1
EXHBIT 4
INVESTMENT AGREEMENT
Investment Agreement dated June 29, 1998 (this "Agreement"), among Davel
Communications Group, Inc., an Illinois corporation (the "Company"), Samstock,
L.L.C., a Delaware limited liability company ("Investor"), and Xxxxx X. Xxxx,
an individual residing in the State of Illinois ("Shareholder").
W I T N E S S E T H:
WHEREAS, Investor and the Company are parties to a Stock Purchase
Agreement dated May 14, 1998 (the "Company Stock Purchase Agreement") pursuant
to which, among other things, the Company has agreed to issue and sell, and
Investor has agreed to purchase from the Company, 1,000,000 shares of common
stock, no par value, of the Company ("Common Stock");
WHEREAS, Investor and Shareholder are parties to a Stock Purchase
agreement dated May 14, 1998 (the "Shareholder Stock Purchase Agreement")
pursuant to which, among other things, Shareholder has agreed to sell, and
Investor has agreed to purchase from Shareholder, 500,000 shares of Common
Stock;
WHEREAS, Investor and certain directors and members of management of the
Company (the "Management Shareholders") are parties to a Stock Purchase
Agreement pursuant to which, among other things, the Management Shareholders
have agreed to sell, and Investor has agreed to purchase from the Management
Shareholders, 123,900 shares of Common Stock (such Stock Purchase Agreement,
together with the Company Stock Purchase Agreement and the Shareholder Stock
Purchase Agreement, the "Stock Purchase Agreements");
WHEREAS, the closing of the transactions contemplated by each of the Stock
Purchase Agreements is occurring concurrently with the execution and delivery
of this Agreement;
WHEREAS, concurrently herewith, Investor and Shareholder have executed and
delivered a Shareholders Agreement of even date herewith (the "Shareholders
Agreement");
WHEREAS, the Company Stock Purchase Agreement and the Shareholder Stock
Purchase Agreement require that this Agreement be executed and delivered by the
Company, Investor and Shareholder at or prior to the closing of the
transactions contemplated by such agreements.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
PAGE 86 OF 134
2
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such first person. As used in
this definition "control" (including, with correlative meanings, "controlled
by" and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies, whether through the ownership of securities or partnership or other
ownership interests, by contract or otherwise.
1.2 The terms "beneficial ownership," "person" and "group" shall have the
respective meanings ascribed to such terms pursuant to Regulation 13D-G adopted
by the Securities and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date
hereof. The term "affiliate" shall have the meaning ascribed to such term
pursuant to Rule 12b-2 under the Exchange Act, as in effect on the date hereof.
1.3 The "Combined Voting Power" at any measurement date shall mean the
total number of votes which could have been cast in an election of directors of
the Company had a meeting of the shareholders of the Company been duly held
based upon a record date as of the measurement date if all Company Voting
Securities then outstanding and entitled to vote at such meeting were present
and voted to the fullest extent possible at such meeting.
1.4 "Company Voting Securities" shall mean, collectively, Common Stock (or
any other security into which Common Stock is exchanged or converted), any
preferred stock of the Company (or any successor to the Company) that is
entitled to vote generally for the election of directors, any other class or
series of Company securities (or securities of any successor to the Company)
that is entitled to vote generally for the election of directors and any other
securities, warrants, options or rights of any nature (whether or not issued by
the Company or any successor to the Company) that are convertible into,
exchangeable for, or exercisable for the purchase of, or otherwise give the
holder thereof any rights in respect of, Common Stock (or any other security
into which Common Stock is exchanged or converted), preferred stock of the
Company (or any successor to the Company) that is entitled to vote generally
for the election of directors of the Company or any successor thereto, or any
other class or series of Company securities that is entitled to vote generally
for the election of directors of the Company or any successor thereto.
1.5 "Disinterested Director" means Independent Directors who, with respect
to any contract or transaction being considered or voted upon by the Company's
Board of Directors, have no financial interest in such contract or transaction,
either directly or by virtue of serving as an officer or director of any other
corporation, partnership,
Page 87 of 134
3
association or other organization that is a party to such contract or
transaction; provided, however, an Independent Director shall not be deemed to
have a financial interest in any contract or transaction by virtue of holding
Common Stock or options to acquire Common Stock.
1.6 "Effective Date" means the date of this Agreement.
1.7 "Independent Director" means a director of the Company who (i) is not
a current or former employee or officer of the Company, (ii) is not serving as
a designee of Investor or Shareholder pursuant to Section 4.3 or 4.4 hereof,
and (iii) does not beneficially own 5% or more of any class of capital stock of
the Company.
1.8 "Investor Group" means (i) Investor, (ii) any member of Investor and
(iii) any Affiliate of Investor (other than the Company) or any member of
Investor; provided, however, that publicly-held entities that would otherwise
fall within this definition (a "Public Investor Affiliate") shall not be
treated as members of the Investor Group hereunder unless any member of the
Investor Group (which, for purposes hereof, shall exclude such publicly-held
entity) took any action, directly or indirectly, to assist, encourage or induce
such entity in taking the relevant action to be attributed to the Investor
Group hereunder.
1.9 "Shareholder Group" means (i) Shareholder and (ii) any Affiliate or
Shareholder Family Entity (as defined in the Shareholder's Agreement) of
Shareholder (other than the Company).
1.10 "Shares" means all shares of Company Voting Securities, whether now
owned or hereafter acquired.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Investor represents and warrants to the Company and Shareholder as
follows:
(a) Investor is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Investor has the requisite power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) This Agreement has been duly authorized by all necessary action on the
part of Investor, duly executed and delivered by Investor and constitutes the
legal, valid and binding obligation of Investor, enforceable against it in
accordance with its terms hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance by Investor of its obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under (i) the
Page 88 of 134
4
organizational documents of Investor, or (ii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Investor or its
properties or assets, other than, in the case of clause (ii), any such
conflicts, violations or defaults that, individually or in the aggregate, would
not prevent Investor from performing its obligations under this Agreement in
any material respect.
(d) As of the date hereof, no Shares are beneficially owned by Investor.
2.2 Shareholder represents and warrants to the Company and Investor as
follows:
(a) This Agreement has been duly authorized by all necessary action on the
part of Shareholder, duly executed and delivered by Shareholder and constitutes
a valid and binding obligation of Investor, enforceable against him in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
performance by Shareholder of his obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse or
time, or both) under any judgment , order, decree, statute, law, ordinance,
rule or regulation applicable to Shareholder or his properties or assets, other
than any such conflicts, violations or defaults that, individually or in the
aggregate, would not prevent Shareholder from performing his obligations under
this Agreement in any material respect.
(c) As of the date hereof (and giving effect to the closing of the
transactions contemplated by the Shareholder Stock Purchase Agreement),
Shareholder beneficially owns 2,585,729 Shares (including 234,196 Shares that
may be acquired pursuant to outstanding options either currently, within the
next 60 days or at any time thereafter).
2.3 The Company represents and warrants to Investor and Shareholder as
follows:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized. The
Company has the requisite power and authority to enter into this Agreement and
perform its obligations hereunder.
(b) This Agreement has been duly authorized by all necessary action on the
part of the Company, duly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable against it in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse or
time, or both) under any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or its properties or assets, other than
any such conflicts, violations or defaults that, individually or in the
aggregate, would not prevent the Company from performing its obligations under
this Agreement in any material respect.
Page 89 of 134
5
ARTICLE III
STANDSTILL AGREEMENT
3.1 Acquisition of Company Voting Securities. Except as the same may be
approved by a majority of the Disinterested Directors in a specific resolution
to that effect adopted prior to the taking of such action, prior to the third
anniversary of the Effective Date, neither the Investor Group nor the
Shareholder Group shall, directly or indirectly, acquire, offer to acquire,
agree to acquire, make any proposal to acquire, become the beneficial owner of
or obtain any rights in respect of any Company Voting Securities, by purchase
or otherwise, or take any action in furtherance thereof, if the effect of such
acquisition, agreement or other action would be (either immediately or upon
consummation of any such acquisition, agreement or other action, or expiration
of any period of time provided in any such acquisition, agreement or other
action) to increase the aggregate beneficial ownership of Company Voting
Securities by the Investor Group or the Shareholder Group to such number of
Company Voting Securities that represents or possesses greater than 33.7
percent of the Combined Voting Power, in the case of the Investor Group, and
37.0 percent of the Combined Voting Power of all Company Voting Securities, in
the case of the Shareholder Group. Notwithstanding the foregoing maximum
limitations, (a) no member of the Investor Group or the Shareholder Group shall
be obligated to dispose of any Company Voting Securities beneficially owned
that exceed such maximum limitations if, and solely to the extent that, its
beneficial ownership is or will be increased solely as a result of (i) a
repurchase of any Company Voting Securities by the Company or any of its
subsidiaries if such repurchase was approved by a majority of the Disinterested
Directors or (ii) in the case of any member of the Investor Group, the purchase
of Company Voting Securities by any Public Investor Affiliate unless any member
of the Investor Group took any action, directly or indirectly, to assist,
encourage or induce such Public Investor Affiliate to make such purchase and
(b) the foregoing shall not prohibit any purchase of Company Voting Securities
directly from the Company pursuant to the exercise of any rights,
oversubscription rights or standby purchase obligations in connection with
rights offerings by the Company or exercise of any stock options granted by the
Company or pursuant to any rights set forth in the Shareholders Agreement. For
purposes of calculating the maximum limitations specified above, all Company
Voting Securities that are the subject of an agreement, arrangement or
understanding pursuant to which the Investor Group (or any member thereof) or
the Shareholder Group (or any member thereof) has the right to obtain
beneficial ownership of such securities in the future shall also be deemed to
be outstanding and beneficially owned by the Investor Group (or the applicable
member thereof) or the Shareholder Group (or the applicable member thereof),
respectively.
3.2 Proxy Solicitations, Etc. Prior to the third anniversary of the
Effective Date, no member of the Investor Group or the Shareholder Group shall,
in any way, participate in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in Regulation 14A promulgated under the
Exchange Act) to vote or consent with respect to any Company Voting Securities
or become a "participant" in an "election contest" (as such terms are used in
Rule 14a-11 under the Exchange Act) with respect
Page 90 of 134
6
to the Company, except, in each case, with the prior approval of the
Disinterested Directors; provided, however, that members of the Shareholder
Group may participate in the solicitation of proxies with respect to matters
recommended by the Company's Board of Directors.
3.3 No Groups, Voting Trusts, Etc. Except as the same may be approved by a
majority of the Disinterested Directors in a specific resolution to that effect
adopted prior to the taking of such action, prior to the third anniversary of
the Effective Date, neither the Investor Group nor the Shareholder Group shall
(a) form, join in or participate in the formation of a group with respect to
any Company Voting Securities, other than (i) in the case of the Investor
Group, a group consisting solely of the members of the Investor Group, (ii) in
the case of the Shareholder Group, a group consisting solely of the members of
the Shareholder Group and (iii) any group that may be deemed to exist by virtue
of the Shareholders Agreement; or (b) deposit any Company Voting Securities
into a voting trust or subject any Company Voting Securities to any arrangement
or agreement with respect to the voting thereof, other than (i) the
Shareholders Agreement, (ii) in the case of the Investor Group, any such trust,
arrangement or agreement the only parties to, or beneficiaries of, which are
members of the Investor Group or Permitted Transferees (as defined in the
Shareholders Agreement) of Investor and (iii) in the case of the Shareholder
Group, any such trust, arrangement or agreement the only parties to, or
beneficiaries of, which are members of the Shareholder Group or Permitted
Transferees of Shareholder.
3.4 No Solicitation of Bidders. Prior to the third anniversary of the
Effective Date, neither the Investor Group nor the Shareholder Group shall,
directly or indirectly, assist, encourage or induce any other person to bid for
or acquire outstanding Company Voting Securities in any transaction or series
of related transactions, unless the consummation of such transaction or series
of related transactions requires approval of a majority of the Board of
Directors.
3.5 Non-Circumvention. Except as the same may be approved by a majority
of the Disinterested Directors in a specific resolution to that effect adopted
prior to the taking of such action, prior to the third anniversary of the
Effective Date, neither the Investor Group nor the Shareholder Group shall take
any action, alone or in concert with any other person to circumvent the
limitations set forth in Sections 3.1, 3.2, 3.3 and 3.4 of this Agreement.
3.6 Investor Nominees. If, for any reason, (i) any person designated by
Investor as a director of the Company pursuant to Article IV hereof is not
nominated by the Company's Board of Directors for election to the Company's
Board of Directors or the Company's Board of Directors does not recommend such
person to serve as a director of the Company, or (ii) the Board of Directors of
the Company shall change the size of the Board of Directors of the Company from
seven directors at such time as Investor is entitled to designate two directors
of the Company's Board of Directors in accordance with the provisions of
Section 4.3 hereof or Shareholder is entitled to designate three directors of
such Board in accordance with Section 4.4 hereof, then, upon the happening of
such event, all of the provisions of this Article III shall lapse and no
Page 91 of 134
7
longer be of any force or effect; provided, however, that the obligations of a
party under this Article III shall not lapse and cease to be of any force or
effect with respect to either the Investor Group or the Shareholder Group if
any of its respective members shall have breached any provision of this
Agreement and as a result thereof, one of the events described in clause (i) or
(ii) above shall have occurred.
3.7 Shareholder Nominees. If, for any reason, (i) any person designated
by Shareholder as a director of the Company pursuant to Article IV hereof is
not nominated by the Company's Board of Directors for election to the Company's
Board of Directors or the Company's Board of Directors does not recommend such
person to serve as a director of the Company, or (ii) the Board of Directors of
the Company shall change the size of the Board of Directors of the Company from
seven directors at such time as Investor is entitled to designate two directors
of the Company's Board of Directors in accordance with the provisions of
Section 4.3 hereof or Shareholder is entitled to designate three directors of
such Board in accordance with Section 4.4 hereof, then, upon the happening of
such event, all of the provisions of this Article III shall lapse and no longer
be of any force or effect; provided, however, that the obligations of a party
under this Article III shall not lapse and cease to be of any force or effect
with respect to either the Investor Group or the Shareholder Group if any of
its respective members shall have breached any provision of this Agreement and
as a result thereof, one of the events described in clause (i) or (ii) above
shall have occurred.
3.8 Acquisitions by Investor. Prior to the later of (i) such time as
Investor no longer has any rights under Section 4.3 or (ii) the third
anniversary of the Effective Date, the Investor Group shall not solicit,
encourage, enter into substantive discussions or negotiations with respect to,
or effect any acquisition of any entity the principal business of which is the
operation of a network of payphones or of any material amount of assets of any
such entity; provided, however, that (i) the Investor Group may solicit,
encourage or enter into discussions or negotiations of which the Company is
generally aware with respect to any such acquisition with the intent of
effecting such acquisition through the Company and (ii) the Investor Group
shall not be prohibited from purchasing and owning equity securities of any
such entity so long as such securities in the aggregate represent no more than
five percent of the outstanding equity securities of such entity. Investor
represents and warrants that from May 14, 1998 through the Effective Date, the
Investor Group has not solicited, encouraged or entered into substantive
discussions or negotiations with respect to any such acquisition except with
the intent of effecting such acquisition through the Company.
Page 92 of 134
8
ARTICLE IV
VOTING OF COMPANY VOTING SECURITIES AND RELATED MATTERS
4.1 Shareholder Meetings. So long as Shareholder is entitled to designate
three directors of the Company's Board of Directors in accordance with Section
4.4 hereof, each member of the Investor Group that is a holder of record of
Company Voting Securities shall be present, and each member of the Investor
Group that is a beneficial owner of Company Voting Securities shall cause the
holder of record of such Company Voting Securities to be present, in person or
by proxy, at all meetings of shareholders of the Company so that all Company
Voting Securities owned of record or beneficially by the Investor Group may be
counted for the purpose of determining the presence of a quorum at such
meetings. So long as Investor is entitled to designate two directors of the
Company's Board of Directors in accordance with Section 4.3 hereof, each
member of the Shareholder Group that is a holder of record of Company Voting
Securities shall be present, and each member of the Shareholder Group that is a
beneficial owner of Company Voting Securities shall cause the holder of record
of such Company Voting Securities to be present, in person or by proxy, at all
meetings of shareholders of the Company so that all Company Voting Securities
owned of record or beneficially by the Shareholder Group may be counted for the
purpose of determining the presence of a quorum at such meetings.
4.2 Election of Board of Directors. (a) So long as Investor is entitled
to designate two directors of the Company's Board of Directors in accordance
with the provisions of Section 4.3 hereof, except to the extent otherwise
provided herein, the Company shall take all reasonably necessary or appropriate
action to assist in the nomination and election as directors of the two
individuals designated by Investor to be elected as directors of the Company.
(b) So long as Shareholder is entitled to designate three directors of
the Company's Board of Directors in accordance with the provisions of Section
4.4 hereof, except to the extent otherwise provided herein, the Company shall
take all reasonably necessary or appropriate action to assist in the nomination
and election as directors of the three individuals specified in Section 4.4
below designated by Shareholder to be elected as directors of the Company.
(c) So long as Investor is entitled to designate two directors of the
Company's Board of Directors in accordance with the provisions of Section 4.3
hereof or Shareholder is entitled to designate three directors of such Board
pursuant to Section 4.4 hereof, none of Investor, Shareholder or the Company
shall take any action to decrease the size of such Board to less than seven
directors or to increase the size of such Board to more than seven directors.
(d) So long as Shareholder, individually, or Shareholder and Investor,
acting jointly, are entitled to designate two Independent Directors in
accordance with the provisions of Section 4.5 hereof, except to the extent
otherwise provided herein, the Company shall take all necessary or appropriate
action to assist in the nomination and
Page 93 of 134
9
election as directors of the two persons designated by Shareholder or
Shareholder and Investor, as the case may be, to be elected as Independent
Directors.
(e) So long as Investor is entitled to designate two directors of the
Company's Board of Directors in accordance with the provisions of Section 4.3
hereof (each such director, an "Investor Designee") and Shareholder is entitled
to designate three directors of the Company's Board of Directors in accordance
with Section 4.4 hereof (each such director, a "Shareholder Designee"), each
committee of the Board of Directors shall consist of at least three directors,
and (other than any committee consisting entirely of Independent Directors and
other than the Executive Committee) shall include no more than one Investor
Designee and no more than one Shareholder Designee. The Executive Committee
shall include no more than one Investor Designee, but may include more than one
Shareholder Designee.
4.3 Investor Board Nominees. So long as the Investor Group beneficially
owns at least 10% of the Combined Voting Power of all Company Voting
Securities, Investor shall have the right to designate two directors of the
Company; provided, however, that at such time as the Investor Group shall no
longer beneficially own at least 10% of the Combined Voting Power of all
Company Voting Securities, (i) Investor shall cease to have the right to
designate any directors of the Company, (ii) Investor's rights under this
Article IV shall terminate and (iii) Investor shall cause its two designees to
resign from the Board of Directors of the Company.
4.4 Shareholder Board Nominees. So long as the Shareholder Group
beneficially owns at least 10% of the Combined Voting Power of all Company
Voting Securities, Shareholder shall have the right to designate three
directors of the Company; provided, however, that at such time as the
Shareholder Group shall no longer beneficially own at least 10% of the Combined
Voting Power of all Company Voting Securities, (i) Shareholder shall cease to
have the right to designate any directors of the Company, (ii) Shareholder's
rights under this Article IV shall terminate and (iii) Shareholder shall cause
its three designees to resign from the Board of Directors of the Company.
4.5 Independent Directors. Prior to the first anniversary of the
Effective Date, Shareholder shall be entitled to designate two persons to be
elected as Independent Directors, provided that such designees are reasonably
acceptable to Investor (it being understood that at least one non-employee
director of the Company holding such position as of May 14, 1998 shall be
acceptable to Investor). Following the first anniversary of the Effective
Date, Investor and Shareholder shall jointly designate the two persons to be
elected as Independent Directors. Investor and Shareholder shall cause their
designees on the Board of Directors of the Company to take all reasonably
necessary or appropriate action to assist in the nomination and election as
directors of all such nominees as may be selected to serve as Independent
Directors in the manner described above.
Page 94 of 134
10
ARTICLE V
REGISTRATION RIGHTS
5.1 Definitions. For purposes of this Article V:
(a) The term "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act").
(b) The term "Registrable Securities" means shares of Common Stock held,
from time to time, by any member of the Investor Group.
(c) The term "Holder" means any member of the Investor Group or (other
than for purposes of Section 5.2) the Shareholder Group that owns of record
Registrable Securities.
(d) The term "Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Act.
(e) The term "Shelf Registration Statement" means a registration statement
intended to effect a shelf registration in connection with a Rule 415 Offering.
5.2 Shelf Registrations. No later than ninety (90) days after the Company
becomes eligible to use Form S-3 under the Act to register Shares for resale by
shareholders, the Company shall, upon the written request of Investor, prepare
and file with the SEC a Shelf Registration Statement (which shall include
pledgees of any selling shareholder under the caption "plan of distribution"
contained in such Shelf Registration Statement) with respect to all Shares
acquired by Investor pursuant to the Purchase Agreements and use its reasonable
efforts to cause such Shelf Registration Statement to become effective and keep
such registration statement effective until such time as such Shares have been
sold or disposed of thereunder or sold, transferred or otherwise disposed of
(other than pursuant to a pledge of such Registrable Securities) to a person
that is not a Holder. Notwithstanding the foregoing, if the Company shall
furnish to Investor a certificate signed by the Chief Executive, Chief
Operating, or Chief Financial Officer of the Company stating that, in the good
faith judgment of a majority of the Disinterested Directors, it would be
materially detrimental to the Company for such registration statement to be
filed, the Company shall have the right to defer such filing for a period of
not more than 120 days after receipt of Investor's request; provided, however,
that the Company may not utilize this right more than once in any 12-month
period.
5.3 Incidental Registration. If the Company proposes to register any of
its voting securities ("Other Securities") for public sale under the Securities
Act, on a form and in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give prompt
written notice to each Holder of its intention to do so, and upon the written
request of a Holder delivered to the Company within fifteen Business Days after
the giving of any such notice (which
Page 95 of 134
11
request shall specify the Registrable Securities intended to be disposed of by
such Holder and the intended method of disposition thereof) the Company will
use its best efforts to effect, in connection with the registration of the
Other Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by such Holder,
to the extent required to permit the disposition (in accordance with the
intended method or methods thereof as aforesaid) of the Registrable Securities
so to be registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the
managing underwriters of such offering or offerings determine that the
aggregate amount of shares to be registered by the Holders of the
Registrable Securities could materially and adversely affect such offering,
then the Company may reduce the number of Registrable Securities of such
Holders to be included in such offering; provided, that such Holders will be
entitled to register the maximum number of Registrable Securities, together
with those shares of Common Stock held by any other person exercising
registration rights, which the underwriters deem advisable and the Company
will allocate the number of Registrable Shares to be registered for each
such Holder on a pro rata basis in accordance with the number of shares each
Holder initially requested to be sold;
(b) the Company shall not be required to effect any registration of
Registrable Securities under this Section 5.3 incidental to the registration
of any of its securities in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans or stock option or other employee
benefit plans; and
(c) Holder, cumulatively, shall have the right to exercise registration
rights pursuant to this Section 5.3 without limit during the term hereof.
No registration of Registrable Securities effected under this Section 5.3 shall
relieve the Company of its obligation to effect registrations of Registrable
Securities pursuant to Section 5.2.
5.4 Additional Obligations of the Company. Whenever the Company is
required to effect a registration statement pursuant to Section 5.2 or 5.3, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered thereby.
(b) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities covered by such
registration statement owned by them.
Page 96 of 134
12
(c) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such states or other jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not be required to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions where it is not so subject.
(d) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
then use its best efforts to promptly correct such statement or omission.
Notwithstanding the foregoing and anything to the contrary set forth in this
Section 5.4, each Holder acknowledges that the Company shall have the right to
suspend the use of the prospectus forming a part of a registration statement if
such offering would interfere with a pending corporate transaction or for other
reasons until such time as an amendment to the registration statement has been
filed by the Company and declared effective by the SEC, or until such time as
the Company has filed an appropriate report with the SEC pursuant to the
Exchange Act. Each Holder hereby covenants that it will (a) keep any such
notice strictly confidential, and (b) not sell any shares of Common Stock
pursuant to such prospectus during the period commencing at the time at which
the Company gives the Holder notice of the suspension of the use of such
prospectus and ending at the time the Company gives the Holder notice that it
may thereafter effect sales pursuant to such prospectus. The Company shall
only be able to suspend the use of such prospectus for periods aggregating no
more than 90 days in respect of any registration.
5.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities and as may be required from time to time to keep such
registration current.
5.6 Expenses of Registration. All expenses incurred by or on behalf of
the Company in connection with registrations, filings or qualifications
pursuant to Section 5.3 including, without limitation, all registration, filing
and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company. In no
event shall the Company be obligated to bear any underwriting discounts or
commissions or brokerage fees or commissions relating to Registrable Securities
or the fees and expenses of counsel to the selling Holders.
5.7 Indemnification. In the event registration of any Registrable
Securities hereunder:
Page 97 of 134
13
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder and the affiliates of such Holder, and their respective
directors, officers, general and limited partners, agents and representatives
(and the directors, officers, affiliates and controlling persons thereof), and
each other person, if any, who controls such Holder within the meaning of the
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus (but only if
such statement is not corrected in the final prospectus) contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading (but only if such omission is not
corrected in the final prospectus), or (iii) any violation or alleged violation
by the Company in connection with the registration of Registrable Securities
under the Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, affiliate or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 5.7(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of any such Holder or its Affiliates or
controlling person. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder
selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 5.7(b) in connection with
investigating or defending any such loss, claim,
Page 98 of 134
14
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 5.7(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
this Section 5.7(b) exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under this Section 5.7
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to deliver written notice to the
indemnifying party within a reasonable time after the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 5.7 to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 5.7. The indemnified party shall have the right, but not the
obligation, to participate in the defense of any action referred to above
through counsel of its own choosing and shall have the right, but not the
obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
such counsel has been specifically authorized in advance by the indemnifying
party, (ii) there is a conflict of interest that prevents counsel for the
indemnifying party from adequately representing the interests of the
indemnified party or there are defenses available to the indemnified party that
are different from, or additional to, the defenses that are available to the
indemnifying party, (iii) the indemnifying party does not employ counsel that
is reasonably satisfactory to the indemnified party within a reasonable period
of time, or (iv) the indemnifying party fails to assume the defense or does not
reasonably contest such action in good faith, in which case, if the indemnified
party notifies the indemnifying party that it elects to employ separate
counsel, the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party and the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party;
provided, however, that, the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (in addition
to, to the extent reasonably necessary to employ local counsel, one firm acting
as local counsel) for all indemnified parties.
(d) The obligations of the Company and the Holders under this Section 5.7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article V.
Page 99 of 134
15
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Registrable Securities are in conflict with the foregoing provisions, the
provisions in such underwriting agreement shall control.
5.8 Reports Under the Exchange Act. With a view to making available to
the holders the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of the Company to
the public without registration or pursuant to a registration on Form S-3, the
Company agrees to:
(a) use its reasonable best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;
(b) use its reasonable best efforts to file with the SEC in a timely
manner all reports and other documents required under the Act and the Exchange
Act; and
(c) furnish to any Holder forthwith upon request (i) a written statement
by the Company as to its compliance with the reporting requirements of Rule
144, or as to whether it qualifies as a registrant whose securities may be
resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information (and the Company shall take such
action) as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
5.9 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Article V may only be assigned
by a Holder to a transferee or assignee of any Registrable Securities if such
transferee or assignee is a member of the Investor Group or the Shareholder
Group, as the case may be.
5.10 Waiver Procedures. The observance by the Company of any provision of
this Article V may be waived (either generally or in a particular instance and
either retroactively or prospectively) with the written consent of the Holders
of a majority of the Registrable Securities, and any waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities.
5.11 "Market Stand-off" Agreement. Any Holder of Registrable Securities,
if requested by an underwriter of any registered public offering of Company
securities being sold in a firm commitment underwriting, agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other Company Voting
Securities) held by such Holder other than shares of Registrable Securities
included in the registration during the seven days prior to, and during a
period of up to 180 days following, the effective date of the registration
statement. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restriction until the end of the required stand-off period.
Page 100 of 134
16
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement; Certain Provisions Regarding Termination. Unless
this Agreement specifically provides for earlier or later termination with
respect to any particular right or obligation, this Agreement shall terminate
(a) in the case of the Investor Group, if the Investor Group beneficially owns
Company Voting Securities in the aggregate representing less than 5% of the
Combined Voting Power of all Company Voting Securities, and (b) in the case of
the Shareholder Group, if the Shareholder Group beneficially owns Company
Voting Securities in the aggregate representing less than 5% of the Combined
Voting Power of all Company Voting Securities.
6.2 Legend and Stop Transfer Order. To assist in effectuating the
provisions of this Agreement, each of Investor and Shareholder hereby consents
to the placement, in connection with the transactions contemplated by the
Purchase Agreement or otherwise within 10 business days after any Company
Voting Securities become subject to the provisions of this Agreement, of the
legend set forth below on all certificates representing ownership of Company
Voting Securities owned of record or beneficially by any member of the Investor
Group or the Shareholder Group, until such shares are sold, transferred or
disposed in a manner permitted hereby to a person who is not then a member of
either such group:
"The shares represented by this certificate have not been registered under
the Federal Securities Act of 1933, as amended (the "Act") or any state
securities laws of any jurisdiction. No sale, offer to sell, assignment,
pledge, hypothecation, gift, transfer or other disposition of the shares
represented by this certificate may be made unless a registration statement
under the Act with respect to such shares is then in effect or an exemption
from the registration requirements of the Act is available with respect to
said transfer and the requirements of applicable state laws are satisfied.
The sale, assignment, pledge, hypothecation, gift, transfer or other
disposition of the shares represented by this certificate is subject to
certain restrictions pursuant to an Investment Agreement dated June 29, 1998
and a Shareholders Agreement dated June 29, 1998, in each case, by and among
the Company and certain of its shareholders, copies of which may be obtained
from the Company upon request."
The Company agrees to remove promptly all legends and stop transfer orders with
respect to the transfer of Company Voting Securities being made to a person who
is not then a member of the Investor Group or the Shareholder Group in
compliance with the provisions of this Agreement.
6.3 Remedies.
(a) Each party recognizes and acknowledges that a breach by it of Article
III, Article IV or Article V of this Agreement would cause the other parties to
sustain damages for which they would not have an adequate remedy at law for
money damages,
Page 101 of 134
17
and therefore each party agrees that in the event of any such breach any of the
other parties shall be entitled to seek the remedy of specific performance of
such Article III, Article IV or Article V and injunctive relief and other
equitable relief in addition to any other remedy to which it may be entitled,
at law or in equity.
(b) In addition to any other remedy the Company may have under this
Agreement or in law or equity, if any member of the Investor Group or the
Shareholder Group, as the case may be, shall acquire or transfer any Company
Voting Securities in violation of this Agreement, such Company Voting
Securities which are in excess of the number permitted to be owned or
controlled by the Investor Group or Shareholder Group, as the case may be, or
which have been transferred by a member of the Investor Group or the
Shareholder Group in violation of the provisions of this Agreement, will not be
voted with respect to any matter by such member either in person or by proxy.
6.4 Additional Investor Group Parties; Several Obligations. Each member
of the Investor Group or the Shareholder Group that shall become or have the
right to become the record owner of Company Voting Securities shall, promptly
upon becoming such record owner, execute and deliver to the Company a joinder
agreement, agreeing to be legally
Page 102 of 134
18
bound by the terms of this Agreement to the same extent as if it had signed
this Agreement as an original signatory as Investor or Shareholder, as the case
may be; provided that failure to execute such an agreement shall not excuse
such member's non-compliance with any provision of this Agreement. No member
of the Investor Group or the Shareholder Group shall transfer securities to
another member of its group unless the transferee shall agree to be bound by
this Agreement in the manner specified above in this Section 7.4.
6.5 Notices. All notices, and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy, to
the appropriate address or telecopy number set forth below (or at such other
address or telecopy number for a party as shall be specified by like notice):
if to Investor:
Samstock, L.L.C.
Two X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: F. Xxxxxx Xxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Two X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telecopy Number: (000) 000-0000
if to the Company:
Davel Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: R. Xxxxx Xxxx
Telecopy Number: (000) 000-0000
Page 103 of 134
19
with an additional copy to:
Davel Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxxx, Xx.
Telecopy Number: (000) 000-0000
If to Shareholder:
Xxxxx X. Xxxx
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
6.6 Severability. Any provision hereof which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
6.7 Amendments; Waivers. (a) This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by each party
hereto.
(b) The failure of any party hereto to comply with any representation,
warranty, covenant or agreement contained in this Agreement may be waived only
by a written instrument signed by the party granting such waiver. No action
taken pursuant to this Agreement, including any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained in this Agreement, and no failure by any party to take any action
with respect to any breach of this Agreement or default by any other party
shall constitute a waiver of such party's right to enforce any provision hereof
or to take any such action. The waiver by any party hereto of a breach of any
provision hereunder shall not operate as a waiver of any prior or subsequent
breach of the same or any other provision hereunder.
6.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
6.9 Interpretation. The headings contained in this Agreement are inserted
for convenience of reference only and shall not affect in anyway the meaning or
interpretation of this Agreement. All references to a Section, Article,
Schedule or Exhibit contained herein mean Sections, Articles, Schedules or
Exhibits of this Agreement unless otherwise stated. All capitalized terms
defined herein are equally applicable to both the singular and plural forms of
such terms.
Whenever the words "include", includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
Page 104 of 134
20
6.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
6.11 . Neither this Agreement nor any of the rights, interest or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Investor may assign any of or all of
its rights and obligations under this Agreement to any person that is an
Affiliate of Xxxxxx Xxxx or an Affiliate of any one or more trusts established
for the benefit of Xxxxxx Xxxx and/or members of his family without the consent
of any other party and Shareholder may assign any or all of his rights and
obligations under this Agreement to one or more Affiliates of Shareholder
(including any Shareholder Family Entity) without the consent of any other
party; provided that, in each case, such person or persons shall have executed
and delivered a joinder to this Agreement and agreed to be bound by the terms
and conditions hereof. Subject to the preceding sentence, this Agreement shall
be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
6.12 Consent to Jurisdiction. Each party hereto irrevocably submits to
the nonexclusive jurisdiction of (a) the state courts of the State of Illinois
and (b) any federal district court located in the State of Illinois for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby.
Page 105 of 134
21
IN WITNESS WHEREOF, each of Investor, Shareholder and the Company have
executed this Investment Agreement as of the date first above written.
INVESTOR:
SAMSTOCK, L.L.C.
_____________________________________
By:
SHAREHOLDER:
_____________________________________
Xxxxx X. Xxxx, individually
COMPANY:
DAVEL COMMUNICATIONS GROUP, INC.
_____________________________________
By:
Page 106 of 134
