Exhibit 10.29
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
SEVENTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
As of December 13, 1997
TABLE OF CONTENTS
PAGE
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1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Request for Registration. . . . . . . . . . . . . . . . . . 3
1.3 Company Registration. . . . . . . . . . . . . . . . . . . . 5
1.4 Obligations of the Company. . . . . . . . . . . . . . . . . 5
1.5 Furnish Information . . . . . . . . . . . . . . . . . . . . 7
1.6 Expenses of Demand Registration . . . . . . . . . . . . . . 7
1.7 Expenses of Company Registration. . . . . . . . . . . . . . 7
1.8 Underwriting Requirements . . . . . . . . . . . . . . . . . 8
1.9 Delay of Registration . . . . . . . . . . . . . . . . . . . 8
1.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . 9
1.11 Reports Under Securities Exchange Act of 1934. . . . . . . 10
1.12 Form S-3 Registration. . . . . . . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights. . . . . . . . . . . . . 12
1.14 Limitations on Subsequent Registration Rights;
Registration Rights Agreement. . . . . . . . . . . . . . . 12
1.15 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . 13
1.16 Termination of Registration Rights . . . . . . . . . . . . 14
2. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Delivery of Financial Statements. . . . . . . . . . . . . . 14
2.2 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Right of First Offer on Primary Sales . . . . . . . . . . . 15
2.4 Restrictions on Sale or Other Disposition of Shares . . . . 17
2.5 Right of First Offer on Certain Secondary Sales . . . . . . 19
2.6 Board Representation. . . . . . . . . . . . . . . . . . . . 21
2.7 Observer Rights . . . . . . . . . . . . . . . . . . . . . . 23
2.8 Co-Sale Rights. . . . . . . . . . . . . . . . . . . . . . . 23
2.9 Stock Purchases by Employees, Officers, Directors and
Consulants. . . . . . . . . . . . . . . . . . . . . . . . . 27
2.10 Additional Liquidity Rights . . . . . . . . . . . . . . . . 27
2.11 Termination of Certain Covenants. . . . . . . . . . . . . . 28
2A Toronto Dominion Regulatory Compliance. . . . . . 28
2A.1 Violation of BHCA or SBIA . . . . . . . . . . . . 28
2A.2 SBIC Requirements . . . . . . . . . . . . . . . . 29
2A.3 Acquisition of Shares . . . . . . . . . . . . . . 30
2A.4 BHCA Issue, SBIC Issue and SBIC Requirements
Defined . . . . . . . . . . . . . . . . . . . . . 30
3. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . 30
3.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 31
3.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 31
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3.4 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . 31
3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 31
3.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . 32
3.9 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . 32
3.10 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . 32
Schedule A Schedule of Investors
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SEVENTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS SEVENTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as
of the 13th day of December, 1997, by and among International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), and
the investors listed on SCHEDULE A hereto, each of which is herein referred
to as an "Investor."
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold shares
of the Company's Preferred Stock and/or shares of Common Stock issued upon
conversion thereof and/or other securities convertible or exchangeable into
the Company's Preferred Stock and possess registration rights, information
rights, rights of first offer, co-sale rights and other rights pursuant to
the Sixth Amended and Restated Investor Rights Agreement dated as of August
18, 1997, among the Company and such Investors, as amended as of October 24,
1997; and
WHEREAS, certain of the Existing Investors are lenders under the Loan
Agreement dated August 18, 1997 among the Company and the lenders named
therein (the "IWCH Loan Agreement") and under the Loan Agreement dated August
18, 1997 among Pakistan Wireless Holdings Limited, a Mauritius Company
("PWH"), and the lenders named therein (the "PWH Loan Agreement;" together
with the IWCH Loan Agreement, the "Loan Agreements"); and
WHEREAS, subject to certain terms and conditions, the Notes, as that
term is defined in the IWCH Loan Agreement (the "IWCH Notes") may be
exchanged for Series G-1 or Series G-2 Preferred Stock of the Company and the
Notes, as that term is defined in the PWH Loan Agreement (the "PWH Notes;"
together with the IWCH Notes, the "IWCH/PWH Notes") may be exchanged for
shares of Series H-1 or Series H-2 Preferred Stock of the Company (the shares
of Series G-1, Series G-2, Series H-1 and Series H-2 Preferred Stock issuable
upon exchange of the IWCH/PWH Notes or the conversion of other shares of
Series G-1, Series G-2, Series H-1 or Series H-2 Preferred Stock being
referred to as the "Series G/H Preferred Shares"); and
WHEREAS, the Company has issued or may issue to certain of the Existing
Investors the Warrants, as that term is defined in the IWCH Loan Agreement
(individually an "IWCH/PWH Warrant"; collectively, the "IWCH/PWH Warrants");
and
WHEREAS, certain of the Investors are former stockholders of Radio Movil
Digital Americas, Inc., a Delaware corporation ("RMD"), that acquired shares
of the Company's Series I Preferred Stock or Common Stock (collectively, the
"Merger Shares") pursuant to the Agreement and Plan of Merger dated November
22, 1997 (the "RMD Merger Agreement") among the Company, a wholly owned
subsidiary of the Company and RMD; and
WHEREAS, the Company desires to grant certain registration rights,
information rights, rights of first offer, co-sale rights and other rights to
holders of the Merger Shares; and
WHEREAS, the Existing Investors desire to amend and restate the Prior
Agreement and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1. DEFINITIONS. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof. For purposes of this Agreement, the holders of
securities which are convertible or exchangeable into Registrable Securities,
or which are convertible or exchangeable into other securities which are
convertible or exchangeable into Registrable Securities, shall be treated as
Holders of such underlying Registrable Securities, and references to
Registrable Securities held by such holders shall include such underlying
Registrable Securities.
(d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "register", "registered", and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration
or ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) (A) the
Common Stock of the Company ("Common Stock") issuable or issued upon
conversion of (aa) the Series B, Series C, Series D, and Series E Preferred
Stock of the Company and (bb) the Series I Preferred Stock of the Company
issued pursuant to the RMD Merger Agreement (if any) and (B) the Common Stock
issued pursuant to the RMD Merger Agreement (if any), (ii) the Common Stock
issuable or issued upon conversion of Preferred Stock of the Company issuable
or issued (A) upon exercise of the warrants issued to Vanguard pursuant to
that certain Series C Preferred Stock Purchase Agreement dated as of February
24, 1994, as such warrants are amended and restated pursuant to the Warrant
Amendment Agreement dated as of July 31, 1995 (the "Vanguard Warrant
Shares"), (B) upon the exercise of warrants issued to certain Investors
pursuant to that certain Note and Warrant Purchase Agreement dated as of May
6, 1994 (the
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"1994 Warrant Shares"), (C) upon exercise of warrants (the "1995 Warrant
Shares") issued to certain Investors pursuant to that certain Securities
Purchase Agreement dated as of July 12, 1995 (the "Securities Purchase
Agreement"), (D) upon exercise of warrants issued to Vanguard pursuant to the
Note and Warrant Purchase Agreement dated as of July 31, 1995 (the
"Additional Vanguard Warrant Shares"), and (E) upon exercise of warrants
issued to Toronto Dominion Investments, Inc. or its Affiliates (collectively,
"Toronto Dominion"), pursuant to the Note and Warrant Purchase Agreement (the
"TD Purchase Agreement") and the Loan Agreement, each dated as of August 14,
1995 (the "TD Warrant Shares", together with Vanguard Warrant Shares, the
1994 Warrant Shares, the 1995 Warrant Shares, and the Additional Vanguard
Warrant Shares, the "Warrant Shares"), (iii) Common Stock that is issued or
issuable upon exercise of the Warrant to Purchase Common Stock granted to
Vanguard Cellular Financial Corp., a North Carolina corporation ("Vanguard"),
pursuant to Section 2.01(c) of the Reimbursement Agreement dated September
18, 1997 between Vanguard and IWC China Limited, (iv) the Common Stock
issuable or issued upon conversion of Preferred Stock issuable or issued upon
conversion of the two $900,000 notes issued to Vanguard pursuant to that
certain Note Purchase Agreement dated as of October 26, 1994, as amended by
the Amendment to Note Purchase Agreement dated as of July 12, 1995 between
the Company and Vanguard (collectively, the "Vanguard Notes"), and (v) Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares
referenced in (i) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which the related rights
under this Section 1 are not assigned pursuant to Section 1.13.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2. REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the
earlier of (i) December 31, 1997, or (ii) six (6) months after the effective
date of the first registration statement for a public offering of securities
of the Company (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from the Holders of at least forty percent (40%) of the Registrable
Securities then outstanding that the Company file a registration statement
under the Act covering the registration of at least forty percent (40%) of
the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $2,500,000), then the Company shall:
(i) within twenty (20) days of the receipt thereof,
give written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as
practicable, and in any event within 60 days of the receipt of such request,
the registration under the Act of all Registrable Securities which the
Holders request to be registered, subject to the limitations of
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subsection 1.2(b), within twenty (20) days of the mailing of such notice by
the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Company as a part of their request made pursuant to subsection
1.2(a) and the Company shall include such information in the written notice
referred to in subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to holders of a majority of the
Registrable Securities then held by Initiating Holders. In such event, the
right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by holders of a majority of
the Registrable Securities then held by Initiating Holders and such Holder)
to the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in subsection 1.4(e)) enter into an underwriting agreement in usual
and customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 1.2, if
the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating
Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company held by each Holder; provided, however,
that, except as provided in that certain Amended and Restated Registration
Rights Agreement dated as of August 18, 1997 among the Company and the
holders of "Registrable Securities" as defined therein (the "Registration
Rights Agreement"), the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company
shall have the right to defer taking action with respect to such filing for a
period of not more than 120 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
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(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose
of shares of Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 1.12 below.
1.3. COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the
public offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company stock
plan, a registration on any form which does not include substantially the
same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities or a registration
in which the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with
Section 3.5, the Company shall, subject to the provisions of Section 1.8,
cause to be registered under the Act all of the Registrable Securities that
each such Holder has requested to be registered.
1.4. OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
twenty (120) days or until the distribution contemplated in the Registration
Statement has been completed; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities
on Form S-3 which are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Act, permits an
offering on a continuous or delayed basis, and provided further that
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (I) includes any prospectus required by Section 10(a)(3) of the Act or
(II) reflects facts or events representing a material or fundamental change
in the information set
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forth in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) 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
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) 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.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are
not
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being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any,
and to the Holders requesting registration of Registrable Securities and (ii)
a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
1.5. FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
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.
1.6. EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printing and accounting fees, fees and disbursements of counsel for the
Company (including fees and disbursements of counsel for the Company in its
capacity as counsel to the selling Holders hereunder; if Company counsel does
not make itself available for this purpose, the Company will pay the
reasonable fees and disbursements of one counsel for the selling Holders
selected by them) shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses on a pro rata basis based on the number of
Registrable Securities requested to be registered), unless the Holders of a
majority of the Registrable Securities requested to be registered agree to
forfeit their right to one demand registration pursuant to Section 1.2;
provided further, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the condition, business,
or prospects of the Company from that known to the Holders at the time of
their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 1.2.
1.7. EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing and qualification fees, printing and accounting fees
relating or apportionable thereto and the fees and disbursements of counsel
for the Company (including fees and disbursements of counsel for the Company
in its capacity as counsel to the selling Holders hereunder; if Company
counsel does not make itself available for
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this purpose, the Company will pay the reasonable fees and disbursements of
one counsel for the selling Holders selected by them), but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8. UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among the
selling stockholders according to the total amount of securities entitled to
be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders) but
in no event, except as otherwise required by the Registration Rights
Agreement, shall (i) the amount of securities of the selling Holders included
in the offering be reduced below thirty percent (30%) of the total amount of
securities included in such offering, unless such offering is the initial
public offering of the Company's securities in which case the selling
stockholders may be excluded entirely if the underwriters make the
determination described above and no other stockholder's securities are
included or (ii) notwithstanding (i) above, any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is
a holder of Registrable Securities and which is a partnership or corporation,
the partners, retired partners and stockholders of such holder, or the
estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be
a single "selling stockholder", and any pro-rata reduction with respect to
such "selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included
in such "selling stockholder", as defined in this sentence.
1.9. DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.
1.10. INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such
8
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 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 or 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, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934
Act or any state securities law; and the Company will pay to each such
Holder, underwriter 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 subsection 1.10(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 any such Holder, underwriter or controlling person.
(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 1934 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 subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(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 the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 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 1.10,
deliver to the indemnifying party a written notice of the
9
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; provided, however,
that an indemnified party (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.10, 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
1.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act 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) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed
by the Company for the offering of its securities to the general public;
10
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal
year in which the first registration statement filed by the Company for the
offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), or that
it qualifies as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (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 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.
1.12. FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder or Holders of at least 20% in the aggregate of Registrable
Securities a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written
request given within 15 days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this section
1.12: (1) if Form S-3 is not available for such offering by the Holders; (2)
if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of
less than $250,000; (3) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3 registration statement for
a period of not more than
11
60 days after receipt of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this
right more than once in any twelve month period; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do business
or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses incurred in
connection with a registration requested pursuant to Section 1.12, including
(without limitation) all registration, filing, qualification, printer's and
accounting fees and the reasonable fees and disbursements of counsel for the
selling Holder or Holders and counsel for the Company, but excluding any
underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company, unless the Company has within the
12 month period preceding the date of such request paid the expenses incurred
in connection with a registration pursuant to Section 1.12, in which case the
expenses shall be borne pro rata by the Holder or Holders participating in
the Form S-3 registration. Registrations effected pursuant to this Section
1.12 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.13. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee
or assignee of such securities, provided: (a) the transferee or assignee
receives at least 10,000 shares of Registrable Securities (subject to
adjustment for stock splits, stock dividends and the like) in the transfer of
such securities; (b) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (c) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of
this Agreement, including without limitation the provisions of Section 1.15
below; and (d) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
1.14. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS; REGISTRATION
RIGHTS AGREEMENT. From and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of a majority of
the outstanding Registrable Securities, enter into any agreement with any
holder or prospective holder of any securities of the Company which would
allow such holder or prospective holder (a) to include such securities in any
registration filed under Section 1.2 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of his securities
will not reduce the amount of the Registrable Securities of the Holders which
is included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of
either of the dates set forth in subsection 1.2(a) or within one hundred
twenty (120) days of the effective date of any registration effected pursuant
to Section 1.2. Notwithstanding anything herein to the contrary,
12
the holders of Registrable Securities acknowledge the terms and provisions of
the Registration Rights Agreement and agree that to the extent that this
Agreement conflicts in any respect with the Registration Rights Agreement,
the terms and provisions of the Registration Rights Agreement shall govern in
all respects, including, without limitation, the terms and provisions of
Sections 2, 3, and 12 of the Registration Rights Agreement governing the
priorities of inclusion of securities of the Company in a registration,
whether such registration is by the Company for its own account or on behalf
of any security holder of the Company (including the Holders) exercising a
demand or incidental registration right.
1.15. "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees
that, during the period of duration specified by the Company and an
underwriter of common stock or other securities of the Company, following the
date of the first sale to the public pursuant to a registration statement of
the Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at
any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten
offering;
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements;
(c) such market stand-off time period shall not exceed one
hundred and twenty (120) days; and
(d) such agreement shall not preclude transfer in a private
transaction to an institutional buyer who agrees to be bound by such
agreement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this Section
1.15 shall not apply to a registration relating solely to employee benefit
plans on Form S-l or Form S-8 or similar forms which may be promulgated in
the future, or a registration relating solely to a SEC Rule 145 transaction.
1.16. TERMINATION OF REGISTRATION RIGHTS. The right of any Holder
to request registration or inclusion in any registration pursuant to Section
1.3 shall terminate on the closing of the first Company-initiated registered
public offering of Common Stock of the
13
Company if all shares of Registrable Securities held or entitled to be held
upon conversion by such Holder may immediately be sold under Rule 144 during
any 90-day period, or on such date after the closing of the first
Company-initiated registered public offering of Common Stock of the Company
as all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 during any
90-day period.
2. COVENANTS OF THE COMPANY.
2.1. DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver
to each Investor:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement
of stockholder's equity as of the end of such year, and a statement of cash
flows for such year, including notes thereto, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent
public accountants of nationally recognized standing selected by the Company;
(b) within thirty (30) days of the end of each month, an
unaudited income statement, a balance sheet and a statement of cash flows for
and as of the end of such month, in reasonable detail;
(c) as soon as practicable, but in any event sixty (60) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including income statements,
balance sheets and statements of cash flows for such months and, as soon as
prepared, any other budgets, including internally prepared quarterly budget
forecasts or revised budgets prepared by the Company;
(d) within fifteen (15) days of the end of each calendar
quarter, a quarterly operations reports summarizing activities during
preceding quarter;
(e) with respect to the financial statements called for in
subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financial statements were prepared in accordance with GAAP consistently
applied with prior practice for earlier periods (with the exception of
footnotes that may be required by GAAP) and fairly present the financial
condition of the Company and its results of operation for the period
specified, subject to year-end audit adjustment; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this
subsection (f) or any other subsection of Section 2.1 to provide information
which it deems in good faith to be a trade secret or similar confidential
information.
14
2.2. INSPECTION. The Company will also permit each Investor and
its authorized representatives, at all reasonable times and as often as
reasonably requested, to visit and inspect, at the expense of such Investor,
any of the properties of the Company, to inspect its books and records and to
make extracts therefrom, and to discuss the affairs, finances and accounts of
the Company with its officers and consult with and advise the officers of the
Company as to the management of the Company, provided that the Investors
shall maintain the confidentiality of any proprietary information of the
Company thereby obtained and provided further that the Investors shall
conduct all such inspections in a manner that is not disruptive to the
employees or operations of the Company.
2.3. RIGHT OF FIRST OFFER ON PRIMARY SALES. Subject to the terms
and conditions specified in this Section 2.3, the Company hereby grants to
each Major Investor (as hereinafter defined) a right of first offer with
respect to future sales by the Company of its Securities (as hereinafter
defined). For purposes of this Section 2.3, a Major Investor shall mean (i)
any Investor who is a Holder of at least 10% of either the Registrable
Securities or the Other Registrable Securities (as defined below) initially
acquired by such Investor, but in any event not less than 4000 shares of
either the Registrable Securities or the Other Registrable Securities and
(ii) any person who acquires at least 10% in the aggregate of any of the
Series B, Series C, Series D, Series E, Series F, Series G, Series H or
Series I Preferred Stock (or the Common Stock issued or issuable upon
conversion thereof) outstanding as of the date hereof. For purposes of this
Agreement, the term "Other Registrable Securities" and the term "Holder" as
used in relation thereto shall have the meanings given to the terms
"Registrable Securities" and "Holder" in the Registration Rights Agreement,
and the term "Affiliates" shall have the meaning given to such term in
Section 2.4(e) below. For purposes of this Section 2.3, Investor includes
any general partners and Affiliates of an Investor. An Investor shall be
entitled to apportion the right of first offer hereby granted it among itself
and its partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock or any debt securities ("Securities"), the Company shall first make an
offering of such Securities to each Major Investor in accordance with the
following provisions:
(a) The Company shall deliver a notice by certified mail
("Section 2.3 Notice") to each Major Investor stating (i) its bona fide
intention to offer such Securities, (ii) the number of such Securities to be
offered, and (iii) the price and terms, if any, upon which it proposes to
offer such Securities.
(b) By written notification received by the Company within
twenty (20) calendar days after receiving the Section 2.3 Notice, each Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Section 2.3 Notice, up to that portion of such Securities
which equals the total number of Securities multiplied by a fraction, (a) the
numerator of which is the sum of the number of Registrable Securities
referred to in clauses (i) and (iv) of Section 1.1(f) and the number of Other
Registrable Securities then held by such Major Investor, and (b) the
denominator of which is the total number of shares of Common
15
Stock then outstanding (assuming full conversion of all then outstanding
securities that are convertible into and exchangeable and exercisable for
shares of Common Stock of the Company). The Company shall promptly, in
writing, inform each Major Investor which purchases all of the Securities
available to it under this Section 2.3 ("Fully Exercising Investor") of any
other Major Investor's failure to do likewise. During the ten (10)-day
period commencing after receipt of such information, each Fully Exercising
Investor shall be entitled to purchase up to that portion of the Securities
for which Major Investors were entitled to subscribe but which were not
subscribed for by the Major Investors which is equal to the total number of
unsubscribed Securities multiplied by a fraction, (a) the numerator of which
is the sum of the number of Registrable Securities referred to in clauses (i)
and (iv) of Section 1.1(f) and the number of Other Registrable Securities, as
the case may be, then held by such Fully Exercising Investor, and (B) the
denominator of which is the total number of Registrable Securities referred
to in clauses (i) and (iv) of Section 1.1(f) and the number of Other
Registrable Securities then held by all Fully Exercising Investors who wish
to purchase some of the unsubscribed shares.
(c) If all Securities which Major Investors are entitled to
purchase pursuant to subsection 2.3(b) are not elected to be purchased as
provided in subsection 2.3(b) hereof, the Company may, during the ninety
(90)-day period following the expiration of the period provided in subsection
2.3(b) hereof, offer the remaining unsubscribed portion of such Securities to
any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Section 2.3 Notice. If
the Company does not enter into an agreement for the sale of the Securities
within such period, or if such agreement is not consummated within thirty
(30) days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Securities shall not be offered unless first
reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not
be applicable (i) to the issuance or sale of up to 2,811,526 shares of Common
Stock (or such additional number of shares of Common Stock as may be approved
in writing by holders of a majority of the number of outstanding Registrable
Securities and holders of a majority of the Other Registrable Securities at
the time of such approval) (in each case, as appropriately adjusted for any
stock dividends, contributions, splits, reclassifications or the like) to
officers, directors and employees of and consultants to the Company for the
primary purpose of soliciting or retaining their services, provided each such
person executes an agreement, pursuant to which such person agrees to resell
to the Company at the original purchase price thereof all shares of the
Company's Common Stock that are not vested on the date of termination of such
employee's term of service with the Company and not to transfer any unvested
shares of the Company's Common Stock to any person except to members of his
or her immediate family or to a trust for the benefit of members of his or
her immediate family, or (ii) to or after consummation of a Threshold Public
Offering (as defined in the Amended and Restated Certificate of Incorporation
of the Company), (iii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities (including
the Warrant Shares and the Series G/H Preferred Shares and the Common Stock
issuable upon conversion thereof and upon exercise of the IWCH/PWH Warrants),
(iv) to the issuance of securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or
16
exchange of stock or otherwise, (v) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has
business relationships provided such issuances are for other than primarily
equity financing purposes (provided that no more than 1% of the total number
of shares of Common Stock then outstanding (assuming full conversion of all
then outstanding convertible securities of the Company) may be excluded from
the right of first offer pursuant to this clause (v) during any twelve
(12)-month period), and (vi) to the issuance of Securities upon conversion of
the Vanguard Notes and exchange of the IWCH/PWH Notes.
(e) The right of first offer set forth in this Section 2.3
may not be assigned or transferred, except that (i) such right is assignable
by each Holder and each Holder (within the meaning of the Registration Rights
Agreement) of Other Registrable Securities (an "Other Holder") to any wholly
owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Act, controlling, controlled by or under common
control with, any such Holder or Other Holder, and (ii) such right may be
transferred to a third party who buys (x) at least 40,000 shares of the
Registrable Securities or Other Registrable Securities (subject to adjustment
for stock splits, stock dividends and the like) or (y) all shares held by an
Investor.
2.4. RESTRICTIONS ON SALE OR OTHER DISPOSITION OF SECURITIES. (a) No
Investor shall, either directly or indirectly, sell, assign, mortgage,
hypothecate, transfer, pledge, create a security interest in or lien upon,
encumber, give, place in trust, or otherwise voluntarily or involuntarily
dispose of (collectively hereinafter sometimes referred to as "Transfer") any
of the shares of Capital Stock (as defined in the Securities Purchase
Agreement (as defined in the Registration Rights Agreement)) then owned or
controlled by such party except in accordance with Section 2.4(b), 2.4(d),
2.4(f), 2.5 or 2.8. No Transfer of any shares of Capital Stock in violation
of the provisions of this Agreement shall be made or recorded on the books of
the Corporation and any such purported transfer shall be void and of no force
or effect.
(b) Notwithstanding anything to the contrary contained in
this Agreement, any Investor shall have the right at any time to Transfer any
of its shares of Capital Stock of the Company to any Affiliate, upon such
terms as may be agreed upon by such party and its transferee; PROVIDED,
HOWEVER, that (i) any such Transfer shall be made in compliance with the
Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom, and (ii) any such transferee shall (A) acquire the
shares so transferred subject to all the terms and conditions of this
Agreement, (B) shall agree in writing, at the time of the Transfer, to be
bound by all of the provisions of this Agreement which would be applicable to
the Investor if it continued to own the shares so transferred, and (C) shall
be an "accredited investor" within the meaning of Regulation D under the
Securities Act. In addition to and subject to compliance with the foregoing,
Electra Investment Trust P.L.C. ("EIT") and Electra Associates, Inc.
(collectively, "Electra"), shall have the right to Transfer any of its shares
of Capital Stock of the Company to Electra Xxxxxxx Equity Partners (provided
that at the time of such Transfer such entity is an Affiliate of EIT).
Notwithstanding anything to the contrary in this Agreement, each Investor
other than a Section 2.5 Stockholder (as defined below) shall be permitted to
Transfer such Investor's shares of Capital Stock of the Company, subject only
to compliance with clauses (i) and (ii) of the proviso to the first sentence
of this Section 2.4(b). Notwithstanding anything to the contrary contained
in this Agreement, Toronto Dominion Investments, Inc. ("Toronto
17
Dominion") shall have the unrestricted right to assign or transfer any of its
shares of Capital Stock of the Company to an indirect or direct wholly or
majority owned subsidiary of the ultimate parent of Toronto Dominion
including, without limitation, a subsidiary established as (or which is
expected by Toronto Dominion to become) a small business investment company
pursuant to the Small Business Investment Act of 1958, as amended from time
to time, subject to compliance with clauses (i) and (ii) of the proviso to
the first sentence of this Section 2.4(b). Notwithstanding anything to the
contrary contained in this Agreement, Vanguard shall have the right at any
time to Transfer any shares of Capital Stock of the Company (whether now
owned or hereafter acquired by Vanguard) to the Vanguard Lenders (as defined
below) pursuant to that certain Amended and Restated Subsidiary Pledge
Agreement dated as of December 23, 1994 between Vanguard and Toronto Dominion
(Texas), Inc., as Collateral Agent, as amended, subject to and in accordance
with the Fourth Amended and Restated Investor Rights Agreement dated as of
July 31, 1995, among the Company and the investors name therein (the "Fourth
Amended and Restated Investor Rights Agreement") and, Vanguard Lenders shall
have the right to Transfer any such shares acquired upon the exercise of
their rights under such Amended and Restated Subsidiary Pledge Agreement
subject to and in accordance with the Fourth Amended and Restated Investor
Rights Agreement, in each case as if the Prior Agreement were in full force
and effect on the date of Transfer. "Vanguard Lenders" shall have the
meaning given to the term "Lenders" in that certain Amended and Restated Loan
Agreement dated as of December 23, 1994 among Vanguard, the Lenders, and the
other parties thereto. Any Transfer under this Section 2.4(b) shall not be
subject to the provisions of Section 2.5.
(c) In the event of any Transfer in accordance with the
provisions of Section 2.4(b), prompt written notice of the Transfer shall be
delivered by the Transferor to the Corporation, and, in the case of any
Transfer pursuant to Section 2.4 hereof, references herein to the Investor
shall include, from and after the date of such permitted transfer, each such
permitted transferee (transferees acquiring such shares pursuant to Section
2.4(b) are hereinafter sometimes referred to as "Permitted Transferees").
(d) For so long as any shares of Series F Preferred Stock
shall remain outstanding, none of Xxxx X. Xxxxxxx, Xxxx X. X. XxXxxxx,
Xxxxxxx X. Xxxxxxxx, Xxxxxx Xxxx, Xxxxxxx Xxxxxxx, or Xxxxx Xxxxx
(collectively, "Management") may Transfer any Capital Stock of the Company
owned at any time by such individual. The foregoing transfer restrictions
shall not (i) apply to any member of Management (other than a director of the
Company) who owns 20,000 or fewer shares of Capital Stock of the Company or
(ii) prevent any member of Management (other than a director of the Company)
who as of the date of this Agreement owns 20,000 or fewer shares of Capital
Stock of the Company and who hereafter owns more than 20,000 shares of
Capital Stock of the Company from Transferring up to 20,000 shares of Capital
Stock of the Company.
(e) For purposes of this Agreement, the term "Affiliate"
means, (i) with respect to any person, any other person (A) which directly or
indirectly of record or beneficially owns or holds fifty percent (50%) or
more of the equity interest of such person, or (B) fifty percent (50%) or
more of the equity interest which is owned or held, directly or indirectly,
of record or beneficially, by such person and (ii) with respect to any person
that is an
18
investment fund, any other person which is an investment fund and which has
as its investment managers or adviser, the same investment manager or adviser
as such a person or an investment manager or adviser a majority of the
individual investment professionals of which are the same as the individual
investment professionals of the investment manager or adviser of such other
person.
(f) Prior to the earlier of the second anniversary of the
date of this Agreement and the date on which any shares of Series F Preferred
Stock no longer remain outstanding, except as set forth in Section 2.4(b)
above, neither Vanguard nor any of its Affiliates may Transfer any of its
Capital Stock of the Company unless (i) immediately following such Transfer
Vanguard and its Affiliates collectively own not less than 30% of the then
issued and outstanding shares of Capital Stock of the Company and (ii) the
consideration per share received by Vanguard or such Affiliate of Vanguard,
as the case may be, with respect to such Transfer equals or exceeds 9.375 per
share (as appropriately adjusted for stock splits, stock dividends,
combinations and other recapitalizations).
2.5. RIGHT OF FIRST OFFER ON CERTAIN SECONDARY SALES. Subject to
the terms and conditions specified in this Section 2.5, each Investor who, as
of the date of this Agreement or hereafter, holds at least 100,000 shares of
Registrable Securities referred to in clauses (i) and (iv) of Section 1.1(f)
and/or Other Registrable Securities (as appropriately adjusted for any stock
dividends, contributions, splits, reclassifications or the like)
(individually a "Section 2.5 Stockholder," and collectively the "Section 2.5
Stockholders"), hereby grants to each other Section 2.5 Stockholder (but
excluding each holder of Series A Preferred Stock) (individually a "Section
2.5 Rights Holder," and collectively the "Section 2.5 Rights Holders") a
right of first offer with respect to future sales of Securities by such
Section 2.5 Stockholder. Notwithstanding any other provision of this
Agreement, a Section 2.5 Stockholder; (i) includes any general partners and
Affiliates of such Section 2.5 Stockholder; and (ii) excludes each Investor
listed on SCHEDULE 1 attached hereto, provided that each such Investor shall
be excluded only for so long as such Investor and its Affiliates own in the
aggregate in excess of 800,000 shares of the Capital Stock of the Company (as
appropriately adjusted for any stock dividends, contributions, splits,
reclassifications or the like). The Section 2.5 Stockholder, shall be
entitled to a portion of the right of first offer hereby granted it among
itself and its partners and Affiliate in such proportions as it deems
appropriate.
Each time a Section 2.5 Stockholder (an "Initiating Section 2.5
Stockholder") proposes to offer any Securities, except as provided in Section
2.4(b) above, the Section 2.5 Stockholder shall first make an offering of
such shares to each other Section 2.5 Rights Holder in accordance with the
following provisions:
(a) The Initiating Section 2.5 Stockholder shall deliver a
written notice by certified mail ("Section 2.5 Notice") to the Section 2.5
Rights Holders stating (i) its bona fide intention to offer such Securities,
(ii) the number of Securities to be offered ("Section 2.5 Shares") and (iii)
the price and terms, if any, upon which it proposes to offer the Section 2.5
Shares.
19
(b) By written notification received by the Initiating Section 2.5
Stockholder within ten (10) business days after receiving the Section 2.5
Notice, each Section 2.5 Rights Holder may elect to purchase or obtain, at
the price and on the terms specified in the Section 2.5 Notice, up to that
number of the Section 2.5 Shares equal to the product of the total number of
Section 2.5 Shares multiplied by a fraction (A) the numerator of which is the
sum of the number of Registrable Securities referred to in clauses (i) and
(iv) of Section 1.1(f) and the number of Other Registrable Securities, as the
case may be, then held by such Section 2.5 Rights Holder and (B) the
denominator of which is the total number of shares of Common Stock then
outstanding (assuming full conversion of all then outstanding securities that
are convertible into and exchangeable and exercisable for shares of Common
Stock of the Company). The Initiating Section 2.5 Stockholder shall
promptly, in writing, inform each Section 2.5 Rights Holder which purchases
all of the Section 2.5 Shares available to it ("Fully Exercising Section 2.5
Rights Holder") of any other Section 2.5 Rights Holder's failure to do
likewise. During the ten (10) business day period commencing after receipt
of such information, each Fully Exercising Section 2.5 Rights Holder shall be
entitled to purchase up to that portion of the Section 2.5 Shares that the
Section 2.5 Rights Holders were entitled to subscribe but which were not
subscribed for by the Section 2.5 Rights Holders which is equal to the
proportion that the sum of the number of Registrable Securities referred to
in clauses (i) and (iv) of Section 1.1(f) and the number of Other Registrable
Securities then held, by such Fully Exercising Section 2.5 Rights Holder
bears to the sum of the number of Registrable Securities referred to in
clauses (i) and (iv) of Section 1.1(f) and the number of Other Registrable
Securities then held, by all Fully Exercising Section 2.5 Rights Holders who
wish to purchase some of the unsubscribed Securities.
(c) If all of the Section 2.5 Shares which Section 2.5 Rights
Holders are entitled to purchase pursuant to subsection 2.5(b) hereof are not
elected to be purchased as provided in such subsection and if such purchases
have not been consummated within thirty (30) days of the expiration of the
periods provided in such subsection 2.5(b), the Initiating Section 2.5
Stockholder may, during the sixty (60)-day period following the expiration of
the period provided in such subsection 2.5(b), offer the remaining
unsubscribed portion of such Section 2.5 Shares to the offeree at a price not
less than, and upon terms more favorable to the offeree than those specified
in the Section 2.5 Notice. If the Initiating Section 2.5 Stockholder does
not enter into an agreement for the sale of such Section 2.5 Shares within
such period, or if such agreement is not consummated within the ninety
(90)-day period following the expiration of the period provided in such
subsection 2.5(b), the right provided herein shall be deemed to be revived in
such Section 2.5 Shares shall not be offered unless first reoffered to the
Section 2.5 Stockholders in accordance herewith.
(d) The Company may, at its discretion, cause any additional
purchaser of Capital Stock of the Company to agree to comply with the
provisions of this Section 2.5 as a Section 2.5 Stockholder.
(e) Notwithstanding the foregoing, the provisions of this Section
2.5 shall not apply to the sale of any Securities (i) to the public pursuant
to a registration
20
statement filed with, and declared effective by, the SEC under the Act or
pursuant to Rule 144 or 701 under the Act or (ii) to the Company.
Notwithstanding any other provision of this Agreement, each of Mitsui &
Co. Ltd. and its Affiliates and Mitsubishi Corporation and its Affiliates
(individually, a "Section 2.5A Stockholder;" collectively, the "Section 2.5A
Stockholders") may, at its sole discretion, elect not to be a Section 2.5
Stockholder for purposes of this Agreement if all of the following conditions
are satisfied:
(i) the Company shall acquire a direct or indirect interest in a
United States PCS License ("License") or an entity that holds a License;
(ii) at the time of such acquisition by the Company, such Section
2.5A Stockholder holds a direct or indirect interest in a License or an
entity that holds a License;
(iii) as a result of such acquisition by the Company, such Section
2.5A Stockholder would violate applicable United States federal or state
communications laws, including the United States Federal Communications Act,
or the rules and regulations thereunder, by continuing to hold both its
equity interest in the Company and a direct or indirect interest in a License
or an entity that holds a License; and
(iv) such Section 2.5A Stockholder notifies the Company within
sixty days after receiving notice from the Company that the Company has
acquired a direct or indirect interest in a License or an entity that holds a
License.
2.6. BOARD REPRESENTATION. (a) [intentionally left blank]
(b) From and after such time as the criteria set forth in Section
V.B.5(b) of the Company's Amended and Restated Certificate of Incorporation
with respect to the election of directors by the Series F Holders are no
longer satisfied, for so long as 20% of the Series F Conversion Shares (as
defined below) are held by Series F Holders, each Investor covenants to vote
his or its shares in favor of at least three (3) directors (the "Series F
Directors") designated by the holders of a majority of the Series F
Conversion Shares held by the Series F Holders at each annual meeting of
stockholders of the Corporation at which any director is elected or at the
time of any written consent to action in lieu of any such meeting; PROVIDED,
that (i) for so long as Electra (or its assignee) owns at least 213,360
Series F Conversion Shares (as such number may be adjusted appropriately for
stock splits, stock dividends, combinations and other recapitalizations),
Electra (or its assignee, provided such assignee is an Affiliate of Electra)
shall have the right to designate one (1) of the directors (the "Electra
Director") to be designated by the holders of the Series F Conversion Shares,
(ii) for so long as Central Investment Holdings, Inc. ("CIH") (or its
assignee) owns at least 213,360 Series F Conversion Shares (as such number
may be adjusted appropriately for stock splits, stock dividends, combinations
and other recapitalizations), CIH (or its assignee, provided such assignee is
an Affiliate of CIH) shall have the right to designate one (1) of the
directors to be designated by the holders of the Series F Conversion Shares;
and (iii) for so long as Toronto Dominion (or its
21
assignee) owns at least 213,360 Series F Conversion Shares (as such number
may be adjusted appropriately for stock splits, stock dividends, combinations
and other recapitalizations), Toronto Dominion (or its assignee, provided
such assignee is an Affiliate) shall have the right to designate one (1) of
the directors to be designated by the holders of the Series F Conversion
Shares, PROVIDED, HOWEVER, that Toronto Dominion or such Affiliate shall not
be entitled to so designate such director if exercising this right would be
in violation of the Bank Holding Company Act (as defined in Section 2A.4).
At least one of the Series F Directors, which shall be the Electra Director,
if any, shall have the right to be a member of the Audit and Compensation
Committees of the Board, if any, or of any committee of the Board performing
comparable functions. For purposes of this Section 2.6(b), "Series F
Conversion Shares" shall mean the shares of Common Stock issued or issuable
upon conversion of the shares of Series F-1 Preferred Stock originally issued
pursuant to the Series F Purchase Agreement or shares of Common Stock issued
or issuable upon conversion of the shares of Series F-1 Preferred Stock
issued upon conversion of the Series F-2 Preferred Stock originally issued
pursuant to the Series F Purchase Agreement.
No director(s) so designated by the holders of the Series F Conversion
Shares, or Electra, CIH or Toronto Dominion (or its respective assignee,
provided such assignee is a Section 2.4 Affiliate of Electra, CIH or Toronto
Dominion), as the case may be, may be removed without the prior consent,
given in person or by proxy, either in writing or at a special meeting called
for that purpose, of the holders of such Series F Conversion Shares, voting
separately as a class. In case of the death, resignation or other removal of
any Series F Director, including the Electra Director, the holders of a
majority of the Series F Conversion Shares held by the Series F Holders, or
Electra (or its assignee), as the case may be, shall have the right to
designate a successor director to hold such office for the unexpired term of
such removed director. Each Investor covenants and agrees to vote his or its
shares, as promptly as possible, either at a special meeting called for such
purpose or by written consent in lieu of a meeting, in favor of the election
of such successor designee.
Until the Company completes an initial public offering of its Common
Stock or is sold to or merges with another entity, none of Vanguard or
Electra, in their capacity as stockholders of the Company, will take any
actions which would result in the representative of BEA Associates, as the
manager of certain investment funds that are stockholders of the Company,
being removed from the Board of Directors of IWC, so long as such investment
funds retain their current level of ownership of Registrable Securities (as
defined in Section 1.1(f) hereof) and Registrable Securities (as defined in
the Registration Rights Agreement).
2.7. OBSERVER RIGHTS. Each Investor who is the Holder of not less than
either 80,000 Registrable Securities referred to in clauses (i), (iii) and
(iv) of Section 1.1(f) or the Holder (within the meaning of the Registration
Rights Agreement) of not less than 80,000 Other Registrable Securities
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations) is entitled to have one
representative designated by such Investor attend all meetings of its Board
in the capacity of a nonvoting, observer who may participate in discussions
and, in this respect, copies of all notices, minutes, consents, and other
materials that the Company provides to its directors shall be given to such
representative;
22
PROVIDED, HOWEVER, that such representative shall agree to hold in confidence
and trust and to act in a fiduciary manner with respect to all information so
provided; and, provided further, that the Company reserves the right to
withhold any information and to exclude such representative from any meeting
or portion thereof if access to such information or attendance at such
meeting could adversely affect the attorney-client privilege between the
Company and its counsel or would result in disclosure of trade secrets to
such representative of if such Investor or its representative is a direct
competitor of the Company. Each Investor that is an entity may designate a
representative to attend such meetings on its behalf. Each Investor (or
representative thereof) may designate an alternate to attend such meetings on
its behalf if such Investor (or representative thereof) is unable to attend.
The Company acknowledges that it is contractually required to comply with the
obligations of this Section 2.7.
2.8. CO-SALE RIGHTS.
(a) Any Section 2.5 Rights Holder which does not elect to purchase
any of the Section 2.5 Shares available to it may elect to participate (a
Section 2.5 Rights Holder so electing being herein a "Participant") in the
Initiating Section 2.5 Stockholder's sale of Securities in accordance with
this Section 2.8.
(b) Subject to subsection 2.8(l) below, each Participant shall
have the right (the "Participation Right") to Transfer to the purchaser and
any Section 2.5 Rights Holders who has exercised the Right of First Offer set
forth in Section 2.5 above a number of Securities equal to the product of (i)
the aggregate number of Section 2.5 Shares and (ii) such Participant's Pro
Rata Percentage Amount (as defined below); PROVIDED, HOWEVER, that (A) with
respect to any Participant (other than an Original Series G/H Participant)
which is a holder of Series G/H Registrable Securities (as defined in the
Registration Rights Agreement), until such time as such Participant shall
have received proceeds upon the Transfer of Series G/H Registrable Securities
and the Preferred Stock of the Company underlying such Registrable Securities
which equals or exceeds the product of (x) the aggregate liquidation
preference of all such Series G/H Registrable Securities and underlying
Preferred Stock acquired by such participant (where the "liquidation
preference" of Series G Preferred Stock and Series H Preferred Stock means
the Original Series G Issue Price and the Original Series H Issue Price (as
those terms are defined in the Company's certificate of incorporation),
respectively) and (y) 0.50, and (B) with respect to any Participant which is
a Series F Holder, until such time as such Participant shall have received
proceeds upon the Transfer of Series F Registrable Securities (as defined in
the Registration Rights Agreement) which equals or exceeds the product of (x)
the number of Series F Registrable Securities purchased by such Participant,
(y) $9.375 (as appropriately adjusted for any stock dividends, combinations,
splits or the like with respect to such shares), and (z) .50, each such
Participant specified in clause (A) and (B) above shall have the right to
Transfer a number of Securities equal to the product of (i) the aggregate
number of Section 2.5 Shares, (ii) such Participant's Pro Rata Percentage
Amount and (iii) 150%. For purposes of this Section 2.8, a Participant's Pro
Rata Percentage Amount shall be equal to the fraction, the numerator of which
is the number of shares of Common Stock owned by such Participant at the time
of the sale or transfer (assuming the full conversion, exchange and exercise
of all convertible, exchangeable and exercisable securities of the Company
then owned
23
by such Participant) and the denominator of which is the total
number of shares of Common Stock owned by the Initiating Section 2.5
Stockholder and all Participants at the time of the Transfer (assuming the
full conversion, exchange and exercise of all convertible, exchangeable and
exercisable securities of the Company then owned by the Initiating Section
2.5 Stockholder and all Participants), and rounded to the nearest whole
number.
(c) Each Participant shall effect its participation in the sale by
promptly delivering to the Initiating Section 2.5 Stockholder for transfer to
the prospective purchaser one or more certificates, properly endorsed for
transfer, which represent:
(i) the type and number of shares of Common Stock which such
Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at such
time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective
purchaser objects to the delivery of Preferred Stock in lieu of Common Stock,
such Participant shall convert such Preferred Stock into Common Stock and
deliver Common Stock as provided in subsection 2.8(c)(i) above. The Company
agrees to make any such conversion concurrent with the actual transfer of
such shares to the purchaser.
(d) The stock certificate or certificates that the Participant
delivers to the Initiating Section 2.5 Stockholder pursuant to paragraph
2.8(c) shall be transferred to the prospective purchaser in consummation of
the sale of the Securities pursuant to the terms and conditions specified in
the Notice, and the Initiating Section 2.5 Stockholder shall concurrently
therewith remit to such Participant that portion of the sale proceeds to
which such Participant is entitled by reason of its participation in such
sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities
from a Participant exercising its rights of co-sale hereunder, the Initiating
Section 2.5 Stockholder shall not sell to such prospective purchaser or
purchasers any Securities unless and until, simultaneously with such sale,
the Initiating Section 2.5 Stockholder shall purchase such shares or other
securities from such Participant.
(e) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Securities made by an
Initiating Section 2.5 Stockholder shall not adversely affect their rights to
participate in subsequent sales of Securities subject to this Section 2.8.
(f) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any pledge of Securities made pursuant to a
bona fide loan transaction that creates a mere security interest; (ii) any
transfer to the ancestors, descendants or spouse or to trusts for the benefit
of such persons of a Investor; (iii) any bona fide gift, provided that the
transferring Investor shall inform the other Investors of such pledge,
transfer or gift prior to effecting it; (iv) a transfer by an Investor that
is a partnership to a partner of such partnership or a retired partner of
such partnership who retires after the date hereof, or to the estate of any
such partner or retired partner or (v) a transfer by any Investor to any
Affiliate of such Investor;
24
provided that in each such case the pledgee, transferee or donee, as the case
may be, shall furnish to the Company and the other Investor a written
agreement to be bound by and comply with all the provisions of this Section
2.8. Such transferred Securities shall remain "Securities" hereunder.
(g) Notwithstanding the foregoing, the provisions of this Section
2.8 shall not apply to (A) the sale of any Securities (i) to the public
pursuant to a registration statement filed with, and declared effective by,
the SEC under the Act or pursuant to Rule 144 or 701 under the Act or (ii) to
the Company or (B) the Post-Exchange Sale (as that term is defined in the
Exchange Agreement).
(h) In the event an Initiating Section 2.5 Stockholder should
sell any Securities in contravention of the co-sale rights of the Investor
under this agreement (a "Prohibited Transfer"), the Investors, in addition to
such other remedies as may be available at law, in equity or hereunder, shall
have the put option provided below, and the Initiating Section 2.5
Stockholder shall be bound by the applicable provisions of such option.
(i) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to the Initiating Section 2.5 Stockholder the type and
number of Securities equal to the number of shares each Investor would have
been entitled to transfer to the purchaser had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the Securities are to be
sold to the Initiating Section 2.5 Stockholder shall be equal to the price
per share paid by the purchaser to the seller in the Prohibited Transfer.
The Initiating Section 2.5 Stockholder shall also reimburse each Investor for
any and all fees and expenses, including legal fees and expenses, incurred
pursuant to the exercise or the attempted exercise of the Investor's rights
under this Section 2.8.
(ii) Within 90 days after the later of the dates on which the
Investor (A) received notice of the Prohibited Transfer or (B) otherwise
become aware of the Prohibited Transfer, each Investor shall, if exercising
the option created hereby, deliver to the Initiating Section 2.5 Stockholder
the certificate or certificates representing shares to be sold, each
certificate to be properly endorsed for transfer.
(iii) The Initiating Section 2.5 Stockholder shall, upon
receipt of the certificate or certificates for the shares to be sold by a
Investor, pursuant to this subsection 2.8(i), pay the aggregate purchase
price therefor and the amount of reimbursable fees and expense, as specified
in clause (i) of this subsection 2.8(i), in cash or by other means acceptable
to the Investor.
(iv) Notwithstanding the foregoing, any attempt by an
Initiating Section 2.5 Stockholder to transfer Securities in violation of
this Section 2.8 hereof shall be void and the Company agrees it will not
effect such a transfer nor will it treat any alleged
25
transferee as the holder of such shares without the written consent of a
majority in interest of the Investors.
(j) Each certificate representing shares of Capital Stock of the
Company now or hereafter owned by each Investor or issued to any person in
connection with a transfer pursuant to Subsections 2.8(d) and (i) hereof
shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE
AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
(k) Each Investor agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in subsection 2.8(j) above to
enforce the provisions of this Agreement and the Company agrees to promptly
do so. The legend shall be removed upon termination of this Agreement.
(l) Each Original Series G/H Participant (as defined below) shall
have the right (the "Original Series G/H Participation Right") to transfer to
the purchaser and any Section 2.5 Rights Holders who have exercised the Right
of First Offer set forth in Section 2.5 above, Original Series G/H
Registrable Securities pro rata according to the respective Original Series
G/H Pro Rata Percentage Amounts (as defined below) of the Original Series G/H
Participants who exercise the Original Series G/H Participation Right with
respect to such transfer. The Original Series G/H Participation Right of
each holder of Original Series G/H Registrable Securities shall terminate
when the aggregate amount of the proceeds received by Original Series G/H
Participants in respect of Original Series G/H Registrable Securities that
all Original Series G/H Participants have included in Transfers pursuant to
this subsection 2.8(l) (regardless of whether such holders have exercised
such right) is at least equal to the aggregate principal amount of, and
accrued but unpaid interest on, the IWCH/PWH Notes exchanged for Series G and
Series H Preferred Stock pursuant the Exchange Agreement. The Original
Series G/H Participation Right may be exercised prior to and in preference
over any Participation Right in subsection 2.8(b) hereof. For purposes of
this subsection 2.8(l):
(i) "Original Series G/H Participant" means any holder of
Original Series G/H Registrable Securities;
(ii) "Original Series G/H Pro Rata Percentage Amount" for any
Original Series G/H Participant means the fraction, the numerator of which is
the number of Original Series G/H Registrable Securities owned by such
participant at the time of the
26
Transfer and the denominator of which is the total number of Original Series
G/H Registrable Securities held by all Original Series G/H Participants at
such time; and
(iii) "Original Series G/H Registrable Securities" means (A)
all shares of Series G and Series H Preferred Stock that were acquired by the
holder thereof (or an Affiliate of such holder) pursuant to Sections 2, 2A or
3 of the Exchange Agreement and not transferred to any third party (other
than an Affiliate of such holder), (B) all shares of Series G and Series H
Preferred Stock held by such holder (or an Affiliate thereof) and issued upon
the conversion of any shares of Series G or Series H Preferred Stock
described in clause (A) above and (C) all shares of Common Stock held by such
holder (or an Affiliate thereof) and issued or issuable upon conversion of
such shares of Series G and Series H Preferred Stock described in clause (A)
or clause (B).
2.9. STOCK PURCHASES BY EMPLOYEES, OFFICERS, DIRECTORS AND CONSULTANTS.
Each employee who purchases any of the shares of the Company's Common Stock
that are subject to vesting and are reserved for issuance to officers and
employees of the Company shall execute and deliver to the Company an employee
stock purchase agreement committing each such person to resell to the Company
at the original purchase price thereof all shares of the Company's Common
Stock that are not vested on the date of termination of such employee's term
of employment with the Company, and restricting each such person from
transferring any unvested shares of the Company's Common Stock to any person
except to members of his or her immediate family or to a trust for the
benefit of members of his or her immediate family.
2.10. ADDITIONAL LIQUIDITY RIGHTS. Each Investor with a representative
on the Board shall cause such representative to take all steps necessary to
cause the Board to maintain a committee of the Board (the "Committee")
consisting of a representative of the Board designated by Vanguard (as long
as Vanguard or Affiliate thereof owns not less than fifty percent (50%) of
the shares of Series C Preferred Stock it holds as of the date hereof (or an
equivalent amount of Common Stock issued upon conversion thereof)), a Series
F Director (but only so long as the holders of Series F-1 Preferred stock
shall be entitled to elect the Series F Directors pursuant to subsection
V.B.6(b) of the Restated Certificate), which shall be the Electra Director,
if any, a representative of the Board designated by the other outside
investors and a representative of the Company's Executive Management. (If
Vanguard shall at any time fail the ownership requirements set forth in the
preceding sentence, the Board at its sole discretion may elect to the
Committee a representative of the Board not designated by Vanguard.) The
Committee shall, from time to time at the request of any member, consult with
an investment banking firm of recognized national standing that is
unaffiliated with the Committee members. The Committee shall request such
investment banking firm to thereafter make a formal presentation to the
Committee as to the commercial reasonableness of proceeding with an initial
public offering of the Company's Common Stock ("IPO") in light of then
prevailing market conditions and the condition and performance of the
Company. Based on the recommendation of such investment banking firm, the
Committee shall make a recommendation to the full Board about proceeding with
an IPO. If the Board approves proceeding with an IPO, the Company shall,
subject to the rights of the Series F Holders under the Series F Registration
Rights
27
Agreement, use commercially reasonable efforts to proceed with an IPO
unless three directors vote to oppose proceeding with the IPO. In such
event, the Company shall submit to binding arbitration to be completed within
30 days whether it is commercially feasible to proceed with an IPO. Such
arbitration shall be conducted in accordance with the procedures set forth in
Section 8.3 of the Reorganization Agreement. The arbitrators shall be
representatives of nationally known investment banking firms unaffiliated
with the Company. Upon a finding of commercial feasibility, the Company
shall, subject to the rights of the Series F Holders under the Series F
Registration Rights Agreement, use commercially reasonable efforts to proceed
with an IPO. If no IPO occurs by December 31, 1996, the Committee shall then
explore in good faith other means to provide liquidity for all outside
investors. The Committee shall again consult with an investment banking firm
of recognized national standing that is unaffiliated with any of the
Committee members and request such investment banking firm to submit a
written report to the Committee regarding liquidity alternatives, including
the sale of the Company, the repurchase of the Company's stock by all
electing investors and any other commercially feasible liquidity strategies.
2.11. TERMINATION OF CERTAIN COVENANTS. The covenants set forth in
Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.7, 2.8, 2.9, and 2.10 shall terminate and
be of no further force or effect upon the consummation of a Threshold Public
Offering.
2A. TORONTO DOMINION REGULATORY COMPLIANCE.
2A.1 VIOLATION OF BHCA OR SBIA. If Toronto Dominion or an affiliate of
Toronto Dominion determines that it has a BHCA Issue (as defined below) or an
SBIC Issue (as defined below), the Company and all other Investors agree to
take all such actions as are reasonably requested by Toronto Dominion or such
affiliate in order to, at the option of Toronto Dominion or such affiliate,
either (a) permit Toronto Dominion or such affiliate to convert all or any
portion of any shares of Series F-1 Preferred Stock held by Toronto Dominion
or its affiliate into an equal number of shares of Series F-2 Preferred Stock
(which Series F-2 Preferred Stock shall be convertible back into Series F-1
Preferred Stock on such terms as may be permitted by regulatory
considerations then prevailing) or (b) effectuate and facilitate a Transfer
by Toronto Dominion or such affiliate of all or a part of its interest in the
Company to a person or entity designated by Toronto Dominion or such
affiliate, provided that such assignment or transfer is in compliance with
applicable federal and state securities laws and the assignee or transferee
agrees to be bound by the Agreement.
2A.2 SBIC REQUIREMENTS.
(a) The Company and each Investor hereby agree to take all action and
execute all such instruments as may be reasonably required by Toronto
Dominion or its permitted assignee or transferee, in either case which may
hereafter become (or which is expected by Toronto Dominion to become) a small
business investment company (an "SBIC") subject to the SBIC Requirements, so
that such SBIC shall be entitled to legally hold its shares of Capital Stock
of the Company as a small business investment company under the SBIC
Requirements. Such actions shall be taken at the reasonable request of
Toronto Dominion or such affiliate within a reasonable
28
time in advance of the earlier of (i) Toronto Dominion or such affiliate
becoming an SBIC or (ii) Toronto Dominion assigning or transferring the
shares of Capital Stock in the Company held by it to an SBIC or an affiliate
of Toronto Dominion which is expected by Toronto Dominion to become an SBIC.
(b) Such actions referred to in clause (a) above shall include, without
limitation, an amendment to this Agreement providing for (i) the provision of
financial statements and other information by the Company as required by and
on forms specified by SBIC Requirements (including information with respect
to the Company's use of proceeds and to confirm the Company's size for
purposes of eligibility under the SBIC Requirements), (ii) in the event that
the SBIC Requirements are not met for such SBIC to legally hold such Capital
Stock (including, without limitation, as a result of a diversion of the
proceeds from the reported use thereof or a change in the Company's business
activities), the SBIC's right to put its shares of Capital Stock of the
Company back to the Company for prompt payment at the original purchase price
of such shares and (iii) such other representations, warranties and covenants
for the benefit of such SBIC as may be reasonably required by the SBIC
Requirements. Notwithstanding any other provision of this Agreement, SBIC's
right under clause (ii) of the first sentence of this Section 2A.2(b) shall
arise solely if (i) the Company shall become an ineligible investment for
SBIC (within the meaning of the SBIC Requirements) as a result of (A)
changing its business activity (within the meaning of the SBIC Requirements)
from that contemplated by the Memorandum or (B) using the proceeds from the
sale of Series F Preferred Stock pursuant to the Series F Purchase Agreement
in a manner different than that contemplated by the Memorandum (as defined in
the Series F Purchase Agreement) and the Series F Purchase Agreement and (ii)
as a result of such change in business activity or use of proceeds, SBIC
would violate the SBIC Requirements by maintaining its investment in the
Company. In addition, before exercising its rights under clause (ii) of the
first sentence of this Section 2A.2(b), SBIC shall use commercially
reasonable efforts to obtain approval of the Small Business Administration to
permit it to maintain its investment in the Company notwithstanding such
change in business activity.
2A.3 ACQUISITION OF SECURITIES. Notwithstanding anything contained in
this Agreement to the contrary, Toronto Dominion shall not be entitled to
acquire any shares of Capital Stock of the Company hereunder, including,
without limitation, under Sections 2.3 and 2.5, if the acquisition of such
shares would cause Toronto Dominion to hold shares of Capital Stock in the
Company in excess of the amount permitted under the Bank Holding Company Act
(as defined below).
2A.4 BHCA ISSUE, SBIC ISSUE AND SBIC REQUIREMENTS DEFINED.
(a) For purposes of this Agreement, a "BHCA Issue" means any facts or
circumstances under which Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Bank Holding
Company Act of 1956, as amended from time to time (and any successor law
thereto), or the rules and regulations promulgated from time to time
thereunder (collectively, the "Bank Holding Company Act"), or any assertion
by any governmental regulatory agency that Toronto Dominion or an affiliate
of Toronto Dominion is or may be in violation or potential violation of the
Bank Holding Company Act by virtue of Toronto Dominion
29
or an affiliate of Toronto Dominion holding, or exercising any significant
right with respect to, any Capital Stock of the Company.
(b) For purposes of this Agreement, an "SBIC Issue" means any facts or
circumstances under which Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Small
Business Investment Act of 1958, as amended from time to time (and any
successor law thereto), or the rules and regulations promulgated thereunder
(collectively, the "Small Business Investment Act"), or any assertion by the
U.S. Small Business Administration or other governmental agency that Toronto
Dominion or an affiliate of Toronto Dominion is or may be in violation or
potential violation of the Small Business Investment Act or other laws or
regulations pertaining to small business investment companies by virtue of
Toronto Dominion or an affiliate of Toronto Dominion holding, or exercising
any significant right with respect to, any Capital Stock of the Company.
(c) For purposes of this Agreement, "SBIC Requirements" means all of the
requirements of the Small Business Investment Act relating to small business
investment companies and investments by small business investment companies
as in effect on the date hereof or as they may be amended or supplemented
from time to time.
3. MISCELLANEOUS.
3.1. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
3.2. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
3.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5. NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at
30
the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by at least ten (10) days' advance
written notice to the other parties.
3.6. EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements
in addition to any other relief to which such party may be entitled.
3.7. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders
of seventy-five percent (75%) of the then outstanding Registrable Securities
and Holders (as defined in the Registration Rights Agreement) of a majority
of the Series F Registrable Securities and a majority of the Series G/H
Registrable Securities (as defined in the Registration Rights Agreement).
Any amendment or waiver effected in accordance with this Section 3.7 shall be
binding upon each Holder of any Registrable Securities, Series F Registrable
Securities or Series G/H Registrable Securities then outstanding, each future
Holder of all such Registrable Securities or the Series F Registrable
Securities, and the Company. Notwithstanding the foregoing, (i) the rights of
Section 2.5 Stockholders pursuant to Section 2.5 hereof, (ii) the rights of
Investors pursuant to Section 2.7 hereof and (iii) the rights of Investors
pursuant to Section 2.10 hereof may not be amended without the written
consent of Holders of a majority of the Registrable Securities and
seventy-five percent (75%) of the Series F Registrable Securities and
seventy-five percent (75%) of the Series G/H Registrable Securities then held
by the Section 2.5 Stockholders in the case of clause (i) hereof, each Holder
of at least 80,000 Registrable Securities in the case of clause (ii) hereof,
and Holders of a majority of the Registrable Securities and Other Registrable
Securities in the case of clause (iii) hereof. By executing this Agreement,
an Existing Investor hereby consents to amending and restating the Prior
Agreement in its entirety as set forth herein upon the effectiveness of this
Agreement and to waive any rights that would otherwise arise under the Prior
Agreement by virtue of the transactions contemplated by the Loan Agreements.
3.8. SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9. AGGREGATION OF STOCK. All shares of Registrable Securities and
Other Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
3.10. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement hereby
amends and restates the Prior Agreement in its entirety and any other
previous agreements among any of the parties hereto with respect to the
subject matter of this Agreement, and any such previous agreements shall be
of no further force and effect.
31
IN WITNESS WHEREOF, the parties have executed this Seventh Amended and
Restated Investor Rights Agreement as of the date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: 000 Xx. Xx Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
INVESTOR
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------------
---------------------------------------
SIGNATURE PAGE TO SEVENTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SCHEDULE A
SCHEDULE OF INVESTORS
Electra Investment Trust P.L.C.
Electra Associates, Inc.
The Emerging Markets Infrastructure Fund, Inc.
The Emerging Markets Telecommunications Fund, Inc.
Latin America Investment Fund, Inc.
Latin America Equity Fund, Inc.
Latin America Capital Partners
Argentina Equity Investments Partnership
JAFCO America Ventures, Inc.
Japan Associated Finance Co., Ltd.
JAFCO G-5 Investment Enterprise Partnership
JAFCO R-1(A) Investment Enterprise Partnership
JAFCO R-1(B) Investment Enterprise Partnership
JAFCO R-2 Investment Enterprise Partnership
U.S. Information Technology Investment Enterprise Partnership
Northwood Ventures
Northwood Capital Partners LLC
Xxxxx X. Xxxxxx
Gateway Venture Partners III, L.P.
Bayview Investors, Ltd.
R & S Co. IV, X.X.
Xxxxxxxx Partners
Xxxxxx X. Xxxxxxxx
Xxxxx X. Xxxx
Xxxx X. Xxxxxxxxxxxx
The Xxxxx Family Partnership
Xxxxxx Xxxxxx
Vanguard Cellular Operating Corp.
Xxxx X. Xxxxxx
C.I. Global Fund
C.I. Emerging Markets Fund
C.I. Latin American Fund
Xxxxxxx X. Xxxxxx XX
Xxxxxxx X. Xxxxxx XX, XXX DLJSC as Custodian
Xxxxxx Enterprises, Inc.
Xxxxxx Corporation
Toronto Dominion Investments, Inc.
Xxxxxxx Xxxxxxx
Xxxxx Xxxxx
Xxxx Xxxxxxx
X-0
SCHEDULE A
SCHEDULE OF INVESTORS (CONTINUED)
Xxxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxx
BPPA IWC LLC
[RMD Xxxxxxxxxxxx]
X-0
