Exhibit 10.25
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STOCKHOLDERS' AGREEMENT
OF
MJD COMMUNICATIONS, INC.
Dated as of January 20, 2000
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TABLE OF CONTENTS
Page
1. Restrictions on Transfers of Shares by Founders and Management
Stockholders...............................................................1
1.1. Restrictions Generally..........................................1
1.2. Treatment of Certain Xxxxxxxxx Family Members...................3
1.3. Treatment of XXX................................................3
1.4. Right of First Refusal..........................................3
1.5. Tag-Along Rights................................................5
2. Restrictions on Transfers of Shares by Investor Stockholders...............5
2.1. Restrictions Generally..........................................5
2.2. Right of First Offer............................................6
2.3. Tag-Along Rights................................................8
2.4. Drag-Along Rights...............................................8
3. Management Stockholders...................................................10
3.1. Right of the Company to Purchase..............................10
3.2. Notice to Management Stockholders..............................11
3.3. Payment........................................................11
3.4. Appraisal......................................................11
3.5. Fair Market Value..............................................11
3.6. Acknowledgment of Status.......................................12
3.7. Prohibited Purchases...........................................12
4. Involuntary Transfers.....................................................13
5. Auction Sale Procedure....................................................13
5.1. General........................................................13
5.2. Retention of Investment Bank...................................14
5.3. Preparation of Confidential Memorandum.........................14
5.4. Auction Procedures.............................................14
5.5. Selection of Bid...............................................14
5.6. Negotiation of Sale Agreement..................................14
5.7. Right of Remaining Stockholders to Bid.........................15
5.8. Cooperation....................................................15
6. Issuance of Additional Equity Securities..................................15
6.1. Preemptive Rights of the Stockholders..........................15
6.2. Investments....................................................16
6.3. Participation by the Stockholders..............................16
7. Corporate Governance......................................................17
7.1. Election of Directors..........................................17
7.2. Five Year Plan and Annual Budget...............................19
7.3. Records and Reports, etc.......................................19
7.4. Board Meetings, Committees, etc................................20
7.5. Directors' and Officers' Insurance.............................21
8. Actions Requiring Approval of the Investor Stockholders...................21
8.1. General........................................................21
9. Stock Certificate Legends.................................................23
10. Absence of Other Arrangements............................................24
11. New Management Stockholders..............................................24
12. Parties..................................................................24
12.1. Assignment by the Company.....................................24
12.2. Assignment Generally..........................................25
12.3. Termination...................................................25
12.4. Agreements to Be Bound........................................25
12.5. THL Related Parties, THL Holders, Xxxxx Holders...............26
13. Defined Terms............................................................27
14. Miscellaneous............................................................32
14.1. Recapitalizations, Exchanges, etc. Affecting the Shares.......32
14.2. Non-Competition Agreement.....................................32
14.3. No Third Party Beneficiaries..................................32
14.4. Further Assurances............................................32
14.5. Amendment and Modification....................................33
14.6. Governing Law.................................................33
14.7. Invalidity of Provision.......................................33
14.8. Notices.......................................................33
14.9. Headings; Execution in Counterparts...........................35
14.10. Injunctive Relief............................................36
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14.11. Entire Agreement.............................................36
14.12. Transfer of Shares from MJD Partners.........................36
SCHEDULES
Schedule A THL Related Parties
Schedule B Management Stockholders
Schedule C Xxxxx Holders
EXHIBITS
Exhibit A Five Year Plan
Exhibit B Spousal Waiver
ANNEXES
Annex A Xxxxx Approval Rights
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STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of January 20, 2000, among
MJD Communications, Inc., a Delaware corporation (the "COMPANY"), Xxxxx
Investment Associates V, L.P., a Delaware limited partnership ("KIA V"), Xxxxx
Equity Partners V, L.P., a Delaware limited partnership ("KEP V"; together with
KIA V, "XXXXX"), Xxxxxx X. Xxx Equity Fund IV, L.P., a Delaware limited
partnership ("THL FUND IV"), those parties listed on Schedule A attached hereto
(collectively, the "THL RELATED PARTIES"; together with THL Fund IV, "THL" and
each of them together with Xxxxx, the "INVESTOR STOCKHOLDERS"), XXX
Communications Associates, Inc., a Delaware corporation (formerly named Bugger
Associates, Inc. ("XXX"), Xxxxxx X. Xxxxxxxxx ("XXXXXXXXX"), Xxxx Xxxxxxxxx,
Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx ("XXXXXXXX"; together
with XXX, and Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx and Xxxxx Xxxxx
Xxxxxxxxx, the "FOUNDERS"), Xxxxxx Xxxxxxxxx, Xxxxxxxxx Xxxxxx, and those
employees of the Company listed on Schedule B attached hereto, as the same shall
be amended from time to time in accordance with Section 12 (collectively, the
"MANAGEMENT STOCKHOLDERS"). For purposes of this Agreement, KIA V and KEP V
shall be deemed to be a single Investor Stockholder and THL Fund IV and each of
the THL Related Parties shall be deemed to be a single Investor Stockholder. The
Investor Stockholders, the Founders and the Management Stockholders are
hereinafter referred to collectively as the "STOCKHOLDERS".
Capitalized terms used herein without definition are defined
in Section 13.
The parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFERS OF SHARES BY FOUNDERS AND
MANAGEMENT STOCKHOLDERS. 1.1. RESTRICTIONS GENERALLY. (a) Prior to such time as
each Investor Stockholder (and the Xxxxx Holders or THL Holders, as applicable),
each own less than 50% of the number of Shares owned by such Investor
Stockholder on the Closing Date (the "50% CONDITION"), no Founder or Management
Stockholder may Transfer any Shares or any interest therein now or hereafter
owned by such Founder or Management Stockholder, except for (I) any (A)
involuntary Transfer to a third party in accordance with Section 4, (B) sale to
one or more third parties pursuant to Section 2.3 ("Tag-Along Rights"), Section
2.4 ("Drag-Along Rights") or Section 5 ("Auction Sale Procedure") or (C) sale
pursuant to a Registration in accordance with the Registration Rights Agreement,
(ii) any Transfer for estate-planning purposes of such Founder or
Management Stockholder, authorized by the prior written approval (not to be
unreasonably withheld) of the Board (excluding such Founder or Management
Stockholder and any other interested Board members), and PROVIDED that the
restrictions contained in this Section 1 shall continue to be applicable to the
Shares after any such Transfer and PROVIDED further that the transferees of such
Shares shall have complied with Section 12.4, (A) a trust under which the
distribution of the Shares may be made only to beneficiaries who are such
Founder or Management Stockholder, his or her spouse, his or her parents,
members of his or her immediate family or his or her lineal descendants, (B) a
charitable remainder trust, the income from which will be paid to such Founder
or Management Stockholder during his or her life, (C) a corporation, the
stockholders of which are only such Founder or Management Stockholder, his or
her spouse, his or her parents, members of his or her immediate family or his or
her lineal descendants or (D) a partnership or limited liability company, the
partners or members of which are only such Founder or Management Stockholder,
his or her spouse, his or her parents, members of his or her immediate family or
his or her lineal descendants, (III) any Transfer in case of the death of such
Founder (other than XXX) or Management Stockholder, by will or by the laws of
intestate succession, to his or her executors, administrators, testamentary
trustees, legatees or beneficiaries and PROVIDED that the restrictions contained
in this Section 1 shall continue to be applicable to the Shares after any such
Transfer and PROVIDED further that the transferees of such Shares shall have
complied with Section 12.4, or (IV) Transfer by XXX, authorized by the prior
written approval (not to be unreasonably withheld) of the Board (excluding
interested Board members), to an Affiliate of XXX that agrees to be bound by the
terms of this Agreement pursuant to Section 12.4.
(b) After the 50% Condition has been satisfied, the Founders
and Management Stockholders may Transfer any Shares or any interest therein now
or hereafter owned by such Founder or Management Stockholder, PROVIDED that such
sale is made in compliance with the provisions of Section 1.4 ("Right of First
Refusal") and Section 1.5 ("Tag-Along Rights"), or such sale is made pursuant to
Section 2.4 ("Drag-Along Rights") or Section 5 ("Auction Sale Procedure"), or
such sale is pursuant to a Registration effected in accordance with the
Registration Rights Agreement.
(c) Notwithstanding anything in this Agreement to the
contrary, a Founder or Management Stockholder may pledge any or all Shares now
or hereafter owned by such Founder or Management Stockholder or grant a security
interest therein to secure indebtedness of such Founder or Management
Stockholder owing to a bank or other financial institution on terms and
conditions approved by the Board (excluding such Founder or Management
Stockholder and other members of the Board who are designees of the Founders and
Management Stockholders), PROVIDED, however, that any pledgee pursuant to this
subsection (c) shall acquire only a security interest in such
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Shares entitling such pledgee to (I) the proceeds from any sale of such Shares
made in compliance with the terms of this Agreement and (II) any proceeds of any
distribution to stockholders on account of the Shares in any liquidation as a
result of any bankruptcy proceeding or the winding up of affairs of the Company
and in no event shall such pledgee be entitled to receive title to such Shares
or any other rights incident thereto other than those specified above. The
pledge agreements or other related financing agreements of any Founder or
Management Stockholder shall be subject to and acknowledge the rights of the
Company and the other Stockholders set forth herein and shall acknowledge the
restrictions imposed on the pledgee's security interest pursuant to this Section
1.1(c), such acknowledgment being in form and substance reasonably satisfactory
to the Board.
1.2. TREATMENT OF CERTAIN XXXXXXXXX FAMILY MEMBERS. Each of
Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx and Xxxxx Xxxxx Xxxxxxxxx (collectively, the
"XXXXXXXXX FAMILY MEMBERS") hereby acknowledges that all Shares and all
interests therein now or hereafter owned by such Person shall for all purposes
of this Agreement be treated as if such shares and interests were owned by XXX
and each such Person has as of the date hereof granted XXX an irrevocable power
of attorney directing XXX to exercise all rights and perform all obligations
hereunder and under the Registration Rights Agreement in respect of such
Person's Shares and interests so long as this Agreement shall remain in full
force and effect.
1.3. TREATMENT OF XXX. Notwithstanding anything in this
Agreement to the contrary, Xxxxxxxxx, together with Xxxxxx Xxxxxxxxx and
Xxxxxxxxx Xxxxxx, shall continue to own 100% of XXX and shall not Transfer any
Shares in XXX or any direct or indirect interest therein until such time as XXX
no longer owns any Shares, except for any Transfer to or from any Xxxxxxxxx
Family Member or Xxxxxx Xxxxxxxxx or Xxxxxxxxx Xxxxxx or any Transfer made for
estate-planning purposes pursuant to Section 1.1(a)(ii) or any Transfer of
shares of XXX, in case of the death of a stockholder of XXX, by will or by the
laws of intestate succession, to such stockholder's executors, administrators,
testamentary trustees, legatees or beneficiaries, all of whom shall be subject
to the restrictions set forth in this Section 1.3 and PROVIDED further that the
transferees of such Shares shall have complied with Section 12.4.
1.4. RIGHT OF FIRST REFUSAL. (a) If at any time after the 50%
Condition has been satisfied, any of the Founders or Management Stockholders
shall have received a BONA FIDE offer or offers from a third party or parties to
purchase any Shares, then prior to selling such Shares to such third party or
parties the relevant Founder or Management Stockholder shall deliver to the
Company and the Investor Stockholders a letter signed by the relevant Founder or
Management Stockholder setting forth in reasonable detail:
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(i) the name(s) of such third party or parties;
(ii) the purchase price per share of the Shares offered by
such third party or parties;
(iii) all material terms and conditions contained in the offer
of the third party or parties;
(iv) the relevant Founder or Management Stockholder's offer
(irrevocable by its terms for 30 days following receipt) to sell to the
Company all (but not less than all) of the Shares covered by the offer
of the third party or parties, for a purchase price per share and on
other terms and conditions not less favorable to the Company than those
contained in the offer of the third party or parties (the "OFFER"); and
(v) closing arrangements and a closing date not less than 60
nor more than 90 days following the delivery of such letter (or such
later date as is necessary to obtain all requisite governmental and
regulatory approvals and consents, PROVIDED the relevant Founder or
Management Stockholder covenants to use commercially reasonable efforts
to obtain such approvals and consents) for any purchase and sale that
may be effected by the Company.
(b) After the receipt of the Offer, the Company shall have a
30-day period in which to determine whether to purchase the Shares covered by
the Offer on the terms set forth therein (or assign the right to purchase such
Shares, or that portion of the right not being exercised by the Company, to the
Investor Stockholders or any Xxxxx Holder or THL Holder in accordance with
Section 1.4(c)).
(c) If the Company does not exercise its rights with respect
to all of the Shares covered by the Offer under Section 1.4(b), then the Company
shall, within five days following the date of the Offer, notify the Investor
Stockholders of such Offer and make available to each of them the right to
purchase all of the Shares covered by the Offer which are not being purchased by
the Company on a pro rata basis (based on their relative ownership of the
Company) or (II) such other portion of such Shares as the Investor Stockholders
may mutually agree upon. The Investor Stockholders shall have the right to
assign to any of the Xxxxx Holders or THL Holders all or any of their rights to
purchase Shares pursuant to this Section 1.4(c). Notwithstanding the foregoing,
in no event shall the Company, the Investor Stockholders or any Xxxxx Holder or
THL Holder be entitled to purchase any Shares pursuant to this Section 1.4
unless all of the Shares covered by the Offer are purchased. Any purchases made
by
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the Investor Stockholders or any Xxxxx Holder or THL Holder hereunder shall be
made in accordance with Section 1.4(b).
(d) If the Company (or the Investor Stockholders or any Xxxxx
Holder or THL Holder pursuant to Section 1.4(c)) fails to accept the Offer
within the 30-day period or fails to consummate the closing of the purchase of
all of the Shares covered by the Offer within the time period set forth therein,
then the relevant Founder or Management Stockholder shall have the right to sell
to the third party or parties identified in such Offer all (but not less than
all) of the Shares covered by the Offer, for a purchase price not less than the
purchase price contained in the Offer and on the other terms and conditions no
less favorable to the relevant Founder or Management Stockholder than those
contained in the Offer. If the relevant Founder or Management Stockholder has
not signed a binding purchase agreement (subject to customary closing
conditions) with such third party or parties within 45 days after the expiration
of such 30-day period or if such sale has not been completed within 120 days (or
such later date as is necessary to obtain all requisite governmental and
regulatory approvals and consents) after the expiration of such 30-day period,
the Shares covered by such Offer may not thereafter be sold by the relevant
Founder or Management Stockholder unless the procedures set forth in this
Section 1.4 shall have again been complied with.
1.5. TAG-ALONG RIGHTS. If none of the Company, the Investor
Stockholders, the Xxxxx Holders or the THL Holders, either singly or in the
aggregate, shall have accepted the Offer pursuant to Section 1.4, and any of the
Founders or Management Stockholders shall have agreed to sell to a third party
or parties the Shares covered by the Offer, then such Founder or Management
Stockholder must offer each other Stockholder a PRO RATA right to participate in
such sale with respect to such Stockholder's Shares, for a purchase price per
Share equal to the purchase price per Share being paid for such Founder or
Management Stockholder's Shares and on other terms and conditions not less
favorable to such Stockholder than those applicable to such Founder or
Management Stockholder.
2. RESTRICTIONS ON TRANSFERS OF SHARES BY INVESTOR
STOCKHOLDERS. 2.1. RESTRICTIONS GENERALLY. (a) Prior to December 31, 2002, no
Shares or any interest therein now or hereafter owned by either Investor
Stockholder (or any Xxxxx Holder or THL Holder) may be Transferred without the
written consent of the other Investor Stockholder, and then subject to Sections
2.2 and 2.3, except for any (I) involuntary Transfer to a third party in
accordance with Section 4 ("Involuntary Transfers") or (II) Transfer from Xxxxx
to a Xxxxx Holder, from a Xxxxx Holder to Xxxxx or to another Xxxxx Holder, from
THL to a THL Holder, or from a THL Holder to THL or to another THL Holder,
provided that such Xxxxx Holder or THL Holder, as the case may be, agrees to be
bound by the terms of this Agreement pursuant to Section 12.4.
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Notwithstanding anything in this Agreement to the contrary, prior to the earlier
of the fifth anniversary of the Closing Date and an IPO, (I) no Shares may be
Transferred by KIA V or KEP V to any of their respective limited partners
without the prior consent of THL, and no Shares may be Transferred by THL Fund
IV or any of the THL Related Parties to any of their respective limited partners
without the prior consent of Xxxxx, and (II) no THL Individual or Xxxxx
Individual may pledge any Shares other than pursuant to Section 2.1(c) without
the consent of Xxxxx or THL, respectively.
(b) After December 31, 2002, each Investor Stockholder (and
any Xxxxx Holder or THL Holder) may sell any Shares held by it, PROVIDED that if
such sale is not pursuant to Section 2.1(a)(i) or (ii), such sale must be either
(I) made in compliance with the provisions of Section 2.2 ("Right of First
Offer") and Section 2.3 ("Tag-Along Rights"), (II) pursuant to Section 2.4
("Drag-Along Rights") or Section 5 ("Auction Sale Procedure"), or (III) pursuant
to a Registration effected in accordance with the Registration Rights Agreement.
(c) Notwithstanding anything in this Agreement to the
contrary, a Xxxxx Holder or THL Holder may pledge any or all Shares now or
hereafter owned by such Xxxxx Holder or THL Holder or grant a security interest
therein to secure indebtedness of such Xxxxx Holder or THL Holder owing to a
bank or other financial institution, PROVIDED, however, that any pledgee
pursuant to this subsection (c) shall acquire only a security interest in such
Shares entitling such pledgee to (I) the proceeds from any sale of such Shares
made in compliance with the terms of this Agreement and (II) any proceeds of any
distribution to stockholders on account of the Shares in any liquidation as a
result of any bankruptcy proceeding or the winding up of affairs of the Company
and in no event shall such pledgee be entitled to receive title to such Shares
or any other rights incident thereto other than those specified above. The
pledge agreements or other related financing agreements of any Xxxxx Holder or
THL Holder shall be subject to and acknowledge the rights of the Company and the
other Stockholders set forth herein and shall acknowledge the restrictions
imposed on the pledgee's security interest pursuant to this Section 2.1(c).
2.2. RIGHT OF FIRST OFFER. (a) PROCEDURE. If at any time after
the date hereof (I) either Investor Stockholder desires to sell any of the
Shares held by it (the "OFFERING INVESTOR STOCKHOLDER"), (II) such sale is
permitted under Section 2.1, (III) such sale is a sale which, pursuant to
Section 2.1, is subject to this Section 2.2, and (IV) the other Investor
Stockholder, the Founders or the Management Stockholders continue to own at
least 20% of the aggregate number of Shares owned by such Investor Stockholder,
the Founders or the Management Stockholders, as the case may be, on the Closing
Date (any and all parties meeting such 20% condition, an "ELIGIBLE
STOCKHOLDER"), then prior to selling such Shares, the Offering Investor
Stockholder
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shall deliver to each Eligible Stockholder a letter signed by it setting forth
the number of Shares the Offering Investor Stockholder desires to sell (the
"SALE NOTICE"). Within 30 days of receipt of the Sale Notice, the Eligible
Stockholders may make offers to purchase in the aggregate, all of the shares
covered by the Sale Notice, and (I) individually, that portion of such Shares
offered by the Offering Investor Stockholder equal to their PRO RATA interest in
the Company relative to each other (based on the percentage of outstanding
Shares owned by each of them on the date of the Sale Notice) or (II) such other
portion of such shares as the Eligible Stockholders collectively may agree upon,
by delivering written notice to the Offering Investor Stockholder setting forth:
(i) the number of Shares to be purchased and the prospective
purchase price per Share;
(ii) any other material terms and conditions to such purchase;
(iii) evidence reasonably satisfactory to such Offering
Investor Stockholder for the financing of such purchase; and
(iv) closing arrangements and a closing date not less than 30
nor more than 90 days following the delivery of such notice (or such
later date as is necessary to obtain all requisite governmental and
regulatory approvals and consents).
(b) If, upon the expiration of 30 days following receipt by
the Eligible Stockholders of the Sale Notice, the Eligible Stockholders shall
not have made an offer to purchase all (but not less than all) of the Shares
covered by the Sale Notice, the Offering Investor Stockholder may sell the
Shares covered by the Sale Notice at a price per share and on other terms and
conditions not less favorable to the Offering Investor Stockholder than those
set forth in the Sale Notice, PROVIDED that the Offering Investor Stockholder
and the third party execute a binding purchase agreement (subject to customary
closing conditions) within 120 days after the expiration of such 30 day period
and consummate the closing thereunder within 120 days (or such later date as is
necessary to obtain all requisite governmental and regulatory approvals and
consents) from the execution of the binding purchase agreement. If the Eligible
Stockholders shall have made an offer to purchase all of the Shares covered by
the Sale Notice, then the Offering Investor Stockholder may either (I) accept
such offer and the sale of such Shares shall be consummated as soon as
practicable after the delivery of a notice of acceptance by the Offering
Investor Stockholder, but in any event within 90 days of the delivery of the
Sale Notice (or such later date as is necessary to obtain all requisite
governmental and regulatory approvals and consents), or (II) reject such offer,
by
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written notice delivered to the Eligible Stockholders within 20 days of the
delivery to the Offering Investor Stockholder of such offer, in which case the
Offering Investor Stockholder shall have the right to sell all (but not less
than all) of the Shares covered by the Sale Notice, for a purchase price and on
other terms and conditions no less favorable to the Offering Investor
Stockholder than those contained in the Eligible Stockholders' offer, PROVIDED
that the Offering Investor Stockholder and the purchasers execute a binding
purchase agreement (subject to customary closing conditions) within 120 days of
the Eligible Stockholders' offer and consummate the closing thereunder within
120 days (or such later date as is necessary to obtain all requisite
governmental and regulatory approvals and consents) from the execution of the
binding purchase agreement. If the Offering Investor Stockholder and such
purchasers do not execute such a purchase agreement or close such transaction
within the time periods set forth in the proviso of the preceding sentence, then
the Shares covered by such Sale Notice may not thereafter be sold by the
Offering Investor Stockholder unless the procedures set forth in this Section
2.2 shall have again been complied with. Any offer by the Eligible Stockholders
pursuant to this Section 2.2(b) shall not preclude any of them from making
additional offers for such Shares outside of this Section 2.2, which offers may
be rejected in the Offering Investor Stockholder's sole discretion, or
participating in any auction relating to the sale of any such Shares.
(c) SALE OF ASSETS. The provisions of Sections 2.2(a) and (b)
shall apply, MUTATIS MUTANDIS, in the event of a proposed sale of all or
substantially all of the assets of the Company and its subsidiaries.
2.3. TAG-ALONG RIGHTS. If the Eligible Stockholders shall not
have purchased, pursuant to Section 2.2(a), all of the Shares covered by the
Sale Notice, and the Offering Investor Stockholder shall have agreed to sell to
a third party or parties the Shares covered by the Sale Notice, and the Shares
proposed to be sold, together with all Shares previously sold by the Offering
Investor Stockholder, would represent more than 25% of the aggregate number of
Shares owned by the Offering Investor Stockholder on the Closing Date, then the
Offering Investor Stockholder must offer the other Stockholders a PRO RATA right
to participate in such sale with respect to the other Stockholders' Shares, for
a purchase price per Share equal to the purchase price per Share being paid for
the Offering Investor Stockholder's Shares and on other terms and conditions not
less favorable to the other Stockholders than those applicable to the Offering
Investor Stockholder.
2.4. DRAG-ALONG RIGHTS. (a) If either of the Investor
Stockholders proposes to sell to a third party or parties (a "PROPOSED
PURCHASER") Shares owned by such Investor Stockholder (other than a sale
pursuant to Section 2.1(a)(i) or (ii)) which, together with all Shares
previously sold by such Offering Investor Stockholder, would
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represent more than 25% of the aggregate number of Shares owned by such Offering
Investor Stockholder on the Closing Date, and (I) such sale is permitted by
Section 2.1, (II) the Offering Investor Stockholder has previously complied with
Section 2.2 with respect to such proposed sale, (III) if the Proposed Purchaser
proposes to sell 100% of the Proposed Purchaser's Shares, such sale meets the
THL Requirements, if applicable, and (IV) if the Proposed Purchaser proposes to
sell less than 100% of the Proposed Purchaser's Shares, the other Investor
Stockholder approves such sale (any proposed sale meeting all such conditions, a
"PROPOSED SALE"), then the Offering Investor Stockholder may provide each other
Stockholder written notice (a "DRAG-ALONG NOTICE") of such Proposed Sale and the
material terms thereof not less than 20 business days prior to the proposed
closing date of the Proposed Sale and each of the other Stockholders hereby
agrees to sell to such Proposed Purchaser that number of Shares equal to the
product of (I) the number of Shares then held by each such other Stockholder and
(II) a fraction, the numerator of which shall be the number of Shares which the
Offering Investor Stockholder (together with the Xxxxx Holders or the THL
Holders as applicable) proposes to sell in the Proposed Sale and the denominator
of which shall be the number of Shares then owned by the Offering Investor
Stockholder (together with the Xxxxx Holders or the THL Holders as applicable).
(b) Shares which are subject to a Drag-Along Notice will be
included in the Proposed Sale pursuant hereto and to any agreement with the
Proposed Purchaser relating thereto, on the same terms and subject to the same
conditions applicable to the Shares which the Offering Investor Stockholder
proposes to sell in the Proposed Sale. Such terms and conditions shall include,
without limitation, (I) the sale consideration (which shall be reduced by the
fees and expenses incurred by the Offering Investor Stockholder in connection
with the Proposed Sale); (II) the provision of information, representations,
warranties, covenants and requisite indemnifications, PROVIDED, HOWEVER, that
any representations and warranties relating specifically to any Stockholder
shall only be made by that Stockholder and any indemnification provided by the
Stockholders shall be on a several and ratable, not joint, basis based on the
number of Shares being sold by each Stockholder in the Proposed Sale; PROVIDED,
FURTHER, HOWEVER, that the form of consideration to be received by the Offering
Investor Stockholder (or any Xxxxx Holder or THL Holder as applicable) in
connection with the Proposed Sale may be different from that received by the
other Stockholders so long as the value of the consideration to be received by
the Offering Investor Stockholder (or any Xxxxx Holder or THL Holder as
applicable) is the same or less than that to be received by the other
Stockholders (as reasonably determined by the Board in good faith, excluding
members of the Board who are designees of the Offering Investor Stockholder). No
other Stockholders shall exercise any dissenter's rights with respect to the
consummation of any such Proposed Sale pursuant to this Section 2.4.
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(c) Each other Stockholder will, if requested by the Offering
Investor Stockholder, execute and deliver a custody agreement and power of
attorney in form and substance reasonably satisfactory to the Offering Investor
Stockholder with respect to the Shares which are to be included in the Proposed
Sale pursuant to this Section 2.4. The custody agreement and power of attorney
will provide, among other things, that the other Stockholders will deliver to
and deposit in custody with the custodian and attorney-in-fact named therein a
certificate or certificates representing such Shares (duly endorsed in blank by
the registered owner or owners thereof or accompanied by duly endorsed stock
powers in blank) and irrevocably appoint said custodian and attorney-in-fact as
such other Stockholder's agent and attorney-in-fact with full power and
authority to act under a custody agreement and power of attorney on behalf of
such other Stockholder with respect to the matters specified therein.
(d) Each other Stockholder agrees to execute such other
agreements as the Offering Investor Stockholder may reasonably request in
connection with the consummation of a Proposed Sale and Drag-Along Notice and
the transactions contemplated thereby, including, without limitation, any
purchase agreement, proxies, written consents in lieu of meetings or waiver of
appraisal rights.
3. MANAGEMENT STOCKHOLDERS. 3.1. RIGHT OF THE COMPANY TO
PURCHASE. Subject to all subsections of this Section 3, the Company shall have
the right to purchase from a Management Stockholder, and such Management
Stockholder shall have the obligation to sell to the Company, all (but not less
than all) of such Management Stockholder's Shares:
(a) at the Fair Market Value of the Shares to be purchased if
such Management Stockholder's employment with the Company or any of its
subsidiaries is terminated as a result of (I) the termination by the
Company or any such subsidiary of such employment without Cause, (II)
the death or Disability of such Management Stockholder, (III) the
resignation of such Management Stockholder for Good Reason or (IV) the
retirement of such Management Stockholder upon or after reaching the
age of 65 ("RETIREMENT") ;
(b) at the lesser of the Fair Market Value and the Carrying
Value of the Shares to be purchased if such Management Stockholder's
employment with the Company or any of its subsidiaries is terminated by
the Company or any such subsidiary for Cause; or
(c) at the Fair Market Value or the Carrying Value of the
Shares to be purchased, in the sole discretion of the Board (excluding
interested Board members), if such Management Stockholder's employment
with the Company or
10
any of its subsidiaries is terminated for any reason other than as a
result of an event described in subparagraph (a)(i), (a)(ii), (a)(iii)
or (a)(iv) or in paragraph (b) of this Section 3.1.
3.2. NOTICE TO MANAGEMENT STOCKHOLDERS. If the Company desires
to purchase Shares from a Management Stockholder pursuant to Section 3.1, it
shall notify such Management Stockholder (or his or her estate, as the case may
be) not more than 60 days after the occurrence of the event giving rise to the
Company's right to acquire such Management Stockholder's Shares.
3.3. PAYMENT. If at any time the Company purchases any Shares
pursuant to this Agreement, then within 30 days after the date that the Company
sends the notice to the Management Stockholder pursuant to Section 3.2, the
Company must pay the purchase price determined under this Agreement for the
Shares it purchases by wire transfer of funds or company check in the amount of
the purchase price, and upon receipt of payment of such purchase price or,
pursuant to Section 3.7, any portion thereof, the seller shall deliver the
certificates representing the number of Shares being purchased in a form
suitable for transfer, duly endorsed in blank, and free and clear of any lien,
claim or encumbrance. Notwithstanding anything in this Agreement to the
contrary, the Company shall not be required to make any payment for Shares
purchased hereunder until delivery to it of the certificates representing such
shares or evidence or an affidavit, in either case in form and substance
reasonably satisfactory to the Company of loss, theft or destruction of such
certificates.
3.4. APPRAISAL. The Company shall engage, from time to time at
the discretion of the Board, but not less often than within 90 days after every
fiscal year, an independent valuation consultant or appraiser of recognized
national standing reasonably satisfactory to the Investor Stockholders (the
"APPRAISER") to appraise the Fair Market Value of the Shares as of the last day
of the calendar year then most recently ended or, at the request of the Board,
as of any more recent date (the "APPRAISAL DATE"), and to prepare and deliver a
report to the Company describing the results of such appraisal (the
"APPRAISAL"). The Appraiser shall (A) exclude any premiums for control or
discounts for minority interests or restrictions on transfer; (B) appraise the
Shares on a fully-diluted basis, PROVIDED that it shall use its judgment as to
the extent to which any "out of the money" Share equivalents should be included;
and (C) value the Non-Voting Common Stock and Preferred Stock on an as-converted
basis. The Company shall bear the fees and expenses of each Appraisal. Promptly
after receipt of each Appraisal, the Company shall deliver to each Stockholder a
copy of the Appraisal.
11
3.5. FAIR MARKET VALUE. The "FAIR MARKET VALUE" of any Share
being purchased by or sold to the Company (or to Xxxxx, any Xxxxx Holder, THL or
any THL Holder if the right to purchase has been assigned thereto pursuant to
this Section 3) shall be derived from the most recent Appraisal pursuant to
Section 3.4, unless the Board in its sole discretion decides to obtain a more
recent Appraisal.
3.6. ACKNOWLEDGMENT OF STATUS. Each of Xxxxxxx and Xxxxxx
hereby acknowledges that, except with respect to the Shares distributed to him
upon the dissolution of MJD Partners (with respect to which he shall be deemed a
Founder), he shall be deemed a "Management Stockholder" for all purposes of this
Agreement with respect to any Shares or hereafter owned directly by him.
3.7. PROHIBITED PURCHASES. Notwithstanding anything to the
contrary herein, the Company shall not be permitted to purchase any Shares under
this Section 3 to the extent (A) the Company is prohibited from purchasing such
shares by applicable law or by any debt instruments or agreements, including any
amendment, renewal, extension, substitution, refinancing, replacement or other
modification thereof (the "FINANCING DOCUMENTS") entered into by the Company or
any of its subsidiaries, (B) an event of default has occurred (or, with notice
or the lapse of time or both, would occur) under any Financing Document and is
(or would be) continuing, (C) the purchase of such Shares would, or in the
reasonable opinion of the Board (excluding such Management Stockholder and other
members of the Board who are designees of the Management Stockholders) might,
result in the occurrence of an event of default under any Financing Document or
create a condition which would or might, with notice or lapse of time or both,
result in such an event of default, or (D) the purchase of such Shares would, in
the reasonable opinion of the Board (excluding such Management Stockholder and
other members of the Board who are designees of the Management Stockholders), be
imprudent in view of the financial condition (present or projected) of the
Company or any of its subsidiaries or the anticipated impact of the purchase of
such shares on the Company's or any of its subsidiaries' ability to meet their
respective obligations under any Financing Document. If Shares that the Company
has the right to purchase on any date exceed the total amount permitted to be
purchased on such date pursuant to the preceding sentence (the "MAXIMUM
AMOUNT"), the Company shall purchase on such date only that number of Shares up
to the Maximum Amount (and shall not be required to purchase more than the
Maximum Amount) in such amounts as the Board (excluding such Management
Stockholder and other members of the Board who are designees of the Management
Stockholders) shall in good faith determine. Notwithstanding anything to the
contrary contained in this Agreement, if the Company is unable to make any
payment when due under this Agreement by reason of this Section 3.7, the Company
shall have the option to either: (I) make such payment at the earliest
practicable date permitted under this Section 3.7 and any such payment shall
12
accrue simple interest (or if such payment is accruing interest at such time,
shall continue to accrue interest) at a rate per annum of 8% from the date such
payment is due and owing to the date such payment is made, PROVIDED that all
payments of interest accrued hereunder shall be paid only at the date of payment
by the Company for the Shares being purchased, or (II) pay the purchase price
for such Shares with a subordinated note which is fully subordinated in right of
payment and exercise of remedies to the lenders' rights under the Financing
Documents and the maturity date of which is 30 days after the latest maturity
date on any debt of the Company which is outstanding (or reasonably expected to
become outstanding) as of the date such subordinated note is issued.
4. INVOLUNTARY TRANSFERS. Any transfer of title or beneficial
ownership of Shares upon default, foreclosure, forfeit, court order, or
otherwise than by a voluntary decision on the part of a Stockholder (an
"INVOLUNTARY TRANSFER") shall be void unless such Stockholder complies with this
Section 4 and enables the Company to exercise in full its rights hereunder. Upon
any Involuntary Transfer, the Company shall have the right to purchase such
Shares pursuant to this Section 4 and the Person to whom such Shares have been
transferred (the "INVOLUNTARY TRANSFEREE") shall have the obligation to sell
such Shares in accordance with this Section 4. Upon the Involuntary Transfer of
any Shares, such Stockholder shall promptly (but in no event later than five
business days after such Involuntary Transfer) furnish written notice to the
Company and the Investor Stockholders indicating that the Involuntary Transfer
has occurred, specifying the name of the Involuntary Transferee, giving a
detailed description of the circumstances giving rise to, and stating the legal
basis for, the Involuntary Transfer. Upon the receipt of such notice, and for 60
days thereafter, the Company shall have the right to purchase, and the
Involuntary Transferee shall have the obligation to sell, all (but not less than
all) of the Shares acquired by the Involuntary Transferee for a purchase price
equal to the lesser of (A) the Fair Market Value of such Shares and (B) the
amount of the indebtedness or other liability that gave rise to the Involuntary
Transfer plus the excess, if any, of the Carrying Value of such Shares over the
amount of such indebtedness or other liability that gave rise to the Involuntary
Transfer. Notwithstanding the provisions of Section 3, for purposes of this
Section 4, the Fair Market Value of any Share shall be calculated with reference
to the most recent Appraisal and as of the most recent Appraisal Date prior to
the date of the Involuntary Transfer, unless the Board in its sole discretion
decides to obtain a more recent Appraisal.
5. AUCTION SALE PROCEDURE. 5.1. GENERAL. At any time after the
second anniversary of the Closing Date, either Investor Stockholder shall be
entitled to initiate the following procedure for the sale of the Company,
PROVIDED that such Investor Stockholder together with the Xxxxx Holders and the
THL Holders, as applicable,
13
continues to own, in the aggregate, at least 25% as many Shares as owned by such
Investor Stockholder on the Closing Date and FURTHER PROVIDED that such
procedure complies with the THL Requirements. The sale procedure (the "AUCTION
SALE PROCEDURE") set forth in this Section 5 shall be initiated by the Investor
Stockholders authorized pursuant to this Section 5.1, in any case, by delivering
to the Company and the Remaining Stockholders (as defined below) a written
notice that such Stockholder(s) has elected to initiate the Auction Sale
Procedure. For purposes of this Section 5, "SUPERVISING STOCKHOLDER" shall mean
both Investor Stockholders acting together, and "REMAINING STOCKHOLDERS" shall
mean all of the other Stockholders. Notwithstanding the foregoing, the Investor
Stockholders shall jointly be entitled to initiate the Auction Sale Procedure at
any time.
5.2. RETENTION OF INVESTMENT BANK. Within 45 days after the
initiation of the Auction Sale Procedure, the Supervising Stockholder shall in
good faith select an investment banking firm (the "INVESTMENT BANK") to assist
the Company and the Stockholders in connection with the Auction Sale Procedure.
All fees and expenses of the Investment Bank shall be borne by the Company.
5.3. PREPARATION OF CONFIDENTIAL MEMORANDUM. As soon as
practicable following the selection of the Investment Bank, the Investment Bank
shall prepare a confidential offering memorandum (the "CONFIDENTIAL MEMORANDUM")
for the purpose of soliciting prospective purchasers of all of the Shares. The
Company and each Stockholder shall provide all such assistance and cooperation
with respect to the preparation of the Confidential Memorandum as the Investment
Bank or any other Stockholder may reasonably request.
5.4. AUCTION PROCEDURES. If requested by the Supervising
Stockholder, the Investment Bank shall develop procedures for conducting the
auction of the Company, such procedures to be reasonably acceptable to the
Supervising Stockholder, and no more onerous to prospective purchasers than
procedures that are customary in the market place at the time of the initiation
of the Auction Sale Procedure.
5.5. SELECTION OF BID. The Confidential Memorandum and auction
procedures shall solicit prospective purchasers of all of the Shares. Based on
the advice of the Investment Bank, the Supervising Stockholder shall in good
faith select the best bid or bids.
5.6. NEGOTIATION OF SALE AGREEMENT. The Supervising
Stockholder and its counsel shall be entitled to negotiate the sale agreement or
agreements and any ancillary agreements on behalf of the Company with the
prospective purchaser or purchasers. The Remaining Stockholders and their
counsel shall be entitled to
14
participate in such negotiations, and the Supervising Stockholder shall consider
in good faith the Remaining Stockholders' comments. Without the Remaining
Stockholders' consent, which consent may be withheld for any reason, the
Supervising Stockholder shall not agree to any term in any sale agreement that
is more favorable to the Supervising Stockholder or its Affiliates, PROVIDED,
HOWEVER, that the form of consideration to be received by the Investor
Stockholders or the Xxxxx Holders or the THL Holders in connection with the
Auction may be different from that received by the other Stockholders so long as
the value of the consideration to be received by the Investor Stockholders or
the Xxxxx Holders or the THL Holders is the same or less than that to be
received by the other Stockholders (as reasonably determined by the Board in
good faith, excluding members of the Board who are designees of the Investor
Stockholders).
5.7. RIGHT OF REMAINING STOCKHOLDERS TO BID. No Stockholder
may participate as a bidder in the Auction Sale Procedure.
5.8. COOPERATION. Each Stockholder shall cooperate in all
respects in order to carry out the intent and accomplish the purposes of this
Section 5. No Stockholder shall exercise any dissenter's rights with respect to
the consummation of any such Auction pursuant to this Section 5. The provisions
of Section 14.4 ("Further Assurances") are specifically incorporated herein by
reference and the Stockholders' obligations thereunder, insofar as they relate
to this Section 5, shall include, without limitation, the obligation to deliver
stock certificates representing Shares, in a form suitable for transfer, duly
endorsed in blank, and the obligation to execute and deliver any stock purchase
agreement or approve any merger agreement or agreements negotiated pursuant to
Section 5.6. Each Stockholder agrees that its failure to strictly comply with
the provisions of this Section 5 and Section 14.4, insofar as it relates to this
Section 5, shall be deemed a material breach of this Agreement and shall entitle
the aggrieved Stockholders to institute and prosecute proceedings in any court
of competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of this Agreement. Such remedies shall be cumulative and not
exclusive, and shall be in addition to any other remedies which such
Stockholders may have.
6. ISSUANCE OF ADDITIONAL EQUITY SECURITIES. 6.1. PREEMPTIVE
RIGHTS OF THE STOCKHOLDERS. In the case of the proposed sale or issuance of, or
the proposed granting by the Company of, any equity securities of the Company to
any Person (other than any Excluded Shares) following the date hereof, then the
Stockholders shall have the right, exercisable within 20 days after the Company
has given notice to the Stockholders of such proposed sale, issuance or grant,
to purchase all of the equity securities proposed to be issued or granted on the
terms set forth in Sections 6.2 and 6.3; PROVIDED that the Founders shall only
have such right for any proposed sale or
15
issuance of, or the proposed granting by the Company of, any equity securities
of the Company to any Person (other than Excluded Shares) at less than fair
market value.
6.2. INVESTMENTS. Subject to Section 6.3, if the Company
proposes to sell, issue or grant any equity securities of the Company as
provided in Section 6.1, then each Stockholder, in such Stockholder's sole
discretion, shall be entitled to make one or more purchases of equity securities
for a purchase price per share as set forth in the Company's notice pursuant to
Section 6.1. The notice referred to in Section 6.1 shall state the number of
equity securities to be offered to each Stockholder, the aggregate consideration
to be paid for such equity securities by each Stockholder and the proposed date,
time and location of the closing of such purchase (which shall not be earlier
than 45 days or later than 120 days after the date of such notice). At the
closing of each such additional purchase, the Company shall issue and deliver to
each Stockholder stock certificates representing that number of fully paid and
nonassessable Shares (or executed agreements representing equity securities
other than Shares) that each such Stockholder has agreed to purchase pursuant to
this Section 6.2 and each such Stockholder shall pay to the Company by wire
transfer of immediately available funds the aggregate consideration for such
equity securities.
6.3. PARTICIPATION BY THE STOCKHOLDERS. (a) Subject to all
subsections of this Section 6.3, (I) each Stockholder shall be entitled to
purchase that portion of the equity securities covered by the notice referred to
in Section 6.1 equal to such Stockholder's PRO RATA interest in the Company
(based on the percentage of outstanding Shares owned by each Stockholder on the
date of such notice), and (II) if any Stockholder does not exercise such right
to purchase such Stockholder's PRO RATA portion of all of the equity securities
that the Company proposes to issue and sell pursuant to Section 6.1, then each
other Stockholder who elected to purchase pursuant to this Section 6.3(a) shall
have the right to purchase such Stockholder's respective PRO RATA portion of
such equity securities not elected to be so purchased by such Stockholder that
the Company proposes to issue and sell.
(b) Notwithstanding subsection (a) of this Section 6.3, the
Investor Stockholders may allocate any equity securities proposed to be sold to
them pursuant to Section 6.2 between themselves in whatever manner they choose
and, in any event, either Investor Stockholder may purchase any of the equity
securities not purchased by the other Investor Stockholder before the
application of Section 6.3(a)(ii).
(c) Any purchase by any Founder or Management Stockholder of
any Shares pursuant to this Section 6 may only be financed by personal funds or
borrowings made directly by such Founder or Management Stockholder, PROVIDED
that such financing arrangements must be authorized by the prior written
approval (not to be
16
unreasonably withheld) of the Board (excluding interested Board members) and no
funds may be provided by any third party investor.
7. CORPORATE GOVERNANCE. 7.1. ELECTION OF DIRECTORS. (a) Each
Stockholder shall vote all of such Stockholder's voting securities of the
Company over which such Stockholder has voting control and shall take all other
reasonably necessary or desirable actions within such Stockholder's control
(whether in such Stockholder's capacity as a stockholder, 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, execution of written consents in lieu of meetings and
approval of amendments and/or restatements of the Company's Certificate of
Incorporation or bylaws), and the Company shall take all reasonably necessary
and desirable actions within its control (including, without limitation, calling
special board, stockholder meetings and approval of amendments and/or
restatements of the Company's Certificate of Incorporation or bylaws), so that:
(i) the authorized number of directors on the Board shall be
seven;
(ii) two representatives designated for nomination by Xxxxx
shall be elected to the Board;
(iii) two representatives designated for nomination by THL
shall be elected to the Board;
(iv) Xxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxx and Xxxx X.
Xxxxxx;
PROVIDED HOWEVER, that after the conversion of the Preferred Stock and the
Non-Voting Common Stock, in each case into Common Stock after receipt of all
regulatory approvals for such conversion (the "CONVERSION DATE"), the three
representatives specified in Section 7.1(a)(iv) shall be designated for
nomination jointly by Xxxxx and THL;
(v) the Chief Executive Officer of the Company shall serve as
the Board's Chairman;
(vi) any committees of the Board or the board of directors of
any of the Company's subsidiaries shall be created only upon the
approval of the Board;
(vii) the board of directors of each of the Company's
subsidiaries shall be constituted consistently with Sections
7(a)(i)-(iv);
17
(viii) the removal from the Board or the board of directors of
any of the Company's subsidiaries (with or without cause) of any
representative designated under this Section 7.1(a) by Xxxxx or THL
shall be at the written request of Xxxxx or THL, as the case may be,
or, after the Conversion Date, in the case of a representative
designated under Section 7.1(a)(iv), Xxxxx and THL, but only upon such
written request and under no other circumstances;
(ix) in the event that any representative designated under
this Section 7.1(a) by Xxxxx or THL or, after the Conversion Date, by
Xxxxx and THL jointly for any reason ceases to serve as a member of the
Board or the board of directors of any of the Company's subsidiaries
during his or her term of office, the resulting vacancy on the Board or
such subsidiary board shall only be filled by a representative
designated by Xxxxx, THL or, after the Conversion Date, by Xxxxx and
THL jointly, as applicable.
(b) If Xxxxx or THL or Xxxxx and THL jointly fail to designate
a representative to fill a directorship pursuant to the terms of this Section
7.1, the election of a person to such directorship shall be accomplished in
accordance with the Company's bylaws and applicable law.
(c) Upon the Conversion Date, in order to secure the
obligation of each Founder and Management Stockholder to vote Shares and other
voting securities of the Company held by such Founder or Management Stockholder
in accordance with the provisions of this Section 7.1, each Founder and
Management Stockholder shall appoint each of the Investor Stockholders, and both
of them, as the true and lawful proxy and attorney-in-fact of such Founder or
Management Stockholder, with full power of substitution, to vote all of such
Person's Shares and other voting securities of the Company for the election and
removal of directors and all such other matters as expressly provided for in
this Section 7.1. Each of the Investor Stockholders may exercise the proxy to be
granted to it at any time any Founder or Management Stockholder fails to comply
with the provisions of this Section 7.1. The proxies and powers to be granted by
each Founder and Management Stockholder pursuant to this paragraph (c) are
coupled with an interest and are given to secure the performance of their
obligations under this Agreement. Such proxies and powers will be irrevocable
until the earlier of the termination of this Agreement or this Section 7
pursuant to Section 12.3(b) and will survive the death, incompetency, disability
or dissolution, as applicable, of each Founder or Management Stockholder and the
holders of each of such Founder's or Management Stockholder's respective Shares.
7.2. FIVE YEAR PLAN AND ANNUAL BUDGET. Attached hereto as
Exhibit A are the capital and operating budgets, together with the EBITDA
performance targets,
18
for the Company and its subsidiaries' competitive and rural local exchange
carrier business for the five year period ending December 31, 2004 (the "FIVE
YEAR PLAN"). The Company shall prepare and submit to the Board for its approval
at least 30 days prior to the first day of each Fiscal Year proposed capital and
operating budgets for the Company and its subsidiaries for the forthcoming
Fiscal Year. As revised and approved by the Board, such proposed capital and
operating budgets shall become the "ANNUAL BUDGET" for the Company and its
subsidiaries. Attached hereto as Exhibit B is the Annual Budget for the 2000
Fiscal Year.
7.3. RECORDS AND REPORTS, ETC. (a) The Company shall furnish
or cause to be furnished to the Investor Stockholders and each of the Founders
until such Founder shall have Transferred 50% or more of the number of Shares
held by such Founder on the Closing Date:
(i) within 120 days following the end of each Fiscal Year,
audited consolidated financial statements of the Company and its
subsidiaries, together with unaudited consolidating financial
statements of the Company and its subsidiaries for such Fiscal Year;
(ii) within 45 days following of the end of each fiscal
quarter, unaudited consolidated and consolidating financial statements
of the Company and its subsidiaries;
(iii) monthly financial statements, together with a management
overview and report with respect to the Company's and its subsidiaries'
performance for such month; and
(iv) such other information or reports as either of the
Investor Stockholders or any of the Founders may reasonably request.
(b) The Investor Stockholders and each of the Founders, until
such Founder shall have Transferred 50% or more of the number of Shares held by
such Founder on the Closing Date, shall each, upon reasonable notice, and using
their best efforts to minimize any interruption of the Company's and its
subsidiaries' business, be entitled to inspect and audit the books, records and
accounts of the Company and its subsidiaries during normal business hours and
make copies thereof.
(c) The Company shall deliver prompt written notice to each
Investor Stockholder of the occurrence of any of the following:
19
(i) the actual or threatened commencement of any suit, action
or other legal or administrative proceeding affecting the Company or
any of its subsidiaries which, if adversely determined, would involve
in excess of $100,000;
(ii) any event of default under any Financing Document,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied; or
(iii) any other event that could reasonably be expected to
have a material adverse effect on the business, assets, properties,
liabilities, revenues, costs and expenses, operations, prospects or
condition, financial or otherwise, of Company or any of its
subsidiaries.
7.4. BOARD MEETINGS, COMMITTEES, ETC. (a) There shall be
regular meetings of the Board held at least once per calendar quarter, at such
times and in such places as the Board shall determine.
(b) At its first meeting after the Closing Date, the Board
shall designate a Compensation Committee (the "COMPENSATION COMMITTEE")
consisting of three members of the Board, one of whom shall be the Company's
chief executive officer, one of whom shall be designated by THL and one of whom
shall be designated by Xxxxx. The Compensation Committee shall act by a majority
of its members and its powers, subject to Section 8, shall include the power to
review and approve the salaries and other compensation of the executive officers
of the Company and its subsidiaries, including incentive compensation, deferred
compensation and stock plans and the power to administer the Stock Option Plans,
and such other powers as may be delegated to it by the Board. The Board may
designate an Executive Committee (the "EXECUTIVE COMMITTEE") consisting of three
members of the Board, one of whom shall be the Company's chief executive
officer, one of whom shall be designated by THL and one of whom shall be
designated by Xxxxx. The Executive Committee shall act by a majority of its
members and shall, subject to Section 8 and the Delaware General Corporation
Law, have such powers as may be delegated to it by the Board.
(c) Members of the Board shall not be entitled to receive
compensation for their service as such, except (I) for members of the Board who
are not affiliated with any Stockholder or (II) as may be provided in the
Financial Advisory Agreements. Members of the Board shall be entitled to
reimbursement for their reasonable out-of-pocket expenses incurred in connection
with their service as such.
20
7.5. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall
maintain directors' and officers' liability insurance in an amount and with
other terms approved by the Board.
8. ACTIONS REQUIRING APPROVAL OF THE INVESTOR STOCKHOLDERS.
8.1. GENERAL. Prior to the Conversion Date, Xxxxx shall have only those approval
rights it had under Section 10.1 of the Amended and Restated Stockholders'
Agreement, dated as of July 21, 1999, by and among the Company, KIA V, KEP V and
the other stockholders party thereto (which agreement was terminated on the
Closing Date). For ease of reference, such rights are listed on Annex A hereto.
On and after the Conversion Date, as long as an Investor Stockholder owns at
least 10% of the issued and outstanding Shares owned by such Investor
Stockholder as of the Closing Date, no Stockholder shall cause the Company or
any of its subsidiaries to take, and the Company shall not take and shall cause
each of its subsidiaries not to take, any of the following actions without the
prior written approval of each of the Investor Stockholders who still own 10% of
the Shares owned by such Investor Stockholder as of the Closing Date or their
designees on the Board:
(a) any issuance, sale, delivery, or any entry into an
agreement to issue, sell or deliver, any capital stock, warrants,
options or similar rights (other than issuances with respect to those
options and warrants outstanding as of the date hereof or issuable
under the Stock Option Plans as in effect on date hereof), other
securities convertible into any capital stock or other securities which
contain any voting or equity participation rights of which the Company
or any of its subsidiaries is the issuer or grantor, or any grant or
issuance, or any agreement to grant or issue, any options, warrants,
incentive awards or similar rights calling for the issuance of such
securities;
(b) any repurchase or redemption of any shares of capital
stock of the Company or any of its subsidiaries, including pursuant to
Sections 2, 3 and 4 (other than pursuant to the Stock Redemption
Agreement);
(c) (I) any merger or consolidation with or into any other
Person (whether or not the Company or any of its subsidiaries survives
such merger or consolidation), (II) any conveyance, sale, lease or
other disposal, in any transaction or related series of transactions,
of 25% or more of the property, business or assets of the Company
(including the capital stock or assets of any of the Company's
subsidiaries) or (iii) any acquisition by the Company or any of its
subsidiaries of any Person for which the price paid by the Company or
any such subsidiary exceeds $5,000,000;
21
(d) any recapitalization of the capital stock of the Company
or its subsidiaries or any amendment, whether by merger, consolidation
or otherwise, to the articles of incorporation or the by-laws of the
Company or any of its subsidiaries;
(e) any IPO;
(f) any liquidation or dissolution of the Company or any of
its subsidiaries;
(g) entry into any business not substantially similar or
reasonably related to the business of the Company and its subsidiaries
as of the date hereof;
(h) termination of the Company's Chief Executive Officer or
any employee who reports directly to the Company's Chief Executive
Officer (including, for the avoidance of doubt, Xxxx X. Xxxxxx, Xxxxxx
X. Xxxxxxx, Xxxx X. Xxxx and Xxxxxx X. Xxxxx, Xx.) or termination of
Fairpoint Communication Corp.'s Chief Executive Officer or any employee
who reports directly to Fairpoint Communication Corp.'s Chief Executive
Officer;
(i) establishment of or material change to any incentive or
bonus program of the Company or any of its subsidiaries, including the
Stock Option Plans;
(j) any approval of or material change to the Annual Budget;
(k) incurrence or guarantee by the Company or any of its
subsidiaries of indebtedness in excess of $5 million in the aggregate;
(l) declaration or payment of dividends or other distributions
in respect of the capital stock of the Company or any of its
subsidiaries;
(m) enter into any transaction or modify any existing
arrangement between the Company or any of its subsidiaries, on the one
hand, and any Founder or any of their respective Affiliates, on the
other hand; or
(n) selection or replacement of the Company's and its
subsidiaries' independent public accountants;
PROVIDED, HOWEVER, that any transactions that would otherwise be permitted or
required by Section 2.3 ("Tag-Along Rights"), Section 2.4 ("Drag-Along Rights")
or Section 5
22
("Auction Sale Procedure") will not be subject to the approval requirements of
this Section 8.1.
9. STOCK CERTIFICATE LEGENDS. A copy of this Agreement shall
be filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing Shares owned by the Stockholders shall
bear upon its face the following legends, as appropriate:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL TO THE
STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM
AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY
TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS
EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE
STOCKHOLDERS' AGREEMENT OF THE ISSUER, DATED AS OF
JANUARY [__], 2000 (THE "STOCKHOLDERS' AGREEMENT")."
(b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS
SPECIFIED IN THE STOCKHOLDERS' AGREEMENT, COPIES OF WHICH ARE
ON FILE AT THE OFFICE OF THE ISSUER AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN
REQUEST."
(c) "THE ISSUER WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF
EACH CLASS OR SERIES OF SHARES AUTHORIZED TO BE ISSUED AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS."
23
In addition, certificates representing Shares owned by any permitted transferees
who are residents of certain states shall bear any legends required by the laws
of such states.
Each Stockholder shall be bound by the requirements of such
legends. Upon a Registration of any Shares, the certificate representing the
registered shares shall be replaced, at the expense of the Company, with
certificates not bearing the legends required by this Section 9.
10. ABSENCE OF OTHER ARRANGEMENTS. Each of the parties hereto
hereby represents and warrants to each other party hereto that it has not
entered into or agreed to be bound by any other arrangements or agreements of
any kind with any other Person with respect to the Shares, including, but not
limited to, arrangements or agreements with respect to the acquisition,
disposition or voting of Shares or any interest therein (whether or not such
arrangements or agreements are with the Company or any Investor Stockholder,
Founder, Management Stockholder or holder of Shares that is not party to this
Agreement), except for (A) the Stock Purchase Agreement and (B) the Registration
Rights Agreement.
11. NEW MANAGEMENT STOCKHOLDERS. The Company and each of the
Stockholders hereby agrees that any employee of the Company or any of its
subsidiaries who after the date of this Agreement is offered Shares or holds
stock options exercisable into Shares shall, as a condition precedent to the
acquisition of such Shares or the exercise of such stock options, as the case
may be, (A) become a party to this Agreement by executing the same and (B) if
such employee is a resident of a state with a community property system, cause
his or her spouse to execute a Spousal Waiver in the form of Exhibit B attached
hereto and deliver such Agreement and Spousal Waiver, if applicable, to the
Company at its address specified in Section 14.8. Upon such execution and
delivery, such employee shall be a Management Stockholder for all purposes of
this Agreement.
12. PARTIES. 12.1. ASSIGNMENT BY THE COMPANY. The Company
shall have the right to assign to the Investor Stockholders all or any portion
of its rights and obligations under Sections 2, 3 and 4, PROVIDED that any such
assignment or assumption is accepted by the Investor Stockholders. If the
Company has not exercised its right to purchase Shares pursuant to any such
Section within 15 days of receipt by the Company of the letter, notice or other
occurrence giving rise to such right, then the Investor Stockholders shall have
the right to require the Company to assign such right. The Investor Stockholders
shall have the right to assign to one or more Xxxxx Holders or THL Holders all
or any of their rights to purchase Shares pursuant to this Section 12.1,
PROVIDED that any such Xxxxx Holder or THL Holder becomes a party to this
Agreement
24
pursuant to a joinder agreement in form and substance satisfactory to the
Company and the Investor Stockholders and otherwise complies with Section 12.4.
12.2. ASSIGNMENT GENERALLY. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, permitted successors and assigns,
PROVIDED that neither any Founder nor any Management Stockholder shall be
permitted to assign any of its rights or cause a third party to assume any of
its obligations under this Agreement, unless such assignment or assumption is in
connection with a Transfer explicitly permitted by this Agreement and, prior to
such assignment or assumption, such assignee complies with the requirements of
Section 12.4 ("Agreements to Be Bound").
12.3. TERMINATION. (a) Any party to, or Person who is subject
to, this Agreement which ceases to own any Shares or any interest therein shall
cease to be a party to, or Person who is subject to, this Agreement and
thereafter shall have no rights or obligations hereunder; PROVIDED, however,
that a Transfer of Shares not explicitly permitted under this Agreement shall
not relieve any Stockholder of any of its obligations hereunder. Notwithstanding
the foregoing, in connection with a Transfer to an Affiliate explicitly
permitted by this Agreement, prior to any such Person ceasing to be an Affiliate
of the Stockholder from whom such Person acquired its Shares, such Person shall
be obligated to transfer such Shares back to such original Stockholder and such
original Stockholder shall thereupon be subject to this Agreement again.
(b) All rights and obligations pursuant to Section 1
("Restrictions on Transfers of Shares by Founders or Management Stockholders"),
Section 2 ("Restrictions on Transfers of Shares by Investor Stockholders"),
Section 3 ("Management Stockholders"), Section 4 ("Involuntary Transfers"),
Section 5 ("Auction Sale Procedure"), Section 6 ("Issuance of Additional Equity
Securities"), Section 7 ("Corporate Governance"), Section 8 ("Actions Requiring
Approval of the Investor Stockholders"), Section 10 ("Absence of Other
Arrangements"), Section 11 ("New Management Stockholders"), Section 12.4
("Agreements to Be Bound") and Section 14.2 ("Non-Competition Agreement") shall
terminate upon an IPO. In the event that an Investor Stockholder ceases to own
at least 10% of the Shares owned by it on the Closing Date, all rights of such
Investor Stockholder pursuant to Section 2.4 ("Drag-Along Rights"), Section 7
("Corporate Governance") and Section 14.2 ("Non-Competition Agreement") shall
terminate.
12.4. AGREEMENTS TO BE BOUND. Notwithstanding anything to the
contrary contained in this Agreement, any Transfer of Shares by a Stockholder
(other than pursuant to a Registration) shall be permitted under the terms of
this Agreement only if (A), such Stockholder shall cause the transferee of such
Shares to execute the
25
Spousal Waiver in the form attached hereto as Exhibit B, if such transferee is
an individual who resides in a state with a community property system, and (B)
the transferee of such Shares shall agree in writing to be bound by the terms
and conditions of this Agreement pursuant to an instrument of assignment and
assumption reasonably satisfactory in substance and form, (I) in the case of a
Transfer by an Investor Stockholder, to the other Investor Stockholder and the
Company, (II) in the case of a Transfer by a Founder, to the Investor
Stockholders and the Company, and (III) in the case of a Transfer by a
Management Stockholder, to the Investor Stockholders and the Company. Upon the
execution of the Spousal Waiver and the instrument of assignment and assumption
by such transferee, such transferee shall be deemed to be the relevant
Stockholder, for all purposes of this Agreement, including, in the case of a
Transfer by a Management Stockholder, the provisions of Section 3.
12.5. THL RELATED PARTIES, THL HOLDERS, XXXXX HOLDERS. (a) To
facilitate the arrangements, understandings and agreements contemplated by this
Agreement, each THL Related Party and THL Holder (and its successors and
assigns) hereby irrevocably consents to the appointment of, and does hereby
appoint and empower, THL Equity Advisors IV, LLC (and THL Equity Advisors IV,
LLC does hereby accept such appointment) as the sole and exclusive
representative (the "THL REPRESENTATIVE") of the THL Related Parties and THL
Holders (and their successors and assigns) to make all decisions and
determinations on behalf of them (and their successors and assigns) that the THL
Representative may deem necessary or appropriate in connection with this
Agreement. All decisions of the THL Representative shall be final and binding on
all of the THL Related Parties and THL Holders (and their successors and
assigns). The parties to this Agreement other than THL (and their successors and
assigns) shall be entitled to rely upon, without independent investigation, any
decision of the THL Representative and shall be fully protected in connection
with any action or inaction taken or omitted to be taken in reliance thereon.
(b) To facilitate the arrangements, understandings and
agreements contemplated by this Agreement, each Xxxxx Holder (and its successors
and assigns) hereby irrevocably consents to the appointment of, and does hereby
appoint and empower, Xxxxx & Company, L.P. (and Xxxxx & Company, L.P. does
hereby accept such appointment) as the sole and exclusive representative (the
"XXXXX REPRESENTATIVE") of the Xxxxx Holders (and their successors and assigns)
to make all decisions and determinations on behalf of them (and their successors
and assigns) that the Xxxxx Representative may deem necessary or appropriate in
connection with this Agreement. All decisions of the Xxxxx Representative shall
be final and binding on all of the Xxxxx Holders (and their successors and
assigns). The parties to this Agreement other than Xxxxx (and their successors
and assigns) shall be entitled to rely upon, without independent investigation,
any decision of the Xxxxx Representative and shall be
26
fully protected in connection with any action or inaction taken or omitted to be
taken in reliance thereon.
13. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings ascribed to them below:
"AFFILIATE": A Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified, including the spouse, parents and children
of natural persons, general partners of a partnership and managing members of a
limited liability company.
"BOARD": The Board of Directors of the Company.
"CARRYING VALUE": With respect to any Share owned by any
Management Stockholder as of the Closing Date, "Carrying Value" shall mean
$262.33. With respect to any Share acquired by any Management Stockholder after
the Closing Date, Carrying Value shall mean the price paid for such Share by the
relevant Management Stockholder.
"CAUSE": The meaning as set forth in the employment agreement
between the Company and such Management Stockholder, or, if such Management
Stockholder is not a party to an employment agreement, a termination of such
Management Stockholder's employment by the Company or any of its subsidiaries
due to (I) the refusal or neglect of the Management Stockholder to perform
substantially his or her lawful employment-related duties, following written
notice from the Company describing in reasonable detail such refusal or neglect
and an opportunity for 30 days to cure the condition which is the subject of
such notice, (II) the Management Stockholder's personal dishonesty, willful
misconduct or breach of fiduciary duty, (III) the Management Stockholder's
conviction of or entering a plea of guilty or NOLO CONTENDERE to a crime
constituting a felony or his or her willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense or violation which
in no way adversely affects the Company or its reputation or the ability of the
Management Stockholder to perform his or her employment-related duties or to
represent the Company) or (IV) the breach by the Management Stockholder of any
written covenant or agreement with the Company or any of its subsidiaries not to
disclose any material information pertaining to the Company or such subsidiary
or not to compete or interfere with the Company or such subsidiary.
"CLOSING DATE": The date on which the closing of the
transactions contemplated by the Stock Purchase Agreement occurs.
27
"COMMON STOCK": The Company's Class A Voting common stock, par
value $.01 per share.
"DISABILITY": With respect to a Management Stockholder, the
term "Disability" shall have the meaning set forth in the employment agreement
between the Company and such Management Stockholder, or, if such Management
Stockholder is not a party to an employment agreement, the termination of the
employment of any Management Stockholder by the Company or any of its
subsidiaries shall be deemed to be by reason of a "Disability" if, as a result
of such Management Stockholder's incapacity due to reasonably documented
physical or mental illness, such Management Stockholder shall have been unable
for more than six months within any 12-month period despite reasonable
accommodations made by the Company to perform his or her duties with the Company
or such subsidiary on a full-time basis and within 90 days after written notice
of termination has been given to such Management Stockholder, such Management
Stockholder shall not have returned to the full time performance of his or her
duties. The date of termination in the case of a termination for "Disability"
shall be deemed to be the last day of the aforementioned 90-day period.
"EXCLUDED SHARES": Any Shares issued or issuable (I) in
connection with an IPO or public offering of debt securities by the Company,
(II) to any employee of the Company or any of its subsidiaries in connection
with the Stock Option Plans or any other employee incentive or bonus program
duly authorized pursuant to this Agreement and by the Board or (iii) upon
exercise of any warrants to purchase Common Stock which are outstanding as of
the date hereof.
"FINANCIAL ADVISORY AGREEMENTS": The Amended and Restated
Financial Advisory Agreement, dated as of the Closing Date, as the same shall be
amended from time to time, between the Company and Xxxxx & Company, L.P. and the
Management Services Agreement, dated as of the Closing Date, as the same shall
be amended from time to time, between the Company and THL Equity Advisors IV,
LLC.
"FISCAL YEAR": A year beginning on January 1 of one calendar
year and ending on December 31 of the same calendar year, or such other fiscal
year as the Board may hereafter determine.
"GOOD REASON": The meaning as set forth in the employment
agreement between the Company and such Management Stockholder, or, if such
Management Stockholder is not a party to an employment agreement, a termination
of a Management Stockholder's employment with the Company or any of its
subsidiaries shall be for "Good Reason" if such Management Stockholder
voluntarily terminates his employment with the Company or any of its
subsidiaries as a result of either of the following:
28
(i) without the Management Stockholder's prior written
consent, a reduction by the Company or such subsidiary of his or her
current salary, other than any such reduction which is part of a
general salary reduction or other concessionary arrangement affecting
all employees or affecting the group of employees of which the
Management Stockholder is a member (after receipt by the Company of
written notice and a 20 day cure period), or a significant reduction in
the level of authority theretofore exercised by the Management
Stockholder, PROVIDED that the degree of acquisition activity by the
Company and its subsidiaries shall not be taken into consideration when
determining the Management Stockholder's level of authority; or
(ii) the taking of any action by the Company or such
subsidiary that would substantially diminish the aggregate value of the
benefits provided him or her under the Company's or any of its
subsidiaries' accident, disability, life insurance and any other
employee benefit plans in which he or she was participating on the date
of his or her execution of this Agreement, other than any such
reduction which is (A) required by law, (B) implemented in connection
with a general concessionary arrangement affecting all employees or
affecting the group of employees of which the Management Stockholder is
a member or (C) generally applicable to all beneficiaries of such
plans.
"IPO": A Registration that covers (together with any prior
effective Registrations) (I) Shares which are sold for an aggregate price of at
least $150 million or (II) Shares that, after the closing of such Registration,
will be traded on the New York Stock Exchange, the American Stock Exchange or
the National Association of Securities Dealers Automated Quotation System.
"XXXXX HOLDER": (A) any general or limited partner of the
Xxxxx Entities (a "XXXXX PARTNER"), and any corporation, partnership, or other
entity which is an Affiliate of the Xxxxx Entities or any Kelso Partner
(collectively, the "XXXXX AFFILIATES"), (B) any managing director, general
partner, director, limited partner, officer or employee of the Xxxxx Entities or
a Xxxxx Affiliate, or the heirs, executors, administrators, testamentary
trustees, lifetime trustees, legatees or beneficiaries of any of the foregoing
persons referred to in this clause (B) (collectively, "XXXXX ASSOCIATES"), (C) a
charitable institution as defined in Section 501(c) of the Internal Revenue Code
of 1986, as amended, which receives a bona fide gift by a Xxxxx Individual of
Shares, (D) a bank, financial institution or other lender which receives a bona
fide pledge by a Xxxxx Individual of Shares, (E) any trust, the beneficiaries of
which, or any corporation, limited liability company or partnership, the
stockholders, members or general or limited partners of which include only the
Xxxxx Entities, Xxxxx Affiliates, Xxxxx Associates, their spouses or their
lineal descendants, and (F) any of
29
the individuals or entities set forth on Schedule C hereto. "XXXXX ENTITIES"
shall mean Xxxxx & Company, L.P. and its affiliated entities. "XXXXX INDIVIDUAL"
shall mean any individual set forth on Schedule C hereto and any employee of
Xxxxx & Company, L.P..
"MJD PARTNERS": MJD Partners, L.P., a Delaware limited
partnership.
"NON-VOTING COMMON STOCK": The Company's Class B Non-Voting
common stock, par value $.01 per share.
"PERSON": An individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PREFERRED STOCK": The Company's Non-Voting Convertible Series
D Preferred Stock, par value $0.01 per share.
"REGISTRATION": The closing of a public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"REGISTRATION RIGHTS AGREEMENT": The Registration Rights
Agreement, dated as of the date hereof, as the same shall be amended from time
to time, among the Company, the Investor Stockholders, the Founders and the
Management Stockholders.
"SHARES": Prior to the Conversion Date, shares of Common
Stock, Non- Voting Common Stock and Preferred Stock and after the Conversion
Date, shares of Common Stock. For purposes of any calculations hereunder, shares
of Non-Voting Common and Preferred Stock shall be calculated on an as-converted
basis.
"STOCK OPTION PLANS": The MJD Communications, Inc. 1995 and
1998 Stock Incentive Plans, as each may be amended from time to time, and any
other equity incentive plan of the Company.
"STOCK PURCHASE AGREEMENT": The Stock Purchase Agreement,
dated as of January 3, 2000, as the same shall be amended from time to time,
among the Company, THL and Xxxxx.
"THL HOLDER": (A) any general or limited partner of the THL
Entities (a "THL PARTNER"), and any corporation, partnership, or other entity
which is an Affiliate of the THL Entities, any THL Partner or Xxxxxx
Investments, Inc. or any corporation,
30
partnership or other entity controlled by Xxxxxx Investments, Inc.
(collectively, the "THL AFFILIATES"), (B) any managing director, general
partner, director, limited partner, officer or employee of the THL Entities or a
THL Affiliate, or the heirs, executors, administrators, testamentary trustees,
lifetime trustees, legatees or beneficiaries of any of the foregoing persons
referred to in this clause (B) (collectively, "THL ASSOCIATES"), (C) a
charitable institution as defined in Section 501(c) of the Internal Revenue Code
of 1986, as amended, which receives a bona fide gift by a THL Individual of
Shares, (D) a bank, financial institution or other lender which receives a bona
fide pledge by a THL Individual of Shares, (E) any trust, the beneficiaries of
which, or any corporation, limited liability company or partnership, the
stockholders, members or general or limited partners of which include only the
THL Entities, THL Affiliates, THL Associates, their spouses or their lineal
descendants, and (F) any of the individuals or entities set forth on Schedule A
hereto. "THL ENTITIES" shall mean Xxxxxx X. Xxx Partners, L.P. and its
affiliated entities. "THL INDIVIDUAL" shall mean each THL Related Party other
than Xxxxxx X. Xxx Foreign Fund IV, L.P. and Xxxxxx X. Xxx Foreign Fund IV-B,
L.P.
[CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED WITH THE COMMISSION]
31
"TRANSFER (OR ANY VARIATION THEREOF USED HEREIN)": Any direct
or indirect sale, assignment, mortgage, transfer, pledge, hypothecation or other
disposal or any arrangement or agreement with respect to any of the foregoing.
14. MISCELLANEOUS.
14.1. RECAPITALIZATIONS, EXCHANGES, ETC. AFFECTING THE SHARES.
Except as otherwise provided herein, the provisions of this Agreement shall
apply to the full extent set forth herein with respect to (A) the Shares and (B)
any and all shares of capital stock of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for, or in substitution for the
Shares, by reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
14.2. NON-COMPETITION AGREEMENT. In order to induce the
Investor Stockholders to enter into the Stock Purchase Agreement and this
Agreement and in consideration of the purchase by THL of certain of the Shares
of Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx, Xxxx X. Xxxx and Xxxxxx X. Xxxxx, Xx.
pursuant to the Stock Purchase Agreement, each of Xxxxxx X. Xxxxxxx, Xxxx X.
Xxxxxx, Xxxx X. Xxxx and Xxxxxx X. Xxxxx, Xx. agrees that from the date of the
termination of his employment with the Company or any of its subsidiaries for
any reason until the second anniversary of such termination, such Person will
not become, directly or indirectly, associated in any way with any Person,
whether as principal, owner, partner, consultant, advisor, agent, employee,
director, independent contractor, member, stockholder or otherwise (other than a
holder of less than 5% of the outstanding shares of any class of equity
securities of a public company), that is actively engaged in the ownership,
management or operation of any telephone company, other access provider or other
Person, any of which competes or has any plans to compete with the Company or
any of its subsidiaries in regard to the activities of the Company or any of its
subsidiaries being conducted at the time of such termination or which are
planned at the time of such termination.
32
14.3. NO THIRD PARTY BENEFICIARIES. Except as otherwise
provided herein, this Agreement is not intended to confer upon any Person,
except for the parties hereto, any rights or remedies hereunder.
14.4. FURTHER ASSURANCES. Each party hereto or Person subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or Person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
14.5. AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented with the written consent of both Investor
Stockholders, PROVIDED HOWEVER, that (A) if such amendment, modification or
supplement would have an effect that uniquely impacts the economic or other
rights of the Founders as a class of holders of Shares, then the consent of a
majority in number of the Founders will also be required for such amendment,
modification or supplement and (B) if such amendment, modification or supplement
could reasonably be expected to adversely affect the Management Stockholders,
then the consent of a majority in interest of the Management Stockholders (based
on the number of Shares owned by each Management Stockholder at the time of such
amendment, modification or supplement) will also be required for such amendment,
modification or supplement.
14.6. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder and the persons subject hereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of Delaware, without giving effect to the choice of law principles
thereof.
14.7. INVALIDITY OF PROVISION. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
14.8. NOTICES. All notices, requests, demands, letters,
waivers and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if (A)
delivered personally, (B) mailed, certified or registered mail with postage
prepaid, (C) sent by next-day or overnight mail or delivery or (D) sent by fax,
as follows:
33
(i) If to the Company, to it at:
MJD Communications, Inc.
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxx, Xx.
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
and a copy to THL at its address set forth in (ii) below and a
copy to Xxxxx at its address set forth in (iii) below:
(ii) If to THL, to it at: Xxxxxx X. Xxx Partners, L.P. 00 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxxxxx 00000 Fax: (000) 000-0000
Attention: Xxxxxxx X. XxXxxx
Xxxx X. Xxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, P.C.
34
(iii) If to Xxxxx, to it at:
Xxxxx & Company
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, XX, Esq.
Fax: (000) 000-0000
with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
(iv) If to XXX, a Bergstein Family Member, Xxxxxx Xxxxxxxxx or Xxxxxxxxx
Xxxxxx, to XXX, such Xxxxxxxxx Family Member, Xxxxxx Xxxxxxxxx or
Xxxxxxxxx Xxxxxx c/x Xxxxxxxxx at his address set forth in (v) below.
(v) If to Bergstein, to him at:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
(vi) If to Xxxxx Xxxxxxxx, to him at:
Interquest, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
(vii) If to a Management Stockholder, to him or her, as listed below his or
her name on the signature pages hereto.
35
or to such other Person or address as any party shall specify by notice in
writing to the Company and the other parties hereto. All such notices, requests,
demands, letters, waivers and other communications shall be deemed to have been
received (W) if by personal delivery on the day after such delivery, (X) if by
certified or registered mail, on the fifth business day after the mailing
thereof, (Y) if by next-day or overnight mail or delivery, on the day delivered
or (Z) if by fax, on the next day following the day on which such fax was sent,
PROVIDED that a copy is also sent by certified or registered mail.
14.9. HEADINGS; EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
14.10. INJUNCTIVE RELIEF. The Shares cannot readily be
purchased or sold in the open market, and for that reason, among others, the
parties hereto would be irreparably damaged in the event this Agreement is not
specifically enforced. Each of the parties therefore agrees that in the event of
a breach of any provision of this Agreement, the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of this
Agreement. Such remedies shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which any such party may have.
14.11. ENTIRE AGREEMENT. This Agreement, together with the
Stock Purchase Agreement and the Registration Rights Agreement, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings relating to the Shares,
other than those expressly set forth or referred to herein or as set forth in
the Stock Purchase Agreement or the Registration Rights Agreement. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
14.12. TRANSFER OF SHARES FROM MJD PARTNERS. The Founders
(other than the Xxxxxxxxx Family Members) have caused MJD Partners to transfer
free and clear of any lien, claim or encumbrance all of the Shares held by MJD
Partners to such Founders in proportion to the ownership interests of each of
such Founders in MJD Partners. If the transfer of such Shares, or the
dissolution or winding up of MJD Partners has or will result in or give rise to
any lien, claim or encumbrance on any Shares by any creditor of MJD Partners or
otherwise, the Founders shall take all
36
actions necessary to remove or satisfy such lien, claim or encumbrance in order
to hold such Shares free and clear of any such lien, claim or encumbrance.
37
IN WITNESS WHEREOF, this Agreement has been signed by each of
the parties hereto, effective as of the date first above written.
MJD COMMUNICATIONS, INC.
By: /s/ XXXXXX X. XXXXX, XX.
---------------------------------
Name:
Title:
XXXXX INVESTMENT ASSOCIATES V, L.P.
By: Xxxxx Partners V, L.P.,
its general partner
By: /s/ XXXXXX X. XXXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: General Partner
XXXXX EQUITY PARTNERS V, L.P.
By: /s/ XXXXXX X. XXXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: General Partner
XXXXXX X. XXX EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name:
Title:
[Signature Page to Stockholders' Agreement]
XXX COMMUNICATIONS ASSOCIATES, INC.
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------
Name:
Title:
/s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxxxx
[Address]
/s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx
0000 X. Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
/s/ XXXXX XXXXXXXX
-------------------------------------
Xxxxx Xxxxxxxx
[Address]
/s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
/s/ XXXXXX X. XXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxx
[Address]
[Signature Page to Stockholders' Agreement]
/s/ XXXXXX X. XXXXX, XX.
-------------------------------------
Xxxxxx X. Xxxxx, Xx.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
/s/ XXXXX X. XXXXX
-------------------------------------
Xxxxx X. Xxxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000
/s/ XXXXXXX X. XXXXX
-------------------------------------
Xxxxxxx X. Xxxxx
0000 Xxxxxxx
Xxxxx Xxxx, XX 00000
/s/ XXXX X. XXXXXX
-------------------------------------
Xxxx X. Xxxxxx
[Address]
/s/ XXXXXXX X. XXXXX
-------------------------------------
Xxx Xxxxx
[Address]
/s/ XXX XXXXX
-------------------------------------
Xxx Xxxxx
[Address]
[Signature Page to Stockholders' Agreement]
/s/ XXX XXXX
-------------------------------------
Xxx Xxxx
[Address]
/s/ XXXX XXXXXXXXX
-------------------------------------
Xxxx Xxxxxxxxx
/s/ XXXXXXX XXXXXXXXX
-------------------------------------
Xxxxxxx Xxxxxxxxx
/s/ XXXXX XXXXX XXXXXXXXX
-------------------------------------
Xxxxx Xxxxx Xxxxxxxxx
/s/ XXXXXX XXXXXXXXX
-------------------------------------
Xxxxxx Xxxxxxxxx
/s/ XXXXXXXXX XXXXXX
-------------------------------------
Xxxxxxxxx Xxxxxx
XXXXXX X. XXX FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name:
Title:
[Signature Page to Stockholders' Agreement]
XXXXXX X. XXX FOREIGN FUND IV-B, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ X. XXXXXX XXXX
---------------------------------
Name:
Title:
1987 XXXXXX X. XXX NOMINEE TRUST
By: /s/ XXXXXX X. XXX
---------------------------------
Trustee:
/s/ XXXXX X. XXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxx
THE HARKINS 1995 GIFT TRUST
By: /s/ XXXXXXX X. XXXXXXX
---------------------------------
Trustee: Xxxxxxx X. Xxxxxxx
Trustee
/s/ XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx
/s/ X. XXXXXX XXXX
-------------------------------------
X. Xxxxxx Xxxx
[Signature Page to Stockholders' Agreement]
/s/ XXXXX X. XXXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxxx
/s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. XxXxxx
/s/ XXXXXX X. XXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxx
/s/ XXXXXX X. XXXXX, XX.
-------------------------------------
Xxxxxx X. Xxxxx, Xx.
/s/ XXXX X. XXXXX
-------------------------------------
Xxxx X. Xxxxx
/s/ XXXX X. XXXXXX
-------------------------------------
Xxxx X. Xxxxxx
/s/ XXXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxxx X. Xxxxxx
/s/ XXXX X. XXXXXXXX
-------------------------------------
Xxxx X. Xxxxxxxx
/s/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXX XXXXXXX
-------------------------------------
Xxxxx Xxxxxxx
[Signature Page to Stockholders' Agreement]
/s/ XXXXX XXXXX
-------------------------------------
Xxxxx Xxxxx
/s/ XXXXXX X. XXXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxx
XXXXXX XXXXXX XXX 1988 IRREVOCABLE
TRUST
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Trustee:
/s/ XXXXXXX XXXXXXX XXX
-------------------------------------
Xxxxxxx Xxxxxxx Xxx
/s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx as Custodian for
Xxxxx Xxx
/s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx as Custodian for
Xxxxxx Xxx
[Signature Page to Stockholders' Agreement]
/s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXXX XXXXXX
-------------------------------------
Xxxxx Xxxxxx
XXXXXX X. XXX CHARITABLE
INVESTMENT L.P.
By: Xxxxxx X. Xxx,
its general partner
By: /s/ XXXXXX X. XXX
---------------------------------
Name:
Title:
THL-CCI INVESTORS LIMITED PARTNERSHIP
By: THL Investment Management Corp.
its general partner
By: /s/ XXXXX X. XXXXXX
---------------------------------
Name:
Title:
XXXXXX INVESTMENTS, INC.
By: /s/ XXXXXXX X. XXXXXXXXXX
---------------------------------
Name:
Title:
[Signature Page to Stockholders' Agreement]
For purposes of Section 12.5 only:
THL EQUITY ADVISORS IV, LLC
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name:
Title:
For purposes of Section 12.5 only:
XXXXX & COMPANY, L.P.
By: Xxxxx & Companies, Inc.,
its general partner
By: /s/ XXXXX X. XXXXXXX
---------------------------------
Name: Xxxxx X. Xxxxxxx, XX
Title: Vice President and General
Counsel
[Signature Page to Stockholders' Agreement]
SCHEDULE A
THL Related Parties
Xxxxxx X. Xxx Foreign Fund IV, L.P.
Xxxxxx X. Xxx Foreign Fund IV-B, L.P.
1987 Xxxxxx X. Xxx Nominee Trust
Xxxxx X. Xxxxxxx
The Harkins 1995 Gift Trust
Xxxxx X. Xxxxxx
X. Xxxxxx Xxxx
Xxxxx X. Xxxxxxxx
Xxxxxxx X. XxXxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxx X. Xxxxx
Xxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx Xxxxxxx
Xxxxx Xxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx Xxxxxx Xxx 1988 Irrevocable Trust
Xxxxxxx Xxxxxxx Xxx
Xxxxxxx X. Xxxxxx as Custodian for Xxxxx Xxx
Xxxxxxx X. Xxxxxx as Custodian for Xxxxxx Xxx
Xxxxxxx X. Xxxxxx
Xxxxx Xxxxxx
Xxxxxx X. Xxx Charitable Investment L.P.
THL-CCI Investors Limited Partnership
Xxxxxx Investments, Inc.
SCHEDULE B
Management Stockholders
Xxxx X. Xxxx
Xxxx X. Xxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Xxxx X. Xxxxxx
Xxx Xxxxx
Xxx Xxxxx
Xxx Xxxx
SCHEDULE C
Xxxxx Holders
EXHIBIT A
Five Year Plan
See attached.
EXHIBIT B
Annual Budget for 2000 Fiscal Year
See attached.
EXHIBIT C
Spousal Waiver
_________________ [insert name of spouse] hereby waives and
releases any and all equitable or legal claims and rights, actual, inchoate or
contingent, which ___________ [insert he or she] may acquire with respect to the
disposition, voting or control of the Shares subject to the Stockholders'
Agreement of MJD Communications, Inc., dated as of December [__], 1999, as the
same shall be amended from time to time, except for rights in respect of the
proceeds of any disposition of such Shares.
-------------------------
[signature of spouse]
ANNEX A
(a) any issuance, sale, delivery, or any entry into an agreement to
issue, sell or deliver, any capital stock, warrants, options or similar
rights, other securities convertible into any capital stock or other
securities which contain any voting or equity participation rights of
which the Company or any of its subsidiaries is the issuer or grantor,
or any grant or issuance, or any agreement to grant or issue, any
options, warrants, incentive awards or similar rights calling for the
issuance of such securities;
(b) any repurchase or redemption of any shares of capital stock of
the Company or any of its subsidiaries, including pursuant to Section
2.2 and Section 4;
(c) (I) any merger or consolidation with or into any other Person
(whether or not the Company or any of its subsidiaries survives such
merger or consolidation) or (II) any conveyance, sale, lease or other
disposal, in any transaction or related series of transactions, of 25%
or more of the property, business or assets of the Company (including
the capital stock or assets of any of the Company's subsidiaries);
(d) any recapitalization of the capital stock of the Company or its
subsidiaries or any amendment, whether by merger, consolidation or
otherwise, to the articles of incorporation or the by-laws of the
Company or any of its subsidiaries;
(e) any liquidation or dissolution of the Company or any of its
subsidiaries;
(f) entry into any business not substantially similar or reasonably
related to the business of the Company and its subsidiaries as of the
date hereof;
(g) establishment of or material change to any incentive or bonus
program of the Company or any of its subsidiaries, including the Stock
Option Plan;
(h) any change to the EBITDA performance targets included in the
Five Year Plan or approval of or material change to the Annual Business
Plan;
(i) incurrence or guarantee by the Company or any of its
subsidiaries of indebtedness in excess of $5 million in the aggregate;
(j) declaration or payment of dividends or other distributions in
respect of the capital stock of the Company or any of its subsidiaries;
(k) enter into any transaction or modify any existing arrangement
between the Company or any of its subsidiaries, on the one hand, and
any MJD Principal or any of their respective Affiliates, on the other
hand; or
(l) selection or replacement of the Company's and its subsidiaries'
independent public accountants.
ii
