EXHIBIT 10.1
Execution Copy
SHAREHOLDERS AGREEMENT
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THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made as of September
16, 1998, by and among Pac-West Telecomm, Inc., a California corporation (the
"Company"), Xxxx X. Xx Xxx ("La Rue"), Bay Alarm Company, a California
corporation ("Bay Alarm," and collectively with La Rue, the "Existing
Shareholders"), each of the Persons listed on the Schedule of New Investors
attached hereto (the "New Investors") and each of the individuals listed on the
Schedule of Executives attached hereto (the "Executives"). The Existing
Shareholders, the New Investors and the Executives are collectively referred to
herein as the "Shareholders" and individually as a "Shareholder." Unless
otherwise indicated herein, capitalized terms used herein are defined in
paragraph 9 hereof.
WHEREAS, the Existing Shareholders hold shares of the Company's Class
A Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock"), and shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock");
WHEREAS, the New Investors received shares of the Company's Preferred
Stock and Common Stock pursuant to a merger agreement among the Company, the
Existing Shareholders and PWT Acquisition Corp., dated as of June 30, 1998 (as
the same may be amended and modified from time to time in accordance with its
terms, the "Merger Agreement") and shares of the Company's Common Stock pursuant
to a Stock Purchase Agreement, dated as of the date hereof, between the Company
and certain of the New Investors (as the same may be amended and modified from
time to time in accordance with its terms, the "Purchase Agreement");
WHEREAS, the Company and certain of the Executives are parties to
executive agreements, stock purchase agreements and/or stock option agreements,
pursuant to which such Executives purchased shares of the Company's Common Stock
or received stock options to purchase shares of the Company's Common Stock;
WHEREAS, the Company and the Shareholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Shareholders' stock may be transferred; and
WHEREAS, the execution and delivery of this Agreement is a condition
to the merger contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Voting Agreement.
(a) From and after the Closing (as defined in the Merger Agreement)
and until the provisions of this paragraph 1 cease to be effective, each holder
of Shares shall vote all of such holder's Shares and any other voting securities
of the Company over which such holder has voting control and shall take all
other necessary or desirable actions within such holder's control (whether in
such holder's capacity as a shareholder, director, member of a board committee
or officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the Company shall
take all necessary and desirable actions within its control (including, without
limitation, calling special board and shareholder meetings), so that:
(i) subject to paragraph l(c) below, the authorized number of
directors on the Board shall be established at seven (7) directors;
(ii) the following persons shall be elected to the Board:
(A) one (1) representative designated by La Rue; provided that La
Rue shall initially serve as such representative;
(B) one (1) representative designated by Bay Alarm; provided that
Xxxxx X. Xxxxxxxx shall initially serve as the representative
designated by Bay Alarm;
(C) one (1) representative designated by the Xxxxx Holders (the
"Xxxxx Director"); provided that Xxxxx X. Xxxxxxxx shall initially
serve as the Xxxxx Director;
(D) one (1) representative designated by the SCP Holders (the
"SCP Director"); provided that Xxxxxx X. Plum shall initially serve as
the SCP Director;
(E) one (1) representative designated by the Safeguard Holders
(the "Safeguard Director"); provided that Xxxxx X. Xxxxxxx shall
initially serve as the Safeguard Director;
(F) one representative designated by TL Ventures III, L.P. for so
long as it holds any Shares (the "TL Director" and collectively with
the Xxxxx Director, the SCP Director and the Safeguard Director, the
"Investor Directors"); provided that initially Xxxx X. XxXxxx shall
serve as the TL Director; and
(G) the Company's chief executive officer;
(iii) the removal from the Board (without cause) of any representative
designated hereunder shall be solely upon the written request of the
persons entitled to designate such representative pursuant to subparagraph
1(a)(ii), but only upon such written request and
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under no other circumstances; provided that if any director elected
pursuant to subparagraph 1(a)(ii)(G) above ceases to be chief executive
officer of the Company and its Subsidiaries, such director shall be removed
as a director promptly after such director ceases to be the Company's chief
executive officer and shall be replaced by such director's successor (if
any); and provided further that any director may be removed for cause in
accordance with applicable law;
(iv) in the event that any representative designated hereunder ceases
to serve as a member of the Board during such representative's term of
office, the resulting vacancy on the Board shall be filled by a
representative designated by persons entitled to designate such
representative pursuant to subparagraph 1(a)(ii);
(v) if any party fails to designate a representative to fill a
directorship pursuant to the terms of this paragraph 1, the individual
previously holding such directorship shall be elected to such position, or
if such individual fails or declines to serve, the election of an
individual to such directorship shall be accomplished in accordance with
the Company's Articles of Incorporation and bylaws and applicable law;
provided that the holders of Shares shall vote to remove such individual if
the party or parties which failed to designate such directorship so directs
and shall elect any individual designated by such party or parties;
(vi) except as required by applicable law or any rule or regulation of
any governmental entity, the composition of the board of directors of each
of the Company's Subsidiaries (a "Sub Board") shall be the same as the
composition of the Board as it exists from time to time; and
(vii) the Board shall hold at least one meeting during each fiscal
quarter.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
or a Sub Board and any committees thereof. So long as any Investor Director or
representative designated by La Rue or Bay Alarm serves on the Board or a Sub
Board, the Company's Articles of Incorporation and bylaws shall provide for
indemnification and exculpation of directors to the fullest extent permitted
under applicable law.
(c) The rights of an Existing Shareholder under this paragraph 1 shall
terminate at such time as such Existing Shareholder and such Existing
Shareholder's Permitted Transferees shall hold less than 50% of the Shares held
by such Existing Shareholder immediately following the Closing. In such event,
at the written request of a majority of the Investor Directors, each holder of
Shares shall vote all of his, her or its Shares which are voting shares and any
other voting securities of the Company over which such holder has voting control
and shall take all other necessary or desirable action within his, her or its
control to remove the director designated by such Existing Shareholder from the
Board and any Sub Board at the time specified in such written request and to
reduce the number of directors on the Board by one representative.
(d) The provisions of this paragraph 1 shall terminate automatically
and shall be of no further force and effect upon the consummation of a Qualified
Public Offering or a Sale of the Company.
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2. Restrictions on Transfer of Shares.
(a) Transfer of Shares. No holder of Shares shall sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any interest in
any Shares (a "Transfer") except pursuant to the provisions of this paragraph 2
or pursuant to an Exempt Transfer.
(b) Notice of Proposed Transfer. At least 90 days prior to making any
Transfer of any Shares (other than an Exempt Transfer), the transferring holder
of Shares (the "Transferring Shareholder") shall deliver a written notice (the
"Sale Notice") to the Company and the Other Shareholders. The Sale Notice shall
disclose in reasonable detail the proposed number and class of Shares to be
transferred (the "Offered Shares") and the proposed terms and conditions of the
Transfer, which shall be in the form of a sale of such Offered Shares solely for
cash (payable at closing or in specified installments).
(c) First Offer Right. The Company may elect to purchase all or any
portion of the Offered Shares at the price and on the terms specified in the
Sale Notice by delivering written notice of such election to the Transferring
Shareholder and the Other Shareholders as soon as practicable but in any event
within 30 days after the delivery of the Sale Notice. If the Company has not
elected to purchase all of the Offered Shares within such 30-day period, each
Other Shareholder (other than the Transferring Shareholder) may elect to
purchase up to such Person's Pro Rata Share (as defined below) of the Offered
Shares at the price and on the terms specified in the Sale Notice by delivering
written notice of such election to the Transferring Shareholder and all Other
Shareholders as soon as practicable but in any event within 45 days after
delivery of the Sale Notice. Any Offered Shares not elected to be purchased by
the end of such 45-day period shall be reoffered for an additional 15-day period
by the Transferring Shareholder on a pro rata basis to the Other Shareholders
who have elected to purchase their Pro Rata Share. If the Company or any Other
Shareholder has elected to purchase Offered Shares from the Transferring
Shareholder, the transfer of such shares shall be consummated as soon as
practicable after the delivery of the election notices, but in any event within
90 days after delivery of the Sale Notice. To the extent that the Company and
the Other Shareholders have not elected to purchase all of the Offered Shares,
the Transferring Shareholder may, within 120 days after the end of the 60-day
notice period, transfer the balance of such Offered Shares to one or more third
parties at a price no less than the price per share specified in the Sale Notice
and on other terms no more favorable to the transferees than offered to the
Company and the Shareholders in the Sale Notice. Each Other Shareholder's "Pro
Rata Share" shall be based upon such holder's percentage ownership of the Shares
of such class being Transferred held by the Other Shareholders (other than the
Transferring Shareholder) on a fully-diluted basis. The Transferring
Shareholder's ability to effect any Transfer pursuant to this Section 2(c),
whether to the Company, the Other Shareholders Shares or any third party, shall
in all cases be subject to the participation rights of other Shareholders
pursuant to Section 2(d) below.
(d) Participation Rights. Each Other Shareholder (other than the
Transferring Shareholder) may elect to participate in the contemplated Transfer
by delivering written notice to the Transferring Shareholder within 30 days
after delivery of the Sale Notice. If any Other Shareholders have elected to
participate in such Transfer, the Transferring Shareholder and such Other
Shareholders shall be entitled to include in the contemplated Transfer, at the
same price and on the same terms, a number of such class or classes of Shares
(the "Included Shares") equal to the
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product of (i) the quotient determined by dividing the percentage of such class
of the Shares owned by such person by the aggregate percentage of such class of
the Shares owned by the Transferring Shareholder and all Other Shareholders
electing to participate in such Transfer and (ii) the number of such class of
Offered Shares.
For example, if the contemplated Transfer involves 100 Offered Shares of a
certain class and if the Transferring Shareholder at such time owns 30% of
all Shares of such class and if one other holder elects to participate and
owns 20% of all Shares of such class, the Transferring Shareholder would be
entitled to sell 60 shares of such class ((30% / 50%) x 100 shares) and the
other holder would be entitled to sell 40 shares of such class ((20% / 50%)
x 100 shares).
Each Transferring Shareholder shall use reasonable best efforts to obtain the
agreement of the prospective transferee(s) to the participation of the Other
Shareholders in any contemplated Transfer, and each Transferring Shareholder
shall not transfer any of its Shares to the prospective transferee(s) unless (i)
simultaneously with such transfer, the prospective transferee or transferees
purchase from the Other Shareholders the Shares which the Other Shareholders are
entitled to sell to such prospective transferee(s) pursuant to this paragraph
2(d) or (ii) simultaneously with such Transfer, the Transferring Shareholders
purchase (on the same terms and conditions on which such Shares were sold to the
transferee(s)) the number of Shares from the Other Shareholders which the Other
Shareholders would have been entitled to sell pursuant to this paragraph 2(d).
Each holder of Shares transferring Shares pursuant to this paragraph 2(d) shall
pay its pro rata share (based on the proceeds received in such Transfer) of the
expenses incurred by the holders of Shares in connection with such transfer and
shall be obligated to join on a pro rata basis (based on the proceeds received
in such Transfer) in any indemnification or other obligations that the
Transferring Shareholder agrees to provide in connection with such transfer
(other than any such obligation that relate specifically to a particular holder
of Shares such as indemnification with respect to representations and warranties
given by a holder regarding such holder's title to and ownership of Shares;
provided that no holder shall be obligated in connection with such Transfer to
agree to indemnify or hold harmless the transferees with respect to an amount in
excess of the net cash proceeds paid to such holder in connection with such
Transfer).
(e) Classes of Capital Stock. Notwithstanding anything herein to the
contrary, the provisions of this paragraph 2 shall be applied on a class by
class basis to the Shares; provided that in the event any Transferring
Shareholder is Transferring Shares of more than one class, each Other
Shareholder electing to exercise any right granted to such Other Shareholder
pursuant to this paragraph 2 shall exercise such right with respect to each
class of Shares being so Transferred.
(f) Permitted Transfers. The restrictions set forth in this paragraph
2 shall not apply with respect to any Transfer of Shares (i) pursuant to a
Public Sale, (ii) pursuant to Employee Repurchases or (iii) by any holder (A) in
the case of an individual, pursuant to applicable laws of descent and
distribution or among such individual's Family Group or (B) in the case of any
Person which is not an individual, among its Affiliates (such transferees
pursuant to this clause (iii) collectively referred to herein as "Permitted
Transferees"); provided that the restrictions contained in this paragraph 2
shall continue to be applicable to the Shares after any such Transfer pursuant
to clause (iii) and provided further that the transferees of such Shares
Transferred pursuant to clause (iii) shall have agreed in writing to be bound by
the provisions of this Agreement affecting
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the Shares so transferred. The restrictions set forth in paragraph 2(c) shall
not apply with respect to any Transfer of Shares pursuant to a Sale of the
Company. Notwithstanding the foregoing, no party hereto shall avoid the
provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee.
(g) Termination of Restrictions. The restrictions set forth in this
paragraph 2 shall continue with respect to each Share until the earlier of (i)
the date on which such Share has been transferred in a Public Sale, (ii) the
consummation of a Sale of the Company or (iii) the consummation of a Qualified
Public Offering.
3. Sale of the Company.
(a) Upon the approval by the Board of a Sale of the Company (an
"Approved Sale"), each holder of the Shares will consent to and raise no
objections to the Approved Sale of the Company. If the Approved Sale of the
Company is structured as a (i) merger or consolidation, each of the holders of
Shares will waive any dissenter rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) sale of stock (whether by
merger, consolidation, reorganization or otherwise), each of the holders of
Shares will agree to sell all of their Shares and rights to acquire Shares on
the terms and conditions approved by the Board. Each of the holders of the
Shares will use their best efforts to cooperate in the Approved Sale of the
Company and will take all necessary or desirable actions in connection with the
consummation of the Approved Sale as are reasonably requested by the Board.
(b) Notwithstanding any provision to the contrary contained herein,
after the fourth anniversary of the Closing, the holders of at least 60% of the
Investor Shares (the "Sale Shareholders"), may require that the Company enter
into a Sale of the Company. Upon the request of the Sale Shareholders, the
Board will determine in its reasonable judgment the form and manner in which the
Sale of the Company is to be accomplished with a view to accomplishing such Sale
of the Company as soon as is reasonably practicable (but in any event within
twelve months of the request of the Sale Shareholders to enter into a Sale of
the Company), including, without limitation, (i) whether the Sale of the Company
should be pursuant to a merger, sale of stock, sale of assets, or otherwise,
(ii) whether to conduct a public auction or privately negotiated sale, and (iii)
whether to employ one or more professional firms to assist the Board in
accomplishing a Sale of the Company. Each holder of Shares will take such
actions (i) as are necessary or desirable in order to cause the Board to effect
a Sale of the Company, including, without limitation, electing directors who
will effect a Sale of the Company or (ii) as are requested by the Board in order
to further the Sale of the Company, in each case with a view to accomplishing
such Sale of the Company as soon as is reasonably practicable (but in any event
within twelve months of the request of the Sale Shareholders to enter into a
Sale of the Company). In the event that the Board is unable to accomplish a
Sale of the Company within twelve months as described above, the Sale
Shareholders will be entitled to take all actions to accomplish a Sale of the
Company and each holder of Shares shall (x) use commercially reasonable efforts
to cause the Board to approve such Sale of the Company and (y) cooperate with
the Sale Shareholders in the Sale of the Company and take all necessary or
desirable actions in connection with the consummation of the Sale of the Company
as are reasonably requested by the Sale Shareholders, including, without
limitation, delivering to the Sale Shareholders the stock
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certificates representing the Shares owned by such holder, with duly executed
blank stock powers attached thereto.
(c) The obligations of the holders of Shares with respect to any Sale
of the Company (including an Approved Sale) pursuant to this paragraph 3 are
subject to the satisfaction of the following conditions: (i) upon the
consummation of a Sale of the Company, each holder of Shares will receive the
same form of consideration and the same portion of the aggregate consideration
that such holder of Shares would have received if such aggregate consideration
had been distributed by the Company in complete liquidation pursuant to the
rights and preferences set forth in the Company's Articles of Incorporation as
in effect immediately prior to such Sale of the Company; (ii) each holder of any
class of Shares will be given the same consideration with respect to each share
of such class, and if any holders of a class of Shares are given an option as to
the form and amount of consideration to be received, each holder of such class
of Shares will be given the same option with respect to each share of such
class; and (iii) all holders of then currently exercisable rights to acquire,
directly or indirectly, shares of any class of Common Stock will be given an
opportunity either to (A) exercise such rights prior to the consummation of the
Sale of the Company and participate in such sale as holders of such class of
Common Stock or (B) upon the consummation of the Sale of the Company, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of such class of
Common Stock receivable by the holders of such class of Common Stock in
connection with the Approved Sale less the exercise price or conversion price
per share of such class of Common Stock of such right to acquire, directly or
indirectly, such class of Common Stock by (2) the number of shares of such class
of Common Stock represented by such rights.
(d) If the Company or the Sale Shareholders enter into any negotiation
or transaction for which Rule 506 promulgated under the Securities Act (or any
similar rule then in effect) may be available with respect to such negotiation
or transaction (including a merger, consolidation or other reorganization), the
holders of Shares will, at the request of the Board, appoint a purchaser
representative (as such term is defined in Rule 501 promulgated under the
Securities Act) reasonably acceptable to the Board. If any holder of Shares
appoints the purchaser representative designated by the Board, the Company will
pay the fees of such purchaser representative, but if any holder of Shares
declines to appoint the purchaser representative designated by the Board, such
holder will appoint another purchaser representative (reasonably acceptable to
the Board), and such holder will be responsible for the fees of the purchaser
representative so appointed.
(e) Each holder of Shares will bear its pro rata share (based upon the
aggregate proceeds received by such Shareholder) of the costs of any sale of
Shares pursuant to any Sale of the Company to the extent such costs are incurred
for the benefit of all holders of Common Stock and are not otherwise paid by the
Company or the acquiring party. Costs incurred by any holder of Shares on its
own behalf will not be considered costs of the transaction hereunder. Each
holder of shares shall also be obligated to join on a pro rata basis (based on
the proceeds received in such Sale of the Company) in any indemnification or
other obligations that the Shareholders agree to provide in connection with such
Sale of the Company (other than any such obligation that relate specifically to
a particular holder of Shares such as indemnification with respect to
representations and warranties given by a holder regarding such holder's title
to and ownership of Shares; provided that no holder shall be obligated in
connection with such Sale of the Company to agree to indemnify or
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hold harmless the transferees with respect to an amount in excess of the net
cash proceeds paid to such holder in connection with such Sale of the Company).
(f) The provisions of this Section 3 will terminate upon the
completion of a Qualified Public Offering or a Sale of the Company.
4. Preemptive Rights.
(a) Except for issuances of Common Stock (i) to the Company's or any
of its Subsidiaries' employees approved by the Board or any compensation
committee of the Board (including pursuant to options or other rights to acquire
Common Stock approved by the Board or any compensation committee of the Board),
(ii) in connection with the acquisition of another company or business approved
by the Board, (iii) pursuant to any stock dividend or stock split, (iv) pursuant
to a Public Offering or (v) pursuant to the purchase agreement referred to in
Section 11.19 of the Merger Agreement, if the Company authorizes the issuance or
sale of any shares of Common Stock or any securities (including debt securities)
containing options or rights to acquire any shares of Common Stock or any
securities exchangeable for or convertible into Common Stock or such securities
exchangeable for or convertible into Common Stock, the Company shall first offer
to sell to each Other Shareholder, a portion of such shares or securities equal
to the quotient determined by dividing (1) the number of shares of Common Stock
held by such Person on a fully diluted basis by (2) the total number of shares
of Common Stock then outstanding on a fully diluted basis. In addition, if the
Company authorizes the issuance or sale of any debt securities or preferred
shares (other than any preferred shares convertible into or otherwise containing
any rights to acquire shares of Common Stock), in each case to any holders of
Investor Shares or any of their Affiliates (other than as a dividend on the
outstanding Common Stock) (any such issuance or sale, a "Preemptive Sale"), the
Company shall first offer each Other Shareholder the right to purchase a portion
of such securities equal to the product determined by multiplying (x) the total
number of securities to be issued or sold in a Preemptive Sale by (y) the
quotient determined by dividing (1) the number of outstanding shares of Common
Stock held by such Other Shareholder by (2) the total number of shares of
outstanding Common Stock held by all Other Shareholders on a fully diluted
basis. Each Other Shareholder shall be entitled to purchase such shares or
securities at the most favorable price and on the most favorable terms as such
shares or securities are to be offered or sold to any other Persons; provided
that if all Persons entitled to purchase or receive such stock or securities are
required to also purchase other securities of the Company, each Other
Shareholder exercising their rights pursuant to this paragraph shall also be
required to purchase the same strip of securities (on the same terms and
conditions) that such other Persons are required to purchase. The purchase
price for all shares and securities offered to the Other Shareholders shall be
payable in cash or, to the extent otherwise consistent with the terms offered to
any other Persons, installments over time.
(b) In order to exercise its purchase rights hereunder, an Other
Shareholder must within 20 days after receipt of written notice from the Company
describing in reasonable detail the shares or securities being offered, the
purchase price therefor, the payment terms and such Other Shareholder's
percentage allotment, deliver a written notice to the Company describing its
election hereunder. If all of the shares and securities offered to the Other
Shareholders are not fully subscribed by the Other Shareholders, the remaining
stock and securities shall be reoffered by the
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Company to any of the Other Shareholders purchasing such Person's full allotment
upon the terms set forth in this paragraph, except that such holders must
exercise their purchase rights within 10 days after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such shares or securities which the Other
Shareholders have not elected to purchase during the 60 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to the Other Shareholders. Any shares or securities offered
or sold by the Company after such 60-day period must be reoffered to the Other
Shareholders pursuant to the terms of this paragraph 4.
(d) The rights of the Other Shareholders under this paragraph 4 shall
terminate upon the consummation of a Qualified Public Offering or a Sale of the
Company.
5. Initial Public Offering. In the event that the Board approves an
initial Public Offering, the Shareholders will take all necessary and desirable
actions in consummation of the Public Offering. In the event that such Public
Offering is an underwritten offering and the managing underwriters advise the
Company in writing that in their opinion the capital stock structure will
adversely affect the marketability of the offering, the Shareholders will vote
for a recapitalization and/or exchange of the Shares into securities the
managing underwriters and the Board find acceptable; provided that the resulting
securities provide each Shareholder with the same relative economic interest as
such Shareholder had prior to such recapitalization and/or exchange and is
consistent with the rights and preferences set forth in the Articles of
Incorporation as in effect immediately prior to such Public Offering.
6. Covenants.
(a) Financial Statements and Other Information. The Company shall
deliver to each Qualified Holder:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each
case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal year-
end adjustments;
(ii) as soon as available but in any event within 30 days after
the end of each quarterly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarterly period, setting forth in each
case comparisons to
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the annual budget and to the corresponding period in the preceding fiscal
year, and all such statements shall be prepared in accordance with
generally accepted accounting principles, consistently applied, subject to
the absence of footnote disclosures and to normal year-end adjustments;
(iii) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
annual budget and to the preceding fiscal year, all prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by (A) with respect to the consolidated portions of such
statements, an opinion of an independent accounting firm of national
recognized standing and (B) a copy of such firm's annual management letter
to the board of directors;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other information concerning significant aspects of
the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials
provided hereunder); and
(v) at least 30 days prior to the beginning of each fiscal year,
a preliminary budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows and balance sheets), and promptly upon preparation
thereof any other budgets prepared by the Company and any revisions of such
annual or other budgets.
Except as otherwise required by law or judicial order or decree or by
any governmental agency or authority, each Shareholder entitled to receive
information regarding the Company and its Subsidiaries under paragraph 6(a)
shall use commercially reasonable efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Shareholder may disclose such information in connection with the sale or
transfer of any Shares if such Shareholder's transferee agrees in writing to be
bound by the provisions of this paragraph; and provided further that each such
Shareholder may disclose such information to its attorneys, accountants and
other advisors, provided that such Persons are informed of, and agree to be
bound by, the confidentiality provisions of this paragraph 6(a).
(b) Inspection of Property. The Company shall permit any
representatives designated by any Qualified Holder upon reasonable notice and
during normal business hours and such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
entities with the directors, officers, key employees and independent accountants
of the Company and its Subsidiaries. The presentation of an executed copy of
this Agreement by any Qualified Holder to the Company's independent accountants
shall constitute the Company's permission to its independent accountants to
participate in such discussions.
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(c) Venture Capital Operating Company Compliance.
If and for so long as any VCOC does not have a representative on the
Board ("Unrepresented Party") and holds any Shares, such VCOC shall be permitted
to select one representative ("Representative") to:
(i) consult with and advise management of the Company on
significant business issues, including management's proposed annual
operating plans, and management will meet with that Representative
regularly during each year at the Company's facilities at mutually
agreeable times for such consultation and advice and to review progress in
achieving said plans;
(ii) examine the books and records of the Company and inspect its
facilities and request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary
information and facilities need not be provided; and
(iii) invite the Representative to attend in a nonvoting observer
capacity all meetings of its Board and, in this respect, shall give such
Representative copies of all notices, minutes, consents, and other material
that it provides to its Directors; provided, that the Company reserves the
right to exclude such Representative from access to any material or meeting
or portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonably necessary to preserve the attorney-client
privilege, to protect highly confidential proprietary information or for
other similar reasons. Such Representative may participate in discussions
of matters brought to the Board.
The rights described in this paragraph 6(c) shall terminate and be of
no further force or effect upon the earliest to occur of (i) the occurrence of a
Public offering, or (ii) such time as the Company becomes required to file
reports with the Securities and Exchange Commission under Sections 12(g) or
15(d) of the Securities Exchange Act of 1934, as amended.
(d) Regulatory Compliance Cooperation.
(i) Before the Company redeems, purchases or otherwise acquires,
directly or indirectly, or converts or takes any action with respect to the
voting rights of, any shares of any class of its capital stock or any
securities convertible into or exchangeable for any shares of any class of
its capital stock (other than a redemption of the Preferred Stock), the
Company shall give written notice of such pending action to BankAmerica and
MIG. Upon the written request of either BankAmerica or MIG made within 10
days after its receipt of any such notice stating that after giving effect
to such action such Shareholder would have a Regulatory Problem, the
Company shall defer taking such action for such period (not to extend
beyond 45 days after such Shareholder 's receipt of the Company's original
notice) as such Shareholder requests to permit it and its Affiliates to
reduce the quantity of the Company's securities they own in order to avoid
the Regulatory Problem. In addition, the Company shall not be a party to
any merger, consolidation, recapitalization or other transaction pursuant
to which any such Shareholder would be required to take any voting
securities, or any securities convertible into voting securities, which
might reasonably be
-11-
expected to cause such Purchaser to have a Regulatory Problem. For purposes
of this paragraph, a Person shall be deemed to have a "Regulatory Problem"
when such Person and such Person's Affiliates would own, control or have
power over a greater quantity of securities of any kind issued by the
Company or any other entity than are permitted under any requirement of any
governmental authority.
(ii) The Company shall grant to any subsequent holder of
Restricted Securities, upon such holder's request, the same rights granted
to BankAmerica and MIG pursuant to this paragraph.
7. Additional Restrictions on Transfer.
(a) Restricted Shares Legend. The Shares have not been registered
under the Securities Act and, therefore, in addition to the other restrictions
on Transfer contained in this Agreement, cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
then available. Each certificate evidencing Shares and each certificate issued
in exchange for or upon the Transfer of any Shares (if such securities remain
Shares as defined herein after such Transfer) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUE] AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER
SPECIFIED IN THE SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 16, 1998, AS
AMENDED AND MODIFIED FROM TIME TO TIME, AMONG THE ISSUER (THE "COMPANY"),
AND CERTAIN INVESTORS. THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO ANY TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
The Company shall imprint such legend on certificates evidencing the
Shares. The legend set forth above shall be removed from the certificates
evidencing any Shares which cease to be Shares in accordance with the definition
thereof.
(b) Opinion of Counsel. No holder of Shares may Transfer any Shares
(except pursuant to an effective registration statement under the Securities
Act) without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Board) that
-12-
neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection with such Transfer.
8. Transfer.
(a) Prior to transferring any Shares (other than pursuant to a Public
Sale or pursuant to an Employee Repurchase) to any Person, the transferring
holders of Shares shall cause the prospective transferee to be bound by this
Agreement and to execute and deliver to the Company and the other parties to
this Agreement a counterpart of this Agreement and such transferee shall be a
"Shareholder" for purposes of this Agreement.
(b) After the date of this Agreement, all shares of capital stock
issued by the Company (other than pursuant to a Public Sale) and all options or
other rights to acquire Common Stock or any securities convertible or
exchangeable into Common Stock shall be subject to the terms of this Agreement,
and the Company shall cause each holder thereof which is not a party to this
Agreement to execute and deliver to the Company and the other parties to this
Agreement a counterpart of this Agreement and such holder shall be a
"Shareholder" for purposes of this Agreement.
9. Definitions.
"Affiliate" of a Shareholder means any other Person controlling,
controlled by or under common control with the Shareholder and, in the case of
an Person which is a partnership, any partner of such Person and any members or
partners of such partner. For purposes of paragraph 2 hereof, BankAmerica
Investment Corporation and MIG Partners VII shall be deemed to be Affiliates.
"Articles of Incorporation" means the Company's articles of
incorporation in effect at the time as of which any determination is being made.
"BankAmerica" means BankAmerica Investment Corporation and its
Permitted Transferees.
"Xxxxx" means Xxxxxxx Xxxxx Capital Partners VI, L.P.
"Xxxxx Holders" means the holders of a majority of the Xxxxx Shares.
"Xxxxx Shares" means (i) any Common Stock held by Xxxxx and its
Permitted Transferees acquired pursuant to the Merger Agreement or the Purchase
Agreement, (ii) any shares of Common Stock otherwise acquired by Xxxxx and its
Permitted Transferees and (iii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in clauses
(i) or (ii) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Xxxxx Shares, such
shares will cease to be Xxxxx Shares only when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
-13-
"Closing" has the meaning set forth in the Merger Agreement.
"Employee Repurchase" means repurchases from employees of the Company
and its Subsidiaries upon termination of employment pursuant to arrangements
approved by the Board.
"Exempt Transfer" means any Transfer permitted by Section 2(f).
"Family Group" means a shareholder's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of the Shareholder
and/or the Shareholder's spouse and/or descendants.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other person.
"Investor Shares" means, collectively, the Xxxxx Shares, the SCP
Shares, the Safeguard Shares and the TL Shares.
"MIG" means MIG Partners VII and its Permitted Transferees.
"Other Shareholders" means any holder of Xxxxx Shares, any holder of
SCP Shares, any holder of Safeguard Shares, any holder of TL Shares, La Rue and
his Permitted Transferees, Bay Alarm and its Permitted Transferees, Xxxxxxx
Xxxxxxx and his Permitted Transferees, BankAmerica, MIG and Xxxxx; provided that
BankAmerica, MIG and Xxxxx shall not be considered Other Shareholders for
purposes of paragraph 2(c) hereof.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Public Offering" means any offering by the Company of its Common
Stock or rights to purchase it Common Stock to the public pursuant to an
effective registration statement under the Securities Act, as then in effect, or
any comparable statement under any similar federal statute then in force.
"Public Sale" means any sale of Shares to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
Securities Act.
"Qualified Holder" means any holder (or group of affiliated holders)
of Shares representing 5% or more of the outstanding Shares and any VCOC and for
purposes of paragraph 6(a), BankAmerica, MIG and Xxxxx.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares or rights to purchase
shares of the Company's Common
-14-
Stock having an aggregate value of at least $15 million and which results in an
equity valuation of the Company immediately prior to such Public Offering (based
upon the offering price of the Common Stock to the public in such Public
Offering) of at least $100 million.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) all or substantially all of the capital stock of the
Company (whether by merger, consolidation, sale, transfer or exchange of the
Company's capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"SCP" means SCP Private Equity Partners, L.P.
"SCP Holders" means the holders of a majority of the SCP Shares.
"SCP Shares" means (i) any Common Stock held by SCP and its Permitted
Transferees acquired pursuant to the Merger Agreement or the Purchase Agreement,
(ii) any shares of Common Stock otherwise acquired by SCP and its Permitted
Transferees and (iii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clauses (i) or (ii)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular shares constituting SCP Shares, such shares will cease to be SCP
Shares only when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or by similar provision then in force) under the Securities Act.
"Safeguard" means Safeguard 98 Capital, L.P.
"Safeguard Holders" means the holders of a majority of the Safeguard
Shares.
"Safeguard Shares" means (i) any Common Stock held by Safeguard and
its Permitted Transferees acquired pursuant to the Merger Agreement or the
Purchase Agreement, (ii) any shares of Common Stock otherwise acquired by
Safeguard and its Permitted Transferees and (iii) any equity securities issued
or issuable directly or indirectly with respect to the Common Stock referred to
in clauses (i) or (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Safeguard Shares, such
shares will cease to be Safeguard Shares only when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, or (y) sold to the public through
a broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Xxxxx" means Xxxxx Holdings, Inc. and its Permitted Transferees.
"Shares" means (i) any Preferred Stock or Common Stock purchased or
otherwise acquired by any Shareholder and any options, warrants or similar
rights to acquired Preferred Stock or Common Stock held by any Shareholder, (ii)
any capital stock or other equity securities issued
-15-
or issuable directly or indirectly with respect to the Preferred Stock or Common
Stock referred to in clause (i) above by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of any class
or series of capital stock of the Company held by a Shareholder; provided that
Shares shall not include nonvoting Shares for purposes of paragraph 1 hereof or
paragraph 11 hereof. As to any particular shares constituting Shares, such
shares shall cease to be Shares when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
"TL" means, collectively, TL Ventures III L.P., TL Ventures III
Offshore L.P., TL Ventures III Interfund L.P. and EnerTech Capital Partners,
L.P.
"TL Holders" means the holders of a majority of the TL Shares.
"TL Shares" means (i) any Common Stock held by TL and its Permitted
Transferees acquired pursuant to the Merger Agreement or the Purchase Agreement,
(ii) any shares of Common Stock otherwise acquired by TL and its Permitted
Transferees and (iii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clauses (i) or (ii)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular shares constituting TL Shares, such shares will cease to be TL
Shares only when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or by similar provision then in force) under the Securities Act.
"VCOC" means any holder of Preferred Stock or Common Stock which is a
"venture capital operating company" for purposes of Department of Labor
Regulation (S) 2510.3-100 or any similar regulation.
10. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Shares in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Shares as the owner of such shares for any purpose.
11. Amendment and Waiver. Except as otherwise provided herein, (i)
no modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company unless such modification, amendment or waiver is
approved in writing by the Company, (ii) no modification, amendment or waiver of
any provision of this Agreement shall be effective against the Xxxxx Holders
unless such modification, amendment or waiver is approved in writing by the
Xxxxx Holders, (iii) no modification, amendment or waiver of any provision of
this Agreement
-16-
shall be effective against the SCP Holders unless such modification, amendment
or waiver is approved in writing by the SCP Holders, (iv) no modification,
amendment or waiver of any provision of this Agreement shall be effective
against the Safeguard Holders unless such modification, amendment or waiver is
approved in writing by the Safeguard Holders, (v) no modification, amendment or
waiver of any provision of this Agreement shall be effective against the TL
Holders unless such modification, amendment or waiver is approved in writing by
the TL Holders, (vi) no modification, amendment or waiver of any provision of
this Agreement shall be effective against the Existing Shareholders and their
respective Permitted Transferees unless such modification, amendment or waiver
is approved in writing by the holders of a majority of the Shares held by the
Existing Shareholders and their respective Permitted Transferees, and (vii) no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Executives, any other party hereto and their respective
Permitted Transferees unless such modification, amendment or waiver is approved
in writing by the holders of a majority of the Shares held by the Executives,
such other parties hereto and their respective Permitted Transferees; provided
that no modification, amendment or waiver of any provision of this Agreement
which adversely affects the rights or obligations of any New Investor hereunder
in a manner which is different than the affect on the other New Investors and
their Permitted Transferees shall be effective against such affected New
Investor unless such modification, amendment or waiver is approved in writing by
such New Investor. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
12. Severability; Certain Waivers. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or the effectiveness or validity of any provision
in any other jurisdiction, and this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. The Shareholders acknowledge and
agree that the covenants and agreements set forth in this agreement were a
material inducement to the New Investors to consummate the transactions
contemplated by the Merger Agreement, and the New Investors would not obtain the
benefit of their bargain as set forth herein and in the Merger Agreement and the
other agreements contemplated thereby as specifically negotiated by the
Shareholders if any Shareholder breached or challenged any of the provisions of
this Agreement. Therefore, notwithstanding anything to the contrary expressed or
implied in this paragraph 12 or elsewhere in this Agreement, each of the
Shareholders unconditionally covenants and agrees that such Shareholder will not
directly or indirectly challenge the validity, legality or enforceability of any
provision of this Agreement and will cooperate with the Company (at the
Company's cost and expense, except in connection with a breach by such
Shareholder) to enforce the provisions of this Agreement.
13. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement and the Registration Agreement between the Company and
the Shareholders embody the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
-17-
14. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Shareholders and any subsequent
holders of Shares and the respective successors and assigns of each of them, so
long as they hold Shares; provided that the rights of the Existing Shareholders
hereunder shall not be assignable without the written consent of a majority of
the Shares held by the New Investors.
15. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
16. Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and any Shareholder shall have the right to
injunctive relief, in addition to all of its rights and remedies at law or in
equity, to enforce the provisions of this Agreement. Nothing contained in this
Agreement shall be construed to confer upon any Person who is not a signatory
hereto any rights or benefits, as a third party beneficiary or otherwise.
17. Arbitration.
(a) Arbitration. In the event of disputes between the parties with
respect to the terms and conditions of this Agreement, such disputes shall be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at San Francisco, California. Such arbitration proceeding
shall be conducted in as expedited a manner as is then permitted by the
commercial arbitration rules (formal or informal) of the American Arbitration
Association, and the arbitrator or arbitrators in any such arbitration shall be
persons who are expert in the subject matter of the dispute. Both the foregoing
agreement of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such Arbitration,
shall be final and binding on the parties hereto and may be specifically
enforced by legal proceedings. The parties agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may, in his or its sole discretion, ask for
specific performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(b) Procedure. Such arbitration may be initiated by written notice
from either party to the other which shall be a compulsory and binding
proceeding on each party. The arbitration shall be conducted before a panel of
arbitrators selected in accordance with the rules of the American Arbitration
Association. The costs of said arbitrators and the arbitration shall be borne
equally by the parties hereto. Each party shall bear separately the cost of
their respective attorneys, witnesses and experts in connection with such
arbitration. Time is of the essence of this arbitration procedure, and the
arbitrators shall be instructed and required to render their decision within ten
(10) days following completion of the arbitration.
(c) Venue and Jurisdiction. Any and all legal proceedings to enforce
this Agreement, (including any action to compel arbitration hereunder or to
enforce any award or judgment rendered thereby), shall be governed in accordance
with this paragraph 17 hereunder.
-18-
18. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or received by certified mail,
return receipt requested, or sent by reputable overnight courier service
(charges prepaid) or by facsimile (with an additional copy by U.S. mail) to the
Company at the address set forth below and to any other recipient at the address
indicated on the schedules hereto or on the books and records of the Company and
to any subsequent holder of Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's address
is:
Pac-West Telecomm, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
19. Governing Law. All issues concerning this Agreement shall be
governed by and construed in accordance with the laws of the State of
California, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the law of any jurisdiction other than the
State of California.
20. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
21. Representations and Warranties. Each Shareholder represents and
warrants that (i) this Agreement has been duly authorized, executed and
delivered by such Shareholder and constitutes the valid and binding obligation
of such Shareholder, enforceable in accordance with its terms, and (ii) such
Shareholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Shares shall grant any proxy or become
party to any voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
* * * * *
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PAC-WEST TELECOMM, INC.
By: /s/ Xxxx X. Xx Xxx
-----------------------------
Name: Xxxx X. Xx Xxx
-----------------------------
Its: President
-----------------------------
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------
Its: Secretary
-----------------------------
/s/ Xxxx X. Xx Xxx
-----------------------------------
XXXX X. XX XXX
BAY ALARM COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------
Its: Chairman
-----------------------------
[SIGNATURE PAGE TO SHAREHOLDERS AGREEMENT]
XXXXXXX XXXXX CAPITAL PARTNERS VI, L.P.
By: Xxxxxxx Xxxxx Capital Partners VI,
L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Its Managing Director
SCP PRIVATE EQUITY PARTNERS, L.P.
By: SCP Private Equity Management,
L.P., its General Partner
By: /s/ Xxxxxx X. Plum
-----------------------------
Name: Xxxxxx X. Plum
-----------------------------
Its General Partner
SAFEGUARD 98 CAPITAL, L.P.
By: Safeguard Delaware, Inc.
its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------
Title: Senior Vice President
-----------------------------
[SIGNATURE PAGE TO SHAREHOLDERS AGREEMENT]
TL VENTURES III L.P.
By: TL Ventures III Management L.P.,
its General Partner
By: TL Ventures III LLC,
its General Partner
By: /s/ Xxxx X. XxXxxx
-----------------------------
Name: Xxxx X. XxXxxx
-----------------------------
Title: Managing Director
TL VENTURES III OFFSHORE L.P.
By: TL Ventures III Offshore Partners
L.P., its General Partner
By: TL Ventures III Offshore Ltd.,
its General Partner
By: /s/ Xxxx X. XxXxxx
-----------------------------
Name: Xxxx X. XxXxxx
-----------------------------
Title: Managing Director
-----------------------------
TL VENTURES III INTERFUND L.P.
By: TL Ventures III LLC,
its General Partner
By: /s/ Xxxx X. XxXxxx
-----------------------------
Name: Xxxx X. XxXxxx
-----------------------------
Title: Managing Director
[SIGNATURE PAGE TO SHAREHOLDERS AGREEMENT]
ENERTECH CAPITAL PARTNERS, L.P.
By: EnerTech Management, L.P.
its General Partner
By: EnerTech Management Company,
L.L.C., its General Partner
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
-----------------------------
Title: Managing Director
XXXXX HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
-----------------------------
Title: President
-----------------------------
BANKAMERICA INVESTMENT CORPORATION
By: /s/ M. Xxx X'Xxxxx
-----------------------------
Name: M. Xxx X'Xxxxx
-----------------------------
Title: Managing Director
-----------------------------
MIG PARTNERS VII
By: /s/ M. Xxx X'Xxxxx
-----------------------------
Name: M. Xxx X'Xxxxx
-----------------------------
Title: General Partner
-----------------------------
[SIGNATURE PAGE TO SHAREHOLDERS AGREEMENT]
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
XXXXXXX X. XXXXXXX
XXXXX FAMILY LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: General Partner
-----------------------------
[SIGNATURE PAGE TO SHAREHOLDERS AGREEMENT]
SCHEDULE OF NEW INVESTORS
SCP Private Equity Partners, L.P.
000 Xxx Xxxxxxxxx Xxxx.
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Safeguard 98 Capital, L.P.
c/o Safeguard Scientifics, Inc.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
TL Ventures III L.P.
c/o TL Ventures LLC
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
TL Ventures III Offshore L.P.
c/o Trident Trust Company (Cayman) Limited
X.X. Xxx 000
One Capital Place, Fourth Floor
Grand Cayman, Cayman Islands
with a copy to:
TL Ventures LLC
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
-25-
TL Ventures III Interfund L.P.
c/o TL Ventures LLC
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
EnerTech Capital Partners
000 Xxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxx, XX 00000
Xxxxxxx Xxxxx Capital Partners VI, L.P.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Segal Holdings, Inc.
c/o Segal & Co. Inc.
0000 Xxxxxx xx xxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
BankAmerica Investment Corporation
c\o Bank of America Mezzanine Investments Group
000 Xxxxx XxXxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxx, XX 00000
MIG Partners VII
c\o Bank of America Mezzanine Investments Group
000 Xxxxx XxXxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxx, XX 00000
Xxxxx Family Limited Partnership
0000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
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