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EXHIBIT 10.1
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TRANSCEND TELECOM, INC.
AND
TRANSCEND TELECOM, L.L.C.
AUGUST 13, 1997
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TABLE OF CONTENTS
Page
1. Authorization and Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of the Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1B. Purchase and Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1C. The Initial Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1D. The Subsequent Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Conditions to the Initial Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2A. Representations and Warranties; Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2B. Adoption of Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2C. Adoption of the Company's Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2D. LLC Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2E. Investor Unit Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2F. Executive Unit Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2G. Securityholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2H. Registration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2I. Securities Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2J. Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2K. Initial Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2L. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2M. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Conditions to Each Subsequent Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3A. Authorized by Approved Business Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3B. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3C. No Breach or Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3D. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3E. Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3F. Subsequent Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3G. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3H. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4A. Financial Statements and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4B. Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4C. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4D. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4E. Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4F. Current Public Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4G. Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4H. Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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4I. Additional Restrictive Covenant Concerning Stock Issuances and Incurring Debt . . . . . . . . . . . 15
4J. Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4K. Affiliated Entity Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Transfer of Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5A. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5B. Opinion Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5C. Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5D. Legend Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6A. Organization, Corporate Power and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6B. Capital Stock and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6C. Authorization; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6D. Conduct of Business; Absence of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6E. No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6F. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6G. Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6H. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6I. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7. Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7A. Board Composition and Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7B. Director Expenses; Indemnity Insurance; Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . 23
7C. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8A. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8B. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9A. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9B. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9C. LLC's Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9D. Consent to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9E. Put Cooperation Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9F. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9G. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9H. Capital and Surplus; Special Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9I. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9J. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9K. Descriptive Headings; Interpretation; No Strict Construction . . . . . . . . . . . . . . . . . . . . 34
9L. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9M. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9N. Delivery by Facsimile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
August 13, 1997, by and between Transcend Telecom, Inc., a Delaware corporation
(the "Company"), and Transcend Telecom, L.L.C., a Delaware limited liability
company (the "LLC"). Capitalized terms used but not otherwise defined herein
have the meanings ascribed to such terms in Section 8 below.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1. AUTHORIZATION AND CLOSINGS.
1A. Authorization of the Preferred Stock. The Company
shall authorize the issuance and sale to the LLC of 95,000 shares of the
Company's 12% Cumulative Convertible Preferred Stock, par value $.01 per share
(the "Preferred Stock"), having the rights and preferences set forth in the
Certificate of Incorporation attached hereto as Exhibit 1. The Preferred Stock
is convertible into shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), as set forth in the Certificate of Incorporation.
1B. Purchase and Sale of Preferred Stock. At the Initial
Closing (as defined below), subject to the terms and conditions set forth
herein, the Company shall sell to the LLC and the LLC shall purchase from the
Company 95,000 shares of Preferred Stock at a price per share of $52.63, for an
aggregate purchase price equal to $5,000,000 (the "Initial Contribution").
1C. The Initial Closing. The closing of the purchase and
sale of Preferred Stock (the "Initial Closing") shall take place at the offices
of Xxxxxxxx & Xxxxx in Chicago, Illinois, at 10:00 a.m. local time on the date
hereof (the "Initial Closing Date"). At the Initial Closing, the Company shall
deliver to the LLC stock certificates evidencing the Preferred Stock to be
purchased at the Initial Closing, registered in the name of the LLC, upon the
LLC's payment of the purchase price thereof by delivery to the Company of a
check, or wire transfer of immediately available funds to an account designated
by the Company, in an aggregate amount equal to the Initial Contribution.
1D. The Subsequent Closings. Each of the subsequent
closings hereunder (the "Subsequent Closings") shall, subject to the terms and
conditions set forth below, occur at a time and place determined by the
Company's chief executive officer and set forth in a written notice from such
chief executive officer on behalf of the Company (the "Subsequent Closing
Notice") sent to the LLC and to each Person holding an interest in the profits,
losses, and distributions of the LLC (collectively, the "Unitholders") at least
30 days prior to the applicable Subsequent Closing. Such notice shall set
forth the aggregate amount to be contributed to the capital of the Company by
the LLC at such Subsequent Closing (the "Subsequent Contribution"); provided
that the applicable Subsequent Contribution for any Subsequent Closing shall
not, together with the Initial Contribution and the aggregate Subsequent
Contributions at all prior Subsequent Closings, exceed the Maximum Commitment;
and provided further that there shall exist no further obligations to make any
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Subsequent Contributions under this paragraph after the dissolution of the LLC,
other than any obligations relating to Subsequent Closings which have occurred
prior to such dissolution. At each Subsequent Closing, subject to the terms
and conditions hereof, the LLC shall deliver to the Company a check, or wire
transfer of immediately available funds to an account designated by the
Company, in an aggregate amount equal to the applicable Subsequent
Contribution; provided that in the event the Exercising Holders (as defined in
the LLC Agreement) have elected the remedy set forth in paragraph 5.1(b)(i)(C)
of the LLC Agreement, the LLC shall have no obligation to pay to the Company
the portion of any Subsequent Contribution constituting Related Contributions
(as defined in the LLC Agreement). If at any time after the date hereof the
LLC makes any contributions to the capital of the Company without the issuance
of additional shares of the Company's stock and the amount of such capital
contributions exceed the LLC's then-outstanding unpaid obligations (if any) to
make the Initial Contribution and all Subsequent Contributions required to be
made with respect to Subsequent Closings occurring prior to such time (the
amount of any such excess, an "Excess Contribution"), then such Excess
Contribution shall be credited dollar for dollar against the LLC's obligation
to make Subsequent Contributions at Subsequent Closings occurring after the
date of such Excess Contribution.
SECTION 2. CONDITIONS TO THE INITIAL CLOSING. The
obligation of the LLC to purchase and pay for the Preferred Stock at the
Initial Closing is subject to the satisfaction as of the Initial Closing of the
following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 6 hereof shall be true and
correct in all material respects at and as of the Initial Closing as though
then made, except to the extent of changes caused by the transactions expressly
contemplated herein, and the Company shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the Initial Closing.
2B. Adoption of Certificate of Incorporation. The
Company's certificate of incorporation shall have been amended and restated in
form and substance as set forth in Exhibit 1 hereto (as so amended and
restated, the "Certificate of Incorporation"), shall be in full force and
effect under the laws of Delaware as of the Initial Closing, and shall not have
been further amended or modified.
2C. Adoption of the Company's Bylaws. The Company's
bylaws shall have been duly authorized and adopted in form and substance as set
forth in Exhibit 2 attached hereto (as so adopted, the "Bylaws"), shall be in
full force and effect under the laws of Delaware as of the Initial Closing, and
shall not have been further amended or modified.
2D. LLC Agreement. The Unitholders shall have entered
into a limited liability company agreement governing the affairs of the LLC, in
form and substance as set forth in Exhibit 3 attached hereto (the "LLC
Agreement"), and the LLC Agreement shall be in full force and effect as of the
Initial Closing.
2E. Investor Unit Purchase Agreement. The LLC and the
Investor Members shall have entered into an investor unit purchase agreement in
form and substance as set forth in Exhibit
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4 attached hereto (the "Investor Purchase Agreement"), and the Investor
Purchase Agreement shall be in full force and effect as of the Initial Closing.
2F. Executive Unit Purchase Agreements. The LLC and the
Company shall have entered into an executive unit purchase agreement, in form
and substance substantially similar to that set forth in Exhibit 5 attached
hereto (each an "Executive Purchase Agreement"), with each of Xxxxx X. Xxxxxxx
("Holland") and Xxxxxx X. Xxxx ("Lord"), and such Executive Purchase Agreements
shall be in full force and effect as of the Initial Closing.
2G. Securityholders Agreement. The LLC, the Company, and
each of the Unitholders shall have entered into a securityholders agreement in
form and substance as set forth in Exhibit 7 attached hereto (the
"Securityholders Agreement"), and the Securityholders Agreement shall be in
full force and effect as of the Initial Closing.
2H. Registration Agreement. The Company and each of the
Unitholders shall have entered into a registration agreement in form and
substance as set forth in Exhibit 8 attached hereto (the "Registration
Agreement"), and the Registration Agreement shall be in full force and effect
as of the Initial Closing.
2I. Securities Law Compliance. The Company shall have
made all filings under all applicable federal and state securities laws
necessary to consummate the issuance, in compliance with such laws, of the
Preferred Stock to be issued at the Initial Closing pursuant to this Agreement.
2J. Compliance with Applicable Laws. The purchase of
Preferred Stock by the LLC hereunder at the Initial Closing shall not be
prohibited by any applicable law or governmental rule or regulation and shall
not subject the LLC to any penalty, liability or, in the LLC's reasonable
judgment, other onerous condition under or pursuant to any applicable law or
governmental rule or regulation, and the purchase of the Preferred Stock by the
LLC hereunder shall be permitted by the laws, rules and regulations of the
jurisdictions and governmental authorities and agencies to which the LLC is
subject.
2K. Initial Closing Documents. The Company shall have
delivered to the LLC all of the following documents:
(i) an Officer's Certificate, dated the Initial
Closing Date, stating that the conditions specified in paragraphs
1A-1C, 2A-2C, and 2H-2I, inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly
adopted by the Board authorizing the execution, delivery and
performance of this Agreement, the Securityholders Agreement, the
Registration Agreement and each of the other agreements contemplated
hereby, the amendment and restatement of the Company's Certificate of
Incorporation referred to in paragraph 2B, the adoption of the
Company's Bylaws referred to in paragraph 2C, the issuance and sale of
the Preferred Stock at the Initial Closing, the reservation for
issuance upon conversion of the Preferred Stock the number of shares
of Common Stock
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issuable upon conversion of all shares of Preferred Stock, and the
consummation of all other transactions to occur as of the Initial
Closing as contemplated by this Agreement, and (b) the resolutions
duly adopted by the Company's sole stockholder authorizing the
amendment and restatement of the Certificate of Incorporation referred
to in paragraph 2B;
(iii) certified copies of the Certificate of
Incorporation and the Bylaws, each as in effect at the Initial
Closing;
(iv) copies of all third party and governmental
consents, approvals and filings required in connection with the
consummation of the transactions to occur as of the Initial Closing
hereunder (including, without limitation, all blue sky law filings and
waivers of all preemptive rights and rights of first refusal); and
(v) such other documents relating to the
transactions contemplated by this Agreement as the LLC or its special
counsel may reasonably request.
2L. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with the
transactions to occur at the Initial Closing shall be consummated at or prior
to the Initial Closing and all documents incident thereto shall be satisfactory
in form and substance to the LLC and its special counsel.
2M. Waiver. Any condition specified in this Section 2
may be waived if such waiver is consented to by the LLC; provided that no such
waiver shall be effective against the LLC unless it is set forth in a writing
executed by the LLC.
SECTION 3. CONDITIONS TO EACH SUBSEQUENT CLOSING. The
obligation of the LLC to make the specified Subsequent Contribution to the
capital of the Company at each Subsequent Closing is subject to the
satisfaction as of such Subsequent Closing of the following conditions:
3A. Authorized by Approved Business Plans. The
applicable Subsequent Contribution for such Subsequent Closing shall be
expressly contemplated and authorized under the terms of the Company's Approved
Business Plans, and such Subsequent Contribution shall not exceed the aggregate
capital requirements of the Company during the 6- month period (or such longer
or shorter time period as agreed to by the LLC and the Company's chief
executive officer) commencing on the date of such Subsequent Closing as set
forth in the Company's Approved Business Plans (taking into account any prior
Subsequent Contribution to the extent the time period for such prior Subsequent
Contribution overlaps with the time period for the present Subsequent
Contribution). For purposes of this Agreement, an "Approved Business Plan"
means any business proposal submitted by the chief executive officer of the
Company to the Board and to the LLC, setting forth proposed business activities
of the Company in a specified xxxxxxxxxxxx xxxxxxxxxxx xxxx ("XXX") during the
5-year period commencing on the date of such business proposal (or, if longer,
the period running from the date of such business proposal until the date
estimated in such proposal as the "break even" point for the Company's
operations in such MSA) (including the identification of key managers to be
hired and the proposed compensation and terms for each such hire); projections
of revenues, expenses, and income from such business activities; projections of
the
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amounts, timing, and proposed terms for lease financing and other financing to
be obtained by the Company to support such business activities during such
period; the amounts and timing of periodic capital drawdowns that the chief
executive officer deems necessary to support such business activities during
such period; and a budget of proposed expenditures of such capital; provided,
however, that no such business proposal shall constitute an Approved Business
Plan unless and until it has been approved by the LLC. Notwithstanding the
foregoing sentence, the parties acknowledge that:
(i) such a business proposal detailing the funds
necessary to build out all or part of the Company's business in the first MSA
other than the Dallas MSA (such other MSA, the "Second Market") shall not, even
after receiving the required LLC approval, be considered an "Approved Business
Plan" unless and until an individual has orally agreed (on terms of employment
reasonably satisfactory to the Board's Executive Committee) to serve as the
Company's president and chief operating officer (a "COO"), having primary
responsibility for the operations of the Company and for performing such other
executive duties as are ordinarily commensurate with such position (and subject
to no noncompete or other contractual restrictions on performing such duties),
which individual has been approved in advance for such position by the Board's
Executive Committee;
(ii) such a business proposal detailing the funds
necessary to build out all or part of the Company's business in any MSA other
than the Dallas MSA or the Second Market (such MSA, an "Other MSA") shall not,
even after receiving the required LLC approval, be considered an "Approved
Business Plan" unless and until (x) the Company has actually hired a COO
pursuant to the requirements and conditions set forth in clause (i) above and
such COO has commenced service with the Company as a full-time employee and has
executed an Executive Purchase Agreement and a counterpart to this Agreement,
the LLC Agreement and the Securityholders Agreement, and (y) the Board's
Executive Committee has approved the significant terms and conditions
(including, without limitation, the amount of financing, rate of interest,
duration of financing, conditions of financing, and covenants applicable to the
Company) of an agreement pursuant to which the Company would obtain equipment
financing for building out and conducting its business in such Other MSA; and
(iii) any Approved Business Plan for any particular MSA
shall cease to be such and shall not be considered or deemed to be an Approved
Business Plan for any purpose whatsoever (whether under this Agreement, the LLC
Agreement, or otherwise) during such time as the revenues, expenses, available
financing, capital expenditures, capital requirements, or other business
operations of the Company in the MSA to which such plan relates reflect, in the
good faith judgment of the LLC, a substantial deviation from such plan's
estimates, plans, and projections of any of the foregoing (or from an Approved
Budget's particularization of estimates, plans, and projections of any of the
foregoing, to the extent based on such plan) (it being understood that the
determination of the existence or nonexistence of a "substantial deviation"
shall consider such plan's estimates, plans, and projections in the aggregate
and shall not consider any one factor or measure in isolation to the extent a
deviation in such factor or measure does not impact the plan as a whole).
3B. Representations and Warranties. The representations
and warranties contained in paragraphs 6A (Organization), 6B(ii) (Capital
Stock), 6C (Authorization), 6F (Brokerage), 6G
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(Governmental Consent), 6H (Compliance with Laws), and 6I (Disclosure) hereof
shall be true and correct in all material respects at and as of such Subsequent
Closing as though then made, except to the extent of changes caused by the
transactions expressly contemplated herein.
3C. No Breach or Default. Neither the Company nor any of
its Subsidiaries shall have breached or be in default of any of its material
obligations to the LLC or the Unitholders pursuant to this Agreement or the
Registration Agreement, and neither the Company nor any of its Subsidiaries
shall be in material breach or default under any material agreement to which it
is a party.
3D. No Material Adverse Change. In the good faith
judgment of the LLC, there shall not have occurred a material adverse change
(other than a change specifically and expressly contemplated in one or more
Approved Business Plans approved prior to the date of such Subsequent Closing)
in the business, financial condition, operations, assets, or business prospects
of the Company and its Subsidiaries taken as a whole.
3E. Compliance with Applicable Laws. The making of the
applicable Subsequent Contribution by the LLC hereunder at such Subsequent
Closing shall not be prohibited by any applicable law or governmental rule or
regulation and shall not subject the LLC to any penalty, liability or, in the
LLC's reasonable judgment, other onerous condition under or pursuant to any
applicable law or governmental rule or regulation, and the making of such
Subsequent Contribution by the LLC hereunder shall be permitted by the laws,
rules and regulations of the jurisdictions and governmental authorities and
agencies to which the LLC is subject.
3F. Subsequent Closing Documents. The Company shall have
delivered to the LLC all of the following documents:
(i) an Officer's Certificate, dated the date of
the Subsequent Closing, stating that the conditions specified in
paragraphs 3A through 3D, inclusive, have been fully satisfied; and
(ii) such other documents relating to the
transactions to occur at such Subsequent Closing as the LLC or its
special counsel may reasonably request.
3G. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with the
transactions to occur at such Subsequent Closing shall be consummated at or
prior to such Subsequent Closing and all documents incident thereto shall be
satisfactory in form and substance to the LLC and its special counsel.
3H. Waiver. Any condition specified in this Section 3
may be waived if consented to by the LLC; provided that no such waiver shall be
effective against the LLC unless it is set forth in a writing executed by the
LLC.
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10
SECTION 4. COVENANTS.
4A. Financial Statements and Other Information. The
Company shall deliver (a) to each Management Member (so long as such Management
Member holds any Management Equity and such Management Member does not
"participate" (as such term is defined in the form executive purchase agreement
attached hereto as Exhibit 5) in any business that is competitive with the
Company or any Subsidiary), the information set forth in subparagraph 4A(iii)
below, and (b) to the LLC (so long as it holds any Underlying Common Stock), to
each Investor Member or its Affiliates (so long as such Investor Member or
Affiliate holds any Investor Equity), and to any subsequent holder of at least
5% of the Investor Equity (the LLC, each Investor Member or Affiliate, and each
other such holder, a "Qualified Holder") all the information described in this
paragraph 4A:
(i) as soon as available but in any event within
30 days after the end of each monthly accounting period in each fiscal
year: (a) unaudited consolidating and consolidated statements of
income and cash flows of the Company and its Subsidiaries for such
monthly period and for the period from the beginning of the fiscal
year to the end of such month, and unaudited consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of
the end of such monthly period, setting forth in each case comparisons
to the Company's annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied (subject to the absence of footnote disclosures and to changes
resulting from normal year-end adjustments for recurring accruals),
and shall be certified by the Company's chief financial officer, and
(b) a status report prepared by the Company's chief financial officer,
indicating whether the Company has met its budgeted financial goals
(including, without limitation, those specified in any Approved
Business Plan and those delivered pursuant to subparagraph (v) below),
discussing the reasons for any variation from such goals, and
describing what actions the Company and its Subsidiaries have taken
and propose to take in order to meet budgeted financial targets in the
future;
(ii) within 45 days after the end of each
quarterly accounting period in each fiscal year, an Officer's
Certificate stating that the Company is not in default under this
Agreement or the Registration Agreement, and that neither the Company
nor any of its Subsidiaries is in default under any of its other
material agreements or, if any such default exists, specifying the
nature and period of existence thereof and what actions the Company
and its Subsidiaries have taken and propose to take with respect
thereto;
(iii) within 90 days after the end of each fiscal
year, consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the Company's annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (a)
with respect to the consolidated portions of such statements, an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities) of an
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11
independent accounting firm of recognized national standing acceptable
to the holders of a majority of the Underlying Common Stock, (b) a
certificate from such accounting firm, addressed to the Board, stating
that in the course of its examination nothing came to its attention
that caused it to believe that there was any default specified in
paragraph 4A(ii) in existence or that there was any other default by
the Company or any Subsidiary in the fulfillment of or compliance with
any of the terms, covenants, provisions or conditions of any material
agreement to which the Company or any Subsidiary is a party or, if
such accountants have reason to believe any such default by the
Company or any Subsidiary exists, a certificate specifying the nature
and period of existence thereof, and (c) a copy of such firm's annual
management letter to the Board;
(iv) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
(v) at least 30 days but not more than 90 days
prior to the beginning of each fiscal year, an annual budget prepared
on a monthly basis for the Company and its Subsidiaries for such
fiscal year (displaying anticipated statements of income and cash
flows and balance sheets and budgeted capital expenditures), which
annual budget shall have been approved by the LLC (it being understood
that if the statements, amounts, figures, estimates, plans, and
projections set forth in such budget are substantially in accordance
with that contemplated by the Company's Approved Business Plans then
in effect, the LLC's consent shall not be unreasonably withheld) (as
approved, an "Approved Budget"), and promptly upon preparation thereof
any other significant budgets prepared by the Company and any
revisions of such annual or other budgets (it being understood that
any revisions of any Approved Budget must be approved by the LLC);
(vi) promptly (but in any event within five
business days) after the discovery or receipt of notice of any default
under any material agreement to which the Company or any of its
Subsidiaries is a party, any condition or event which is reasonably
likely to result in any material liability under any federal, state or
local statute or regulation relating to public health and safety,
worker health and safety or pollution or protection of the environment
or any other material adverse change, event or circumstance affecting
the Company or any Subsidiary (including, without limitation, the
filing of any material litigation against the Company or any
Subsidiary or the existence of any dispute with any Person which
involves a reasonable likelihood of such litigation being commenced),
an Officer's Certificate specifying the nature and period of existence
thereof and what actions the Company and its Subsidiaries have taken
and propose to take with respect thereto;
(vii) within ten days after transmission thereof,
copies of all financial statements, proxy statements, reports and any
other general written communications which the Company sends to its
stockholders and copies of all registration statements and all
regular, special or periodic reports which it files, or (to its
knowledge) any of its officers or directors file with respect to the
Company, with the Securities and Exchange Commission
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12
or with any securities exchange on which any of its securities are
then listed, and copies of all press releases and other statements
made available generally by the Company to the public concerning
material developments in the Company's and its Subsidiaries'
businesses; and
(viii) with reasonable promptness, such other
information and financial data concerning the Company and its
Subsidiaries as any Qualified Holder may reasonably request.
Each of the financial statements referred to in subparagraphs 4A(i) and (iii)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, be materially adverse
to the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the provisions of this paragraph 4A shall cease
to be effective so long as the Company (a) is subject to the periodic reporting
requirements of the Securities Exchange Act and continues to comply with such
requirements and (b) promptly provides to each Qualified Holder all reports and
other materials filed by the Company with the Securities and Exchange
Commission pursuant to the periodic reporting requirements of the Securities
Exchange Act; provided that so long as any Preferred Stock remains outstanding,
the Company shall continue to deliver to each Qualified Holder the information
specified in subparagraphs 4A(ii), 4A(iii)(b), 4A(v), 4A(vi), and 4A(viii).
Except as otherwise required by law or judicial order or decree or requested by
any governmental agency or authority, or as specified in the immediately
following proviso, each Person entitled to receive information regarding the
Company and its Subsidiaries under paragraph 4A or 4B shall not disclose any
such information to any third party (other than such Person's advisors or
representatives); provided that such a Person may disclose such information (i)
in connection with the sale or transfer of any Class A Units, Preferred Stock,
or Underlying Common Stock if such Person's transferee agrees in writing to be
bound by the provisions hereof, (ii) if such Person is a partnership, limited
liability company or corporation, to such Person's partners, members and
shareholders, as the case may be, in the ordinary course of its business, or
(iii) if such information is available to the public other than by reason of
such Person's breach of this provision.
For purposes of this Agreement and the Registration Agreement, all holdings of
Class A Units, Preferred Stock and Underlying Common Stock by Persons who are
Affiliates shall be aggregated for purposes of meeting any threshold tests
under this Agreement or the Registration Agreement.
4B. Inspection of Property. To the extent not otherwise
prohibited by law or regulation, the Company shall permit any representatives
designated by any Qualified Holder, upon reasonable notice and during normal
business hours and at such other times as any such Qualified Holder may
reasonably request to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of
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13
the Company and its Subsidiaries. The presentation of an executed copy of this
Agreement (or photocopy thereof) by any Qualified Holder or representative
thereof to the Company's independent accountants shall constitute the Company's
permission to its independent accountants to participate in discussions with
such Persons notwithstanding the fact that such Qualified Holder is not a party
hereto.
4C. Restrictions. Prior to the consummation of a Public
Offering, the Company shall not, without the prior written consent of the LLC
(which consent may be authorized by the LLC's Executive Committee (as defined
in the LLC Agreement)):
(i) directly or indirectly declare or pay any
dividends or make any distributions upon any of its capital stock or
other equity securities other than the Preferred Stock pursuant to the
terms of the Certificate of Incorporation;
(ii) directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's or any Subsidiary's capital
stock or other equity securities (including, without limitation, any
warrants, options and other rights to acquire such capital stock or
other equity securities), except for (A) repurchases of options to
acquire the Company's capital stock or of capital stock issued upon
the exercise of such options, pursuant to the terms of any Permitted
Stock Option Plan (as defined below), (B) repurchases of the Company's
securities pursuant to the terms of the Executive Purchase Agreements,
or (C) repurchases of the Company's securities pursuant to the terms
of paragraph 9E hereof;
(iii) except for (x) issuances of Preferred Stock
at the Initial Closing as contemplated under this Agreement or of
Common Stock upon conversion of such Preferred Stock, or (y) issuances
of options to acquire Common Stock pursuant to the terms of the
Permitted Stock Option Plan (as defined below) or of Common Stock upon
the exercise of such options, authorize, issue or enter into any
agreement providing for the issuance (contingent or otherwise) of (a)
any notes or debt securities containing equity features (including,
without limitation, any notes or debt securities convertible into or
exercisable or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or
other equity securities or containing profit participation features),
other than as may be expressly specified in any Approved Business Plan
or Approved Budget, or (b) any capital stock or other equity
securities (or any securities convertible into or exercisable or
exchangeable for any capital stock or other equity securities);
(iv) make, or permit any Subsidiary to make, any
loans or advances to, guarantees for the benefit of, or Investments
in, any Person (other than a Wholly-Owned Subsidiary established under
the laws of a jurisdiction of the United States or any of its
territorial possessions), except for (a) reasonable advances to
employees or customers in the ordinary course of business, (b)
acquisitions permitted under subparagraph (viii) below, and (c)
Investments having a stated maturity no greater than one year from the
date the Company makes such Investment in (1) obligations of the
United States government or any agency thereof or obligations
guaranteed by the United States government, (2) certificates of
deposit
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14
of commercial banks having combined capital and surplus of at least
$500 million or (3) commercial paper with a rating of at least
"Prime-1" by Xxxxx'x Investors Service, Inc.;
(v) merge or consolidate with any Person or,
except as permitted under subparagraph (viii) below, permit any
Subsidiary to merge or consolidate with any Person (other than a
merger between Wholly-Owned Subsidiaries);
(vi) sell, lease or otherwise dispose of, or
permit any Subsidiary to sell, lease or otherwise dispose of, more
than 10% of the consolidated assets of the Company and its
Subsidiaries (computed on the basis of book value, determined in
accordance with generally accepted accounting principles consistently
applied, or fair market value, determined by the Board in its
reasonable good faith judgment) in any transaction or series of
related transactions, or sell or permanently dispose of any of its or
any Subsidiary's material Intellectual Property Rights;
(vii) liquidate, dissolve or effect a
recapitalization or reorganization, or permit any Subsidiary to
liquidate, dissolve or effect a recapitalization or reorganization, in
any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any
other non-corporate entity which is treated as a partnership for
federal income tax purposes);
(viii) acquire, or permit any Subsidiary to acquire,
any interest in any company or business (whether by a purchase of
assets, purchase of stock, merger or otherwise), or enter into any
joint venture (in each case, other than as may be expressly specified
in any Approved Business Plan or Approved Budget);
(ix) enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any business
other than the provision of telecommunications services or such other
business activities as may be identified in any Approved Business
Plan;
(x) become subject to, or permit any of its
Subsidiaries to become subject to (including, without limitation, by
way of amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict (a) the
right of any Subsidiary to make loans or advances or pay dividends to,
transfer property to, or repay any Indebtedness owed to, the Company
or another Subsidiary or (b) the Company's performance of its
obligations under the provisions of this Agreement, the
Securityholders Agreement, the Registration Agreement, the Certificate
of Incorporation or the Bylaws (including, without limitation,
provisions relating to the declaration and payment of dividends on,
and the conversion of, any Preferred Stock);
(xi) except as expressly contemplated by this
Agreement, make any amendment to the Certificate of Incorporation or
the Bylaws, or file any resolution of the Board with the Delaware
Secretary of State;
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(xii) enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, benefit plan, commitment or arrangement with
any of its or any Subsidiary's executive officers, directors or
Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such
Person or individual owns a beneficial interest, except for customary
and reasonable employment arrangements and except as otherwise
expressly contemplated by this Agreement;
(xiii) establish or acquire any Subsidiaries other
than Wholly-Owned Subsidiaries organized within the United States and
its territorial possessions;
(xiv) create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist,
Indebtedness on a consolidated basis in an aggregate outstanding
principal amount in excess of $500,000 at any time (other than
Indebtedness expressly specified in any Approved Business Plan or
Approved Budget);
(xv) create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any
Liens other than Permitted Liens;
(xvi) make any capital expenditures or permit any
Subsidiary to make any capital expenditures (including, without
limitation, payments with respect to capitalized leases, as determined
in accordance with generally accepted accounting principles
consistently applied) exceeding $100,000 in the aggregate on a
consolidated basis during any 12-month period (other than capital
expenditures expressly specified in any Approved Business Plan or
Approved Budget);
(xvii) enter into, or permit any Subsidiary to enter
into, any leases or other rental agreements (excluding capitalized
leases, as determined in accordance with generally accepted accounting
principles consistently applied) under which the amount of the
aggregate lease payments for all such agreements exceeds $100,000 on a
consolidated basis for any 12-month period, provided that the Company
and its Subsidiaries shall be allowed to enter into any leasing
arrangements (including, but not limited to, leasing
telecommunications networks) that are expressly specified in any
Approved Business Plan or Approved Budget;
(xviii) change its fiscal year or permit any
Subsidiary to change its fiscal year;
(xix) change the authorized size or composition of
the Board, the board of directors of any Subsidiary, or the Board's
Executive Committee from that set forth in paragraph 7 hereof;
(xx) adopt any stock option plan or employee stock
ownership plan or issue any shares of Common Stock to its or its
Subsidiaries' employees other than (a) pursuant to an option plan, the
terms of which shall be approved by a majority of the Board and by the
LLC, under which employees of the Company and its Subsidiaries may be
granted options to acquire up to 5% of the Company's Common Stock,
determined immediately after giving
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effect to the transactions contemplated hereby on a fully diluted and
as-if-converted basis (the "Permitted Stock Option Plan") or (b) the
issuance of options in certain circumstances upon a Public Offering
pursuant to the terms of any Executive Purchase Agreement;
(xxi) issue or sell any shares of the capital stock
or other equity securities (including, without limitation, any
warrants, options, and other rights to acquire such capital stock or
other equity securities) of any Subsidiary to any Person other than
the Company or a Wholly-Owned Subsidiary;
(xxii) terminate the employment of, hire, or enter
into, amend or modify any employment agreement or arrangement with,
any executive employee of the Company or any of its Subsidiaries who
would serve as, or would report directly to, the Company's chief
executive officer;
(xxiii) grant, or permit any of its Subsidiaries to
grant, any registration rights (including, without limitation, any
demand or piggyback registration rights) with respect to any of its
capital stock, other than pursuant to the Registration Agreement as in
effect on the Initial Closing Date;
(xxiv) amend, waive, or otherwise modify any
Approved Business Plan;
(xxv) use the proceeds from the sale of the
Preferred Stock hereunder other than for working capital and budgeted
general corporate purposes reflected in any Approved Business Plan or
Approved Budget, or for such other purposes as are contemplated by any
Approved Business Plan or Approved Budget;
(xxvi) select, retain, or amend, terminate, or
modify any retention arrangement with any underwriter, manager, or
financial advisor to advise the Company and its Subsidiaries with
respect to any proposed Sale of the Company or to underwrite, or
advise the Company with respect to, a Public Offering or any
acquisitions or financing transactions;
(xxvii) change any of the accounting principles or
practices utilized by the Company or its Subsidiaries, or select,
retain, or amend, terminate, or modify any retention arrangement with
any accounting firm engaged to audit the Company's or its
Subsidiaries' financial statements; or
(xxviii) agree or commit to any of the foregoing.
4D. Affirmative Covenants. So long as any Preferred
Stock remains outstanding, the Company shall, and shall cause each Subsidiary
(if any) to, unless it has received the prior written consent of the LLC:
(i) at all times cause to be done all things
necessary to maintain, preserve and renew its corporate existence;
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(ii) at all times take all actions and cause to be
done all things necessary to obtain, maintain, preserve, and renew all
material licenses, authorizations, orders, permits, and other
governmental approvals necessary to the conduct of its businesses as
presently proposed to be conducted and as hereafter conducted;
(iii) maintain and keep its material properties in
good repair, working order and condition, and from time to time make
all necessary or desirable repairs, renewals and replacements, so that
its businesses may be properly and advantageously conducted in all
material respects at all times;
(iv) pay and discharge when payable all taxes,
assessments and governmental charges imposed upon its properties or
upon the income or profits therefrom (in each case before the same
becomes delinquent and before penalties accrue thereon) and all
material claims for labor, materials or supplies which if unpaid would
by law become a Lien upon any of its property unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(v) comply with all other material obligations
which it incurs pursuant to any contract or agreement, whether oral or
written, express or implied, as such obligations become due, unless
and to the extent that the same are being contested in good faith and
by appropriate proceedings and adequate reserves (as determined in
accordance with generally accepted accounting principles, consistently
applied) have been established on its books with respect thereto;
(vi) comply in all material respects with all
applicable laws, rules and regulations of the FCC and all other
governmental authorities to which any of the Company and its
Subsidiaries are subject;
(vii) apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of
such types and in such amounts as are customary for well-insured
corporations of similar size engaged in similar lines of business; and
(viii) maintain proper books of record and account
which present fairly in all material respects its financial condition
and results of operations and make provisions on its financial
statements for all such proper reserves as in each case are required
in accordance with generally accepted accounting principles,
consistently applied.
4E. Compliance with Agreements. The Company shall
perform and observe all of its obligations to each holder of Preferred Stock
and to each holder of Underlying Common Stock set forth in the Certificate of
Incorporation, the Bylaws, and the Registration Agreement.
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18
4F. Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Company shall file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to (i) Rule 144
adopted by the Securities and Exchange Commission under the Securities Act (as
such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the Securities and Exchange Commission. Upon request, the
Company shall deliver to any holder of Restricted Securities a written
statement as to whether it has complied with such requirements.
4G. Intellectual Property Rights. The Company shall, and
shall cause each Subsidiary to, possess and maintain all material Intellectual
Property Rights necessary to the conduct of their respective businesses and own
all right, title and interest in and to, or have a valid license for, all such
Intellectual Property Rights. Neither the Company nor any Subsidiary shall
take any action, or fail to take any action, which would result in the
invalidity, abandonment, misuse or unenforceability of such Intellectual
Property Rights or which would infringe upon or misappropriate any rights of
other Persons.
4H. Public Disclosures. The Company shall not, nor shall
it permit any Subsidiary to, disclose the LLC's or any holder of Investor
Equity's name or identity as an investor in the Company or the LLC in any press
release or other public announcement or in any document or material filed with
any governmental entity, without the prior written consent of such Person,
unless such disclosure is required by applicable law or governmental
regulations or by order of a court of competent jurisdiction, in which case
prior to making such disclosure the Company shall give written notice to such
Person describing in reasonable detail the proposed content of such disclosure
and shall permit such Person to review and comment upon the form and substance
of such disclosure.
4I. Additional Restrictive Covenant Concerning Stock
Issuances and Incurring Debt. At any time prior to the dissolution or
liquidation of the LLC, the Company shall not, without the prior consent of
Holland (i) create, incur or assume Indebtedness for borrowed money, except for
equipment financing and for other Indebtedness expressly specified in any
Approved Business Plan or Approved Budget, or (ii) authorize, issue or enter
into any agreement providing for the issuance (contingent or otherwise) of any
capital stock or other equity securities (or any securities convertible into or
exercisable or exchangeable for any capital stock or other equity securities),
except for (w) issuances of Preferred Stock at the Initial Closing as
contemplated under this Agreement or of Common Stock upon conversion of such
Preferred Stock, (x) issuances of options to acquire Common Stock pursuant to
the terms of the Permitted Stock Option Plan (as defined above) or of Common
Stock upon the exercise of such options, (y) issuances of the Company's
securities in connection with the acquisition of another company or business as
contemplated under Section 4C(viii) above, or (z) issuances pursuant to a
Public Offering; provided that such consent shall not be required in either of
the following circumstances:
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(i) if the aggregate amount of the Initial
Contribution and all Subsequent Contributions made on or prior to the
date of such proposed Issuance is not less than the Maximum
Commitment; or
(ii) if, in the good faith judgment of the LLC,
there has occurred a material adverse change (other than a change
specifically and expressly contemplated in one or more Approved
Business Plans) in the business, financial condition, operations,
assets, or business prospects of the Company and its Subsidiaries
taken as a whole.
The rights of Holland under this paragraph 4I shall terminate and thereafter
cease to apply if at any time Holland (together with members of his Family
Group (as defined in his Executive Purchase Agreement)) ceases to hold at least
90% of the Management Equity initially issued to Holland (and the members of
his Family Group (as defined in his Executive Purchase Agreement)) under his
Executive Purchase Agreement.
4J. Preemptive Rights.
(i) Except for issuances (w) of Preferred Stock at the
Initial Closing as contemplated under this Agreement or of Common Stock upon
conversion of such Preferred Stock, (x) of options to acquire Common Stock
pursuant to the terms of the Permitted Stock Option Plan (as defined above) or
of Common Stock upon the exercise of such options, (y) in connection with the
acquisition of another company or business as contemplated under Section
4C(viii) above, or (z) pursuant to a Public Offering, if the Company authorizes
the issuance or sale of any shares of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock (other than as a
dividend on the outstanding Common Stock), the Company shall first offer to
sell to each Unitholder (or after the dissolution of the LLC, each holder of
Underlying Common Stock) a portion of such stock or securities equal to the
quotient obtained by dividing (1) the number of Class A Units and Class B Units
(or after the dissolution of the LLC, the number of shares of Underlying Common
Stock) held by such holder, by (2) the total number of Class A Units and Class
B Units (or after the dissolution of the LLC, the total number of shares of
Underlying Common Stock). Each such holder shall be entitled to purchase such
stock or securities at the most favorable price and on the most favorable terms
as such stock or securities are to be offered to any other Persons; provided
that if all Persons entitled to purchase or receive such stock or securities
are required to also purchase other securities of the Company, the holders
exercising their rights pursuant to this paragraph shall also be required to
purchase the same strip of securities (on the same terms and conditions) that
such other Persons are required to purchase. The purchase price for all stock
and securities offered to such holders hereunder shall be payable in cash.
(ii) In order to exercise its purchase rights hereunder, a
Unitholder (or holder of Underlying Common Stock, as applicable) must within 30
days after receipt of written notice from the Company describing in reasonable
detail the stock or securities being offered, the purchase price thereof, the
payment terms and such holder's percentage allotment, deliver a written notice
to the Company describing such holder's election hereunder. If all of the
securities offered to the Unitholders (or holders of Underlying Common Stock,
as applicable) are not fully subscribed, the remaining stock and securities
shall be reoffered by the Company to the holders purchasing their full
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allotment upon the terms set forth in this paragraph, except that such holders
must exercise their rights within 5 business days after receipt of such
reoffer.
(iii) Upon the expiration of the offering periods described
above, the Company shall be entitled to sell such stock or securities which the
Unitholders (or holders of Underlying Common Stock, as applicable) have not
elected to purchase during the 180 days following such expiration at a price
not less and on other terms and conditions no more favorable to the purchasers
thereof than that offered to such holders. Any stock or securities offered or
sold by the Company after such 180-day period must be reoffered to the
Unitholders (or holders of Underlying Common Stock, as applicable) pursuant to
the terms of this paragraph.
(iv) The rights of the Unitholders (or holders of
Underlying Common Stock, as applicable) under this paragraph 4J shall terminate
upon the consummation of the first to occur of (x) a Public Offering and (y) a
Sale of the Company.
4K. Affiliated Entity Business Combinations. Any
transaction in which the Company or any Subsidiary would acquire any interest
in, or have any interest in it acquired by, or enter into any joint venture
with, any entity that is an Affiliate of any Investor Member (including by way
of merger, business combination, sale of stock, sale of assets, or otherwise)
shall require, in addition to normal approval of the Board, the approval of a
majority of the Investor Directors (excluding, for purposes of such vote, all
Investor Directors designated by the Investor Member(s) (or Affiliates thereof)
of which such entity is an Affiliate).
SECTION 5. TRANSFER OF RESTRICTED SECURITIES.
5A. General Provisions. Restricted Securities are
transferable only pursuant to (i) public offerings registered under the
Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available, and (iii) subject to the various conditions and prohibitions set
forth in this Agreement (including, without limitation, paragraph 5B below) and
in the other agreements contemplated hereby (including, without limitation, the
Securityholders Agreement and the Executive Purchase Agreements), any other
legally available means of transfer.
5B. Opinion Delivery. In connection with the
transfer of any Restricted Securities (other than a transfer described in
paragraph 5A(i) or (ii) above), the holder thereof shall deliver written notice
to the Company describing in reasonable detail the transfer or proposed
transfer, together with an opinion of Xxxxxxxx & Xxxxx or other counsel which
(to the Company's reasonable satisfaction) is knowledgeable in securities law
matters to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities
delivers to the Company an opinion of Xxxxxxxx & Xxxxx or such other counsel
that no subsequent transfer of such Restricted Securities shall require
registration under the Securities Act, the Company shall promptly upon such
contemplated transfer deliver new certificates for such Restricted Securities
which do not bear the Securities Act legend set forth in paragraph 9C below.
If the Company is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof shall not
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21
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this
Section 5 and paragraph 9C.
5C. Rule 144A. Upon the request of the LLC or any holder
of Investor Equity, the Company shall promptly supply to such Person or its
prospective transferees all information regarding the Company required to be
delivered in connection with a transfer pursuant to Rule 144A of the Securities
and Exchange Commission.
5D. Legend Removal. If any Restricted Securities become
eligible for sale pursuant to Rule 144(k), the Company shall, upon the request
of the holder of such Restricted Securities, remove the legend set forth in
paragraph 9C from the certificates for such Restricted Securities.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. As a material inducement to the LLC to enter into this Agreement and
purchase the Preferred Stock hereunder, the Company hereby represents and
warrants that:
6A. Organization, Corporate Power and Licenses. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. The Company possesses all requisite corporate power and
authority and, except as set forth in the "Licenses Schedule" attached hereto,
all material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its businesses as presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's charter documents and Bylaws which have been
furnished to the LLC's special counsel reflect all amendments made thereto at
any time prior to the date of this Agreement and are correct and complete.
6B. Capital Stock and Related Matters.
(i) As of the Initial Closing and immediately thereafter,
the authorized capital stock of the Company shall consist of (a) 95,000 shares
of Preferred Stock, all of which shares shall be issued and outstanding, and
(b) 100,001 shares of Common Stock, of which 1 share shall be issued and
outstanding, 95,000 shares shall be reserved for issuance upon conversion of
the Preferred Stock and 5,000 shares shall be reserved for issuance upon
exercise of options issued pursuant to the Permitted Stock Option Plan. Except
as set forth on the attached "Capitalization Schedule," as of the Initial
Closing, the Company shall not have outstanding any stock or securities, nor
any options, warrants or other rights to acquire capital stock or securities of
the Company. As of the Initial Closing, all of the outstanding shares of the
Company's capital stock listed on the Capitalization Schedule shall be validly
issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the
Company's knowledge, contractual stockholders preemptive rights or rights of
first refusal with respect to the issuance of the Preferred Stock hereunder or
the issuance of the Common Stock upon conversion of any of the Preferred Stock.
The Company has not violated any applicable federal or state securities laws in
connection
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22
with the offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Preferred Stock hereunder do not require registration
under the Securities Act or any applicable state securities laws. To the best
of the Company's knowledge, there are no agreements between the Company's
stockholders with respect to the voting or transfer of the Company's capital
stock or with respect to any other aspect of the Company's affairs, except for
this Agreement and the Securityholders Agreement.
6C. Authorization; No Breach. The execution, delivery
and performance of this Agreement, the Registration Agreement, the
Securityholders Agreement, the Executive Purchase Agreements, and all other
agreements contemplated hereby to which the Company is a party, the filing of
the Company's amended and restated Certificate of Incorporation referred to in
paragraph 2B above, and the adoption of the Company's Bylaws referred to in
paragraph 2C above have been duly authorized by the Company. This Agreement,
the Registration Agreement, the Securityholders Agreement, the Executive
Purchase Agreements, the Certificate of Incorporation, and all other agreements
contemplated hereby to which the Company is a party each constitutes a valid
and binding obligation of the Company, enforceable in accordance with its
terms. The execution and delivery by the Company of this Agreement, the
Registration Agreement, the Securityholders Agreement, the Executive Purchase
Agreements and all other agreements contemplated hereby to which the Company is
a party and the consummation of the transactions contemplated hereby and
thereby, the offering, sale and issuance of the Preferred Stock hereunder, the
issuance of the options under the Permitted Stock Option Plan, the issuance of
the Common Stock upon conversion of the Preferred Stock and upon exercise of
the options issued pursuant to the Permitted Stock Option Plan, the filing of
the amended and restated Certificate of Incorporation and the adoption of the
Bylaws referred to above and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any Subsidiary's
capital stock or assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to the charter or Bylaws
of the Company, or any law, statute, rule or regulation to which the Company or
any Subsidiary is subject, or any agreement, instrument, order, judgment or
decree to which the Company or any Subsidiary is subject.
6D. Conduct of Business; Absence of Liabilities. Prior
to the Initial Closing, except as set forth on the attached "Liabilities
Schedule," and except for the Company's obligations to pay expenses under
Section 9A hereof, the Company has not conducted any business, activities or
operations nor incurred any expenses, obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Company and whether due or to become due and regardless of when
asserted).
6E. No Subsidiaries. The Company does not own or hold,
and has never owned or held, any shares of stock or any other securities or
interests in or any rights to acquire any shares of stock or any other security
or interest in any other Person.
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23
6F. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company. The Company shall pay, and hold the LLC and
its Unitholders harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim.
6G. Governmental Consent, etc. Except as set forth on
the attached "Consents Schedule," no permit, consent, approval or authorization
of, or declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of this
Agreement or the other agreements contemplated hereby, or the consummation by
the Company of any other transactions contemplated hereby or thereby.
6H. Compliance with Laws. Neither the Company nor any
Subsidiary has violated any law or any governmental regulation or requirement
in any material respect.
6I. Disclosure. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates
or other written items supplied to the LLC or any holder of Investor Equity by
or on behalf of the Company with respect to the transactions contemplated
hereby contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
There is no fact which the Company has not disclosed to the LLC and the holders
of Investor Equity in writing and of which any of its officers, directors or
executive employees is aware and which would reasonably be expected to have a
material adverse effect upon the expected business, financial condition,
operations, assets, or business prospects of the Company and its Subsidiaries
taken as a whole.
SECTION 7. BOARD OF DIRECTORS.
7A. Board Composition and Vacancies. From and after the
Initial Closing and until the provisions of this paragraph 7 cease to be
effective, each holder of Underlying Common Stock shall vote all shares of
Underlying Common Stock owned by such holder or over which such holder has
voting control and shall take all other necessary or desirable actions within
such holder's control (whether in such holder's capacity as a stockholder,
director, member of a Board committee or officer of the Company or otherwise,
and including, without limitation, attendance at meetings in person or by proxy
for purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary or desirable actions within
its control (including, without limitation, calling special Board and
stockholder meetings), so that:
(i) The authorized number of directors on the Board shall
be established and remain at thirteen directors.
(ii) The following individuals shall be elected to the
Board:
(a) two representatives designated by the holders
of a majority of the MDCP Equity held by MDCP and its
Affiliates so long as MDCP and its Affiliates
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24
hold at least 30% of the MDCP Equity, and thereafter one
representative designated by the holders of a majority of the
MDCP Equity held by MDCP and its Affiliates so long as MDCP
and its Affiliates hold at least 15% of the MDCP Equity (such
representatives, the "MDCP Directors");
(b) two representatives designated by the holders
of a majority of the MSCP Equity held by MSCP and its
Affiliates so long as MSCP and its Affiliates hold at least
30% of the MSCP Equity, and thereafter one representative
designated by the holders of a majority of the MSCP Equity
held by MSCP and its Affiliates so long as MSCP and its
Affiliates hold at least 15% of the MSCP Equity (such
representatives, the "MSCP Directors");
(c) two representatives designated by the holders
of a majority of the Frontenac Equity held by Frontenac and
its Affiliates so long as Frontenac and its Affiliates hold at
least 66 2/3% of the Frontenac Equity, and thereafter one
representative designated by the holders of a majority of the
Frontenac Equity held by Frontenac and its Affiliates so long
as Frontenac and its Affiliates hold at least 33 1/3% of the
Frontenac Equity (such representatives, the "Frontenac
Directors");
(d) one representative designated by the holders
of a majority of the BV Equity held by BV and its Affiliates
so long as BV and its Affiliates hold at least 50% of the BV
Equity (such representative, the "BV Director");
(e) the chief executive officer of the Company
(the "CEO Director");
(f) three members of the Company's management in
addition to the chief executive officer (the "Management
Directors") designated by the holders of a majority of the
Management Equity; and
(g) two representatives (the "Outside Directors")
designated by the holders of a majority of the Investor Equity
held by the Investor Members and their respective Affiliates,
and reasonably acceptable to the holders of a majority of the
Management Equity; provided that neither representative shall
be a member of the Company's management or an employee or
officer of the Company or any of its Subsidiaries.
The MDCP Directors, the MSCP Directors, the Frontenac Directors and
the BV Director are referred to herein collectively as the "Investor
Directors."
(iii) The composition of the board of directors of each of
the Company's Subsidiaries (a "Sub Board") shall be the same as that
of the Board.
(iv) The Board shall create and maintain an executive
committee (the "Executive Committee") consisting of the following four
members: (a) the CEO Director, (b) one MDCP Director designated by the
holders of a majority of the MDCP Equity held by MDCP and its
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25
Affiliates so long as such holders are entitled to designate at least
one MDCP Director under subparagraph (ii) above, (c) one MSCP Director
designated by the holders of a majority of the MSCP Equity held by
MSCP and its Affiliates so long as such holders are entitled to
designate at least one MSCP Director under subparagraph (ii) above,
and (d) one Frontenac Director designated by the holders of a majority
of the Frontenac Equity held by Frontenac and its Affiliates so long
as such holders are entitled to designate at least one Frontenac
Director under subparagraph (ii) above. The Executive Committee shall
exercise such powers as are specifically granted to it under the terms
of this Agreement and such powers of the Board as shall be delegated
to it from time to time by the Board. The Executive Committee may
take any action or exercise any power granted to it only with the
affirmative vote of any two of the MDCP Director, the MSCP Director,
and the Frontenac Director then serving thereon.
(v) Committees of the Board or a Sub Board (other than
the Executive Committee) shall be created only upon the approval of a
majority of the members of the Board or the applicable Sub Board that
includes a majority of the Investor Directors serving on such Board or
Sub Board, and the composition of each such committee (if any) shall
be proportionately equivalent to that of the Board to the extent
practicable.
(vi) Any director will be removed from the Board or a Sub
Board, with or without cause, at the written request of the holder or
holders entitled to designate such person to be a director and under
no other circumstances; provided that if the CEO Director ceases to
serve as the Company's chief executive officer, he shall be removed as
a member of the Board and each Sub Board promptly after his employment
ceases (it being understood that, at the election of the holders of a
majority of the Investor Equity held by the Investor Members and their
respective Affiliates, an Outside Director shall be removed from the
Board and such person formerly serving as the Company's chief
executive officer shall be designated to serve in such vacant Outside
Director position); and provided further that if any Management
Director ceases to be an employee of the Company and its Subsidiaries,
he shall be removed as a member of the Board and each Sub Board
promptly after his employment ceases.
(vii) In the event that any CEO Director ceases to serve as
the Company's chief executive officer during his term of office
(regardless of whether such individual ceases to serve as a member of
the Board or whether such individual is designated to serve as an
Outside Director), the resulting vacancy on the Board or the Sub Board
shall be filled by the person hired to replace such departing director
as the chief executive officer of the Company. In the event any
director (other than the CEO Director) ceases to serve as a member of
the Board or a Sub Board during his or her term of office, the
resulting vacancy on the Board or the Sub Board shall be filled by a
representative (or in the case of a vacant Management Directorship, a
member of the Company's management) designated by the holder or
holders entitled to designate the departing director.
(viii) If any party eligible to designate a representative
to fill a directorship pursuant to the terms of this paragraph 7 fails
to so designate, the individual previously holding such
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26
directorship shall be elected to such position, or if such individual
has been removed as a director or fails or declines to serve, the
vacancy shall be filled with an individual designated by holders of a
majority of the Investor Equity held by the Investor Members and their
respective Affiliates; provided that all holders of Underlying Common
Stock shall vote to remove such individual if the party which failed
to designate such directorship so directs.
(ix) If any of MDCP, MSCP, Frontenac, or BV become
ineligible, by virtue of the terms of subparagraphs 7A(ii)(a), (b),
(c), and (d), respectively (including by operation of subparagraph
7A(x)), to designate a representative to fill a directorship pursuant
to such subparagraph (including the concomitant right to designate
such director to serve on the Executive Committee under subparagraph
7(a)(iv)), all rights and entitlements hereunder to designate persons
to fill such directorship shall thereafter be exercised by the holders
of a majority of the Investor Equity held by the Investor Members and
their respective Affiliates.
(x) In accordance with paragraph 9B(ii) hereof, if upon
any Capital Call Notice (as defined in the LLC Agreement), any holder
or Class A Units or Class B Units refuses or otherwise fails to make
the capital contributions required by such Capital Call Notice under
the LLC Agreement with respect to the Class A Units and Class B Units
held by such Unitholder, and in accordance with Section 5.1(b) of the
LLC Agreement, if a Unitholder becomes a Dissenting Holder (as defined
in the LLC Agreement), then in each case all securities held by such
Unitholder shall, for purposes of this paragraph 7A, cease to
constitute any of BV Equity, MDCP Equity, MSCP Equity, Frontenac
Equity, Investor Equity, or Management Equity.
7B. Director Expenses; Indemnity Insurance; Exculpation.
The Company shall pay the reasonable out-of-pocket expenses incurred by each
director in connection with attending the meetings of the Board, any Sub Board
and any committee thereof. So long as any director designated under this
Agreement serves on the Board and for five years thereafter, the Company shall
maintain directors and officers indemnity insurance coverage satisfactory to
the Board at the time such insurance is first obtained and not thereafter
reduced in amount or coverage, and the Company's certificate of incorporation
and bylaws shall provide for indemnification and exculpation of directors to
the fullest extent permitted under applicable law.
7C. Termination. The rights and requirements under
paragraph 7A shall terminate at the closing of a Sale of the Company.
SECTION 8. DEFINITIONS.
8A. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any particular Person means (i) any other
Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the
power to direct the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise, and (ii) if such
Person is a
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27
partnership, any partner thereof (provided that for purposes of paragraph 7A
hereof, the term "Affiliate" shall not include any limited partner of such
particular Person that is a partnership).
"Base Rate" means, on any date, a variable rate per annum
equal to the rate of interest most recently published by The Wall Street
Journal as the "prime rate" at large U.S. money center banks.
"Board" means the board of directors of the Company.
"BV" means, collectively, Battery Ventures IV, L.P., a
Delaware limited partnership, and Battery Investment Partners IV, LLC.
"BV Equity" means (i) the Class A Units initially issued to BV
pursuant to the Investor Purchase Agreement (but not including any Class D
Units issued by the LLC in exchange for such Class A Units), (ii) upon and
after the dissolution or liquidation of the LLC, the Underlying Common Stock
distributed in respect of the Class A Units referred to in clause (i) above
pursuant to such dissolution or liquidation, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization (but not including any Class D Units issued by the LLC in
exchange for any of the foregoing securities). As to any particular securities
constituting BV Equity, such securities shall cease to be BV Equity when they
have been (a) effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them, (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force) or (c) repurchased
by the LLC (including in exchange for Class D Units of the LLC), the Company or
any Subsidiary.
"Class A Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class B Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class C Units" has the meaning ascribed to such term in the
LLC Agreement.
"Class D Units" has the meaning ascribed to such term in the
LLC Agreement.
"Executive Purchase Agreement" shall include (i) any executive
unit purchase agreement substantially similar to that set forth in Exhibit 5
attached hereto entered into on or after the date hereof by and among the LLC,
the Company and any of Holland, Lord or the Company's COO (or members of their
respective Family Groups (as defined in the Executive Purchase Agreements)),
and (ii) any executive unit purchase agreement substantially similar to that
set forth in Exhibit 6 attached hereto entered into on or after the date hereof
by and among the LLC, the Company and a member of the Company's management
(other than Holland, Lord, or the Company's COO), or members of such managers'
respective Family Groups (as defined in the Executive Purchase Agreements).
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"Frontenac" means Frontenac VII, L.P., a Delaware limited
partnership.
"Frontenac Equity" means (i) the Class A Units initially
issued to Frontenac pursuant to the Investor Purchase Agreement (but not
including any Class D Units issued by the LLC in exchange for such Class A
Units), (ii) upon and after the dissolution or liquidation of the LLC, the
Underlying Common Stock distributed in respect of the Class A Units referred to
in clause (i) above pursuant to such dissolution or liquidation, and (iii) any
securities issued directly or indirectly with respect to the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization (but not
including any Class D Units issued by the LLC in exchange for any of the
foregoing securities). As to any particular securities constituting Frontenac
Equity, such securities shall cease to be Frontenac Equity when they have been
(a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force) or (c) repurchased
by the LLC (including in exchange for Class D Units of the LLC), the Company or
any Subsidiary.
"Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business which are not more than six months past due),
(iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information),
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29
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest (including
partnership interests and joint venture interests) of any other Person and (ii)
any capital contribution by such Person to any other Person.
"Investor Equity" means (i) the Class A Units issued pursuant
to the Investor Purchase Agreement (but not including any Class D Units issued
by the LLC in exchange for such Class A Units), (ii) upon and after the
dissolution or liquidation of the LLC, the Underlying Common Stock distributed
in respect of the Class A Units referred to in clause (i) above pursuant to
such dissolution or liquidation, and (iii) any securities issued directly or
indirectly with respect to the foregoing securities by way of a stock split,
stock dividend, or other division of securities, or in connection with a
combination of securities, recapitalization, merger, consolidation, or other
reorganization (but not including any Class D Units issued by the LLC in
exchange for any of the foregoing securities). As to any particular securities
constituting Investor Equity, such securities shall cease to be Investor Equity
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased by the LLC (including in exchange for Class D Units of the
LLC), the Company or any Subsidiary.
"Investor Members" means BV, Frontenac, MDCP, and MSCP.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company, any of its
Subsidiaries or any Affiliate, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to the
Company or any of its Subsidiaries under a lease which is not in the nature of
a conditional sale or title retention agreement, or any subordination
arrangement in favor of another Person (other than any subordination arising in
the ordinary course of business).
"Liquidation Value" has the meaning ascribed to such term in
the Certificate of Incorporation.
"Management Equity" means (i) the Class B Units issued
pursuant to all Executive Purchase Agreements (but not including any Class C
Units or Class D Units issued by the LLC in
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30
exchange for such Class B Units), (ii) upon and after the dissolution or
liquidation of the LLC, the Underlying Common Stock distributed in respect of
the Class B Units referred to in clause (i) above pursuant to such dissolution
or liquidation, and (iii) any securities issued directly or indirectly with
respect to the foregoing securities by way of a stock split, stock dividend, or
other division of securities, or in connection with a combination of
securities, recapitalization, merger, consolidation, or other reorganization
(but not including any Class C Units or Class D Units issued in exchange for
any of the foregoing securities). As to any particular securities constituting
Management Equity, such securities shall cease to be Management Equity when
they have been (a) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (c)
repurchased by the LLC (including in exchange for Class C Units or Class D
Units of the LLC), the Company or any Subsidiary.
"Management Members" means Holland, Lord, and any other Person
that enters into an Executive Purchase Agreement on or after the date hereof.
"Maximum Commitment" shall initially mean the sum of (x)
$95,000,000 plus (y) the product of $5,000,000 times a fraction, the numerator
of which is equal to the aggregate Class B Units outstanding as of the date
hereof, and the denominator of which is the aggregate Class B Units authorized
under the LLC Agreement on the date hereof. In the event any Class B Units are
issued pursuant to the terms of the LLC Agreement and an Executive Purchase
Agreement (other than a reissuance of Class B Units previously repurchased by
the Company), the Maximum Commitment then in effect shall be increased by an
amount equal to the product of $5,000,000 times a fraction, the numerator of
which is the number of Class B Units so issued, and the denominator of which is
the aggregate number of Class B Units authorized under the LLC Agreement on the
date hereof (as such number is equitably adjusted to reflect any combinations
or divisions of Class B Units after the date hereof). In the event any Class A
Units or Class B Units are repurchased by the LLC (including in exchange for
Class C Units or Class D Units of the LLC) pursuant to the provisions of the
LLC Agreement, the Securityholders Agreement, any Executive Purchase Agreement
or otherwise, the Maximum Commitment then in effect shall be reduced by an
amount equal to the product of (x) the Remaining Commitment as of the date of
such repurchase, times (y) a fraction, the numerator of which is equal to the
number of Units so repurchased, and the denominator of which is equal to the
total number of Class A Units and Class B Units authorized under the LLC
Agreement on the date hereof (as such number is equitably adjusted for any
combinations or divisions of Units occurring after the date hereof). If any
such repurchased Class A Units or Class B Units are subsequently reissued to a
Unitholder of the LLC, the Maximum Commitment shall at the time of such
reissuance be increased by an amount equal to the product of (x) the Remaining
Commitment as of the date of such reissuance, times (y) a fraction, the
numerator of which is equal to the number of Units so reissued (which number
shall in no event be greater than the total number of Units so repurchased),
and the denominator of which is equal to the total number of Class A Units and
Class B Units authorized under the LLC Agreement on the date hereof (as such
number is equitably adjusted for any combinations or divisions of Units
occurring after the date hereof). In the event the Exercising Holders (as
defined in the LLC Agreement) elect the remedy set forth in paragraph
5.1(b)(i)(C) of the LLC Agreement, the Maximum Commitment then in effect shall
be reduced by an amount equal to that portion of the Remaining Commitment as of
the date of
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31
such election that would constitute Related Contributions (as defined in the
LLC Agreement) if and when called by the Company as Subsequent Contributions.
"MDCP" means Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership.
"MDCP Equity" means (i) the Class A Units initially issued to
MDCP pursuant to the Investor Purchase Agreement (but not including any Class D
Units issued by the LLC in exchange for such Class A Units), (ii) upon and
after the dissolution or liquidation of the LLC, the Underlying Common Stock
distributed in respect of the Class A Units referred to in clause (i) above
pursuant to such dissolution or liquidation, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization (but not including any Class D Units issued by the LLC in
exchange for any of the foregoing securities). As to any particular securities
constituting MDCP Equity, such securities shall cease to be MDCP Equity when
they have been (a) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (c)
repurchased by the LLC (including in exchange for Class D Units of the LLC),
the Company or any Subsidiary.
"MSCP" means, collectively, Xxxxxx Xxxxxxx Capital Partners
III, L.P., Xxxxxx Xxxxxxx Capital Investors, L.P., and MSCP III 892 Investors,
L.P.
"MSCP Equity" means (i) the Class A Units initially issued to
MSCP pursuant to the Investor Purchase Agreement (but not including any Class D
Units issued by the LLC in exchange for such Class A Units), (ii) upon and
after the dissolution or liquidation of the LLC, the Underlying Common Stock
distributed in respect of the Class A Units referred to in clause (i) above
pursuant to such dissolution or liquidation, and (iii) any securities issued
directly or indirectly with respect to the foregoing securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization (but not including any Class D Units issued by the LLC in
exchange for any of the foregoing securities). As to any particular securities
constituting MSCP Equity, such securities shall cease to be MSCP Equity when
they have been (a) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (c)
repurchased by the LLC (including in exchange for Class D Units of the LLC),
the Company or any Subsidiary.
"Officer's Certificate" means a certificate signed by the
Company's president or its chief financial officer, stating that (i) the
officer signing such certificate has made or has caused to be made such
investigations as are reasonably necessary in order to permit him to verify the
accuracy of the information set forth in such certificate and (ii) such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
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32
"Permitted Lien" means:
(i) tax liens with respect to taxes not yet due
and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established
in accordance with generally accepted accounting principles,
consistently applied;
(ii) deposits or pledges made in connection with,
or to secure payment of, utilities or similar services, workers'
compensation, unemployment insurance, old age pensions or other social
security obligations;
(iii) purchase money security interests in any
property acquired by the Company or any Subsidiary to the extent
permitted by this Agreement;
(iv) interests or title of a lessor under any
lease permitted by this Agreement;
(v) mechanics', materialmen's or contractors'
liens or encumbrances or any similar lien or restriction for amounts
not yet due and payable;
(vi) easements, rights-of-way, restrictions and
other similar charges and encumbrances not interfering with the
ordinary conduct of the business of the Company and its Subsidiaries
or detracting from the value of the assets of the Company and its
Subsidiaries; and
(vii) security interests in the assets of the
Company and its Subsidiaries granted to the Company's and its
Subsidiaries' lenders to secure Indebtedness permitted under
subparagraph 4C(xiv) above.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any underwritten sale of the company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1
(or a successor form adopted by the Securities and Exchange Commission);
provided that the following shall not be considered a Public Offering: (i) any
issuance of common stock as consideration or financing for a merger or
acquisition, and (ii) any issuance of common stock or rights to acquire common
stock to employees of the Company or its Subsidiaries as part of an incentive
or compensation plan.
"Remaining Commitment" means, on any particular date, the
difference of the Maximum Commitment then in effect minus the sum of the
Initial Contribution and the aggregate Subsequent Contributions at all
Subsequent Closings occurring on or prior to such date.
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33
"Restricted Securities" means (i) the Preferred Stock issued
hereunder, (ii) the Common Stock issued upon conversion of the Preferred Stock,
and (iii) any securities issued with respect to the securities referred to in
clauses (i) or (ii) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them, (b) become
eligible for sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act or (c) been otherwise transferred and new certificates
for them not bearing the Securities Act legend set forth in paragraph 9C have
been delivered by the Company in accordance with paragraph 5B. Whenever any
particular securities cease to be Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense, new securities
of like tenor not bearing a Securities Act legend of the character set forth in
paragraph 9C.
"Sale of the Company" means either (i) the sale, lease,
transfer, conveyance or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, or (ii) a transaction or series of transactions
(including by way of merger, consolidation, or sale of stock) the result of
which is that the holders of the Company's outstanding voting stock immediately
prior to such transaction are after giving effect to such transaction no
longer, in the aggregate, the "beneficial owners" (as such term is defined in
Rule 13d-3 and Rule 13d-5 promulgated under the Securities Exchange Act),
directly or indirectly through one or more intermediaries, of more than 50% of
the voting power of the outstanding voting stock of the Company.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority
of limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing
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34
director, manager or general partner of such limited liability company,
partnership, association or other business entity. For purposes of this
Agreement, if the context does not otherwise indicate to which Person the term
"Subsidiary" is used in respect of, the term "Subsidiary" shall refer to any
Subsidiary of the Company.
"Underlying Common Stock" means (i) the Common Stock issued or
issuable upon conversion of any Preferred Stock issued pursuant to this
Agreement and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above, including by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
of this Agreement, any Person who holds any Preferred Stock issued pursuant to
this Agreement shall be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion of such Preferred Stock, such Underlying Common
Stock shall be deemed to be in existence, and such Person shall be entitled to
exercise the rights of a holder of Underlying Common Stock hereunder. As to
any particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) or (c) repurchased by the Company or any Subsidiary of
the Company.
"Units" has the meaning ascribed to such term in the LLC
Agreement.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
8B. Knowledge. As used in Section 6, the terms
"knowledge" or "aware" in respect of the Company shall mean and include (i) the
actual knowledge or awareness of Holland, Lord, or the Company's COO (and any
Person hired to serve as a replacement for any of the foregoing), and (ii) with
respect to the Persons identified in clause (i) above, the knowledge or
awareness which a prudent business person would have obtained in the conduct of
his business after making reasonable inquiry and reasonable diligence with
respect to the particular matter in question.
SECTION 9. MISCELLANEOUS PROVISIONS.
9A. Expenses. The Company shall pay, and hold the LLC
and each of its Unitholders harmless against liability for the payment of, the
out-of-pocket expenses of the LLC and its Unitholders (including the reasonable
fees and expenses of Xxxxxxxx & Xxxxx, Xxxxxxx & Berlin, and any other special
counsel (an "Other Counsel") retained by an Investor Member; provided that the
fees and expenses of such Other Counsels shall not exceed $10,000 for any one
Other Counsel nor $20,000 in the aggregate for all such Other Counsels) arising
in connection with the performance of due diligence investigations concerning
the Company and its operations and management, the negotiation and execution of
this Agreement, and the consummation of the transactions to occur at the
Initial Closing as contemplated hereby. In addition, The Company shall pay,
and hold the LLC and each of the holders of Investor Equity harmless against
liability for the payment of, the out-of-
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35
pocket expenses of the LLC and the holders of Investor Equity (including the
reasonable fees and expenses of Xxxxxxxx & Xxxxx) arising in connection with
(i) any amendments or waivers (whether or not the same become effective) under
or in respect of this Agreement, any of the agreements contemplated hereby or
the Certificate of Incorporation, (ii) the enforcement of the rights granted
under this Agreement, any of the agreements contemplated hereby and the
Certificate of Incorporation, (iii) any filing with any governmental agency
with respect to the LLC's investment in the Company or any holder of Investor
Equity's investment in the LLC, or any other filing with any governmental
agency with respect to the Company or the LLC which mentions any holder of
Investor Equity, and (iv) stamp and other taxes which may be payable in respect
of the execution and delivery of this Agreement or the issuance, delivery or
acquisition of any shares of Preferred Stock or any shares of Common Stock
issuable upon conversion of any Preferred Stock.
9B. Remedies.
(i) Each holder of Preferred Stock and Underlying Common
Stock shall have all rights and remedies set forth in this Agreement and the
Certificate of Incorporation and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law or at equity. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce (upon demonstration of irreparable harm) such rights specifically
(without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law.
(ii) If upon any Capital Call Notice (as defined in the
LLC Agreement), any holder of Class A Units or Class B Units refuses or
otherwise fails to make the capital contributions required by such Capital Call
Notice under the LLC Agreement with respect to the Class A Units and Class B
Units held by such Unitholder, such holder shall forfeit and thereafter cease
to possess all rights hereunder to designate any representatives to the Board
or to any Board committee (including, without limitation, the Executive
Committee) and all voting rights pursuant to Section 9G granted to the holders
entitled to designate certain directors.
(iii) If any holder of Class A Units becomes a Dissenting
Holder (as defined in the LLC Agreement) in accordance with Section 5.1(b) of
the LLC Agreement, such holder shall forfeit and thereafter cease to possess
all rights hereunder to designate any representatives to the Board or to any
Board committee (including, without limitation, the Executive Committee) and
all voting rights pursuant to Section 9G granted to the holders entitled to
designate certain directors.
9C. LLC's Investment Representations. The LLC hereby
represents that it is acquiring the Restricted Securities purchased hereunder
or acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no
intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent the LLC or any subsequent holders
of Restricted Securities from transferring such securities in compliance with
the provisions of Section 5 hereof. Each certificate or instrument
representing Restricted Securities shall be imprinted with a legend in
substantially the following form:
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36
"The securities represented by this certificate were originally issued
on August 13, 1997, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented
by this certificate is subject to the conditions specified in the
Stock Purchase Agreement dated as of August 15, 1997, as amended and
modified from time to time, between the issuer (the "Company") and the
initial holder of these securities. The Company reserves the right to
refuse the transfer of such securities until such conditions have been
fulfilled with respect to such transfer. A copy of such conditions
shall be furnished by the Company to the holder hereof upon written
request and without charge."
9D. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended, modified, or
waived, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the LLC (along with evidence that such consent
has been authorized by the LLC's board of managers in accordance with the LLC
Agreement). Upon and after the dissolution of the LLC, the provisions of this
Agreement may be amended, modified, or waived, and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders (acting in their capacity as shareholders of the Company) entitled to
designate a majority of the Investor Directors hereunder and the holders
(acting in their capacity as shareholders of the Company) entitled to designate
two of the Management Directors (counting, for purposes of such determination,
the CEO Director as a Management Director); provided that if any such
amendment, modification or waiver would adversely affect any holder of Investor
Equity or Management Equity (including for purposes of this proviso holders
forfeiting their voting rights under Section 9B(ii) or (iii)) relative to the
holders of Investor Equity and Management Equity voting in favor of such
amendment, modification, or waiver, such amendment, modification or waiver
shall also require the written consent of the holders of a majority of the
Investor Equity or Management Equity (as the case may be) held by all holders
so adversely affected. No course of dealing between the Company and the LLC or
any other holder of Investor Equity or Management Equity or any delay by such
holder in exercising any rights hereunder or under the Certificate of
Incorporation shall operate as a waiver of any rights of such holder.
9E. Put Cooperation Agreement. The Company hereby
accepts, acknowledges, and agrees that in the event the LLC is obligated,
pursuant to the Unitholder put right provisions set forth in the
Securityholders Agreement, to repurchase Units from any Unitholder or
Unitholders, the Company will (at the request and direction of the LLC) take
any and all actions necessary and within its power under the law and the
Certificate of Incorporation (including, without limitation, assuming or
refinancing debt, obtaining waivers or consents from its lenders, declaring and
paying dividends to the LLC, repurchasing or redeeming Preferred Stock or
Underlying Common Stock held by such putting Unitholder or Unitholders or by
the LLC, or causing a Public Offering, recapitalization, or Sale of the Company
to occur) to enable the LLC to satisfy its repurchase obligations thereunder.
9F. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the
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37
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, regardless of any investigation made by the
LLC or on its or any Investor Member's behalf.
9G. Successors and Assigns.
(i) Except as otherwise expressly provided herein
(including, without limitation, in paragraph 7A hereof), all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
(ii) Notwithstanding the foregoing clause (i), the
Company, the LLC, the Unitholders, and each subsequent holder of Preferred
Stock or Underlying Common Stock hereby accept, acknowledge, and agree that
upon and after the dissolution or liquidation of the LLC:
(a) all rights of the LLC to rely upon the
representations and warranties set forth in paragraph 6 hereof shall
thereafter inure to the benefit of and be enforceable by all holders
of Underlying Common Stock, and thus the provisions of paragraph 6
hereof shall thereafter operate and be construed as if the words
"holder of Underlying Common Stock" were substituted for the word
"LLC" in each such instance;
(b) all rights and powers expressly and
specifically granted to the LLC in paragraph 9D (Consent to
Amendments) hereof shall thereafter operate as provided therein;
(c) all rights and powers (other than those
referred to in subparagraphs (a) and (b) above) expressly and
specifically granted to the LLC hereunder (including, without
limitation, the rights and powers to take certain actions, give or
withhold certain consents or approvals, or make certain
determinations, opinions, judgments, or other decisions) shall
thereafter inure to the benefit of and be exercisable and enforceable
by the holders entitled to designate a majority of the Investor
Directors to the Board, and thus this Agreement shall thereafter
operate and be construed as if the words "holders entitled to
designate a majority of the Investor Directors to the Board" were
substituted for the word "LLC" in each such instance; and
(d) all contractual obligations and duties of the
LLC hereunder as a holder of the Company's securities shall bind and
be enforceable against each holder of Underlying Common Stock (and
their respective successors, assigns, and transferees), it being
understood that nothing in this paragraph (d) shall be construed to
cause any Unitholder to assume any liabilities of the LLC in
contravention of the limited liability provisions set forth in the LLC
Agreement.
9H. Capital and Surplus; Special Reserves. The Company
agrees that the capital of the Company (as such term is used in Section 154 of
the General Corporation Law of Delaware) in respect of the Preferred Stock
issued pursuant to this Agreement shall be equal to the aggregate par value of
such shares and that it shall not increase the capital of the Company with
respect to any shares of the Company's capital stock at any time on or after
the date of this Agreement. The
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38
Company also agrees that it shall not create any special reserves under Section
171 of the General Corporation Law of Delaware without the prior written
consent of the LLC.
9I. 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
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
9J. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
9K. Descriptive Headings; Interpretation; No Strict
Construction. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. The parties agree that prior
drafts of this Agreement shall be deemed not to provide any evidence as to the
meaning of any provision hereof or the intent of the parties hereto with
respect hereto.
9L. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE
OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
9M. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered personally to the recipient, (b) telecopied to the recipient
(with hard copy sent to the recipient by reputable overnight courier service
(charges prepaid) that same day) if telecopied before 5:00 p.m. Chicago,
Illinois time on a business day, and
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39
otherwise on the next business day, or (c) one business day after being sent to
the recipient by reputable overnight courier service (charges prepaid). Such
notices, demands and other communications shall be sent to the following
Persons at the following addresses:
To the LLC:
c/oMadison Dearborn Capital Partners
Three First National Plaza, Suite 3800
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with copies (which shall not constitute notice) to each
Unitholder and to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy (which shall not constitute notice) to:
Xxxxxxx & Berlin
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To any Unitholder: at the address set forth in the LLC's
records.
To any Other Holder of Preferred Stock or Underlying Common
Stock:
at the address set forth in the Company's records.
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40
To the Company:
00000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9N. Delivery by Facsimile. This Agreement, the
agreements referred to herein, and each other agreement or instrument entered
into in connection herewith or therewith or contemplated hereby or thereby, and
any amendments hereto or thereto, to the extent signed and delivered by means
of a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties. No party hereto
or to any such agreement or instrument shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of a facsimile
machine as a defense to the formation or enforceability of a contract and each
such party forever waives any such defense.
* * * * *
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41
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TRANSCEND TELECOM, INC.
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Its: Chief Executive Officer
------------------------------------
TRANSCEND TELECOM, L.L.C.
BY: (EACH OF THE FOLLOWING SIGNING BOTH
INDIVIDUALLY AND IN THEIR CAPACITIES
AS UNITHOLDERS BINDING THE LLC)
/s/ XXXX CROWNE
-----------------------------------
Xxxx Crowne
/s/ XXXXX X. XXXXXXX
-----------------------------------
Xxxxx X. Xxxxxxx
XXXXX X. XXXXXXX FAMILY LIMITED
PARTNERSHIP
By: /s/ XXXXX X. XXXXXXX
--------------------------------
Xxxxx X. Xxxxxxx,
its general partner
/s/ XXXXXX X. XXXX
-----------------------------------
Xxxxxx X. Xxxx (for himself and on
behalf of Xxxxx X. Xxxx and Xxxxx
X. Xxxx)
/S/ XXXXXXXX X. XXXX
-----------------------------------
Xxxxxxxx X. Xxxx
/s/ XXXXX X. XXXX
-----------------------------------
Xxxxx X. Xxxx
/s/ XXXXX X. XXXX
-----------------------------------
Xxxxx X. Xxxx
/s/ XXXXXXX X. XXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxx
42
BATTERY VENTURES IV, L.P.
By Battery Partners IV, L.P.,
its general partner
By /s/ XXXXXXX X. XXXXXXX
----------------------------------
Its Managing Partner
---------------------------------
BATTERY INVESTMENT PARTNERS IV, LLC
By /s/ XXXXXXX X. XXXXXXX
----------------------------------
Its Manager
---------------------------------
FRONTENAC VII, L.P.
By Frontenac Company, its
general partner
By /s/ XXXXX X. XXXXXXXX, III
----------------------------------
Its General Partner
---------------------------------
MADISON DEARBORN CAPITAL
PARTNERS II, L.P.
By Madison Dearborn Partners II,
L.P., its general partner
By Madison Dearborn Partners, Inc.,
its general partner
By /s/ XXXXX X. XXXXX, XX.
----------------------------------
Its Vice President
---------------------------------
43
XXXXXX XXXXXXX CAPITAL PARTNERS III,
L.P.
By MSCP III, L.P., its general partner
By Xxxxxx Xxxxxxx Capital Partners
III, Inc., its general partner
By /s/ XXXXX X. XXXX
----------------------------------
Its Vice Chairman
---------------------------------
By /s/ XXXXXX X. XXXXXXX
----------------------------------
Its Vice Chairman
---------------------------------
MSCP III 892 INVESTORS, L.P.
By MSCP III, L.P., its general partner
By Xxxxxx Xxxxxxx Capital Partners
III, Inc., its general partner
By /s/ XXXXX X. XXXX
----------------------------------
Its Vice Chairman
---------------------------------
By /s/ XXXXXX X. XXXXXXX
----------------------------------
Its Vice Chairman
---------------------------------
XXXXXX XXXXXXX CAPITAL INVESTORS, L.P.
By MSCP III, L.P., its general partner
By Xxxxxx Xxxxxxx Capital Partners
III, Inc., its general partner
By /s/ XXXXX X. XXXX
----------------------------------
Its Vice Chairman
---------------------------------
By /s/ XXXXXX X. XXXXXXX
----------------------------------
Its Vice Chairman
---------------------------------
