1
Exhibit 3
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") dated as of March
5, 1998 is made by and among American Cellular Corporation, a Delaware
corporation, and the parties listed on Exhibit A to this Agreement
(collectively, the "Stockholders").
RECITALS
The parties hereto have entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") dated as of March 5, 1998 with respect to the
purchase by the Stockholders of Shares and Preferred Shares (each as defined
below). The parties hereto desire to provide for certain transfer restrictions
and rights and board election rights with respect to the shares of capital stock
of the Company (as defined below) held by the Stockholders, as well as certain
other matters, all according to the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties to this Agreement, intending to be
legally bound hereby, agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Affiliate" shall mean, with respect to any Person, a Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. For the purposes of such definitions, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(b) "Board" shall mean the board of directors of the Company.
(c) "Change of Control" shall mean (i) any sale, Transfer or
other conveyance, whether direct or indirect, of a majority of the fair market
value of the assets of the Company, in one transaction or a series of related
transactions, to any "person" or "group" (as such terms are used for purposes of
Section 13(d) of the Exchange Act, whether or not applicable), (ii) any "person"
or "group" (as such terms are used for purposes of Section 13(d) of the Exchange
Act, whether or not applicable) is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total equity in the aggregate of all
classes of capital stock of the Company then outstanding normally entitled to
vote in elections of directors, or (iii) during any period of 12 consecutive
months after an Initial Public Offering, individuals who at the beginning of any
such 12-month period constituted the Board (together with any new directors
whose election by such Board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
2
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board then in
office. The Merger shall not constitute a Change of Control.
(d) "Charter Documents" shall mean the Company's Certificate of
Incorporation and Bylaws.
(e) "Company" shall mean American Cellular Corporation, a
Delaware corporation, and any corporation into which it is merged or
consolidated, including the surviving corporation in the Merger.
(f) "Convertible Securities" shall mean (i) any indebtedness or
securities of the Company, convertible into or exchangeable for Shares, and (ii)
any rights, warrants or options to subscribe for or purchase Shares.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Initial Public Offering" shall mean the initial sale of
shares of the Company's Common Stock to the public pursuant to a registration
statement under the Securities Act which has been declared effective by the
Securities and Exchange Commission (other than a registration statement on Form
S-8 or Form S-4 or any successor to such Form, or any other similar form) which
results in an active trading market in shares of Common Stock.
(i) "Merger" shall mean the merger of the Company with and into
PriCellular Corporation, a Delaware corporation ("PCC"), pursuant to the Merger
Agreement.
(j) "Merger Agreement" shall mean the Agreement and Plan of
Merger to be entered into between the Company and PCC, which provides, among
other things, for a merger price of $14.00 per share of the common stock of PCC.
(k) "New Securities" shall mean any Shares or Convertible
Securities, whether now authorized or not; provided that "New Securities" shall
not include: (i) Shares issuable upon exercise or conversion of any previously
issued options, warrants, rights or securities convertible or exchangeable for
Shares; (ii) securities offered by the Company to the public generally pursuant
to a registration statement under the Securities Act; (iii) securities issued
pursuant to the acquisition of a business, whether pursuant to a merger,
consolidation, the purchase of assets or otherwise; (iv) any securities issued
to the officers, directors, employees or consultants of the Company as approved
by the Board (other than any officer, director or employer who is an affiliate
of any Stockholder); (v) Shares issued in connection with any stock split,
reclassification, recapitalization or stock dividend of the Company; (vi) Shares
or Convertible Securities issued to commercial lenders, investment banking firms
or other institutions for services rendered in connection with a debt financing
for the Company or it Affiliates.
2
3
(l) "Outstanding Voting Shares" shall mean, with respect to a
particular matter, the aggregate of all shares of the Company's capital stock
outstanding from time to time which pursuant to the Charter Documents are
entitled to vote on such matter.
(m) "Permitted Transfer" shall mean (i) a Stockholder's Transfer
to the Company of Shares or Preferred Shares or a direct or indirect interest in
Shares or Preferred Shares pursuant to a contractual right of repurchase granted
by the Company at the time such Shares or Preferred Shares were issued; (ii) a
Stockholder's Transfer of all or a portion of its Shares or Preferred Shares to
any Affiliate of such Stockholder or any Person that is a successor to such
Stockholder by merger, consolidation, reorganization or transfer of all, or
substantially all, of its assets; or (iii) if a Stockholder is a partnership,
such Stockholder's Transfer of all or a portion of its Shares or Preferred
Shares to any of its partners.
(n) "Person" shall mean any individual, partnership, limited
liability company, corporation, joint venture, trust, unincorporated
organization, or any other entity, or a government or any department, agency or
political subdivision thereof.
(o) "Preferred Shares" shall mean the shares of Series A
Preferred Stock of the Company.
(p) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(q) "Shares" means shares of Class A Common Stock, par value
$0.01 per share, of the Company.
(r) "Transfer" means any direct or indirect transfer, sale,
assignment, pledge, hypothecation or other disposition.
2. Right of Co-Sale.
2.1. Definition. In the event that a Stockholder or Stockholders holding
Shares or Preferred Shares which represent a majority of the Shares (or
Preferred Shares) then held by all Stockholders (the "Transferor") proposes to,
directly or indirectly, Transfer (in a single transaction or a series of related
transactions) a direct or indirect interest in Shares (or Preferred Shares)
owned by such Stockholders (the "Transferor Securities") to any Person or group
(as such term is used for purposes of Section 13(d) of the Exchange Act) for
value (the "Transferee"), each remaining Stockholders (a "Remaining
Stockholder") shall have a right of co-sale (the "Right of Co-Sale") to sell the
amount equal to a fraction, the numerator of which is the number of Shares (or
Preferred Shares) owned by such Remaining Stockholder and the denominator of
which is the aggregate number of Shares (or Preferred Shares) owned by all the
Stockholders, multiplied by the number of Shares (or Preferred
Shares)represented by the Transferor Securities (such product, the "Right of
Co-Sale Amount") on the same terms and at the same time as the Transferor, all
as described in this Section 2.
3
4
2.2. Right of Co-Sale Amount. Each Remaining Stockholder shall have the
right to sell that number of Shares (or Preferred Shares) held by such
Stockholder to the Transferee (or, upon the unwillingness of any Transferee to
purchase directly from such Stockholder, to the Transferor simultaneously with
the closing of the sale by the Transferor to the Transferee) up to its
respective Right of Co-Sale Amount determined as of the date the Transfer Notice
(as defined below) is delivered to the such Stockholder, upon the terms and
subject to the conditions pursuant to which the Transferor sells its Transferor
Securities to the Transferee.
2.3. Mechanics of Sale.
(a) Exercise by the Stockholders.
If the Transferor proposes to Transfer any Transferor Securities
in a transaction subject to this Section 2, then it shall promptly notify, or
cause to be notified, the Remaining Stockholders, in writing, of each such
proposed Transfer (the "Transfer Notice"). Such Transfer Notice shall set forth:
(i) the name of the Transferee and the number of Transferor Securities proposed
to be Transferred, and (ii) the proposed amount and form of consideration and
terms and conditions of payment offered by the Transferee (the "Transferee
Terms"). The Right of Co-Sale may be exercised by the Remaining Stockholders
delivering a written notice to the Transferor (the "Co-Sale Notice") within
thirty (30) calendar days following receipt of the Transfer Notice. The Co-Sale
Notice shall state the number of Shares (or Preferred Shares) that each
Remaining Stockholder wishes to include in such Transfer to the Transferee,
which number may not exceed its Right of Co-Sale Amount. Upon the giving of a
Co-Sale Notice, a Stockholder shall be irrevocably obligated to sell the number
of Shares or (Preferred Shares) set forth in its Co-Sale Notice to the
Transferee (or the Transferor, if applicable) on the Transferee Terms.
(b) Assignment of Interest.
If a Stockholder exercises its respective Co-Sale Rights, then
the Transferor shall assign to such Stockholder as much of its interest in the
agreement of sale with the Transferee as such Stockholder shall be entitled to,
and such Stockholder shall be obligated to provide the representations,
warranties and covenants to the Transferee reasonably equivalent to those
provided by the Transferor under such agreement of sale. To the extent that any
Transferee prohibits such assignment or otherwise refuses to purchase Shares (or
Preferred Shares) from a Stockholder exercising its Right of Co-Sale hereunder,
then the Transferor shall not sell to such Transferee any Transferor Securities
unless and until, simultaneously with such sale, the Transferor shall purchase
such Shares (or Preferred Shares) from such Stockholder for the same
consideration per share and on the same terms and subject to the same conditions
as the proposed Transfer described in the Transfer Notice.
(c) Failure to Exercise Right of Co-Sale; Additional Transfers.
If no Stockholder elects to exercise its Right of Co-Sale, then
the Transferor may, not later than 60 calendar days following delivery to the
Remaining Stockholders of the Transfer
4
5
Notice, conclude a Transfer of not less than all of the Transferor Securities
covered by the Transfer Notice on terms and subject to conditions not more
favorable to the Transferor than those described in the Transfer Notice. Any
proposed Transfer of more securities by the Transferor shall again be subject to
the Right of Co-Sale and shall require compliance by the Transferor with the
procedures described in this Section 2.
2.4. Exceptions to Right of Co-Sale. The Right of Co-Sale shall not
apply to Permitted Transfers.
3. Drag-Along Right.
3.1. In the event that a Stockholder or Stockholders holding Shares or
Preferred Shares which represent a majority of the Shares (or Preferred Shares)
then held by all Stockholders (the "Majority Stockholders") desire to pursue
discussions with any third party regarding a potential Transfer of all of the
Shares (or Preferred Shares) then held by the Majority Stockholders to such
third party at any time, the Majority Stockholders shall, prior to pursuing such
discussions, disclose to the Board their intentions with respect thereto.
3.2. In the event that the Majority Stockholders shall agree to
Transfer, in a bona fide arm's length transaction for value (either in a single
transaction or a series of related transactions), a direct or indirect interest
in all of the Shares (or Preferred Shares) owned by the Majority Stockholders to
any Person or "group" (as such term is used for purposes of Section 13(d) of the
Exchange Act) (the "Buyer"), which Buyer desires also to purchase all of the
Shares (or Preferred Shares) then owned by the Remaining Stockholders or their
successors or assigns for the same price per share as the Buyer contemplates
purchasing the Majority Stockholders' Shares (or Preferred Shares), the Majority
Stockholders shall notify the Remaining Stockholders and the Company in writing
(such notice, a "Drag-Along Notice") of its intention to effectuate such
contemplated transaction, setting forth in such Drag-Along Notice the identity
of the Buyer, the aggregate purchase price which the Buyer shall pay for all of
the Shares or Preferred Shares and the intended date on which such transaction
shall close; and the Remaining Stockholders shall, on the basis of such
notification, fully cooperate in such transaction and sell all of their Shares
or Preferred Shares to such Buyer, for the same price and otherwise in
accordance with identical terms and conditions as those on which the Majority
Stockholders shall sell their Shares or Preferred Shares to such Buyer. The
Drag-Along Notice shall be delivered no more than 90 nor fewer than 15 days
prior to the intended date of the closing of such transaction, and such
transaction shall not, in fact, close more than 270 calendar days after the
delivery of the Drag-Along Notice.
3.3. Exceptions to Drag-Along Right. The drag-along rights set forth in
this Article 3 shall not apply to Permitted Transfers.
4. Transfer Rights.
4.1. General. Transfers of Shares and Preferred Shares are strictly
prohibited, except for (i) Permitted Transfers and (ii) Transfers consummated in
accordance with Section 2 or Section 3 hereof. Any attempt to Transfer any
Shares or Preferred Shares
5
6
not in accordance with this Agreement shall be null and void and neither the
Company nor any transfer agent of such securities shall give any effect to such
attempted Transfer in its records. Prior to consummation of any Transfer
permitted under the first sentence of this Section 4.1, the transferor shall
cause the transferee to execute an agreement in form and substance reasonably
satisfactory to the Board, providing that such transferee shall be bound by all
the terms and provisions of, and entitled (subject to Section 7.1) to all the
rights and benefits under, this Agreement, which are or theretofore had been
applicable to the transferor of the securities in question.
4.2. Legend. Any certificate representing outstanding Shares or
Preferred Shares which are held by a party to this Agreement or otherwise
subject to the terms hereof shall bear the following legend, in addition to any
other legend required by law or otherwise:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER THE BLUE SKY LAWS OF ANY JURISDICTION. NO SALE OR
TRANSFER OF THESE SHARES MAY BE MADE WITHOUT REGISTRATION UNDER SAID ACT OR
COMPLIANCE WITH EXEMPTIONS THEREFROM AND COMPLIANCE WITH APPLICABLE BLUE SKY
LAWS OR EXEMPTIONS THEREFROM."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY
THE TERMS OF THAT CERTAIN STOCKHOLDERS AGREEMENT (THE "STOCKHOLDERS AGREEMENT")
DATED AS OF MARCH 5, 1998, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
COMPANY. ANY ATTEMPT TO TRANSFER OR ENCUMBER ANY INTEREST IN THE SHARES
REPRESENTED BY THIS CERTIFICATE NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS
AGREEMENT SHALL BE NULL AND VOID AND NEITHER THE COMPANY NOR ANY TRANSFER AGENT
OF SUCH SECURITIES SHALL GIVE ANY EFFECT TO SUCH ATTEMPTED TRANSFER OR
ENCUMBRANCE IN ITS SHARE RECORDS. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF IT, AGREES TO BE BOUND BY THE TERMS OF THE STOCKHOLDERS AGREEMENT."
5. Management of the Company; Voting.
5.1. Board Composition.
(a) Subject to the provisions of this Section 5, each Stockholder
agrees to take such action as may be necessary, in its capacity as a stockholder
of the Company, to nominate and recommend to the stockholders of the Company as
the proposed members of the Board, at any annual or special meeting of
stockholders called for the purpose of voting on the election of directors, or
by consensual action of stockholders with respect to the election of directors,
as follows: (i) Xxxx X. Xxxxx; (ii) Xxxxx XxXxxxxx; (iii) two (2) individuals
designated in writing to the Company by Spectrum Equity Investors II, L.P., (iv)
two (2) individuals designated in writing to the Company by Providence Equity
Partners L.P., (v) one (1) individual designated in writing to the Company by
Sandler Capital Management and (vi)
6
7
one (1) individual designated in writing to the Company by Triumph Partners III,
L.P. The individuals to be designated initially by the foregoing entities are
set forth on Schedule 5.1. The right to designate nominees shall be reduced as
follows:
(A) From and after such time as any entity having the
right to designate two (2) nominees owns, together with its Affiliates, less
than 75% of the Shares purchased by such entity and its Affiliates pursuant to
the Stock Purchase Agreement, such entity shall forfeit its respective right to
designate one (1) nominee for election to the Board of Directors (excluding for
purposes hereof any decrease due to a reverse stock split, Transfer, or other
change affecting all Stockholders on a substantially proportionate basis). This
clause (A), if applicable, shall apply to the exclusion of clause (B) below.
(B) From and after such time as any entity having the
right to designate one nominees owns, together with its Affiliates, less than
50% of the Shares purchased by such entity and its Affiliates pursuant to the
Stock Purchase Agreement, such entity shall forfeit its respective right to
designate any individual for election to the Board of Directors (excluding for
purposes hereof any decrease due to a reverse stock split, Transfer, or other
change affecting all Stockholders on a substantially proportionate basis).
(b) Except as otherwise provided in this Section 5, each of the
Stockholders further agrees (i) to appear in person or by proxy at any annual or
special meeting of stockholders of the Company for the purpose of obtaining a
quorum and to vote all voting securities of the Company now or hereafter
directly or beneficially owned by such Stockholder, either in person or by
proxy, at any such meeting of the stockholders of the Company called for the
purpose of voting on the election of directors, and (ii) to execute a written
consent pursuant to any consensual action with respect to the election of
directors (to the extent permitted by law), in each case (1) in favor of the
election of the directors nominated in accordance with designations made
pursuant to Section 5.1(a), 5.2 or 5.4 and (2) in favor of the removal of any
director required to be removed in accordance with Section 5.3.
5.2. Filling Vacancies. If, at any time during which Stockholders are
entitled to designate directors pursuant to Section 5.1, a vacancy is created on
the Board by the death, removal or resignation of any one of the directors
designated by a Stockholder pursuant to Section 5.1(a)(iii)-(a)(vi), then the
Stockholder that had designated such director, if then entitled to designate
such director pursuant to Section 5.1, shall designate another individual to be
elected to the Board, and the Stockholders shall take such action as may be
necessary to cause, within ten (10) days after such designation occurs, the
election of such designated individual to the Board.
7
8
5.3. Removal of Directors Designated by Stockholder Entitled to
Designate Directors. The Stockholders shall take such action as may be necessary
to cause any director to be removed from the Board for any reason at the request
of the Stockholder that had designated such individual to be a director pursuant
to this Section 5. No Stockholder shall vote its voting securities of the
Company to remove any director designated by a Stockholder except as requested
in writing by the Stockholder who designated that director.
5.4. Replacement Nominees; Regulatory Restrictions.
(a) If, prior to an individual's election to the Board pursuant
to Section 5.1 or 5.2, any individual designated by a Stockholder to serve as a
director shall be unable or unwilling to serve as a director, the Stockholder
who nominated any such individual to serve as a director shall be entitled to
nominate a replacement and the Stockholders shall take all necessary action to
elect such nominee to the Board.
(b) Each Stockholder holding the right to designate a director
pursuant to Section 5.1 shall nominate an individual who, to the best of such
Stockholder's knowledge, does not have any attributable interests in any Person
who then owns or operates property subject to regulation by the Federal
Communications Commission ("Regulated Property") which would likely prohibit the
Company from acquiring or operating any interest in any Regulated Property. If
circumstances should change subsequent to a designee's election to the Board
such that maintaining such designee as a director would likely prohibit the
Company from acquiring or operating any interest in any Regulated Property, the
Stockholder who designated any such individual for election to the Board shall
promptly request the director's removal in accordance with Section 5.3 and
nominate a replacement designee in accordance with Section 5.2.
5.5. Voting of Board.
(a) The vote of the majority of the directors shall decide any
matter brought before the Board, unless the matter is one upon which by express
provision of law, the Charter Documents or this Agreement, a different vote is
required, in which case such express provision shall govern and control.
(b) Notwithstanding the provisions of Section 5.5(a), the
affirmative vote of each director designated by a Stockholder (as set forth on
Schedule 5.1 or any replacement director designated in accordance with this
Section), shall be required for the Company to take, and each such Stockholder
shall exercise all voting rights and other powers of control available to it in
relation to the Company and the directors so as to ensure that the Company shall
not without such approval take, the following actions:
(i) authorize the execution, delivery and performance
of the Merger Agreement by the Company; and
(ii) waive any material condition in, or authorize any
material modification or amendment of the Merger Agreement by the Company
(provided that the Board
8
9
of Directors may not approve any amendment to the Merger Agreement which would
raise the merger price above $14.00 per share).
The Stockholders referenced in the first sentence of this Section 5.5(b) shall
exercise all voting rights and other powers of control available to them in
relation to the Company and the directors to cause the directors to authorize
the delivery of a Drawdown Notice at such time as such Stockholders have a
reasonable basis to expect that the conditions to the Company's obligation to
consummate the Merger and the transactions contemplated by the Merger Agreement
will be satisfied or waived and the delivery of such Drawdown Notice is then
necessary to allow for the timely funding of the purchase of the Committed
Shares (as defined in the Stock Purchase Agreement).
(c) Notwithstanding the provisions of Section 5.5(a) and even if
a vote of the Board may not be required under applicable law for any of the
following, the affirmative vote (or the prior written consent) of five directors
shall be required for the Company to take, and the Stockholders shall exercise
all voting rights and other powers of control available to them in relation to
the Company and the directors so as to ensure that the Company shall not without
such approval take, the following actions:
(i) the disposition of assets (in a single transaction
or a series of related transactions) in an amount in excess of $5,000,000;
(ii) the entry into any transaction which would result in
a Change of Control;
(iii) subject to Section 7.3, the approval of the
dissolution or liquidation of the Company;
(iv) the declaration or payment of any dividends on, or
the incurrence of any obligation to make any other distribution in respect of,
outstanding equity interests of the Company;
(v) the incurring of, entry into or commitment to any
indebtedness, in an aggregate principal amount in excess of $5,000,000 (except
for incurrence of indebtedness to finance the Merger) in a single transaction or
series of related transactions;
(vi) any acquisition of assets (in a single transaction or
a series of related transactions) in an amount in excess of $5,000,000;
(vii) any amendment to the Charter Documents;
(viii) the repurchase or redemption of the Company's
capital stock from a Stockholder in an amount not equal to such Stockholder's
pro rata ownership of such capital stock;
(ix) any change in the number of directors;
9
10
(x) the removal or appointment of any senior
executives, including the Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer;
(xi) any issuance of additional shares of capital stock of
the Company or any rights, options, warrants or other instruments convertible or
exchangeable therefor, other than the issuance of shares of capital stock
contemplated by the Stock Purchase Agreement;
(xii) any transaction with an Affiliate with a value in
excess of $250,000;
(xiii) entering into any other contract or arrangement
material to the Company; and
(xiv) any amendment to Schedule 3.11 of the Stock Purchase
Agreement.
5.6. Voting of Stockholders.
(a) The vote of the holders of a majority of the Outstanding
Voting Shares entitled to vote shall decide any matters brought before any
meeting of Stockholders, unless the matter is one upon which by express
provision of law, the Charter Documents or this Agreement, a different vote is
required, in which case such express provision shall govern and control.
(b) Notwithstanding the provisions of Section 5.6(a) and even if
a vote of the Stockholders may not be required under applicable law for any of
the following, the vote or prior written consent of Stockholders then holding
Outstanding Voting Shares representing 66-2/3% of the Outstanding Voting Shares
held by all Stockholders shall be required before the Company may take, and the
Stockholders shall exercise all voting rights and other powers of control
available to them in relation to the Company and the directors so as to ensure
that the Company shall not without such approval take, the following actions:
(i) the sale of all or substantially all of the assets
of the Company by sale, assignment, merger, reorganization, or by any other
manner;
(ii) the entry into any transaction which would result in
a Change of Control; and
(iii) any amendment to the Company's Charter Documents.
5.7. Approval of Merger. Notwithstanding any provision herein to the
contrary, upon approval by the Board of the Merger and the Merger Agreement,
each Stockholder shall vote, or act by written consent, and hereby gives its
written consent (subject only to such Board approval), in favor of the approval
and authorization of the Merger, the Merger Agreement and the transactions
contemplated thereby and shall execute all documents requested by the Board
necessary to effectuate such approval and authorization. Each Stockholder agrees
that it will not
10
11
exercise, and hereby waives, any and all rights that it may have to dissent or
seek appraisal, arising from the Merger under the Delaware General Corporation
Law or any other principle of law with respect to any of its shares of capital
stock of the Company.
5.8. Officers of the Company. Each Stockholder agrees to cause its
nominees to the Board to take such action as may be necessary to appoint Xxxxx
Xxxxxxxxx as Chairman, Chief Executive Officer and Treasurer, and Xxxxxxxx
Xxxxxx as President and Secretary of the Company effective on or about the date
hereof. Effective upon consummation of the Merger, Xxxxx Xxxxxxxxx and Xxxxxxxx
Xxxxxx shall resign from their respective officer positions. Effective upon
consummation of the Merger, each Stockholder agrees to cause its nominees to the
Board to take such action as may be necessary to appoint Xxxx X. Xxxxx and Xxxxx
XxXxxxxx as Officers of the Company.
5.8.1. Board Observer. During such time as a Stockholder holds
Shares and Preferred Shares for which such Stockholder paid, or has committed to
pay, at least $10 million pursuant to the Stock Purchase Agreement (and has not
defaulted with respect to any such payment obligations), such Stockholder shall
have the right to designate one representative as a Board observer and as an
observer of any committee of the Board. In addition, each such Stockholder shall
have the right to designate one representative as an observer of the board of
directors of any wholly-owned subsidiary ("Subsidiary") of the Company which
does not consist solely of employees of the Company or its Subsidiaries and any
committees thereof. The Company shall provide notice of board and committee
meetings to any duly designated observer at such time and in such manner as it
provides notice to directors and such observer shall have the right to attend
such board and committee meetings. The observer shall be entitled to receive
written materials distributed to the relevant board or committee members. The
Company shall cause each Subsidiary subject to this Section 5.8.1 to comply with
the aforementioned notice and information requirements. Except for the rights
described herein, the observer shall not have any other rights of a board or
committee member, including the right to vote as a member thereof, and shall not
represent to any party that he is a director. The Company and each Subsidiary
subject hereto shall have the right to require any board or committee observer
to execute a confidentiality agreement as a precondition to his being a board or
committee observer.
5.9. Inspection Rights. During such time as a Stockholder shall have
the right to appoint a designee for election to the Board pursuant to Section
5.1 or to designate a Board observer pursuant to Section 5.9, such Stockholder
shall have the right to inspect the books, records and premises of the Company
during normal business hours upon reasonable notice.
6. Right of First Refusal on Issuance of New Securities by the Company.
6.1. Generally. The Company hereby grants to each Stockholder the right
of first refusal to purchase such Stockholder's pro rata share of New Securities
which the Company may from time to time propose to sell and issue. For purposes
of this right of first refusal, a Stockholder's pro rata share (the "Section 6
Pro Rata Share") shall be that
11
12
proportion which the number of shares of Shares then held by such Stockholder
bears to the aggregate number of Shares then held by all Stockholders.
6.2. Notice of New Issues. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Stockholder written
notice (the "Section 6 Notice") of its intention, describing the type of New
Securities, the price, and the principal terms upon which the Company proposes
to issue the same. Each Stockholder shall have twenty (20) days from the
delivery date of any Section 6 Notice to agree, irrevocably, to purchase up to
the Stockholder's Section 6 Pro Rata Share of such New Securities for the price
and upon the terms specified in the Section 6 Notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
6.3. Failure to Exercise Right. In the event a Stockholder fails to
agree to purchase all of such Stockholder's Section 6 Pro Rata Share pursuant to
Section 6.2, the Company shall give a Section 6 Notice to the other Stockholders
of such failure pursuant to Section 6.2, and the other Stockholders shall have
the right to purchase all such shares in the manner set forth in Section 6.2. In
the event any shares of New Securities are still not purchased after the
foregoing procedures have been effected, the Company shall have ninety (90) days
after the last date on which any Stockholder's right to purchase lapsed to sell
or enter into an agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within ninety (90) days from the date of
said agreement) to sell the New Securities in respect of which such
Stockholder's option was not exercised, at or above the price and upon terms not
more favorable to the purchasers of such securities than the terms specified in
the initial Section 6 Notice given in connection with such sale. In the event
the Company has not sold the New Securities or entered into an agreement to sell
the New Securities within said ninety-day period (or sold and issued New
Securities in accordance with the foregoing within ninety (90) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities without first offering such New Securities to the Stockholders in the
manner provided in this Section 6.
6.4. Waiver. Messrs. Fujii and XxXxxxxx agree to waive their respective
rights of first refusal under this Section 6 if the other Stockholders shall
have waived their rights under this Section.
7. Miscellaneous.
7.1. Entire Agreement; Successors and Assigns. This Agreement
constitutes the entire agreement between the Company and the Stockholders
concerning the subject matter hereof. Any previous agreement between the Company
and the Stockholders concerning the subject matter hereof is superseded by this
Agreement. Subject to Section 4.1 hereof, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and permitted assigns of the
parties. Notwithstanding the foregoing or the definition of "Permitted
12
13
Transfers", the rights of the Stockholders set forth in Section 5.1 shall not be
transferable to any Person except to an Affiliate of a Stockholder upon a
Permitted Transfer by such Stockholder of all of its Shares to such Affiliate.
7.2. Termination. Sections 2, 3, 4.1 and 6 shall automatically terminate
upon an Initial Public Offering which raises at least $50,000,000 in proceeds to
the Company and is underwritten pursuant to a firm commitment underwriting by
nationally recognized underwriters. Section 5 shall terminate as provided
therein. Notwithstanding any provision hereof, this entire Agreement shall
terminate at such time as the Stockholders hold in the aggregate less than 20%
of the Outstanding Voting Shares.
7.3. Termination of Stock Purchase Agreements; Dissolution of the
Company. Upon the termination of the Stock Purchase Agreement, the Board shall
take all action to effect the prompt dissolution and liquidation of the Company
in accordance with applicable law.
7.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware, without reference
to any choice of law rules that would require the application of the laws of any
other jurisdiction.
7.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6. Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
7.7. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given (a) upon personal
delivery to the person to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
7.8. Effectiveness; Amendment of Agreement. Any provision of this
Agreement may be amended only by a written instrument signed by Stockholders
then holding Shares representing 66-2/3% of the Shares then held by the
Stockholders; provided that Sections 2, 3, 4 and 7 (and related definitions) may
be amended only by a written instrument signed by each of the Stockholders which
then hold any Shares or any Preferred Shares. In addition to the foregoing, any
amendment to Section 5 must be approved by the affirmative vote (or prior
written consent) of five directors; provided that Section 5.5(b) may be amended
only by a written instrument signed by each of the Stockholders which then hold
any Shares; and, provided further, that no Stockholder shall as a result of any
amendment to Section 5.1 lose its right, if any, to designate a director
pursuant thereto, unless such Stockholder and its Affiliates hold less than 20%
of the Shares that such Stockholder and its affiliates purchased pursuant to the
Stock
13
14
Purchase Agreement. Notwithstanding the foregoing, Exhibit A may be amended by
the Company as necessary to reflect the addition of new Stockholders pursuant to
the terms hereof, or to reflect the addition of parties hereto as contemplated
by this Agreement; and further provided that no amendment which adversely
affects any Stockholder other than in the same manner that such amendment
affects each other Stockholder on a pro rata basis will be effective without
such first Stockholder's written consent.
7.9. Waiver; Severability. The waiver by one party hereto of any breach
by the other (the "Breaching Party") of any provision of this Agreement shall
not operate or be considered as a waiver of any other (prior or subsequent)
breach by the Breaching Party, and the waiver of a breach of a provision in one
instance shall not be deemed a waiver of such provision in any other
circumstance. If any term or provision of this Agreement or the application
thereof to any Person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
7.10. Ownership. Each Stockholder represents and warrants that it is the
sole legal and beneficial owner of those Shares and Preferred Shares it
currently holds subject to this Agreement and that no other Person has any
interest (other than a community property interest) in such Shares or Preferred
Shares.
7.11. Attorneys' Fees. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
7.12. Specific Performance. Each of the Stockholders and the Company
acknowledge that any violation of this Agreement will result in irreparable
injury to the non-breaching party, the exact amount of which will be difficult
to ascertain, and that the remedies at law for any such violation would not be
reasonable or adequate compensation to the non-breaching party for such a
violation. Accordingly, the Stockholders and the Company agree that if any of
the Stockholders and/or the Company violates any provision of this Agreement, in
addition to any other remedy which may be available at law or in equity, the
non-breaching party shall be entitled to specific performance and injunctive
relief, without posting bond or other security, and without the necessity of
proving actual damages.
7.13. Regulated Stockholders. At the request of any Regulated
Stockholder, the Company will exchange (on a share-for-share basis) shares of
voting securities of the Company held by such Regulated Stockholder, or will
issue to such Regulated Stockholder in lieu of voting securities otherwise
issuable to such Regulated Stockholder pursuant to Section 6, shares of other
securities which (a) do not have voting rights (or which have such limited
voting rights as such
14
15
Regulated Stockholder may reasonably request), (b) are convertible into such
voting securities on a share-for-share basis (subject to such limitations as
such Regulated Stockholder may request), and (c) are otherwise identical to such
voting securities. Any such non-voting or limited-voting securities will
constitute "Shares" for purposes of this Agreement. "Regulated Stockholder"
means any direct or indirect majority-owned subsidiary of a bank holding
company, or any bank holding company.
15