Exhibit 10.38
INSTITUTIONAL STOCKHOLDERS' AGREEMENT
THIS INSTITUTIONAL STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as
of January 20, 2000, among MJD Communications, Inc., a Delaware corporation (the
"COMPANY"), each of the stockholders listed on Exhibit A (collectively, the
"INSTITUTIONAL STOCKHOLDERS"; individually, an "INSTITUTIONAL STOCKHOLDER"),
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") and THL Equity Advisors IV, LLC, a Massachusetts
limited liability company, in its capacity as representative of the THL Related
Parties (as such term is defined in the Stock Purchase Agreement (the "STOCK
PURCHASE AGREEMENT"), dated as of January 4, 2000, among the Company, Xxxxx, THL
Fund IV and the other parties thereto). For the purposes of this Agreement,
"CLASS C COMMON STOCK" shall mean the Class C Common Stock of the Company, par
value $.01 per share.
The parties hereto agree as follows:
1. TRANSFER OF CLASS C COMMON STOCK. (a) Prior to the closing of a
registration that covers (together with any prior effective registrations) (I)
shares of Class A Common Stock, par value $.01, of the Company ( "CLASS A COMMON
STOCK") which are sold for an aggregate price of at least $150 million or (II)
shares of Class A Common Stock 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 (an
"IPO"), no Institutional Stockholder may, directly or indirectly, sell, assign,
mortgage, transfer, pledge, hypothecate or otherwise dispose of or transfer
(collectively, "TRANSFER") any shares of Class C Common Stock or any interest
therein, except for (X) Transfers which, prior thereto, the Board of Directors
of the Company (the "BOARD") shall have consented to in writing, (Y) Transfers
pursuant to the following paragraphs (b) and (c), or (Z) Transfers to an
Affiliate which is not a telecom company and which does not directly or
indirectly own a telecom company, PROVIDED that if such Affiliate ceases to be
such an Affiliate, then the transferred shares of Class C Common Stock must be
transferred back to the original Institutional Stockholder. For the purposes of
this Agreement, "AFFILIATE" shall mean, with respect to any individual,
corporation, partnership, trust or other entity or organization (each, a
"PERSON"), any other Person directly or indirectly controlling, controlled by,
or under common control with such Person.
(b) In the event that either (I) (A) Xxxxx, or THL Fund IV, together
with the THL Related Parties (as defined in the Stock Purchase Agreement)
("THL"), owns
at least 10% of the shares of the Company's capital stock owned by it as of the
Closing Date (as defined in the Stock Purchase Agreement) (the "10% CONDITION"),
and (B) whichever of Xxxxx or THL, or both, who satisfy the 10% Condition (such
parties being the "SELLING SHAREHOLDERS"), intend to sell any shares of Class A
Common Stock (including all shares of capital stock convertible into Class A
Common Stock, whether or not then convertible) to one or more third parties who
are not Affiliates, or (II) in the event that the Board has approved the sale of
the Company, whether by merger, consolidation, sale of all or substantially all
of its assets, recapitalization or otherwise, each Institutional Stockholder,
upon the request of the Selling Stockholders, will consent to and raise no
objections against such transaction (and shall waive any rights of appraisal)
and shall fully cooperate with and take all necessary and desirable actions in
connection with the consummation of such transaction, including, without
limitation, executing a purchase agreement in the form approved by the Selling
Stockholders. If the transaction involves a sale of stock, each Institutional
Stockholder shall agree to sell that number of shares equal to the product of
(A) the aggregate number of shares of Class C Common Stock then held by such
Institutional Stockholder times (B) a fraction, the numerator of which is the
aggregate number of shares of Class A Common Stock (including all shares of
capital stock convertible into Class A Common Stock, whether or not then
convertible) being sold by the Selling Stockholders in such sale and the
denominator of which is the aggregate number of shares of Class A Common Stock
(including all shares of capital stock convertible into Class A Common Stock,
whether or not then convertible) then held by all Selling Stockholders. Such
sale shall be for a purchase price per share and on other terms and conditions
not less favorable to each Institutional Stockholder than those applicable to
the Selling Stockholders; PROVIDED, however, that the form of consideration to
be received by the Selling Stockholders may be different from that received by
the Institutional Stockholders so long as the value of the consideration to be
received by the Selling Stockholders is the same or less than that to be
received by the Institutional Stockholders (as reasonably determined by the
Board in good faith, excluding members of the Board who are designees of the
Selling Stockholders).
(c) In the event that either Xxxxx or THL, or both, satisfies the 10%
Condition, and if the Selling Stockholders do not exercise their rights under
Section 1(b) before 20 days prior to any proposed Transfer (including by merger,
consolidation or otherwise) of Class A Common Stock (including all shares of
capital stock convertible into Class A Common Stock, whether or not then
convertible) by the Selling Stockholders to one or more parties who are not
Affiliates of the Selling Stockholders and not including a Transfer pursuant to
a registered offering or Rule 144 under the Securities Act of 1933, as amended,
then such Selling Stockholders shall deliver to the Institutional Stockholders a
written notice (the "SALE NOTICE") specifying in reasonable detail the identity
of the proposed transferee(s) and the terms and conditions of the proposed
Transfer. Any Institutional Stockholder may elect to
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participate in the proposed Transfer by delivering to the Selling Stockholders a
written notice of such election within the 10 business day period following
delivery of the Sale Notice. If one or more Institutional Stockholders elect to
participate in such Transfer (the "PARTICIPATING STOCKHOLDERS"), the number of
shares of Class C Common Stock that each Institutional Stockholder will be
permitted to sell in such proposed Transfer will be the product of (I) the
number of shares of Class C Common Stock then held by the Institutional
Stockholder and (II) a fraction, the numerator of which shall be the number of
shares of Class A Common Stock (including all shares of capital stock
convertible into Class A Common Stock, whether or not then convertible) which
the Selling Stockholders propose to sell in the proposed Transfer and the
denominator of which shall be the number of shares of Class A Common Stock
(including all shares of capital stock convertible into Class A Common Stock,
whether or not then convertible) then held by the Selling Stockholders. The
Participating Stockholders shall pay a pro rata portion of the transaction
expenses associated with such Transfer.
(d) The Institutional Stockholder agrees that, in the event that the
Company files a registration statement under the Securities Act with respect to
a public offering of any shares of its capital stock, the Institutional
Stockholder will not effect any public sale or distribution of any shares of the
Class A Common Stock (other than part of such public offering) including, but
not limited to, pursuant to Rule 144 under the Securities Act, during the 20
days prior to and the 180 days after the effective date of such registration
statement and the Institutional Stockholder agrees to execute a customary
hold-back agreement with the underwriters for any such public offering. In
addition, upon the completion of a public offering which is an IPO, the
Institutional Stockholder agrees that it shall become a party (as an Other
Investor) to the Registration Rights Agreement, dated as of the date hereof,
among the Company, Xxxxx, THL and the other parties thereto, and that it shall
be bound by all of the obligations of an Other Investor thereunder, including
without limitation, Section 5 thereof, and such Institutional Stockholder
acknowledges that it shall have (A) piggyback registration rights under Sections
1.5 and 2 thereof, and (B) the right to Transfer its shares of Class A Common
Stock pursuant to Section 12.1 thereof, but only to the extent that after any
Transfer pursuant to clause (B), such Institutional Stockholder will continue to
own at least as great a percentage of the shares of Class C Common Stock owned
by it as of the date hereof divided by the number of shares of Class A Common
Stock which will be owned by it after the proposed Transfer as that percentage
which is the sum of (i) the percentage of shares of the Company's capital stock
owned by Xxxxx as of the Closing Date (as defined in the Stock Purchase
Agreement) divided by the number of shares of the Company's capital stock owned
by Xxxxx on the date of such proposed Transfer; plus (ii) the percentage of
shares of the Company's capital stock owned by THL as of the Closing Date (as
defined in the Stock Purchase Agreement) divided by the number of shares of the
Company's capital stock owned by THL on the date of such proposed Transfer;
divided by two (i.e. if Xxxxx still
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owns 25% of the shares of capital stock originally owned by it, and THL still
owns 75% of the shares of capital stock originally owned by it, any
Institutional Stockholder proposing to Transfer shares pursuant to clause (B)
would need to own that number of shares of Class A Common Stock after the
proposed Transfer which was at least 50% of the number of shares of Class C
Common Stock originally owned by it).
2. STOCK CERTIFICATE LEGENDS. A copy of this Institutional
Stockholders' Agreement shall be filed with the Secretary of the Company and
kept with the records of the Company. Each certificate representing any shares
of Class C Common Stock owned by the Institutional Stockholder shall bear the
following legends:
"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 INSTITUTIONAL
STOCKHOLDERS' AGREEMENT, DATED AS OF JANUARY [ ], 2000, AMONG THE ISSUER AND
CERTAIN STOCKHOLDERS OF THE ISSUER (THE "STOCKHOLDERS AGREEMENT")."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT. A
COPY OF THE STOCKHOLDERS AGREEMENT IS ON FILE AT THE OFFICE OF THE ISSUER AND
WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN
REQUEST."
"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."
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In addition, such certificates will bear such legends as may be
required by any state securities laws.
3. AGREEMENT TO BE BOUND. Any Transfer of shares of Class C Common
Stock by the Institutional Stockholder permitted under Section 1(a)(x) or
Section 1(a)(z) of this Agreement shall be permitted and shall be effective only
if 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 assumption
reasonably satisfactory in substance and form to the Board. Upon the execution
of such instrument by such transferee, such transferee shall be deemed to be the
Institutional Stockholder for all purposes of this Agreement.
4. INDEMNIFICATION. In the event that THL and/or Xxxxx receive any
payments pursuant to Article XI of the Stock Purchase Agreement (an
"Indemnification Payment"), THL and/or Xxxxx, as the case may be, agree to share
such Indemnification Payment with the Institutional Stockholders in accordance
with Schedule I hereto; PROVIDED that if any such Indemnification Payment is for
a Loss (as defined in the Stock Purchase Agreement) that does not affect one or
more of the Institutional Stockholders, then the Institutional Stockholders not
affected shall have no right to any portion of such Indemnification Payment.
Each Institutional Stockholder agrees that it does not have third party
beneficiary rights under the Stock Purchase Agreement and it has no right to
enforce the provisions of Article XI and its rights to payment in connection
therewith is solely pursuant to this Section 4. Each Institutional Stockholder
further agrees that this Section 4 is such Institutional Stockholder's sole and
exclusive remedy for the breach of any representations and warranties made in
this Agreement, the applicable Institutional Stockholder Subscription Agreement
between the Company and such Institutional Stockholder and the Stock Purchase
Agreement.
5. TERMINATION. Any party to this Agreement which ceases to own any
shares of Class A Common Stock or Class C Common Stock shall cease to be a party
to this Agreement and, thereafter, shall have no rights or obligations
hereunder, PROVIDED that no sale of shares of Class A Common Stock or Class C
Common Stock by any Institutional Stockholder in breach of this Agreement shall
relieve such Institutional Stockholder of liability for any such breach. This
Agreement, except for Section 1(d) hereof, will terminate upon an IPO and will
be of no further force or effect, PROVIDED that any liability of an
Institutional Stockholder for any pre-termination breach of the Agreement will
survive such termination.
6. 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 may reasonably request in
order to carry out the
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intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
7. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to the choice of law principles thereof.
8. SEVERABILITY. In case any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, the validity or enforceability of
the remaining provisions shall not in any way be affected thereby.
9. NOTICES. All notices 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:
(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. Xxxx Xxxxx
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.
(ii) If to an Institutional Stockholder, as provided on Exhibit A,
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or to such other person or address as the Purchaser shall specify by notice in
writing to the Company. 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.
10. HEADINGS. The headings and captions contained herein are for
convenience and shall not control or affect the meaning of our construction of
any provision hereof.
11. COUNTERPARTS. 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.
12. AMENDMENT. This Agreement may only be amended with the consent of
all of the parties hereto.
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IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto as of the date first above written.
MJD COMMUNICATIONS, INC.
By: /s/ XXXXXX X. XXXXX, XX.
--------------------------------------
Name: Xxxxxx X. Xxxxx Xx.
Title: Senior Vice President and CFO
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/ XXXXX X. XXXXXXXX
--------------------------------------
[Institutional Stockholders' Agreement Signature Page]
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management Corporation
By: /s/ XX XXXXXXX
--------------------------------------
Name: Xx Xxxxxxx
Title: Vice President
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management Corporation
By: /s/ XX XXXXXXX
--------------------------------------
Name: Xx Xxxxxxx
Title: Vice President
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
By: WSW Capital, Inc.
By: /s/ XX XXXXXXX
--------------------------------------
Name: Xx Xxxxxxx
Title: Vice President
[Institutional Stockholders' Agreement Signature Page]
DLJ CAPITAL PARTNERS I, LLC
By:
--------------------------------------
By: /s/ XX XXXXXXX
--------------------------------------
Name: Xx Xxxxxxx
Title: Vice President
GREENWICH STREET CAPITAL PARTNERS II, L.P.
By: Greenwich Street Investments II,
L.L.C., its General Partner
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
GSCP OFFSHORE FUND, L.P.
By: Greenwich Street Investments II,
L.L.C., its General Partner
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
GREENWICH FUND, L.P.
By: Greenwich Street Investments II,
L.L.C., its General Partner
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
[Institutional Stockholders' Agreement Signature Page]
GREENWICH STREET EMPLOYEES FUND,
L.P.
By: Greenwich Street Investments II,
L.L.C., its General Partner
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
TRV EXECUTIVES FUND, L.P.
By: Greenwich Street Investments II,
L.L.C., its General Partner
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
MAGNETITE ASSET INVESTORS LLC
By: Blackrock Financial Management, Inc.
As Managing Member
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
[Institutional Stockholders' Agreement Signature Page]
THL EQUITY ADVISORS IV, LLC
By: /s/ XXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P.,
its General Partner
By: DB Capital Partners, Inc.
By: /s/ XXXXX XXXXXX
--------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
[Institutional Stockholders' Agreement Signature Page]
FIRST UNION INVESTORS, INC.
By: /s/ XXXXXX XXXXXX
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
BANCAMERICA CAPITAL INVESTORS I, L.P.
By: BancAmerica Capital
Management I, L.P.
Its general partner
By: BACM I GP, LLC,
Its general partner
By: /s/ XXXXXX X. XXXXXX III
--------------------------------------
Name: Xxxxxx X. Xxxxxx III
Title: Member
[Institutional Stockholders' Agreement Signature Page]
COINVESTMENT I, LLC
By: /s/ XXXXXXXX X. XXXX
--------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Managing Member
[Institutional Stockholders' Agreement Signature Page]
Exhibit A
INSTITUTIONAL XXXXXXXXXXXX
XXX XXXX XXXXXXXXXX XXXXXXXX XX, X.X.
XXX PRIVATE EQUITY EMPLOYEES FUND, L.P.
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
DLJ CAPITAL PARTNERS I, LLC
Xxxxxxxxx Xxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xx. Xxx Xxxxx
GREENWICH STREET CAPITAL PARTNERS II, L.P.
GSCP OFFSHORE FUND, L.P.
GREENWICH FUND, L.P.
GREENWICH STREET EMPLOYEES FUND, L.P.
TRV EXECUTIVES FUND, L.P.
Greenwich Street Capital Partners
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
MAGNETITE ASSET INVESTORS L.L.C.
c/o BlackRock Financial Management
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
DB CAPITAL INVESTORS, L.P.
DB Capital Partners, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000)000-0000
Attention: Xxxxx Xxxxxx
FIRST UNION INVESTORS, INC.
First Union Capital Markets
Xxx Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx
BANCAMERICA CAPITAL INVESTORS I, L.P.
Bank of America
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xx Xxxxxx
COINVESTMENT I, LLC
c/o BlackRock Financial Management
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
Schedule I
Indemnification Payment Sharing Percentages1/
Institutional Stockholder Indemnification Payment Sharing
Percentage
DLJ Fund Investment Partners II, L.P. .5182 %
DLJ Private Equity Employees Fund, .0474 %
L.P.
DLJ Private Equity Partners Fund, L.P. 1.3312 %
DLJ Capital Partners I, LLC .5570 %
Xxxxxxxxx Xxxxxx Xxxxxxx Xxxxxxxx XX, 0.0000 %
L.P.
GSCP Offshore Fund, L.P. .0457 %
Greenwich Fund, L.P. .0742 %
Greenwich Street Employees Fund, L.P. .1308 %
TRV Executives Fund, L.P. .0108 %
Magnetite Asset Investors LLC .9815 %
DB Capital Investors, L.P. 2.4539 %
First Union Investors, Inc. 2.4539 %
BancAmerica Capital Investors I, L.P. 2.4539 %
CoInvestment I, LLC .4907 %
------------
1These percentages will be based on the relative amounts invested in the
Company by THL, Xxxxx and each Institutional Stockholder at the closing.
