EXHIBIT 10.1
EXECUTION COPY
STOCKHOLDERS' AGREEMENT
THIS AGREEMENT is made as of September 20, 2004 (this "Agreement"), by and
among Securus Technologies, Inc., a Delaware corporation (the "Corporation"),
H.I.G.-TNetix, Inc., a company organized under the laws of the Cayman Islands
("HIG"), American Capital Strategies, Ltd., a Delaware corporation ("ACAS"),
Laminar Direct Capital, L.P., a Delaware limited partnership ("Laminar"), Alpine
Associates, L.P., a New Jersey limited partnership ("Alpine"), AIF Investment
Company, a company organized under the laws of the Cayman Islands ("AIF"), each
of the other investors now or hereafter set forth on the signature pages hereto
as Evercom Investors (each such investor, together with HIG, ACAS, Laminar,
Alpine and AIF, each individually an "Investor" and collectively the
"Investors"), and any individual now or hereafter set forth on the signature
pages hereto as Management Stockholders (each individually a "Management
Stockholder" and collectively the "Management Stockholders"). The Investors and
the Management Stockholders are sometimes collectively referred to as the
"Stockholders" and individually as a "Stockholder." Capitalized terms used
herein are defined in Section 21 hereof.
WHEREAS, certain of the Investors have acquired shares of Common Stock
pursuant to certain Investor Subscription Agreements by and between the
individual Investors and the Corporation; and
WHEREAS, Laminar has acquired a warrant to purchase fifty-one thousand
eleven (51,011) shares of the Corporation's Common Stock (the "Laminar
Warrant"); and
WHEREAS, the Management Stockholders have acquired or may in the future
acquire shares of Common Stock or Class B Common Stock pursuant to certain
Restricted Stock Purchase Agreements by and between the individual Management
Stockholders and the Corporation (collectively, the "Restricted Stock Purchase
Agreements"); and
WHEREAS, the Corporation and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) assuring continuity in the
management and ownership of the Corporation, (ii) limiting the manner and terms
by which the Stockholder Shares may be transferred, and (iii) providing the
Stockholders with certain registration rights.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Restrictions on Transfer. The restrictions set forth in this Section 1
shall apply until a Qualified Public Offering or an Approved Sale of the
Corporation (but shall not apply to such Qualified Public Offering or Approved
Sale).
(a) Prohibition Against Transfer of Stockholder Shares. No
Stockholder shall sell, transfer, assign, pledge, hypothecate, encumber, grant
an Option or other interest in, or otherwise dispose of (collectively, a
"Transfer") any interest in any Stockholder Shares or Options except: (i)
pursuant to the provisions of Sections 1 (b) through 1 (e) hereof; (ii) a
Transfer in connection with a sale of securities pursuant to Section 2 or
Section 3 hereof; or (iii) a Transfer to the Corporation. No Management
Stockholder shall be entitled to Transfer any
Unvested Shares at any time until such time as such shares become Vested Shares,
at which time such Vested Shares shall be subject to the restrictions on
Transfer of this Section 1.
(b) The Corporation's Right of First Refusal. At least forty-five
(45) days prior to making any Transfer of any Stockholder Shares by a
Stockholder (other than pursuant to a Permitted Transfer or Section 2 hereof),
the transferring Stockholder (the "Transferring Stockholder") shall deliver an
Offer Notice to the Corporation and the other Stockholders (the "Other
Stockholders"). The Offer Notice shall be deemed to first be an offer of the
subject Stockholder Shares to the Corporation and then to the Other Stockholders
on the same terms and conditions as proposed by the third party. The Corporation
may elect to purchase all or a portion of the Stockholder Shares specified in
the Offer Notice at the price and on the terms specified therein by delivering
written notice of such election to the Transferring Stockholder within
twenty-five (25) days after the delivery of the Offer Notice (the "Election
Period"). The purchase of the subject Stockholder Shares shall be made in
accordance with Section 1(d) hereof.
(c) Other Stockholders' Right of First Refusal. In the event the
Corporation does not elect to purchase all of the Stockholder Shares subject to
the Offer Notice, the Other Stockholders shall have the right, but not the
obligation, to purchase any remaining Stockholder Shares subject to the Offer
Notice. Upon the expiration of the Election Period, the Other Stockholders shall
have an additional five (5) business days to notify the Transferring Stockholder
of their intention to acquire such remaining Stockholder Shares. Each Other
Stockholder may purchase its pro rata portion ("Pro Rata Portion") of such
Stockholder Shares by multiplying the number of such Stockholder Shares by a
fraction: the numerator of which is the number of Vested Shares held by such
Other Stockholder and the denominator of which is the number of Vested Shares
held by all Other Stockholders that are participating in the purchase of the
Stockholder Shares from the Transferring Stockholder. If one or more of the
Other Stockholders elects not to purchase its Pro Rata Portion of such offered
Shares (the "Remaining Shares"), the Other Stockholders who have elected to
purchase their Pro Rata Portion may also purchase their Pro Rata Portion of the
Remaining Shares in successive rounds until all such Remaining Shares have been
purchased. The purchase of the subject Stockholder Shares shall be made in
accordance with Section 1(d) hereof.
(d) Procedures for Acquiring Stockholder Shares. If the Corporation
(or the Other Stockholders) has elected to purchase any or all Stockholder
Shares from the Transferring Stockholder, the purchase of such shares shall be
consummated as soon as practical after the delivery of the election notices, but
in any event within thirty-five (35) days after the expiration of the Election
Period. To the extent that the Corporation (or the Other Stockholders) has not
elected to purchase all of the Stockholder Shares being offered, the
Transferring Stockholder may, within ninety (90) days after the expiration of
the Election Period, Transfer any remaining Vested Shares to one or more third
parties at a price no less than the price per share specified in the Offer
Notice and on other terms no more favorable to the transferee than offered to
the Corporation in the Offer Notice, and such purchases shall be conditioned
upon all purchasers of Stockholder Shares executing a counterpart of this
Agreement. In the event the Offer Notice provides for any non-cash consideration
for the Stockholder Shares or includes terms that differ from a direct purchase
of the Stockholder Shares, the Corporation and the Transferring Stockholder
shall negotiate in good faith to determine the all cash purchase equivalent of
the consideration and terms proposed in the Offer Notice. The Corporation and/or
the Other
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Stockholders shall only be required to pay cash for the Stockholder Shares
acquired from the Transferring Stockholder. At the closing of the purchase of
Stockholder Shares, the Transferring Stockholder shall provide representations
and warranties as to its title to such securities and that there are no liens or
encumbrances on such securities and shall sign such stock powers, releases and
other documents as may reasonably be requested by the Corporation and/or the
Other Stockholders.
(e) Permitted Transfers. The restrictions contained in this
Section 1 shall not apply to any Transfer of Stockholder Shares: (i) by any
Stockholder that is a natural person (A) pursuant to applicable laws of descent
and distribution or (B) to such Stockholder's Family Group; provided, that the
transferees of such Stockholder Shares shall have agreed in writing to be bound
by the provisions of this Agreement and any Restricted Stock Purchase Agreement
affecting the Stockholder Shares so transferred; (ii) by any Stockholder that is
not a natural person, to an Affiliate of such person; (iii) to the Corporation;
or (iv) made in connection with a Reorganization (each of the foregoing is
referred to as a "Permitted Transfer").
(f) Involuntary Transfers. Prior to a Qualified Public Offering, any
event (other, than pursuant to clauses (b) through (e) above) that, were it not
for the provisions of this Agreement, would cause any Stockholder's Stockholder
Shares or Options, or any interest therein, to be Transferred, for consideration
or otherwise, to any person, whether voluntarily, involuntarily or by operation
of law (e.g. divorce, bankruptcy or foreclosure) shall be deemed to constitute
an offer by such Stockholder to sell such Stockholder's Stockholder Shares or
Options pursuant to Section 1(g).
(g) Purchase Rights. Upon the occurrence of any event specified in
Section 1(f), the Corporation (and then the Other Stockholders) shall have the
right to purchase such Stockholder Shares pursuant to the Restricted Stock
Purchase Agreement under which such Stockholder Shares were acquired or, in the
case of the Investors, at their fair market value unless and until the
Stockholder or the proposed transferee otherwise sends an Offer Notice to the
Corporation. Upon the Corporation's becoming aware of any of the events set
forth in Section 1(f), the Corporation (and the Other Stockholders) may, but
shall not be obligated to, purchase all of the Stockholder Shares subject to
such Transfer on the same terms and conditions as set forth in Sections 1(b)
through 1(d) in accordance with the Restricted Stock Purchase Agreement under
which such Stockholder Shares were acquired or, in the case of the Investors, at
their fair market value. The Corporation and the Other Stockholders shall have
the rights and be subject to the same terms and conditions to purchase such
Stockholder Shares as set forth in Sections 1 (b) through 1 (d). In the event
the Corporation and the Other Stockholders do not provide the Transferring
Stockholder timely notice of their election to purchase pursuant to Section 1(b)
and/or 1(c) after receipt of written notice by the Transferring Stockholder (or
the proposed transferee if the Transferring Stockholder has not done so), the
Transferring Stockholder may Transfer its Stockholder Shares and such securities
shall remain subject to this Agreement.
(h) Termination of Restrictions. The restrictions on the Transfer of
Stockholder Shares set forth in this Section 1 shall continue with respect to
each Stockholder's Stockholder Shares until the date on which such Stockholder
Share has been transferred in a
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Public Sale or an Approved Sale or the Corporation's consummation of a Qualified
Public Offering.
2. Drag-Along Rights.
(a) In the event of an Approved Sale, the Corporation shall deliver
twenty (20) days' prior written notice thereof to each Stockholder. If the
Approved Sale is structured as (i) a merger or consolidation, each holder of
Stockholder Shares shall waive any dissenters rights, appraisal rights or
similar rights in connection with such merger or consolidation, (ii) (x) a sale
or contribution of stock or (y) a Reorganization, each Stockholder shall (A)
agree to sell or contribute all of its Stockholder Shares and rights to acquire
Stockholder Shares on the terms and conditions of the Approved Sale and (B)
execute such purchase or contribution agreement and other documents as executed
by the holders of a majority of the Stockholder Shares. Each holder of
Stockholder Shares shall take such other necessary or desirable actions in
connection with the consummation of the Approved Sale as reasonably requested by
the Corporation.
(b) The obligations of the holders of Stockholder Shares with
respect to the Approved Sale of the Corporation are subject to the satisfaction
of the following conditions: (i) upon the consummation of the Approved Sale,
each holder of Stockholder Shares shall receive for its Vested Shares the same
form of consideration and the same amount of consideration as the holders of a
majority of the Stockholder Shares receive for each of their Vested Shares; (ii)
if any holders of Vested Shares are given an option as to the form and amount of
consideration to be received, each holder of Vested Shares shall be given the
same option; (iii) each holder of then currently exercisable rights to acquire
Stockholder Shares shall be given an opportunity to either (A) exercise such
rights prior to the consummation of the Approved Sale or (B) receive in exchange
for such rights consideration equal to the amount determined by multiplying (1)
the same amount of consideration per share received by holders of the same Class
and Series of Stockholder Shares in connection with the Approved Sale less the
exercise price per share of such rights to acquire such class of Stockholder
Shares by (2) the number of shares of such class of Stockholder Shares issuable
upon exercise of such rights; (iv) no Investor shall be obligated to agree to
non-competition provisions; and (v) each Stockholders' indemnification
obligations (other than for title to its shares, authorization and no conflict
as to its execution of the agreement) shall in no event exceed the net proceeds
such Stockholder receives in the transaction and shall not be in excess of the
Stockholder's proportionate ownership of the Common Stock on a Fully Diluted
Basis.
3. Tag-Along Rights.
(a) If (i) any Stockholder proposes to Transfer (other than pursuant
to a Permitted Transfer) at any time any of its Stockholder Shares to any
Independent Third Party in one transaction or a series of transactions, (ii) the
Corporation has not exercised any rights pursuant to Section 1(b), and (iii) the
Other Stockholders have not exercised their rights pursuant to Section 1(c),
then the Transferring Stockholder may transfer its Stockholder Shares provided
it complies with the provisions of this Section 3. First (to the extent an Offer
Notice has not been given pursuant to Section 1(b)), the Transferring
Stockholder shall first give to the Corporation and the Other Stockholders an
Offer Notice. The Offer Notice shall be an offer by the Transferring Stockholder
to allow the Other Stockholders to participate, upon the purchase by
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the proposed transferee, in the sale of any Stockholder Shares proposed to be
sold by the Transferring Stockholder for the same per share consideration and on
the same terms. Each Stockholder shall have the right, for a period of fifteen
(15) days after the Offer Notice is given, to accept such offer in whole or in
part, exercisable by delivering a written notice to the Transferring Stockholder
and the Corporation within such 15-day period, stating therein the number of
Vested Shares (which may be the number of shares set forth in the Offer Notice
or a portion thereof) to be sold by such Stockholder to the proposed transferee.
Prior to the earlier of (x) the end of such 15-day period or (y) the acceptance
or rejection by each Stockholder of the Transferring Stockholder's offer, as the
case may be, the Transferring Stockholder shall not complete any sale of
Stockholder Shares to the proposed transferee.
(b) At the end of such 15-day period the Corporation shall calculate
the total number of Vested Shares that are proposed to be sold. Each Stockholder
shall be entitled to sell to the proposed transferee that number of Vested
Shares (or if such number is not an integral number, the next integral number
which is greater than such number) which shall be the product of (x) the
aggregate number of Vested Shares proposed to be sold by such Stockholder and
(y) a fraction, the numerator of which shall be the number of Stockholder Shares
indicated in the Offer Notice as subject to purchase by the proposed transferee
and the denominator of which shall be the total number of Vested Shares proposed
to be sold by all Stockholders. Thereafter, for a period of one hundred twenty
(120) days, the Transferring Stockholder may sell to the proposed transferee for
the consideration stated and on terms no more favorable to the proposed
transferee than those set forth in the Offer Notice, the Vested Shares stated in
the Offer Notice as subject to purchase by the proposed transferee; provided
that the proposed transferee, as the case may be, shall simultaneously purchase
the number of Vested Shares as calculated above from those Stockholders who have
accepted the Transferring Stockholder's offer. Any purchaser of Stockholder
Shares pursuant to this Section 3 shall be required to enter into and have the
rights and benefits of the terms and conditions of this Agreement.
4. Stockholder Preemptive Rights. At any time after the date hereof and
prior to a Qualified Public Offering or an Approved Sale of the Corporation, and
subject to Section 4(d) below, each time the Corporation proposes to sell shares
of its capital stock or Options for cash, or issue debt to one or more
Stockholders for cash, the Corporation shall also make an offering of such
shares, debt or other investment rights to the Stockholders to acquire the same
in accordance with the following provisions:
(a) The Corporation shall deliver a notice to each Stockholder
stating the amount of securities (and if not Common Stock, a description of the
securities) to be offered and the price and the terms on which it proposes to
offer such securities. Such notice shall be sent to the addresses set forth in
the records of the Corporation.
(b) Each Stockholder may elect to purchase, at the price and on the
terms specified in the notice, up to its pro rata portion of such securities by
delivering written notice of such election to the Corporation within fifteen
(15) days after transmittal of the Corporation's notice. Each Stockholder's pro
rata portion shall be based upon a fraction, the numerator of which is the
number of Vested Shares owned by such Stockholder (and, in the case of Laminar,
the number of shares of Common Stock subject to the Laminar Warrant) and the
denominator of which is the number of shares of Common Stock on a Fully Diluted
Basis (assuming full
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conversion or exercise of convertible securities and Options) held by all
parties who have preemptive rights and who elect to participate. If one or more
of the Stockholders elects not to purchase its pro rata portion of such
securities, the Stockholders who have elected to purchase their pro rata portion
may also purchase the pro rata portion of the remaining securities in successive
rounds until all such remaining securities have been purchased.
(c) Any securities referred to in the notice that are not elected to
be purchased as provided in subsection (b) above may, during the one hundred
eighty (180) day period thereafter, be offered by the Corporation to any other
person or persons at a price not less than, and on material terms no more
favorable to the offeree than, those specified in the notice.
(d) The preemptive rights set forth in this Section 4 shall not be
applicable to the issuance of (i) capital stock or Options to directors,
officers, or employees of the Corporation pursuant to the Corporation's stock
option plans, stock purchase plans, benefit plans or employment agreements that
are approved by a majority of the non-employee directors, (ii) the issuance of
warrants or Options to the Corporation's lenders and shares of Common Stock
issuable upon exercise of such warrants, (iii) capital stock in connection with
a merger, acquisition, plan of exchange or consolidation of another company or
strategic relationship, or (iv) any sale of securities to be issued (or required
to be exchanged into securities to be issued) pursuant to a registration
statement filed pursuant to the Securities Act with the Securities and Exchange
Commission, or (v) Stockholder Shares repurchased from Management Stockholders
pursuant to Section 19 and subsequently reissued.
5. Board of Directors.
(a) Each Stockholder shall vote (and cause any person who has its
proxy to vote) all of its Stockholder Shares and any other voting securities of
the Corporation over which such Stockholder has voting control and shall take
all other necessary or desirable actions within its control (whether in its
capacity as a stockholder, director, member of a Board committee or officer of
the Corporation or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Corporation shall take all
necessary and desirable actions within its control (including, without
limitation, calling special board and stockholder meetings), so that:
(i) the initial number of directors on the Board shall be
seven (7) directors; provided, however, that the Board shall have the right to
increase the number of directors in its sole and absolute discretion;
(ii) the following persons shall be elected to the Board:
(A) Five (5) representatives designated by HIG (the "HIG
Directors"); provided, that in the event of an increase of the number of
directors by the Board in accordance with Section 5(a)(i) above, if, at
the time of such increase, HIG and its Affiliates hold, in the aggregate,
more than 50% of the Stockholder Shares, HIG shall be entitled to
designate such number of additional directors to the Board that will
result in the HIG Directors constituting a majority of the Board;
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(B) One representative shall be the person holding the
office of Chief Executive Officer of the Corporation; and
(C) One representative shall be a senior member of
management of the Corporation designated by HIG.
(iii) the removal from the Board (with or without cause) of
any representative designated hereunder by HIG shall only be at HIG's written
request; provided, that (x) if any director elected pursuant to Section
5(a)(ii)(B) or 5(a)(ii)(C) above ceases to be an employee of the Corporation and
its subsidiaries, he or she shall be removed as a director promptly after his or
her employment ceases and (y) nothing herein shall preclude the Board or the
Stockholders from removing a director for cause under Delaware law;
(iv) in the event that any representative designated hereunder
by HIG for any reason ceases to serve as a member of the Board during his or her
term of office, the resulting vacancy on the Board shall be filled by a
representative designated by HIG, as provided hereunder; provided, that any
representative removed for cause shall not be designated again as a member of
the Board.
(b) The Corporation shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof. In addition, the Corporation shall pay an annual
amount of $100,000 (the "Annual Amount") to Alpine and Mr. Xxx Xxxxxx, pro rated
based on their proportionate ownership in the Corporation; provided that in the
event Alpine or Xx. Xxxxxx shall Transfer any of their Stockholder Shares to a
non-Affiliate, in the case of Alpine, or to a person other than his Family
Group, in the case of Xx. Xxxxxx, the portion of the Annual Amount otherwise
payable to such Evercom Investor shall be proportionately reduced based on the
number of Stockholder Shares so Transferred and the Annual Amount shall be
reduced by an equal amount.
(c) If HIG fails to designate a representative to fill a
directorship pursuant to the terms of this Section 5, the directorship shall
remain vacant, and the size of the board shall be reduced pro tanto. unless and
until HIG designates a representative.
(d) So long as ACAS, Alpine and/or Laminar owns Stockholder Shares,
such Stockholder shall have the right to have an observer (Laminar shall have
the right to two observers) present at all Board meetings, and such observers
shall receive all notices and materials sent or given to the other directors in
their capacity as such. The ACAS observer, the Alpine observer and/or the
Laminar observers, as the case may be, shall not be entitled to attend any
portion of any Board meeting, or receive any written materials related to such
portion of such meeting, if the sole subject of such portion of such meeting is
the discussion of the indebtedness of the Corporation or any of its subsidiaries
or any other obligations to the respective organization. The Corporation shall
pay the reasonable out-of-pocket expenses incurred by the Alpine observer solely
in connection with attending the meetings of the Board.
(e) Certificate of Incorporation and Bylaws. Nothing in this
Agreement shall limit the ability to amend the certificate of incorporation and
bylaws of the Corporation in any
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manner permitted thereunder, except that neither the certificate nor the bylaws
shall be amended in any manner that would conflict with, or be inconsistent
with, the provisions of this Agreement.
(f) Actions Consistent with Agreement. The Corporation shall not
circumvent this Agreement by taking any action through a subsidiary or affiliate
that would be prohibited under this Agreement.
6. Demand Registrations.
(a) Requests for Registration. At any time after a Qualified Public
Offering, the Investors may request registration under the Securities Act of all
or part of their respective Stockholder Shares on Form S-1 or any similar
long-form registration ("Long-Form Registrations"), and the Investors may
request registration under the Securities Act of all or part of their
Stockholder Shares on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. All registrations requested pursuant
to this Section 6(a) are referred to herein as "Demand Registrations." Each
request for a Demand Registration shall specify the approximate number of
Stockholder Shares requested to be registered and the requested per share price
range, if any, for such offering.
(b) Long-Form Registrations. Each Investor shall be entitled to
request (i) one Long-Form Registration for each ten percent (10%) block of
Stockholder Shares that such Investor making the demand owns as of the date
hereof in which the Corporation will pay all Registration Expenses
("Corporation-Paid Long-Form Registrations") and (ii) one Long-Form Registration
in which the Investor will pay its share of the Registration Expenses as set
forth in Section 11 hereof. A registration will not count as one of the
permitted Long-Form Registrations until it has become effective, and no
Long-Form Registration will count as one of the permitted Long-Form
Registrations unless the Investor requesting such Long-Form Registration is able
to register and sell at least 75% of the Stockholder Shares requested to be
included in such registration; provided, that in any event the Corporation will
pay all Registration Expenses in connection with any registration initiated as a
Corporation-Paid Long-Form Registration whether or not it has become effective.
All Long-Form Registrations shall be underwritten registrations that will be
administered by investment banker(s) and/or manager(s) to be selected by the
Corporation in good faith.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 6(b), each Investor shall be entitled
to request one Short-Form Registration per year for each ten percent (10%) block
of Stockholder Shares that such Investor making the demand owns as of the date
hereof, in which the Corporation will pay all Registration Expenses provided
that the Corporation and the securities meet the eligibility requirements for
such forms. The Short Form Registration shall only be required to be effective
for ninety (90) days and shall be subject to no sale periods if in the
reasonable judgment of the Corporation such Short Form Registration conflicts
with the Corporation's business plans or another existing or proposed
registration statement. Demand Registrations shall be Short-Form Registrations
whenever the Corporation is permitted to use any applicable short form. After
the Corporation has become subject to the reporting requirements of the
Securities Exchange Act of 1934, the Corporation shall use its best efforts to
make Short-Form Registrations on Form S-3 available for the sale of Stockholder
Shares.
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(d) Restrictions on Demand Registrations. The Corporation shall not
be obligated to effect any Demand Registration within six (6) months after the
effective date of a previous underwritten registration of equity securities. The
Corporation may postpone for up to six (6) months the filing or the
effectiveness of a registration statement for a Demand Registration if the
Corporation notifies the Investors that such Demand Registration would
reasonably be expected to have an adverse effect on any business plan of the
Corporation or any of its subsidiaries or conflicts with another proposed
registration; provided, that in such event, the Investor initially requesting
such Demand Registration will be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration will not count as one of the
permitted Demand Registrations hereunder and the Corporation shall pay all
Registration Expenses in connection with such registration.
(e) Other Registration Rights. The Corporation may grant to any
person the right to request the Corporation to register any equity securities of
the Corporation, or any securities convertible or exchangeable into or
exercisable for such securities, so long as such rights are not inconsistent
with the rights of the Investors contained herein.
7. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Corporation proposes to
register any of its Common Stock under the Securities Act (other than the
initial public offering, a transaction described under Rule 145 or any successor
rule of the Securities Act, a transaction registering securities convertible
into Common Stock or pursuant to Forms X-0, X-0 or their successor forms) and
the registration form to be used may be used for the registration of the
Stockholder Shares of the Stockholders (a "Piggyback Registration"), the
Corporation shall give fifteen (15) days written notice to the Stockholders of
its intention to effect such a registration and will include in such
registration the Stockholder Shares of the Stockholders with respect to which
the Corporation has received written requests for inclusion therein within five
(5) business days after the receipt of the Corporation's notice.
(b) Piggyback Expenses. The Registration Expenses of the
Stockholders shall be paid by the Corporation in all Piggyback Registrations.
(c) Priority on Primary Registration. If a Piggyback Registration is
an underwritten primary registration on behalf of the Corporation, and the
managing underwriters advise the Corporation in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering without adversely affecting the
marketability of the offering, the Corporation shall include in such
registration (i) first, the securities the Corporation proposes to sell, (ii)
second, the Stockholder Shares of all Stockholders and other persons with
registration rights requested to be included in such registration on a pro rata
basis, and (iii) third, other securities requested by other persons to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the
Corporation's securities, and the managing underwriters advise the Corporation
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in
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such offering without adversely affecting the marketability of the offering, the
Corporation shall include in such registration (i) first, the securities
requested to be included therein by the Stockholder exercising its demand
registration, (ii) second, the Stockholder Shares of all Stockholders and other
persons with registration rights requested to be included in such registration
on a pro rata basis, and (iii) third, other securities requested by other
persons to be included in such registration.
(e) Proration of Eligible Shares. In the event of any registration
pursuant to this Section 7, if the full amount of the Stockholder Shares of the
Stockholders requested to be included in such registration cannot be included in
full, then the number of Stockholder Shares available for registration shall be
allocated among the Stockholders pro rata based upon the number of Stockholder
Shares requested to be included in such registration by each Stockholder.
8. Lockup Agreements.
(a) Each Stockholder agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Corporation, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven (7) days prior to and during (i) the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Stockholder
Shares are included (except as part of such underwritten registration) or (ii)
the 180-day period beginning on the effective date of initial public offering of
the Corporation's Common Stock, unless in the case of either (i) or (ii) the
underwriters managing the registered public offering and the Corporation
otherwise agree. If the managing underwriters and the Corporation agree to allow
for the public sale or distribution of equity securities of the Corporation,
then each of the Stockholders shall be entitled to participate in such sale or
distribution on a pro rata basis.
(b) The Corporation agrees (i) not to effect any sale or
distribution of its equity securities, or any securities then convertible into
or exchangeable or exercisable for such securities, during the seven days prior
to and during (A) the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form) or (B) the 180-day period beginning on the
effective date of initial public offering of the Corporation's Common Stock,
unless the underwriters managing the registered public offering otherwise agree,
and (ii) to use its reasonable best efforts to cause each holder of at least
five percent (5%) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Corporation at
any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
9. Registration Procedures. Whenever the Stockholders have requested that
any securities be registered pursuant to this Agreement, the Corporation shall
use its best efforts to effect the registration and the sale of such securities
in accordance with the intended method of disposition thereof, and pursuant
thereto the Corporation shall as expeditiously as possible:
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(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Corporation shall furnish to the Stockholders covered by such
registration statement copies of all such documents proposed to be filed, which
documents will be subject to the review and comment of such Stockholders,
directly and through their counsel);
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six (6) months
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of securities such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the securities owned by such seller;
(d) use its best efforts to register or qualify such securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller
(provided that the Corporation shall not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of Stockholder Shares, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Corporation shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Stockholder Shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such securities to be listed on each securities
exchange on which similar securities issued by the Corporation are then listed
and, if not so listed, to be listed on the NASD automated quotation system and,
if so listed on the NASD automated quotation system, use its best efforts to
secure designation of all such securities covered by such registration statement
as a NASDAQ national market security within the meaning of Rule 11Aa2-1 under
the Exchange Act or, failing that, to secure NASDAQ authorization for such
securities and, without
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limiting the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such securities with the NASD;
(g) provide a transfer agent and registrar for all such securities
not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other customary actions as the
Stockholders or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such securities (including, without
limitation, making members of senior management of the Corporation available to
participate in, and cause them to cooperate with the underwriters in connection
with, "road-show" and other customary marketing activities (including one-on-one
meetings with prospective purchasers of the Stockholder Shares)) and cause to be
delivered to the underwriters and the sellers, if any, opinions of counsel to
the Corporation in customary form, covering such matters as are customarily
covered by opinions for an underwritten public offering as the underwriters may
request and addressed to the underwriters and the sellers;
(i) make available for inspection by any seller of securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Corporation, and cause the Corporation's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve (12) months beginning
with the first day of the Corporation's first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) permit the Stockholders which are deemed to be an underwriter or
a controlling person of the Corporation by the Corporation's counsel, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Corporation in
writing, which in the reasonable judgment of the Investors and their counsel
should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Corporation shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) obtain a cold comfort letter from the Corporation's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Stockholder may reasonably
request; and
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(n) promptly notify each seller of Stockholder Shares and the
underwriter or underwriters, if any:
(i) when the registration statement, any pre-effective
amendment, the prospectus or any prospectus supplement or post-effective
amendment to the registration statement has been filed and, with respect to the
registration statement or any post-effective amendment, when the same has become
effective;
(ii) of any written request by the Securities and Exchange
Commission for amendments or supplements to the registration statement or
prospectus;
(iii) of the notification to the Corporation by the Securities
and Exchange Commission of its initiation of any proceeding with respect to the
issuance by the Securities and Exchange Commission of any stop order suspending
the effectiveness of the registration statement; and
(iv) of the receipt by the Corporation of any notification
with respect to the suspension of the qualification of any Stockholder Shares
for the sale under the applicable securities or blue sky laws of any
jurisdiction.
10. Registration Expenses.
(a) All expenses incident to the Corporation's performance of or
compliance with Sections 6 through 12 of this Agreement, including without
limitation all registration, listing and filing fees, fees and expenses of
compliance with securities or blue sky laws, NASD fees, fees of transfer agents
and registrars, printing expenses, messenger and delivery expenses, the cost of
distributing prospectuses in preliminary and final form as well as supplements
thereto and fees and disbursements of counsel for the Corporation and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other persons retained by the Corporation (all such expenses
being herein called "Registration Expenses"), shall be borne by the Corporation
including without limitation, the Corporation's internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Corporation are then listed or on the
NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Corporation shall reimburse the Stockholders for the
reasonable fees and disbursements of one counsel chosen by the majority in
interest of the participating Stockholders.
(c) To the extent Registration Expenses are not required to be paid
by the Corporation, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
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(d) The obligation of the Corporation to bear the expenses described
in Section 10(a) and to reimburse the Stockholders for the expenses described in
Section 10(b) shall apply irrespective of whether a registration, once properly
demanded, if applicable, becomes effective, is withdrawn or suspended, is
converted to another form of registration and irrespective of when any of the
foregoing shall occur; provided, however, that Registration Expenses for any
registration statement withdrawn solely at the request of a Stockholder of
Stockholder Shares (unless withdrawn following postponement of filing by the
Corporation in accordance with Section 2(d)) or any supplements or amendments to
a registration statement or prospectus resulting from a misstatement furnished
to the Corporation by a Stockholder shall be borne by such Stockholder.
11. Indemnification.
(a) The Corporation agrees to indemnify, to the extent permitted by
law, the participating Stockholders (in their capacity as a seller of securities
and not as an officer of the Corporation), their officers and directors and each
person who controls such Stockholder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by: (i)
any violation by the Corporation of the Securities Act, the Exchange Act or any
state securities law, or (ii) any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the
Corporation by the Stockholder expressly for use therein or by the Stockholder's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Corporation has furnished the
Stockholder with a sufficient number of copies of the same. In connection with
an underwritten offering, subject to the limitations and qualifications set
forth in the underwriting agreement with respect thereto, the Corporation shall
indemnify such underwriters, their officers and directors and each person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the
Investors.
(b) In connection with any registration statement in which any
Stockholder is participating, each such Stockholder shall furnish to the
Corporation in writing such powers of attorney, custody agreements and letters
of direction and other information and affidavits as the Corporation reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall only have to indemnify the
Corporation, its directors and officers and each person who controls the
Corporation (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by the Stockholder to the
Corporation for specific use in such registration statement, prospectus or
amendment or supplement thereto and which remained in the final prospectus
delivered to the purchaser of such securities; provided that the obligation to
indemnify shall be several, not joint and several,
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among such Stockholders and the liability of each such Stockholder shall be
limited to the net amount of proceeds received by the Stockholder from the sale
of Stockholder Shares pursuant to such registration statement.
(c) Any person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. An indemnified party shall be able to assume the defense if the
indemnifying party does not diligently pursue the defense of the indemnified
party. In addition, no indemnifying party may, except with the consent of each
indemnified party, consent to the entry of any judgment or enter into any
settlement.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and shall survive the transfer of securities. The
Corporation also agrees to make such provisions as are reasonably requested by
any indemnified party, for contribution to such party in the event the
Corporation's indemnification is unavailable for any reason.
(e) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any
Stockholder exercising rights under this Agreement, or any controlling person of
any such Stockholder, makes a claim for indemnification pursuant to this section
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this
section; then, and in each such case, the Corporation and such Stockholder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion as is
appropriate to reflect the relative fault of such indemnfiying party on the one
hand and such indemnitee on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof). The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such indemnifying party or
such indemnitee and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not
-15-
be just or equitable if contribution pursuant to this Section 11(e) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
preceding sentence. The amount paid or payable by a contributing party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 11(e) shall include any
legal or other expenses reasoanbly incurred by such indemnitee in connection
with investigating or defending any such action or claim. No person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
12. Participation in Underwritten Registrations. No person may participate
in any registration hereunder which is underwritten unless such person (i)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of securities included in any underwritten registration shall be required
to make any representations or warranties to the Corporation or the underwriters
other than representations and warranties regarding such holder and such
holder's intended method of distribution.
13. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the Transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS SET FORTH IN A RESTRICTED
STOCK PURCHASE AGREEMENT AND/OR A STOCKHOLDERS' AGREEMENT. A COPY OF SUCH
AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE CORPORATION'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
The Corporation shall imprint such legend on certificates evidencing outstanding
Stockholder Shares. The legend set forth above shall be removed from the
certificates evidencing any shares that cease to be Stockholder Shares pursuant
to a Public Sale.
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14. Information.
(a) Until such time as the Corporation is subject to the reporting
requirements of the Exchange Act, the Corporation agrees to furnish to each
Stockholder the following financial statements and other information:
(i) as soon as available and in any event within forty-five
(45) days after the end of each of the first, second and third quarterly
accounting periods in each fiscal year of the Corporation, copies of the
unaudited consolidated balance sheets of the Corporation and its
subsidiaries as of the end of such quarterly accounting period, and of the
related consolidated and consolidating statements of income and
consolidated and consolidating statements retained earnings and cash flows
for such accounting period and for the portion of the fiscal year then
ended, all in reasonable detail and stating in comparative form the
unaudited consolidated and consolidating figures as of the end of and for
the corresponding date and period in the previous fiscal year;
(ii) as soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Corporation,
copies of the audited consolidated balance sheets of the Corporation and
its subsidiaries as of the end of such fiscal year of the Corporation, and
of the related audited consolidated and consolidating statements of income
and consolidated statements of retained earnings and cash flows for such
fiscal year, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures as of the end of and for
the previous fiscal year, and, in the case of such audited consolidated
statements, accompanied by a report thereon of a national firm of
independent certified public accountants selected by the Corporation (the
"Accountants"), which report shall be unqualified as to going concern and
scope of audit and shall state that such consolidated financial statements
present fairly the consolidated financial position of the Corporation and
its subsidiaries as at the dates indicated and their consolidated income
and retained earnings and cash flows for the periods indicated in
accordance with GAAP, and that the examination by the Accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards.
(b) After a public offering of Common Stock, the Corporation agrees,
so long as the Investors hold any Stockholder Shares, to use all reasonable
efforts to (i) timely file with the Securities and Exchange Commission all
reports required to be filed by the Corporation under the Exchange Act and (ii)
provide each Stockholder, upon request, information sufficient to enable such
Stockholder to sell Stockholder Shares under Rule 144 of the Securities Act;
provided, however, the Corporation shall have no liability to any Stockholder
under this Section 14(b) unless the Corporation fails to perform after thirty
(30) days' prior written notice of a previous failure to perform.
15. Dealings with Affiliates. The Corporation and its subsidiaries will
not lend any funds or property or make any credit arrangement or accommodation
for the benefit of any Stockholder (or any Affiliate of any such Stockholder)
except for transactions with employees approved by a majority of the
disinterested members of the Board. The Corporation and its subsidiaries will
not make any payments to any Stockholder (or any Affiliate of any such
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Stockholder) except for (i) employee salaries in the ordinary course of
business, (ii) the payments provided in Section 5(b), and (iii) the payment of
fees to HIG as follows: (A) an annual management fee equal to $750,000 per
annum, and (B) an amount equal to two percent (2%) of the value of any
acquisition transaction pursuant to which HIG acts as financial advisor to the
Corporation (in the case of both (A) and (B), together with any out of pocket
expenses incurred by HIG).
16. Confidentiality. All materials and information obtained by any
Stockholder pursuant to this Agreement or otherwise delivered by the Corporation
to any Stockholders and designated as confidential shall be kept confidential
and shall not be disclosed to any third party except (a) as has become generally
available to the public (other than through disclosure by such Stockholder in
contravention of this Agreement), (b) to such Stockholder's directors, officers,
trustees, partners, employees, agents and professional advisors on a
confidential and need to know basis, (c) to any other holder of capital stock,
(d) to any Person to which such Stockholder offers to sell or transfer any
shares of capital stock, provided, that the prospective transferee shall agree
to be bound by the provisions of this Section 16, (e) in any required report,
statement, testimony or other submission to any governmental authority having or
claiming to have jurisdiction over such Stockholder, or (f) in order to comply
with any law, rule, regulation or order applicable to such Stockholder, or in
response to any summons, subpoena or other legal process or formal or informal
investigative demand issued to such Stockholder in the course of any litigation,
investigation or administrative proceeding.
17. Conflicting Agreements. Each Stockholder represents that it has not
granted and is not a party to any proxy, voting trust or other agreement that
conflicts with the provisions of this Agreement. No holder of Stockholder Shares
shall grant any proxy or become party to any voting trust or other agreement
which conflicts with the provisions of this Agreement. No Stockholder shall act,
for any reason, as a member of a group or in concert or enter into any agreement
or arrangement with any other person in connection with the acquisition,
disposition or voting of Stockholder Shares in any manner which conflicts with
the provisions of this Agreement.
18. Actions Consistent with Agreement. Neither the Corporation nor any of
the Stockholders shall circumvent this Agreement by taking any action through
their respective equityholders, subsidiaries or Affiliates that would otherwise
be prohibited under this Agreement if taken directly by the Corporation or such
Stockholder.
19. Transfer. Prior to transferring any Stockholder Shares (other than in
a Public Sale) to any person or entity pursuant to the terms of this Agreement,
the Transferring Stockholder shall cause the prospective transferee to execute
and deliver to the Corporation and the other Stockholders a counterpart of this
Agreement. Each such counterpart shall be deemed to be an original part of this
Agreement as though executed on the date hereof. Upon the execution of this
Agreement (a) the transferee shall be treated as an Investor if the majority of
its shares were acquired from the Investors and shall be counted in all votes or
actions of the Investors, (b) the transferee shall be treated as an Evercom
Investor if the majority of its shares were acquired from the Evercom Investors
and shall be counted in all votes or actions of the Evercom Investors or (c) the
transferee shall be treated as a Management Stockholder if the
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majority of its shares were acquired from the Management Stockholders and shall
be counted in all votes or actions of the Management Stockholders.
20. Executive Stock. All Stockholder Shares repurchased by the Corporation
pursuant to the Restricted Stock Purchase Agreements, the Options or otherwise
shall be available for reissue to executive employees of the Corporation and its
subsidiaries as approved by the Board, and such reissued shares shall be subject
to the terms of this Agreement.
21. Definitions.
"Accountants" shall have the meaning set forth in Section 14(a)(ii)
hereof.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended.
"Agreement" shall have the meaning set forth in the preamble.
"Approved Sale" means (a) a Sale of the Corporation approved by the Board
or the holders of a majority of the Stockholder Shares (based upon voting
rights) and pursuant to which the holders of a majority of the Stockholder
Shares transfer a majority of their Stockholder Shares or (b) a Reorganization.
"Board" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Common Stock" means (i) the Corporation's common stock, par value $.01
per share (whether Vested Shares or Unvested Shares) of any class or series, and
(ii) any securities issued or issuable with respect to the capital stock
referred to in clause (i) above by way of stock dividends or stock splits or in
connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization.
"Corporation" shall have the meaning set forth in the preamble.
"Corporation-Paid Long-Form Registrations" shall have the meaning set
forth in Section 6(b) hereof.
"Demand Registrations" shall have the meaning set forth in Section 6(a)
hereof.
"Election Period" shall have the meaning set forth in Section 1(b)
hereof.
"Evercom Investors" shall mean the Investors listed on the signature pages
hereto as Evercom Investors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
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"Family Group" means a Stockholder's spouse and descendants or heirs
(whether natural or adopted) and any trust or other estate planning entity
solely for the benefit of the Stockholder and/or the Stockholder's spouse and/or
descendants or heirs.
"Fully Diluted Basis" means the number of shares of Common Stock that
would be outstanding if all warrants, options and other derivative securities
that have vested as of the date of calculation were exercised and shares of
Common Stock were issued in exchange therefor.
"GAAP" means generally accepted accounting principles, consistently
applied, as in existence from time to time.
"HIG Directors" shall have the meaning set forth in Section 5(a)(ii)(A)
hereof.
"Independent Third Party" means any person who, immediately prior to the
contemplated transaction, is not an Affiliate of the Corporation.
"Investors" shall have the meaning in the preamble.
"Laminar Warrant" shall have the meaning set forth in the recitals hereto.
"Long-Form Registrations" shall have the meaning set forth in Section 6(a)
hereof.
"Management Stockholder" shall have the meaning set forth in the preamble
and shall include his permitted successors and assigns.
"Offer Notice" shall mean the notice required to be given by a
Transferring Stockholder to the Corporation and/or the Other Stockholders
describing a proposed Transfer. At a minimum, the Offer Notice shall be in
writing and shall contain (i) the number of Stockholder Shares that the
Transferring Stockholder proposes to sell; (ii) the name and address of the
proposed transferee; (iii) the proposed purchase price, terms of payment and
other material terms and conditions of such proposed transfer; and (iv) an
estimate, in the Transferring Stockholder's reasonable judgment, of the fair
market value of any non-cash consideration offered by the proposed transferee.
"Option" means any right, warrant, option or arrangement which allows a
person to acquire securities of the Corporation or requires the Corporation to
issue any securities to a Person.
"Other Stockholders" shall have the meaning set forth in Section 1(b)
hereof.
"Permitted Transfer" shall have the meaning set forth in paragraph 1(e)
hereof.
"Piggyback Registration" shall have the meaning set forth in Section 7(a)
hereof.
"Pro Rata Portion" shall have the meaning set forth in Section 1(c)
hereof.
-20-
"Public Sale" means any sale of Stockholder Shares to the public pursuant
to an offering registered under the Securities Act or to the public pursuant to
the provisions of Rule 144 adopted under the Securities Act.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of Common Stock having an
aggregate value of at least $50 million.
"Registration Expenses" shall have the meaning set forth in Section 10(a)
hereof.
"Remaining Shares" shall have the meaning set forth in Section 1(c)
hereof.
"Reorganization" means any reorganization of the capital structure of the
Corporation either (a) separately or (b) in connection with an acquisition of an
Independent Third Party conducted pursuant to Section 351 of the Code, in each
case in which the all of the holders of Vested Shares are treated in the same
manner.
"Restricted Stock Purchase Agreements" shall have the meaning set forth in
the recitals hereto.
"Sale of the Corporation" means the sale of the Corporation to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Corporation possessing
the voting power under normal circumstances to elect a majority of the Board
(whether by merger, consolidation or sale or transfer of the Corporation's
capital stock) or (ii) all or substantially all of the Corporation's assets
determined on a consolidated basis; provided, that a Sale of the Corporation
shall not include any Reorganization in which the Corporation becomes a
subsidiary of a company that is controlled by the Stockholders immediately after
such Reorganization.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Short-Form Registrations" shall have the meaning set forth in Section
6(a) hereof,
"Stockholder" shall have the meaning as set forth in the preamble and
shall include their permitted successors and assigns.
"Stockholders" shall have the meaning as set forth in the preamble.
"Stockholder Shares" means (i) any Common Stock or other capital stock of
the Corporation purchased or otherwise acquired by any Stockholder, including
without limitation, Unvested Shares and Vested Shares, (ii) any equity
securities issued or issuable directly or indirectly with respect to the capital
stock referred to in clause (i) above by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, (iii) the Laminar Warrant and the shares
of Common Stock issued or issuable upon the exercise of the Laminar Warrant, and
(iv) any other shares of any class or series of capital stock of the Corporation
held by a Stockholder. As to any particular shares constituting Stockholder
Shares, such shares shall cease to be Stockholder Shares when
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they have been sold to the public through a Public Sale even if thereafter they
are reacquired by a Stockholder.
"Transfer" shall have the meaning set forth in Section 1(a) hereof.
"Transferring Stockholder" shall have the meaning set forth in Section
l(b) hereof.
"Unvested Shares" means (i) any capital stock or Option purchased or
otherwise acquired by a Management Stockholder that is subject to vesting
requirements or, as a result of an agreement with the Corporation or the
Investors, other contractual risk of forfeiture, and (ii) any equity securities
issued or issuable directly or indirectly with respect to the capital stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization; provided, however, upon the occurrence of the event or
action which causes the Management Stockholder to have vested rights in all or
any portion of such capital stock or otherwise removes the substantial risk of
forfeiture, the portion of such capital stock as to which "vesting" occurred
shall become Vested Shares.
"Vested Shares" means (i) any capital stock purchased or otherwise
acquired by a Stockholder that is free of vesting requirements and substantial
risk of forfeiture from contractual restrictions through an agreement with the
Corporation or the Investors, and (ii) any equity securities issued or issuable
directly or indirectly with respect to the capital stock referred to in the
clause above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
22. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Corporation shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
23. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Corporation, the Investors, or a Management Stockholder
unless such modification, amendment, termination or waiver is approved in
writing by (a) the Corporation, (b) the holders of at least 51% of the
Stockholder Shares held by the Management Stockholders, and (c) the holders of
at least 80% of the Stockholder Shares held by the Investors; provided, however,
that no modification, amendment or waiver of any provision of this Agreement
shall be effective against any Stockholder without such Stockholder's written
approval if such modification, amendment or waiver changes such Stockholder's
rights (e.g. as among Investors as a group or Management Stockholders as a
group) or obligations hereunder in a manner disproportionate to other similarly
situated Stockholders; and provided further, however, that the Corporation may
from time to time add additional stockholders of the Corporation to this
Agreement without the consent or additional signatures of the parties hereto
(and amend and/or restate the Agreement to reflect such additions) and upon the
Corporation's receipt of such additional stockholders' signature pages or
joinder agreements, such additional stockholders shall be deemed to be a party
hereto and such additional signature pages or joinder agreements shall be a part
of this Agreement. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be
-22-
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
24. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
25. Entire Agreement. Except as otherwise expressly set forth herein, this
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
26. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Corporation and its successors and assigns and the Stockholders and any
permitted subsequent holders of Stockholder Shares and the respective successors
and permitted assigns of each of them, so long as they hold Stockholder Shares.
27. Counterparts. This Agreement may be executed in separate counterparts,
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
28. Remedies. The Corporation, the Investors and the Management
Stockholders shall be entitled to enforce their rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that the
Corporation, any Investors or any Management Stockholder may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
29. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) (a) to
the Corporation c/o H.I.G. Capital, LLC at 0000 Xxxxxxxx Xxx Xxxxx, 00xx Xxxxx,
Xxxxx, Xxxxxxx 00000, Attention: Xxxx Xxxxxxxxx, with a copy (which shall not
constitute notice to the Corporation) to White & Case LLP at 000 X. Xxxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Esq.,
(b) to HIG at 0000 Xxxxxxxx Xxx Xxxxx, 00xx Xxxxx, Xxxxx, Xxxxxxx 00000,
Attention: Xxxxx Xxxxxxxx, with a copy (which shall not constitute notice to
HIG) to White & Case LLP at 000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx,
Xxxxxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Esq., (c) to ACAS at 0000 Xxxx
Xxxxxx, Xxxxx 0000 X, Xxxxxx, Xxxxx 00000, Attention: Xxxxx Xxxx, (d) to Laminar
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at 00000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention: Xxxx Xxxxx,
with a copy (which shall not constitute notice to Laminar) to DESCO LP at 000
Xxxx Xxxxx-Xxxxx Xxxxxx, 39th Floor, Tower 45, New York, New York 10036,
Attention: General Counsel, (e) to any other recipient at the address indicated
on the schedules hereto, and (f) to any subsequent holder of Stockholder Shares
subject to this Agreement at such address as indicated by the Corporation's
records, or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
Notices will be deemed to have been given hereunder when delivered personally,
three (3) days after deposit in the U.S. mail and one (1) day after deposit with
a reputable overnight courier service.
30. Governing Law. This Agreement will be construed and interpreted in
accordance with and governed by the internal laws of the State of Delaware.
31. Termination. The provisions of Sections 1, 2, 3, 4, 5, 13, 14(a), 15
and 18 shall terminate on the effective date of a Qualified Public Offering.
This Agreement in its entirety (except for Section 8(b)) shall expire on the
date of a Sale of the Corporation.
32. Waiver of Jury Trial. THE COMPANY AND THE STOCKHOLDERS ALL HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
33. Consent to Jurisdiction and Service of Process. All judicial
proceedings brought against the Corporation with respect to this Agreement or
any securities hereunder may be brought in any State or Federal Court of
competent jurisdiction in the State of Delaware and by execution and delivery of
this Agreement the Corporation accepts for itself and in connection with its
properties, generally and unconditionally, the jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement, subject, however, to rights of appeal. The
Corporation hereby waives personal service of process and consents that service
of process upon it may be made by certified or registered mail, return receipt
requested, at its address specified or determined in accordance with Section 29
hereof, and service so made shall be deemed completed on the third (3rd)
Business Day after mailing. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of any
party hereto to bring proceedings in the courts of any other jurisdiction.
[SIGNATURES START ON THE NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement on the day and year first written above.
THE CORPORATION:
SECURUS TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Its President
THE INVESTORS:
H.I.G.-TNETIX, INC.
By: Xxxx Xxxxxxxx
---------------------------------
Its Co-President
AMERICAN CAPITAL STRATEGIES, LTD.
By:
---------------------------------
Its
---------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement on the day and year first written above.
THE CORPORATION:
SECURUS TECHNOLOGIES, INC.
By:
---------------------------------
It
---------------------------------
THE INVESTORS:
H.I.G.-TNETIX, INC.
By:
---------------------------------
Its
---------------------------------
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/ Xxxxx Xxxx
---------------------------------
Its Senior Vice President
LAMINAR DIRECT CAPITAL, L.P.
By:
---------------------------------
Its
---------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement on the day and year first written above.
THE CORPORATION:
SECURUS TECHNOLOGIES, INC.
By:___________________________________
Its___________________________________
THE INVESTORS:
H.I.G.-TNETIX, INC.
By:___________________________________
Its___________________________________
AMERICAN CAPITAL STRATEGIES, LTD.
By:___________________________________
Its___________________________________
LAMINAR DIRECT CAPITAL, L.P.
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Printed Name: Xxxxxx X. Xxxx
Title: Authorized Signatory
THE MANAGEMENT STOCKHOLDERS:
/s/ Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxxx Xxxxxxx
Address for Notices:
0000 Xxxxxxx Xxxxx
Xxxxxx XX 00000
Facsimile:
/s/ Xxxxxxx Xxxx
------------------------------------
Xxxxxxx Xxxx
Address for Notices:
0000 Xxxxxx XX Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
EVERCOM INVESTORS:
ALPINE ASSOCIATES, L.P.:
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Its: Managing Director
Address for Investor Notices:
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
ALPINE PARTNERS, L.P.:
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Its: Managing Director
Address for Investor Notices:
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
EVERCOM INVESTORS (CONTINUED):
A.I.F. INVESTMENT COMPANY:
By: /s/ Xxxx Xxxxx
------------------------------
Its: Co-President
Address for Investor Notices:
0000 Xxxxxxxx Xxx Xxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
/s/ Xxx Xxxxxx
---------------------------------
Xxx Xxxxxx
Address for Investor Notices:
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
