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EXHIBIT 10.2
SECURITYHOLDERS AGREEMENT
THIS SECURITYHOLDERS AGREEMENT (this "Agreement") is made as
of August 13, 1997, by and among Transcend Telecom, L.L.C., a Delaware limited
liability company (the "LLC"), Transcend Telecom, Inc., a Delaware corporation
(the "Company"), the Investor Members, and the Management Members. The
Investor Members, the Management Members, and any holders of Securityholder
Securities that from time to time become party hereto after the date hereof in
accordance with the terms of this Agreement are referred to herein collectively
as the "Securityholders" and individually as a "Securityholder." Capitalized
terms used but not otherwise defined herein are defined in paragraph 8 hereof.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Representations and Warranties. Each Securityholder
represents and warrants that (i) such Securityholder is the beneficial owner of
the number of Securityholder Securities set forth opposite its name on the
Schedule of Securityholders attached hereto and (ii) this Agreement has been
duly authorized, executed and delivered by such Securityholder and constitutes
the valid and binding obligation of such Securityholder, enforceable in
accordance with its terms.
2. Restrictions on Transfer of Management Securities.
Each Management Member and its transferees accepts, acknowledges, and agrees
that the Management Securities held by such Management Member and its
transferees are subject to significant restrictions on transfer, repurchase
options, and certain other agreements set forth in the Executive Purchase
Agreement to which such Management Member is a party.
3. Restrictions on Transfer of Investor Securities.
(a) Retention of Investor Securities.
(i) No holder of Investor Securities shall sell,
transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in any Investor Securities (a
"Transfer") at any time prior to the first anniversary of the date
hereof, except pursuant to (A) a Sale of the Company, (B) a Permitted
Transfer, or (C) the repurchase provisions set forth in the LLC
Agreement.
(ii) No holder of Investor Securities shall
Transfer any Investor Securities at any time on or after the first
anniversary of the date hereof, except pursuant to (A) a Sale of the
Company, (B) a Public Sale, (C) a Permitted Transfer, (D) the
repurchase provisions of the LLC Agreement, (E) the put provisions set
forth in this Agreement, or (F) the provisions of paragraphs 3(b) and
(c) hereof.
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(b) First Refusal Rights.
(i) At least 30 days prior to any Transfer of
Investor Securities (except pursuant to (A) a Sale of the Company, (B)
a Public Sale, (C) the repurchase provisions of the LLC Agreement, (D)
the put provisions set forth in this Agreement, or (E) a Permitted
Transfer), the Securityholder desiring to make such Transfer (the
"Transferring Securityholder") shall deliver a written notice (the
"Offer Notice") to each holder of Investor Securities, specifying in
reasonable detail the identity of the prospective transferee(s), the
number and type of Investor Securities to be transferred (the "Offered
Securities") and the price and other terms and conditions of the
proposed Transfer. The Transferring Securityholder shall not
consummate such proposed Transfer until at least 30 days after the
delivery of the Offer Notice, unless the parties to the Transfer have
been finally determined pursuant to this paragraph 3 prior to the
expiration of such 30-day period (the date of the first to occur of
such delivery or such final determination is referred to herein as the
"Authorization Date").
(ii) Each holder of Investor Securities may elect
to purchase all (but not less than all) of such holder's Pro Rata
Share of the Offered Securities at the price and on the other terms
set forth in the Offer Notice, by delivering written notice of such
election to the Transferring Securityholder within 20 days after
delivery of the Offer Notice. Any Offered Securities not elected to
be purchased by the end of such 20- day period shall be reoffered by
the Transferring Securityholder for the immediately following 10-day
period on a pro rata basis to the holders of Investor Securities who
have elected to purchase their Pro Rata Share. For purposes of this
paragraph, the "Pro Rata Share" of each holder of Investor Securities
shall be equal to the quotient of (x) the number of Investor
Securities then held by such holder, divided by (y) the aggregate
number of Investor Securities held by all holders of Investor
Securities (other than the Transferring Securityholder).
(iii) If the holders of Investor Securities have
elected to purchase all of the Offered Shares from the Transferring
Securityholder, such purchase shall be consummated as soon as
practicable after the delivery of the election notice(s) to the
Transferring Securityholder, but in any event within 30 days after the
Authorization Date. Notwithstanding any other provision hereof, in
the event that the sale price, or any portion thereof, for the Offered
Securities is not payable in the form of cash at closing or cash
payable on a defined basis (such as pursuant to simple promissory
notes issued by the prospective purchaser described in the Offer
Notice), each holder of Investor Securities electing to purchase
Offered Securities pursuant to this paragraph shall be required to pay
only such portion, if any, of the sale price described in the Offer
Notice as consists of such cash consideration, and delivery of such
consideration to the Transferring Securityholder shall be payment in
full for such Offered Securities.
(iv) If the holders of Investor Securities do not
elect, in the aggregate, to purchase all of the Offered Securities
from the Transferring Securityholder, all elections to
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purchase such Offered Securities shall be null and void, and the
Transferring Securityholder shall have the right, within the 90 days
following the Authorization Date and subject to the provisions of
subparagraph 3(c) below, to transfer such Offered Securities to the
transferee(s) specified in the Offer Notice in the amounts specified
in the Offer Notice at a price not less than the price per security
specified in the Offer Notice and on other terms no more favorable to
the transferee(s) thereof than specified in the Offer Notice. Any
Investor Securities not so transferred within such 90-day period shall
be reoffered to the holders of Investor Securities pursuant to this
paragraph 3(b) prior to any subsequent Transfer.
(c) Participation Rights.
(i) Any holder of Investor Securities not
purchasing any Offered Securities pursuant to paragraph 3(b) above may
elect to participate in any sale of Offered Securities pursuant to
subparagraph 3(b)(iv) above (and only in sales pursuant to such
subparagraph) at the same price and on the same terms applicable to
the Transferring Securityholder by giving written notice of such
election to the Transferring Securityholder within 30 days after
delivery of the Offer Notice. In the event that the number of Offered
Securities to be transferred in the transaction described in the Offer
Notice (or, if such transaction is part of a group of related
transactions, the aggregate number of Investor Securities to be
transferred pursuant to subparagraph 3(b)(iv) hereof in all such
related transactions) is equal to at least 50% of the aggregate number
of Investor Securities then outstanding, (A) the Offer Notice shall
promptly be delivered to the holders of Vested Securities, and (B)
each holder of Vested Securities may elect to participate in such sale
of Offered Securities pursuant to subparagraph 3(b)(iv) at the same
price and on the same terms applicable to the Transferring
Securityholder by giving written notice of such election to the
Transferring Securityholder within 15 days after such delivery of the
Offer Notice.
(ii) Each holder of Investor Securities electing
to participate in such Transfer shall be entitled to sell in the
contemplated Transfer a number of Investor Securities equal to the
product of (x) the number of Offered Securities to be sold in the
contemplated Transfer, times (y) a fraction, the numerator of which is
the number of Investor Securities held by such holder, and the
denominator of which is the aggregate number of Investor Securities
(and, if any holder of Vested Securities has elected to participate in
such Transfer, Vested Securities) held by the Transferring
Securityholder and all other Securityholders electing to participate
in such Transfer. Each holder of Vested Securities electing to
participate in such Transfer shall be entitled to sell in the
contemplated Transfer a number of Vested Securities equal to the
product of (x) the number of Offered Securities to be sold in the
contemplated Transfer, times (y) a fraction, the numerator of which is
the number of Vested Securities held by such holder, and the
denominator of which is the aggregate number of Investor Securities
and Vested Securities held by the Transferring Securityholder and all
other Securityholders electing to participate in such Transfer.
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(iii) Each Transferring Securityholder shall use
best efforts to obtain the agreement of the prospective transferee(s)
to the participation of the electing Securityholders in any
contemplated Transfer and to the inclusion (if requested by any such
holder) of any Investor Securities (and, if applicable, Vested
Securities) held by such holder in the contemplated Transfer, and no
Transferring Securityholder shall transfer any of its Investor
Securities to any prospective transferee(s) unless (A) such
prospective transferee(s) agree to allow the participation of all
electing Securityholders and to the inclusion of the Investor
Securities (and, if applicable Vested Securities) held by such
holders, or (B) the Transferring Securityholder purchases from each
electing Securityholder the same number of securities (at the same
price and on the same terms) that such participating Securityholder
would have been entitled to sell had the prospective transferee(s) so
agreed.
(iv) Each Securityholder transferring shares
pursuant to this paragraph 3(c) shall pay its pro rata share (based on
the number of Securityholder Shares to be transferred by such
Securityholder) of the expenses incurred by the Securityholders in
connection with such transfer and shall be obligated to participate
severally on a pro rata basis (based on the number of Securityholder
Shares to be sold) in any indemnification or other obligations that
the Transferring Securityholder agrees to provide in connection with
such transfer (other than any such obligations that relate solely to a
particular Securityholder, such as indemnification with respect to
representations and warranties given by a Securityholder regarding
such Securityholder's title to and ownership of Securityholder Shares,
in respect of which only such Securityholder shall be liable);
provided that no holder shall be obligated in connection with such
Transfer to agree to indemnify or hold harmless the transferees with
respect to an amount in excess of the net cash proceeds paid to such
holder in connection with such Transfer.
(v) For purposes of this paragraph (c), each
holder of Vested Securities shall be deemed the holder of the number
of Vested Securities determined assuming the consummation of the sale
of Offered Securities pursuant to subparagraph 3(b)(iv) above;
provided that in the event such transaction is not consummated nothing
herein shall be construed to cause any such securities to become
"vested" other than in accordance with the provisions of the Executive
Purchase Agreement to which each such holder is a party.
(d) Permitted Transfers. For purposes of this Agreement,
a "Permitted Transfer" shall mean any Transfer of Investor Securities (i) to an
Affiliate of the transferor, (ii) to any Person acquiring all or substantially
all of the transferor's portfolio investments, or (iii) to any Person whose
association with the LLC and the Company would, in the good faith judgment of
the holders of a majority of the Investor Securities, be beneficial to the LLC
and the Company by virtue of such Person's experience, expertise, or knowledge
in the telecommunications services industry or related industries; provided
that in each case the restrictions, conditions, and obligations contained in
this Agreement, the Stock Purchase Agreement, and (if applicable) the LLC
Agreement shall continue to be applicable to such Investor Securities after any
such Permitted Transfer, and the transferee(s) of such Investor Securities
shall have agreed in writing to be bound by the provisions of such
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agreements; and provided further that the Investor Securities transferred
pursuant to clause (iii) hereof shall not exceed, in the aggregate, 10% of the
total Investor Securities held by all Investor Members on the date hereof; and
provided further that each Investor Member shall have the right to participate
in any Transfer pursuant to clause (iii) hereof pro rata, based on the number
of Investor Securities held by each such Investor Member on the date of such
Transfer.
(e) Termination of Restrictions. The restrictions on the
Transfer of Investor Securities set forth in this paragraph 3 shall continue
with respect to each such Investor Security (and shall survive any transfer
thereof) until the earliest to occur of (A) the date on which such Investor
Security has been transferred in a Public Sale, (B) a Sale of the Company, or
(C) the consummation of a Public Offering.
4. Sale of the Company.
(a) Securityholders Obligation. Subject to the approval
rights granted to Holland under the LLC Agreement and to the LLC (and, upon the
LLC's dissolution, to certain holders of the Company's securities) under the
Stock Purchase Agreement, if at any time the LLC (or, after the dissolution or
liquidation of the LLC, the holders of Investor Securities (acting in their
capacity as shareholders of the Company) entitled to designate a majority of
the Investor Directors under the terms of the Stock Purchase Agreement)
approves a Sale of the Company (an "Approved Sale"), each Securityholder shall
vote for, consent to and raise no objections against such Approved Sale. If
the Approved Sale is structured (i) as a merger or consolidation, each
Securityholder shall waive any dissenters rights, appraisal rights or similar
rights in connection with such merger or consolidation or (ii) as a sale of
stock, each Securityholder shall agree to sell all of such Securityholder's
shares of the Company's capital stock on the terms and conditions approved by
the LLC (or, after the dissolution or liquidation of the LLC, the holders
entitled to designate a majority of the Investor Directors under the Stock
Purchase Agreement). Each holder of Securityholder Securities shall take all
necessary or desirable actions in connection with the consummation of the
Approved Sale as requested by the Company.
(b) Conditions to Obligation. The obligations of the
Securityholders with respect to the Approved Sale of the Company are subject to
the satisfaction of the following conditions: (i) upon the consummation of the
Approved Sale, each holder of a class of the Company's capital stock shall
receive the same form of consideration and the same amount of consideration for
each share of such class of capital stock to be sold in such Approved Sale, and
(ii) if any holders of a class of the Company's capital stock are given an
option as to the form and amount of consideration to be received, each holder
of such class of capital stock shall be given the same option.
(c) Public Offering. Subject to the approval rights
granted to Holland under the LLC Agreement and to the LLC (and, upon the LLC's
dissolution, to certain holders of the Company's securities) under the Stock
Purchase Agreement, in the event that the LLC (or, after the dissolution or
liquidation of the LLC, the holders of Investor Securities entitled to
designate a majority of the Investor Directors under the Stock Purchase
Agreement) approves an initial Public
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Offering, the Stockholders shall take all reasonable actions in connection with
the consummation of such Public Offering as requested by the LLC (or after the
dissolution or liquidation of the LLC, the holders of Investor Securities
entitled to designate a majority of the Investor Directors under the Stock
Purchase Agreement).
(d) Termination. The provisions of this paragraph 4
shall terminate upon the completion of a Sale of the Company.
5. Put Provisions.
(a) Put Right.
(i) At any time and from time to time on or after
the seventh anniversary of the date hereof, but not after the
consummation of a Public Offering or a Sale of the Company, each
Securityholder shall have the right to require the LLC to repurchase
all (but not less than all) of the outstanding Securityholder
Securities held by such holder at the Repurchase Price (as defined
below) by giving written notice to the LLC of such holder's exercise
of this right (the "Exercise Notice").
(ii) Within 10 days after receipt of an Exercise
Notice, the LLC shall give written notice (the "Repurchase Notice") to
each other Securityholder, setting forth the identity of the
Securityholder tendering such Exercise Notice, the number of shares of
Securityholder Securities to be repurchased from such Securityholder,
and a reasonable approximation of the fair market value of the LLC's
assets and of each Securityholder Security at the time of such
Repurchase Notice. Each other Securityholder shall be entitled to
join in such repurchase and require the LLC to purchase all (but not
less than all) of the Securityholder Securities held by such holder at
the same closing, at the same price, and on the same terms as the
Securityholder tendering the Exercise Notice by giving Exercise Notice
within 20 days after the date of the Repurchase Notice.
(iii) Promptly (but in any event within three
business days after the end of this 20-day period), the LLC shall send
each Securityholder written notice updating the information contained
in the Repurchase Notice (the "Revised Repurchase Notice"). Upon the
delivery of the Revised Repurchase Notice, the LLC, the holders of a
majority of the Investor Securities to be repurchased (if any) and the
holders of a majority of the Management Securities to be repurchased
(if any) shall in good faith determine the Repurchase Price as
provided hereunder, and (subject to the provisions hereof) within ten
days after the determination of the Repurchase Price, the LLC shall
purchase and such holders shall sell the number of Securityholder
Securities specified in the Revised Repurchase Notice at a mutually
agreeable time and place.
(b) Duties of the LLC. The LLC shall do everything
within its power (including, without limitation, (i) causing the Company to
assume or refinance debt, obtain waivers or consents
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from its lenders, or declare and pay dividends to the LLC or repurchase Company
securities from the LLC, (ii) distributing Preferred Stock or Common Stock of
the Company to the putting Stockholders and causing the Company to repurchase
or redeem such Company stock, and (iii) causing a Public Offering,
recapitalization, or Sale of the Company to occur)) in order to satisfy its
repurchase obligations under this Section 5.
(c) Repurchase Price.
(i) The repurchase price for each Securityholder
Security repurchased by the LLC under this paragraph 5 (the
"Repurchase Price") shall be equal to the greater of the Original Cost
Value for such security and the Fair Market Value for such security.
(ii) The "Original Cost Value" for any
Securityholder Securities constituting Units shall be equal to the
aggregate Basic Contributions made to the LLC with respect to such
Units (together with interest thereon calculated at the same rate and
in the same manner as dividends are accrued on the Preferred Stock
under the Certificate of Incorporation). The "Original Cost Value"
for any Securityholder Securities constituting Preferred Stock shall
be equal to the Liquidation Value of such Preferred Stock (together
with all accrued and unpaid dividends thereon) as of the date of
valuation as calculated under the Certificate of Incorporation. The
"Original Cost Value" for any Securityholder Securities constituting
Common Stock shall be equal to what the Original Cost Value for the
Preferred Stock that was converted into such Common Stock would have
been as of the date of valuation if such Preferred Stock had never
been so converted.
(iii) The "Fair Market Value" for any
Securityholder Securities to be repurchased under this paragraph 5
shall be determined as follows:
(A) The LLC, the holders of a majority
of the Investor Securities to be repurchased (if any) and the
holders of a majority of the Management Securities to be
repurchased (if any) shall attempt in good faith to agree on
the Fair Market Value of the Securityholder Securities to be
repurchased. Any agreement reached by such Persons shall be
final and binding on all parties hereto.
(B) If such Persons are unable to reach
such agreement within 20 days of the commencement of such
negotiation, the Fair Market Value of any Securityholder
Securities that are publicly traded shall be the average, over
a period of 21 days consisting of the date of the valuation
and the 20 consecutive business days prior to that date, of
the average of the closing prices of the sales of such
securities on all securities exchanges on which such
securities may at that time be listed, or, if there have been
no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day such securities are not
so listed, the average of the representative bid and asked
prices quoted in the Nasdaq System as of 4:00 P.M.,
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New York time, or, if on any day such securities are not
quoted in the Nasdaq System, the average of the highest bid
and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization.
(C) If such Persons are unable to reach
agreement pursuant to subparagraph (A) within 20 days, and to
the extent any Securityholder Securities are not publicly
traded:
1) The LLC, the holders of a
majority of the Investor Securities to be repurchased
(if any) and the holders of a majority of the
Management Securities to be repurchased (if any)
shall each, within 10 days thereafter, choose one
investment banker or other appraiser experienced in
analyzing and making determinations concerning
matters relating to the telecommunications industry
and in valuing interests in entities like the LLC
(including the distribution arrangements of the type
described in the LLC Agreement) (it being understood
that if only Management Securities or only Investor
Securities are to be repurchased, the two appraisers
appointed by the LLC and the holders of a majority of
the Securityholder Securities to be repurchased shall
together appoint a third appraiser).
2) The three investment
bankers/appraisers so selected shall each appraise
the fair market value of the Company (based on the
assumption of an orderly, arm's length sale to a
willing unaffiliated buyer). The three investment
bankers/appraisers shall then appraise the fair
market value of the Securityholder Securities (i)
constituting Common Stock based on such appraiser's
valuation of the Company above divided by the
aggregate number of shares of Common Stock
outstanding on the date of valuation (determined on a
fully diluted basis (A) with respect to the Preferred
Stock and all other outstanding securities
convertible into the Company's Common Stock, assuming
the conversion of such Preferred Stock and other
convertible securities (without regard to any
conditions or other restrictions on such conversion),
and (B) with respect to all outstanding options,
warrants and other rights or securities exercisable
or exchangeable for shares of the Company's Common
Stock, in accordance with the Treasury Stock Method
under generally accepted accounting principles for
determining earnings per share), (ii) constituting
Preferred Stock based on the fair market value of the
Common Stock (according to clause (i)) into which
such Preferred Stock is convertible as of the date of
valuation, (iii) constituting Units based on the fair
market value of the assets that would be distributed
under the LLC Agreement with respect to such Units if
the LLC were to dissolve and liquidate upon a sale of
the Company for a price equal to such appraiser's
valuation of the Company above, and (iv) constituting
other securities based
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on the highest price obtainable for such securities
in an arm's length transaction to a willing
unaffiliated buyer (taking into account all relevant
factors determinative of value). Each of the three
investment bankers/appraisers shall, within thirty
days of its retention, provide the written results of
such appraisals to the LLC and to each holder of
Securityholder Securities to be repurchased
hereunder.
3) For purposes of this paragraph
5, the "Fair Market Value" of any Securityholder
Securities shall be the average of the two appraisals
thereof closest to each other, and such determination
shall be final and binding on all parties hereto.
4) The costs of the appraisal
shall be borne by the Company.
6. Legend. Each certificate evidencing Securityholder
Securities and each certificate issued in exchange for or upon the transfer of
any Securityholder Securities (if such securities remain Securityholder
Securities after such transfer) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The securities represented by this certificate are subject to
a Securityholders Agreement dated as of August 12, 1997, among
the issuer of such securities (the "Issuer") and certain of
the Issuer's securityholders, as amended and modified from
time to time. A copy of such Securityholders Agreement shall
be furnished without charge by the Issuer to the holder hereof
upon written request."
The LLC shall imprint such legend on certificates evidencing Securityholder
Securities outstanding as of the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Securityholder Securities in accordance with the definition of such term
herein.
7. Execution of this Agreement by Transferees. Prior to
transferring any Securityholder Securities to any Person (other than pursuant
to a Public Sale or a Sale of the Company), the transferring Securityholders
shall cause the prospective transferee(s) to be bound by this Agreement and to
execute and deliver to the LLC, the Company, and the other Securityholders a
counterpart of this Agreement.
8. Definitions.
"Affiliate" of any particular Person means (i) any other
Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the
power to direct the management and policies of a Person whether
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through the ownership of voting securities, contract or otherwise, and any
partner of a Person that is a partnership, and (ii) if such Person is a
partnership, the partners thereof.
"Basic Contributions" has the meaning ascribed to such term in
the LLC Agreement.
"Certificate of Incorporation" means the Company's certificate
of incorporation, as in effect on the date hereof.
"Class A Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class B Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class C Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class D Units" has the meaning ascribed to such term in the
LLC Agreement.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Executive Purchase Agreements" has the meaning ascribed to
such term in the Stock Purchase Agreement.
"Holland" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Investor Directors" has the meaning ascribed to such term in
the Stock Purchase Agreement.
"Investor Members" has the meaning ascribed to such term in
the Stock Purchase Agreement.
"Investor Purchase Agreement" means that certain purchase
agreement of even date herewith by and among the LLC and the Investor Members.
"Investor Securities" means (i) the Class A Units issued to
the Investor Members pursuant to the Investor Purchase Agreement, (ii) upon
dissolution and liquidation of the LLC, any securities of the Company
distributed in respect of the securities referred to in clause (i) above
pursuant to such dissolution and liquidation, (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities (but not including any Class D Units issued in exchange for Class A
Units). As to any particular securities constituting Investor Securities, such
securities shall cease to be Investor Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market
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maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased by the LLC (including in exchange for Class D
Units), the Company or any Subsidiary thereof.
"Liquidation Value" has the meaning ascribed to such term in
the Company's certificate of incorporation, as amended from time to time in
accordance with its terms.
"LLC Agreement" means that certain limited liability company
agreement of even date herewith entered into by and among the members of the
LLC, as amended from time to time according to its terms.
"Management Members" has the meaning ascribed to such term in
the Stock Purchase Agreement.
"Management Securities" means (i) the Class B Units issued to
the Management Members under the Executive Purchase Agreements, (ii) upon
dissolution and liquidation of the LLC, any securities of the Company
distributed in respect of the securities referred to in clause (i) above
pursuant to such dissolution and liquidation, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities (but not including any Class C Units or Class D Units issued in
exchange for Class B Units). As to any particular securities constituting
Management Securities, such securities shall cease to be Management Securities
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased by any holder of Class A Units, or by the LLC (including in
exchange for Class C Units or Class D Units), the Company or any Subsidiary
thereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means the Company's 12% Cumulative
Convertible Preferred Stock, par value $.01 per share.
"Public Offering" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1
(or a successor form adopted by the Securities and Exchange Commission);
provided that the following shall not be considered a Public Offering: (i) any
issuance of common stock as consideration or financing for a merger or
acquisition, and (ii) any issuance of
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common stock or rights to acquire common stock to employees of the Company or
its Subsidiaries as part of an incentive or compensation plan.
"Public Sale" means any sale of Securityholder Securities to
the public pursuant to an offering registered under the Securities Act or to
the public through a broker, dealer or market maker pursuant to the provisions
of Rule 144 adopted under the Securities Act.
"Sale of the Company" means either (i) the sale, lease,
transfer, conveyance or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, or (ii) a transaction or series of transactions
(including by way of merger, consolidation, or sale of stock) the result of
which is that the holders of the Company's outstanding voting stock immediately
prior to such transaction are after giving effect to such transaction no
longer, in the aggregate, the "beneficial owners" (as such term is defined in
Rule 13d-3 and Rule 13d-5 promulgated under the Securities Exchange Act),
directly or indirectly through one or more intermediaries, of more than 50% of
the voting power of the outstanding voting stock of the Company.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securityholder Securities" means (i) any Class A Units or
Class B Units issued to or otherwise acquired by a Securityholder, (ii) upon
dissolution and liquidation of the LLC, any securities of the Company
distributed in respect of the securities referred to in clause (i) above
pursuant to such dissolution and liquidation, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities (but not including any Class C Units or Class D Units issued in
exchange for Class A Units or Class B Units). As to any particular securities
constituting Securityholder Securities, such securities shall cease to be
Securityholder Securities when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) or (c) repurchased by any holder of Class A Units
under the terms of an Executive Purchase Agreement, or by the LLC (including in
exchange for Class A Units or Class B Units), the Company or any Subsidiary
thereof.
"Stock Purchase Agreement" means that certain stock purchase
agreement of even date herewith by and between the Company and the LLC, as
amended from time to time in accordance with its terms.
"Subsidiary" means, 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, managers or trustees thereof
is at the time owned
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13
or controlled, directly or indirectly, 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 limited liability company, partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, 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 the
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"Unit" has the meaning ascribed to such term in the LLC
Agreement.
"Vested Securities" means any Management Securities which have
"vested" within the meaning of the Executive Purchase Agreement to which such
securities are subject.
9. Voting Agreement Relating to Stock Purchase
Agreement. Each Securityholder shall vote all Securityholder Securities that
are voting securities and shall take all other necessary or desirable actions
within such Securityholder's control (whether in such holder's capacity as a
Unitholder, representative on the board of managers of the LLC, member of a
committee thereof or otherwise, and including, without limitation, attendance
at meetings in person or by proxy for purposes of obtaining a quorum and
execution of written consents in lieu of meetings), and the LLC shall take all
necessary or desirable actions within its control (including, without
limitation, calling special board and member meetings), so that the LLC shall
satisfy its obligations under Section 7 of the Purchase Agreement to vote its
Company securities and to take all other necessary or desirable actions in
accordance with the provisions of Section 7 of the Stock Purchase Agreement.
10. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Securityholder Securities in violation of any
provision of this Agreement shall be void, and none of the LLC, the Company, or
any Subsidiary shall record such purported Transfer on its books or treat any
purported transferee of such Securityholder Securities as the owner of such
securities for any purpose.
11. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of any other provision of
this Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
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14
12. Entire Agreement. Except as otherwise expressly set
forth herein, this Agreement, those documents expressly referred to herein and
other documents of even date herewith embody the complete agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in
multiple counterparts, none of which need contain the signature of more than
one party hereto but each of which shall be deemed an original and all of which
taken together shall constitute one and the same agreement. Any Management
Member may at any time after the date hereof, with the prior written approval
of the LLC and the Company, become a party to this Agreement by executing a
counterpart to this Agreement agreeing to be bound by the provisions hereof as
if such Management Member were an original signatory hereto (which joinder
shall not constitute an amendment, modification or waiver hereof).
14. Successors and Assigns.
(a) Except as otherwise provided herein, this Agreement
shall bind and inure to the benefit of and be enforceable by the LLC and the
Company and their respective successors and assigns and the Securityholders and
any subsequent holders of Securityholder Securities and the respective
successors and assigns of each of them, so long as they hold Securityholder
Securities, whether so expressed or not.
(b) Each of the Company, the LLC, the Securityholders and
each holder of Securityholder Securities hereby acknowledges that upon and
after the dissolution and liquidation of the LLC, (A) all obligations and
duties of the LLC hereunder shall thereafter bind and be enforceable against
the Company, (B) all rights and powers specifically granted to the LLC
hereunder shall inure to the benefit of and be enforceable by the Company, (C)
all references to the LLC herein shall thereafter be deemed to be references to
the Company, and (D) this Agreement shall thereafter operate and be construed
as if the word "Company" were substituted for the word "LLC" in each such
instance.
15. Remedies. The LLC, the Company and the
Securityholders shall be entitled to enforce their rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages would not be an
adequate remedy for any breach of the provisions of this Agreement and that the
LLC, the Company and any Securityholder 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.
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15
16. Amendment and Waiver. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the holders (acting in their capacity as shareholders of the
Company) then entitled to designate a majority of the Investor Directors (as
defined in the Stock Purchase Agreement) and, except for amendments,
modifications or waivers of Section 3(b) hereof, the holders (acting in their
capacity as shareholders of the Company) then entitled to designate two of the
Management Directors (as defined in the Stock Purchase Agreement) (counting for
purposes of such determination, the CEO Director as a Management Director);
provided that if any such modification, amendment or waiver would adversely
affect any Securityholder or Securityholders relative to the Securityholders
voting in favor thereof, such modification, amendment or waiver shall also
require the prior written approval of the holders of a majority of the
Securityholder Securities held by the Securityholder(s) so adversely affected.
No course of dealing or the failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
17. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered personally to the recipient, (b) telecopied to the recipient
(with hard copy sent to the recipient by reputable overnight courier service
(charges prepaid) that same day) if telecopied before 5:00 p.m. Chicago,
Illinois time on a business day, and otherwise on the next business day, or (c)
one business day after being sent to the recipient by reputable overnight
courier service (charges prepaid). Such notices, demands and other
communications shall be sent to the LLC or the Company at the addresses set
forth below and to any Securityholder or other holder of Securityholder Shares
subject to this Agreement at such address as indicated by the Company's
records, or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
To the LLC:
c/o Madison Dearborn Capital Partners
Three First National Plaza, Suite 3800
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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16
To the Company:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
18. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE
OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
19. Business Days. If any time period for giving notice
or taking action hereunder expires on a day which is a Saturday, Sunday or
legal holiday in the state in which the Company's chief-executive office is
located, the time period shall automatically be extended to the business day
immediately following such Saturday, Sunday or legal holiday.
20. Descriptive Headings; Interpretation; No Strict
Construction. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Except as otherwise expressly provided herein, reference to any agreement,
document, or instrument means such agreement, document, or instrument as
amended or otherwise modified from time to time in accordance with the terms
thereof, and if applicable hereof. The use of the words "include" or
"including" in this Agreement shall be by way of example rather than by
limitation. The use of the words "or," "either" or "any" shall not be
exclusive. The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
21. Delivery by Facsimile. This Agreement, the
agreements referred to herein, and each other agreement or instrument entered
into in connection herewith or therewith or contemplated hereby or thereby, and
any amendments hereto or thereto, to the extent signed and
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17
delivered by means of a facsimile machine, shall be treated in all manner and
respects as an original agreement or instrument and shall be considered to have
the same binding legal effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties. No party hereto
or to any such agreement or instrument shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of a facsimile
machine as a defense to the formation or enforceability of a contract and each
such party forever waives any such defense.
* * * *
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18
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
TRANSCEND TELECOM, L.L.C.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Member
---------------------------------
TRANSCEND TELECOM, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Chief Executive Officer
---------------------------------
/s/ ▇▇▇▇ CROWNE
-------------------------------------
▇▇▇▇ Crowne
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ FAMILY LIMITED
PARTNERSHIP
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, its general partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ (individually, and on
behalf of ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇)
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
19
BATTERY VENTURES IV, L.P.
By Battery Partners IV, L.P.,
its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Managing Partner
---------------------------------
BATTERY INVESTMENT PARTNERS IV, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Manager
---------------------------------
FRONTENAC VII, L.P.
By Frontenac Company, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
----------------------------------
Its: General Partner
---------------------------------
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.,
its general partner By Madison Dearborn
Partners, Inc., its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------------
Its: Vice President
---------------------------------
20
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL PARTNERS III, L.P.
By MSCP III, L.P., its general partner
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Partners III,
Inc.,its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
MSCP III 892 INVESTORS, L.P.
By MSCP III, L.P., its general partner
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Partners III,
Inc.,its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL INVESTORS, L.P.
By MSCP III, L.P., its general partner
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Partners III,
Inc.,its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Its: Vice Chairman
---------------------------------
