stock, on a fully diluted basis (not taking into account conversion of any
Preferred Stock), or options
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exercisable for such stock, to employees of ARC Holdings and New ARC. Such plan,
and awards thereunder, would be subject to Board approval.
4.5 Section Authorized Common Stock and Preferred Stock. Each party to this
Agreement agrees to take and cause to be taken all actions necessary to cause
the Company to comply with the Company's obligations under the applicable
Section of the Investment Agreements between the Company and each Financial
Sponsor, pursuant to which the Company is obligated to cause an adequate
quantity of Preferred Stock and ARC Holdings Common Stock to be authorized and
available for issuance to satisfy the Company's obligation to all current and
future Financial Sponsors.
4.6 Section New Financial Sponsors. Holders of a majority of the outstanding
shares of Preferred Stock shall have the right to designate any purchaser of
newly issued Preferred Stock (or any new series of preferred stock) as a
"Financial Sponsor" by written notice to the Company, whereupon each such
designated Person shall be a Financial Sponsor for all purposes of this
Agreement, entitled to all of the rights and subject to all of the obligations
attendant hereunder to that status.
4.7 Section Qualifying Recapitalization. In the event of a Qualifying
Recapitalization (as defined in the Certificate of Incorporation) as a result of
which the Company receives consideration consisting substantially of cash and/or
securities, each party hereto agrees to vote all shares of ARC Holdings Common
Stock controlled by such Person in order to effect a liquidating distribution
thereof.
4.8 Section Amendment to Certificate of Incorporation. Each party agrees to
refrain from voting ARC Holdings Common Stock in favor of any amendment to the
terms of the Preferred Stock as set forth in the Certificate of Incorporation if
such amendment would adversely impact the rights of the ARC Holdings Common
Stock.
ARTICLE V
MISCELLANEOUS
5.1 Section Further Assurances. Each party agrees to execute, acknowledge,
deliver, file and record such further certificates, amendments, instruments and
documents, and to do all such other acts and things, as may be required by law
or as may be necessary or advisable to carry out the intent and purposes of this
Agreement.
5.2 Section Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) when
transmitted by telecopy (with an acknowledgment of receipt) or personally
delivered on a business day during normal business hours, (b) on the business
day following the date of dispatch by overnight courier or (c) on the fifth
(5th) business day following the date of mailing by registered or certified
mail, with postage prepaid, return receipt requested, in each case addressed to
an Existing Stockholder at such Existing Stockholder's address shown on Schedule
1, or to the Company, EGI-ARC or the Financial Sponsors at the addresses set
forth below, or in any such case to such other address as the Company or any
party hereto shall have last designated to the other parties by notice given in
accordance with this Section 5.2; provided; however, that a notice of a change
of address shall not be deemed to have been given until actually received by the
addressee.
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(1) Notice Address for the Company:
Allied Riser Communications Holdings, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: President
and:
Allied Riser Communications Holdings, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxx & Xxxxxxx, LLP
000 X. Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
(2) Address for EGI-ARC:
EGI-ARC Investors, L.L.C.
c/o EGI Corporate Investments
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000)000-0000
(000)000-0000
Attention: Xxxxxx X. Xxxxxxxxxxx
Xxxxxxx Xxxxx
with a copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxx Xxxxxxxxx
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(3) Address for TP:
Telecom Partners II, L.P.
0000 Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Holland & Xxxx LLP
000 Xxxxxxxxxxx Xx.
Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
5.3 Section Amendments. Except as otherwise provided in this Agreement, this
Agreement may be amended, and, except as provided in the next sentence, the
observance of any term hereof may be waived, only by a written instrument signed
by (i) the Company, (ii) holders of not less than fifty percent (50%) of the
outstanding Preferred Stock, and (iii) Stockholders holding not less than fifty
percent (50%) of the total number of shares of ARC Holdings Common Stock and ARC
Holdings Common Stock Equivalents then held by all Stockholders; provided that
if any amendment is not unanimously approved by all of the Existing Stockholders
and Employee Stockholders, any changes set forth in such amendment must apply in
the same manner to all Existing Stockholders and Employee Stockholders in their
capacities as such. Notwithstanding the preceding sentence, the observance or
nonobservance of any term hereof by one or more of the Existing Stockholders and
Employee Stockholders may be waived only by written instrument signed by the
Company and holders of not less than fifty percent (50%) of the outstanding
Preferred Stock. Sections 2.2(1), 2.4, 2.7, 4.7, 4.8 and this Section 5.3 may be
amended, and the observance of any term of any such section may be waived, only
by a written instrument signed by the (i) holders of more than 50% of the
outstanding Preferred Stock, and (ii) holders of more than 50% of the
outstanding ARC Holdings Common Stock held by Persons who neither own, nor are
Affiliates of Persons who own, Preferred Stock.
5.4 Section Additional Securities Subject to Agreement. Each Stockholder agrees
that any Equity Securities which it shall hereafter acquire by means of a stock
split, stock dividend, distribution, grants of stock options or restricted
stock, exercise of preemptive rights or anti-dilution protections if applicable,
including, without limitation, any Equity Securities issued pursuant to the
exercise of certain pre-emptive and anti-dilution rights contained in Company
employment agreements with any Employee Stockholders, and Company Investment
Agreements existing on the date hereof, or entered into by the Company with
Board approval in the future, or otherwise (other than pursuant to a public
offering) shall be subject to the provisions of this Agreement to the same
extent as if held on the date hereof.
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5.5 Section Inconsistent Agreements. None of the parties shall enter with any
Person into any agreement or other arrangement of any kind which is inconsistent
with the provisions of this Agreement or which may impair its ability to comply
with this Agreement.
5.6 Section Successors, Assigns and Transferees. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their permitted transferees and their respective successors, each of
which permitted transferees shall agree in a writing in form and substance
satisfactory to the Company, to become a party hereto and to be bound to the
same extent as its transferor hereby, provided that (i) no Existing Stockholder
may assign to any permitted transferee any of its rights and obligations
hereunder other than in connection with a Transfer to such permitted transferee
of Equity Securities in accordance with the provisions of this Agreement, and
(ii) each Financial Sponsor shall be entitled to assign or delegate, as the case
may be, any of its rights and obligations hereunder to a transferee of any
Equity Securities by such Financial Sponsor.
5.7 Section Severability. Each provision of this Agreement shall be considered
severable and if for any reason any provision which is not essential to the
effectuation of the basic purposes of this Agreement is determined by a court of
competent jurisdiction to be invalid, unenforceable or contrary to existing or
future applicable law, such invalidity, unenforceability or illegality shall not
impair the operation of or affect those provisions of this Agreement which are
valid, enforceable and legal. In that case, this Agreement shall be construed to
the minimum extent necessary so as to limit any term or provision to the minimum
extent necessary so as to make it valid, enforceable and legal within the
requirements of any applicable law, and, in the event such term or provision
cannot be so limited, this Agreement shall be construed to omit such invalid,
unenforceable or illegal provisions.
5.8 Section Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, when taken together,
shall constitute one and the same agreement.
5.9 Section Governing Law. This Agreement shall be governed by the laws of the
State of Delaware (other than its rules of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby).
5.10 Section Consent to Jurisdiction and Service of Process; Appointment of
Agent for Service of Process. The parties hereto each hereby consent to the
jurisdiction of any state or federal court located within the State of Delaware
and irrevocably agree that all actions or proceedings arising out of or relating
to this Agreement shall be litigated in such courts. Each of the parties hereto
accepts for itself and in connection with its respective properties, generally
and unconditionally, the exclusive jurisdiction and venue of the aforesaid
courts and waives any defense of forum non conveniens, and irrevocably agrees to
be bound by any nonappealable judgment rendered thereby in connection with this
agreement.
5.11 Section Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
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5.12 Section Entire Agreement; Nonwaiver. This Agreement supersedes all prior
agreements between the parties with respect to the subject matter hereof and
contains the entire agreement between the parties with respect to such subject
matter. No delay on the part of any party in exercising any right hereunder
shall operate as a waiver thereof, nor shall any waiver, express or implied, by
any party of any right hereunder or of any failure to perform or breach hereof
by any other party constitute or be deemed a waiver of any other right hereunder
or of any other failure to perform or breach hereof by the same or any other
party, whether of a similar or dissimilar nature.
5.13 Section Term; Termination. This Agreement shall become effective on the
date hereof and shall continue in effect until terminated by upon a Qualifying
Public Offering or at the election of each Financial Sponsor and holders of 50%
or more of the ARC Holdings Common Stock (excluding the Preferred Stock and ARC
Holdings Common Stock Equivalents); provided, however, that Sections 4.2, 4.3
and 4.5 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ALLIED RISER COMMUNICATIONS HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
EGI-ARC INVESTORS, L.L.C.
By:
-----------------------------------
Name:
Title:
TELECOM PARTNERS II, L.P.
By:
-----------------------------------
Name:
Title:
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
--------------------------------------
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[Spouse, if applicable]
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