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EXHIBIT 10.2
BIRCH TELECOM, INC.
AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT
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AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT
THIS AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of August 5, 1999, by and among BIRCH
TELECOM, INC., a Delaware corporation (the "Company"), and certain purchasers of
the Company's Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred (together, the
"Series Preferred"), and of the Company's Common Stock (the "Common Stock")
(including the purchasers of the Common Shares), and certain holders of stock
options, each as set forth on Exhibit A hereto. Such purchasers of the Series
Preferred and Common Stock and holders of stock options or Option Shares
(including members of Key Management) shall be referred to hereinafter as the
"Purchasers" and each individually as a "Purchaser".
RECITALS
WHEREAS, certain of the Purchasers hold shares of the Company's Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock (the "Existing Purchasers");
WHEREAS, the Existing Purchasers possess registration rights,
information rights and other rights pursuant to that certain Amended and
Restated Purchaser Rights Agreement, dated as of July 2, 1999, among the Company
and the Existing Purchasers (the "Prior Agreement");
WHEREAS, the Company proposes to issue 1,904,898 shares of its Series E
Preferred Stock to existing holders of Series B Preferred Stock, on a pro rata
basis, in connection with a certain recapitalization of the Company (such
holders being referred to herein collectively as the "Series E Purchasers" and
each individually as a "Series E Purchaser");
WHEREAS, the Company proposes to sell and issue up to 23,596,492 shares
of its Series F Preferred Stock pursuant to that certain Series F Preferred
Stock Purchase Agreement (the "Purchase Agreement"), by and between the Company
and BTI Ventures L.L.C. (together with its Affiliates, "BTI" and sometimes
referred to herein as the "Series F Purchaser");
WHEREAS, in order to satisfy certain closing conditions under the
Purchase Agreement, the Company desires to add Xxxxxx X. Xxxxxxx as a party to
this Agreement and provide that Xx. Xxxxxxx have the rights, and be subject to
the obligations, under this Agreement; and
WHEREAS, the Existing Purchasers desire to amend and restate the Prior
Agreement in order to induce the Company, the Series E Purchasers and Series F
Purchaser to enter into the Purchase Agreement, and to extend to the Series E
Purchaser, Series F Purchaser and Xx. Xxxxxxx the registration rights,
information rights and other rights and obligations as set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto further agree as follows:
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1. CERTAIN DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed thereto in the Purchase Agreement. As used in this Agreement,
the following terms shall have the meanings set forth below:
(A) "AFFILIATE" shall have the meaning ascribed to such term in
Rule 12b-2 promulgated under the Exchange Act.
(B) "COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(C) "COMMON SHARES" shall mean the shares of the Company's Common
Stock issued pursuant to the Securities Purchase Agreement.
(D) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(E) "HOLDER" shall mean any Purchaser who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 2.9 and Section 3 hereof.
(F) "INITIATING HOLDERS" shall mean any Holder or Holders who in
the aggregate hold at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Registrable Securities.
(G) "KEY MANAGEMENT" shall mean Xxxxx X. Xxxxx, Xxxxxxx X.
Xxxxxxxxxxx, Xxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx X.
Xxxxxx and Xxxxxxx X. Xxxxxx.
(H) "1998 AGREEMENT" shall mean that certain Purchaser Rights
Agreement, dated as of February 10, 1998, among the Company and certain Persons.
(I) "OPTION SHARES" shall mean the shares of Common Stock issued
or issuable upon the exercise of stock options granted pursuant to a stock
option plan of the Company (including the vested and unvested shares of Common
Stock held by Key Management as of the date hereof that were obtained pursuant
to the exercise of stock options pursuant to a stock option plan of the
Company).
(J) "OTHER PURCHASERS" shall mean persons other than Holders who,
by virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.
(K) "QUALIFYING PUBLIC OFFERING" shall mean the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities
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Act covering the offer and sale of Common Stock for the account of the Company
in which the gross proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $60,000,000.
(L) "PERSONS" shall mean any individual, corporation (including
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company, firm or other
enterprise, association, organization or entity, or any governmental body or
authority (federal, state or local).
(M) "REGISTRABLE SECURITIES" shall mean (i) the Common Shares and
fully vested Option Shares; and (ii) the shares of Common Stock issuable upon
the conversion of the Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock;
provided, however, that Registrable Securities shall not include any shares of
Common Stock which have previously been registered or which have been sold to
the public either pursuant to a registration statement or Rule 144, or which
have been sold in a private transaction in which the transferor's rights and
obligations under this Agreement are not assigned.
(N) The terms "REGISTER," "REGISTER" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(O) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses.
(P) "RESTRICTED SECURITIES" shall mean any Registrable Securities
required to bear the legend set forth in Section 3.4 hereof.
(Q) "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(R) "RULE 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(S) "SECURITIES" shall mean (i) the Common Stock, (ii) the Series
Preferred, and (iii) the shares of Common Stock issuable upon the conversion of
the Series Preferred.
(T) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
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(U) "SECURITIES PURCHASE AGREEMENT" shall mean that certain
Securities Purchase Agreement, dated as of February 10, 1998, by and among the
Company and certain of the Existing Purchasers, as the same may be amended and
in effect from time to time.
(V) "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
References to BTI herein shall refer to BTI and each of its Affiliates,
including, without limitation, Kohlberg Kravis Xxxxxxx & Co. L.P. and the KKR
1996 Fund L.P.
2. REGISTRATION RIGHTS.
2.1 REQUESTED REGISTRATION.
(A) REQUEST FOR REGISTRATION. If the Company shall receive from
Initiating Holders at any time after the earlier of (I) five years after the
date of this Agreement or (II) one year after the effective date of the first
registration statement filed by the Company pursuant to the Securities Act
covering an underwritten offering of Common Stock to the general public, a
written request that the Company effect any registration with respect to all or
a part of the Registrable Securities, the Company will:
(I) promptly give written notice of the proposed registration
to all other Holders; and
(II) as soon as practicable, use its commercially reasonable
efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act) and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) calendar days after such written notice from
the Company is given. The registration statement filed pursuant to the request
of the Initiating Holders may, subject to the provisions of Sections 2.1(e),
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1(a):
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has initiated one such registration
pursuant to this Section 2.1(a) (counting for these purposes only registrations
which have been declared or ordered effective and pursuant to which securities
have been sold and registrations which have
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been withdrawn by the Holders as to which the Holders have not elected to bear
the Registration Expenses pursuant to Section 2.3 hereof and would, absent such
election, have been required to bear such expenses) or
(C) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective.
(B) SPECIAL DEMAND RIGHTS. After 180 days after the effective date
of the first registration statement filed by the Company pursuant to the
Securities Act covering an underwritten offering of Common Stock to the general
public, upon the written request of BTI (or its Affiliates or a transferee who
agrees to be bound by the terms of this Agreement) (a "BTI Demand"), that the
Company effect any registration with respect to all or a part of the Registrable
Securities held by such entity, the Company will:
(I) promptly give written notice of the proposed registration
to all other Holders; and
(II) as soon as practicable, use commercially reasonable
efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act) and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request
(including shares of Common Stock issuable upon the conversion of Series F
Preferred Stock, if applicable), together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty (20)
calendar days after such written notice from the Company is given. The
registration statement filed pursuant to a BTI Demand may, subject to the
provisions of Sections 2.1(e), include other securities of the Company, with
respect to which registration rights have been granted, and may include
securities of the Company being sold for the account of the Company.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1(b):
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has initiated pursuant to this
Section 2.1(b) (i) two such registrations, if BTI has not exercised the Option
in full, and (iii) three such registration if BTI has exercised the Option in
full (counting for these purposes only registrations which have been declared or
ordered effective and pursuant to which at least 80% of the securities requested
to be sold by BTI have been sold);
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(C) If the party making the BTI Demand holds less than 5%
of the outstanding shares of Common Stock (on an as converted basis) at the time
of such demand;
(D) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective;
(C) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the requests contemplated in
Sections 2.1(a) and 2.1(b); provided, however, that if (I) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (II) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred twenty (120) days after receipt of the request of the Initiating
Holders or the BTI Demand, as the case may be, and, provided further, that the
Company shall not defer its obligation in this manner more than once in any
twelve-month period.
(D) UNDERWRITING. If the Holders requesting registration intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of their request made
pursuant to Section 2.1(a) or 2.1(b) and the Company shall include such
information in the written notice referred to in Section 2.1(a)(i) and Section
2.1(b)(i). In such event, the right of any Holder to registration pursuant to
Sections 2.1(a) or 2.1(b) shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. A Holder may elect to include
in such underwriting all or a part of the Registrable Securities such Holder
holds.
(E) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Sections 2.1(a) or 2.1(b) of securities being sold for
its own account, or if other persons shall request inclusion in any registration
pursuant to Sections 2.1(a) or 2.1(b), the Initiating Holders or the party
making the BTI Demand shall, on behalf of all Holders, offer to include such
securities in the underwriting and may condition such offer on their acceptance
of the further applicable provisions of this Section 2. The Company shall
(together with all Holders and other persons proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, in the case of registrations pursuant to Section 2.1(a) or the entity
making the BTI Demand, in the case of registrations pursuant to Section 2.1(b),
which underwriters are reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 2.1(e), if the representative of
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the underwriters advises the Initiating Holders or the entity making the BTI
Demand, in writing that marketing factors require a limitation on the number of
shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated: first, to the Holders of
Registrable Securities pro rata based on the number of shares of Registrable
Securities for which registration was requested; and second, to the Company for
securities being sold for its own account; and finally, to the holders of other
securities of the Company with registration rights pro rata based on the number
of shares for which registration was requested. The Company shall not limit the
number of Registrable Securities to be included in a registration statement
pursuant to this Section 2.1 in order to include shares held by Purchasers with
no registration rights or any other shares of stock issued to employees,
officers, directors or consultants pursuant to a stock option plan of the
Company or in order to include in such registration securities registered for
the Company's own account. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice from the
Company, the underwriter, the Initiating Holders or BTI, as the case may be, and
the securities so excluded shall also be withdrawn from registration. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall also be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares to be included in
such registration was previously reduced as a result of marketing factors
pursuant to this Section 2.1(e), then the Company shall offer to all holders who
have retained rights to include securities in the registration the right to
include additional securities in the registration in an aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated among
such Holders requesting additional inclusion in accordance with this Section
2.1(e).
2.2 COMPANY REGISTRATION.
(A) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 2.1 hereof), other than a registration statement on Form S-8
relating solely to employee benefit plans, or a registration relating to a
corporate reorganization or other transaction under Rule 145, or a registration
on any registration form that does not permit secondary sales, the Company will:
(I) promptly give to each Holder written notice thereof; and
(II) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 2.2(b) below, and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by any Holder and received by the Company within ten (10) calendar days after
the written notice from the Company described in clause (i) above is given by
the Company. Such written request may specify all or a part of a Holder's
Registrable Securities.
(B) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.2(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 2.2 shall be conditioned upon such
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Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected by the Company.
(C) Notwithstanding any other provision of this Section 2.2, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated: first, to the Company for
securities being sold for its own account; second, to the Holders of Registrable
Securities pro rata based on the number of shares of Registrable Securities for
which registration was requested; and finally, to the holders of other
securities of the Company with registration rights pro rata based on the number
of Other Shares for which registration was requested. The Company shall not
limit the number of Registrable Securities to be included in a registration
pursuant to this Agreement in order to include shares held by Purchasers with no
registration rights or any other shares of stock issued to employees, officers,
directors, or consultants pursuant to a stock option plan of the Company, in
order to include in such registration securities registered for the Company's
own account. If any person does not agree to the terms of any such underwriting,
he shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion as set forth above.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2.1 and 2.2 hereof and reasonable fees and expenses of one counsel for
the selling Holders shall be borne by the Company; provided, however, that if
the Holders bear the Registration Expenses for any registration proceeding begun
pursuant to Section 2.1(a) and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 2.1(a)(ii)(B) hereof. Furthermore, in the event
that a withdrawal by the Holders is based upon material adverse information
relating to the Company that is different from the information known or
available (upon request from the Company or otherwise) to the Holders requesting
registration at the time of their request for registration under Section 2.1,
such registration shall not be treated as a counted registration for purposes of
Section 2.1 hereof, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered
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on their behalf, as shall any other expenses in connection with the registration
required to be borne by the holders of such securities.
2.4 REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to Section 2, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use commercially reasonable
efforts to:
(A) Keep such registration effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that such 180-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company;
(B) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(C) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request and provide the Holders,
underwriters and their respective counsel the opportunity to participate in the
preparation of such documents;
(D) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(E) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed and use commercially reasonable efforts to
register and qualify the Registrable Securities under state securities laws or
blue sky laws of those jurisdictions within the United States and Puerto Rico as
shall be reasonably required in order to effect the distribution of the
Registrable Securities; provided, however, that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this Section 2.4 be obligated to be so qualified or to consent to general
service of process in any such jurisdiction and provided that the Company shall
not be required to register or qualify such Registrable Securities in any
jurisdiction in which the
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Company would solely as a result thereof (i) become subject to taxation, (ii) be
required (or any shareholder would be required) to escrow shares of Common Stock
or be subject to other significant limitations on its (or any such
shareholder's) disposition of such shares or (iii) be required to amend the
terms of such public offering, in each case in a manner which is materially
adverse to the Company;
(F) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(G) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(H) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1 hereof, the Company will
enter into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.
(I) Use its commercially reasonable efforts to obtain the
withdrawal of any stop order suspending the effectiveness of such registration
statement or any post-effective amendment thereto at the earliest practicable
date;
(J) Cause to be furnished, at the request of each Holder of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration, if
such Registrable Securities are being sold through underwriters, or, if such
Registrable Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Registrable Securities becomes
effective, (i) a signed counterpart of an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance reasonably satisfactory to such Holder, addressed to the
underwriters, if any, and to each Holder of Registrable Securities, and (ii) a
letter dated such date, signed by the independent certified public accountants
of the Company, in form and substance reasonably satisfactory to such Holder of
Registrable Securities, addressed to the underwriters, if any, and to such
Holder of Registrable Securities, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of the independent certified public accountants' letter, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuers' counsel and in independent certified
public accountants' letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the independent certified public
accountants' letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such Holder (or the underwriters, if any)
may reasonably request; and
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(K) Otherwise use commercially reasonable efforts to make
available the executive officers of the Company (including Xxxxx Xxxxx and
Xxxxxxx Xxxxxx) to participate in such "Road Shows" or other selling efforts as
may be reasonably requested by the Holders in connection with the distribution
of the Registrable Securities.
2.5 INDEMNIFICATION.
(A) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 2, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
2.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(B) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder and Other
Purchaser, and each of their officers, directors, and partners, and each person
controlling such Holder or Other Purchaser, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Purchasers,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred
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in connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular,
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein provided, however, that the obligations of such Holder hereunder shall
not apply to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld); and provided that in no event shall any indemnity under this Section
2.5 exceed the gross proceeds from the offering received by such Holder.
(C) Each party entitled to indemnification under this Section 2.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnifying Party otherwise agrees
or unless representation by the Indemnifying Party's counsel is inappropriate
due to actual or potential conflicts of interest), and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2, to the
extent such failure is not prejudicial. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(D) If the indemnification provided for in this Section 2.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
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(E) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(F) Notwithstanding any of the foregoing, no Holder shall be
required to contribute any amount in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities covered by such
registration statement and no person guilty of fraudulent misrepresentation
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.6 INFORMATION BY HOLDER. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 2.
2.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and until
four years after the date of this Agreement, if the Company enters into any
agreement with any holder or prospective holder of any securities of the Company
giving such holder or prospective holder any registration rights the terms of
which are more favorable than the registration rights granted to the Holders
hereunder, then the Company shall give equivalent registration rights to the
Holders.
2.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to use commercially reasonable efforts to:
(A) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
(B) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements;
(C) So long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon written request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
2.9 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted to a Holder by the Company
under this Section 2 may be
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transferred or assigned by a Holder only to a transferee or assignee of not less
than 200,000 shares of Registrable Securities (as currently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like), provided that the Company is given written notice
prior to said transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and, provided further,
that the transferee or assignee of such rights assumes in writing the
obligations of such Holder under this Agreement.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of securities of the Company, a Purchaser shall not sell or
otherwise transfer or dispose of any securities of the Company held by such
Purchaser (other than those included in the registration) during the one hundred
eighty (180) day period following the effective date of a registration statement
of the Company filed under the Securities Act, provided that:
(A) such agreement shall only apply to the first such
registration statement of the Company, including securities to be sold on its
behalf to the public in an underwritten offering; and
(B) all officers and directors of the Company are bound by and
have entered into similar agreements.
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
3. RESTRICTIONS ON TRANSFER.
3.1 TRANSFER. No Purchaser will, voluntarily or involuntarily,
directly or indirectly, sell, transfer, assign, donate, pledge or otherwise
encumber or dispose of any interest in all or any portion of the Securities or
Option Shares (a "Transfer") except pursuant to an Exempt Transfer.
3.2 EXEMPT TRANSFER. The restrictions contained in this Section 3
will not apply to any Transfer which is one of the following "Exempt Transfers":
(A) the Transfer by a partnership to its partners or retired
partners in accordance with partnership interests;
(B) the Transfer by a corporation to its shareholders in
accordance with their interest in the corporation;
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(C) the Transfer by a limited liability company to its members
in accordance with their interest in the limited liability company;
(D) the Transfer by a Purchaser to such Purchaser's spouse,
lineal descendant, father, mother, brother or sister ("Immediate Family");
(E) the Transfer by a Purchaser to a custodian or trustee for the
account of such Purchaser or such Purchaser's Immediate Family;
(F) the Transfer by a Purchaser (other than Transfers of Option
Shares by a member of Key Management) to any Affiliate of that Purchaser;
(G) the Transfer to the Company or any other Purchaser; provided,
however, that a member of Key Management may not Transfer any Option Shares to
the Company or any other Purchaser during the Key Management Restricted Period
(as defined below), except for Transfers to the Company in payment of the
exercise price of any stock option granted pursuant to a stock option plan
and/or option agreement of the Company;
(H) a bona fide pledge or mortgage with a commercial lending
institution that creates a mere security interest;
(I) pursuant to Section 5 or 6 of this Agreement (i) after the
third anniversary of the date of this Agreement for Purchasers other than as
provided in (ii), and (ii) for transfers of fully vested Option Shares held by
Key Management, such Transfers may be made only after the fifth anniversary of
the date of the option grant pursuant to which such Option Shares were acquired
(the "Key Management Restricted Period"); provided, however, that prior to the
end of the applicable Key Management Restricted Period with respect to any fully
vested Option Shares, each member of Key Management may exercise its co-sale
rights under Section 6 on Transfers by BTI or its Affiliates;
(J) pursuant to Section 2 or 7 of this Agreement; provided,
however, each member of Key Management acknowledges and agrees that he may not
Transfer any Option Shares pursuant to Section 2 until the expiration of the Key
Management Restricted Period, except that prior to the end of the applicable Key
Management Restricted Period with respect to any Option Shares, each member of
Key Management may request registration of fully vested Option Shares pursuant
to Section 2.1 or 2.2 in an amount equal to the product of (i) the number of
fully vested Option Shares then held by such member of Key Management and (ii)
the quotient determined by dividing (A) the total number of shares of Common
Stock requested by BTI or its Affiliates to be registered in such offering by
(B) the aggregate number of shares of Common Stock beneficially owned by BTI and
its Affiliates; or
(K) transfers of fully vested Option Shares held Key Management
that are made after a Qualifying Public Offering but before the fifth
anniversary of the date of the option grant pursuant to which such Option Shares
were acquired; provided, that (i) no more than ten percent (10%) of the fully
vested Option Shares held by any individual may be transferred in any given
calendar year pursuant to this Section 3.2(k), (ii) any unused portion of this
ten percent (10%) from a given calendar year may be carried over to, and be
available for transfers in, subsequent calendar years pursuant to this Section
3.2(k), and (iii) in no event can any individual
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transfer more than an aggregate of twenty five percent (25%) of their fully
vested Option Shares pursuant to this Section 3.2(k).
3.3 SECURITIES LAWS; ASSIGNMENT OF OBLIGATIONS. In addition to any
other restriction on Transfer herein, such Purchaser will not effect any
Transfer (other than Transfers pursuant to Sections 2 or 7 hereof) until the
transferee has agreed in writing to be bound by the terms of this Agreement, at
which time such transferee shall be a "Purchaser" for all purposes of this
Agreement, and:
(A) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(B) Such Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act; provided however, that it is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
3.4 LEGEND.
(A) Each certificate representing Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with legends substantially similar to the following (in addition to
any legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO EFFECTUATE
SUCH TRANSACTION.
THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN PURCHASER RIGHTS AGREEMENT BETWEEN THE COMPANY AND
CERTAIN HOLDERS OF ITS SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM
TIME TO TIME. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE COMPANY.
(B) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Purchaser if the Purchaser shall have
obtained an opinion of counsel at such Purchaser's expense (which counsel may be
counsel to the Company) reasonably
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acceptable to the Company to the effect that the securities proposed to be
disposed of may lawfully be so disposed of without registration, qualification
or legend.
3.5 IMPROPER TRANSFER. Any attempt to Transfer any Securities or
Option Shares which is not in accordance with this Agreement shall be null and
void, and the Company shall not give any effect to such attempted Transfer in
the records of the Company.
4. PRE-EMPTIVE RIGHT.
4.1 PRE-EMPTIVE RIGHT. The Company hereby grants to each Purchaser
who owns shares of Series Preferred or Common Stock (such Purchasers referred to
as the "Pre-Emptive Purchasers") the right to purchase a pro rata portion of New
Securities (as defined in Section 4.2) which the Company may, from time to time,
propose to sell and issue (the "Pre-Emptive Right"). Such Pre-Emptive
Purchaser's pro rata share for purposes of this Pre-Emptive Right is the ratio
of the number of shares of Common Stock owned by such Pre-Emptive Purchaser (on
an as-converted, as-exercised basis) immediately prior to the issuance of New
Securities, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of New Securities, assuming full conversion of
all securities and full exercise of all outstanding rights, options and warrants
to acquire Common Stock of the Company. Each Pre-Emptive Purchaser exercising
their portion of the Pre-Emptive Right in full (an "Exercising Pre-Emptive
Purchaser") shall have a right of over-allotment such that if any other
Pre-Emptive Purchaser fails to exercise its right hereunder to purchase its pro
rata share of New Securities (a "Non-Purchasing Pre-Emptive Purchaser"), such
Exercising Pre-Emptive Purchaser may purchase such portion, on a pro rata basis,
by giving written notice to the Company within ten (10) calendar days from the
date that the Company provides written notice of the amount of New Securities
such Non-Purchasing Pre-Emptive Purchasers have failed to exercise their
Pre-Emptive Rights hereunder. This Pre-Emptive Right shall be subject to the
following provisions of this Section 4.
4.2 NEW SECURITIES. "New Securities" shall mean any capital stock
(including Common Stock and/or Preferred Stock) of the Company whether now
authorized or not, and rights, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided that the term "New Securities" does not
include (i) securities purchased under the Securities Purchase Agreement, Series
D Purchase Agreement, dated July 2, 1999 (the "Series D Purchase Agreement"),
the plan of recapitalization adopted by the Board of Directors and stockholders
of the Company providing for the conversion of each share of the Series B
Preferred Stock into one share of Series B Preferred Stock and 0.22222 of a
share of Series E Preferred Stock (the "Series E Recapitalization") or Purchase
Agreement; (ii) securities issuable upon conversion or exercise of the
securities purchased under the Securities Purchase Agreement, Series D Purchase
Agreement, Series E Recapitalization or Purchase Agreement;(iii) securities
issued pursuant to the acquisition of another business entity or business
segment of any such entity by the Company by merger, purchase of substantially
all the assets or other reorganization whereby the Company will own more than
fifty percent (50%) of the voting power of such business entity or business
segment of any such entity; (iv) any borrowings, direct or indirect, from
financial institutions or other Persons by the Company, whether or not currently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features including
warrants, options or other rights to purchase capital stock and are not
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convertible into capital stock of the Company; (v) securities issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Board of Directors; (vi) securities issued to vendors or
customers or to other Persons in similar commercial situations with the Company
if such issuance is approved by the Board of Directors; (vii) securities issued
in connection with obtaining lease financing, whether issued to a lessor,
guarantor or other Person; (viii) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; and (ix) securities
issuable upon the exercise of warrants pursuant to the Warrant Agreement, dated
June 23, 1998, between the Company and Norwest Bank Minnesota, National
Association,
4.3 NOTICE. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Pre-Emptive Purchaser written
notice of its intention, describing the type of New Securities, and their price
and the general terms upon which the Company proposes to issue the same. Each
such Pre-Emptive Purchaser shall have twenty (20) calendar days after any such
notice is given to agree to purchase such Pre-Emptive Purchaser's pro rata share
of such New Securities for the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
4.4 SELLING PERIOD. In the event any Pre-Emptive Purchaser or
Exercising Pre-Emptive Purchaser fails to exercise fully the Pre-Emptive Right
within said twenty (20) day period and after the expiration of the 10-day period
for the exercise of the over-allotment provisions of Section 4.1, the Company
shall have one hundred twenty (120) calendar days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within one hundred twenty (120) calendar days from
the date of said agreement) to sell the New Securities respecting which any
Pre-Emptive Purchasers' or Exercising Pre-Emptive Purchasers' Pre-Emptive Right
option set forth in this Section 4 was not exercised, at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company's
notice to the Pre-Emptive Purchasers pursuant to Section 4.3. In the event the
Company has not sold within said 120-day period or entered into an agreement to
sell the New Securities in accordance with the foregoing within said 120-day
period from the date of said agreement, the Company shall not thereafter issue
or sell any New Securities, without first again offering such securities to the
Pre-Emptive Purchasers in the manner provided in Section 4.3 above.
4.5 TRANSFER OF PRE-EMPTIVE RIGHT. The Pre-Emptive Right set forth
in this Section 4 may be transferred or assigned by a Pre-Emptive Purchaser only
to a transferee or assignee of not less than (i) 200,000 shares of Series B
Preferred Stock, (ii) 200,000 shares of Series C Preferred Stock, (iii) 200,000
shares of Series D Preferred Stock (iv) 200,000 shares of Series E Preferred
Stock, (v) 200,000 shares of Series F Preferred Stock or (vi) 200,000 shares of
Common Stock (in each case, as currently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the Company is given written notice prior to said transfer
or assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such Pre-Emptive Rights are
being transferred or assigned, and, provided further, that the transferee or
assignee of such rights assumes in writing the obligations of such Pre-Emptive
Purchaser under this Agreement.
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5. RIGHT OF FIRST REFUSAL.
5.1 RIGHT OF FIRST REFUSAL. Commencing on (i) the third anniversary
of the date of this Agreement for Purchasers other than as provided in (ii), and
(ii) the fifth anniversary of the date of the option grant pursuant to which the
fully vested Option Shares held by members of Key Management were acquired, no
Purchaser shall sell, assign, pledge, or in any manner transfer any shares of
capital stock of the Company (whether now owned or hereafter acquired) or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except as set forth herein:
(A) If Purchaser desires to sell or otherwise transfer any shares
of capital stock, then such Purchaser (the "Section 5 Selling Purchaser") shall
give at least thirty (30) calendar days written notice thereof to the Company
and the other Purchasers. The notice shall name the proposed transferee and
state the number of shares of capital stock to be transferred, the proposed
consideration, and all other terms and conditions of the proposed transfer.
(B) For twenty (20) calendar days following receipt of such
notice, the Company shall have the option but not the obligation to purchase all
(but not less than all) of the shares of capital stock specified in the notice
at the price and upon the terms set forth in such notice; provided, however,
that, with the consent of the Section 5 Selling Purchaser, the Company shall
have the option to purchase a lesser portion of the shares of capital stock
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares of capital stock, and
that is not otherwise exempted from the provisions of this Section 5.1, the
price shall be deemed to be the fair market value of the capital stock at such
time as determined in good faith by the Board of Directors. In the event the
Company elects to purchase all of the shares of capital stock or, with consent
of the Section 5 Selling Purchaser, a lesser portion of the shares of capital
stock, it shall give written notice to the Section 5 Selling Purchaser of its
election and settlement for said shares of capital stock shall be made as
provided below in paragraph (d).
(C) If the Company does not elect to purchase the shares
specified in the notice, then the Company shall promptly provide written notice
to the Purchasers of such election (which in no event will be later than 20
calendar days following receipt of the notice referred to in Section 5.1(a)) and
the Purchasers may elect to purchase all (but not less than all) of the shares
by delivering written notice to the Company and the Section 5 Selling Purchaser
within ten (10) calendar days after notice is given by the Company.
(D) In the event the Company and/or any other Purchasers elect
to acquire any of the shares of capital stock of the Section 5 Selling Purchaser
as specified in said Section 5 Selling Purchaser's notice, the Secretary of the
Company shall so notify the Section 5 Selling Purchaser and settlement thereof
shall be made in cash within forty (40) days after the Secretary of the Company
receives said Section 5 Selling Purchaser's notice; provided that if the terms
of payment set forth in said Section 5 Selling Purchaser's notice were other
than cash against delivery, the Company and/or the other Purchasers shall pay
for said shares on the same terms and conditions set forth in said Section 5
Selling Purchaser's notice.
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(E) In the event the Company and/or the other Purchasers do not
elect to acquire all of the shares of capital stock specified in the Section 5
Selling Purchaser's notice, said Section 5 Selling Purchaser may, within the
sixty-day period following the expiration of the rights granted to the Company
and/or the other Purchasers' herein, transfer the shares of capital stock
specified in said Section 5 Selling Purchaser's notice which were not acquired
by the Company and/or the other Purchasers as specified in said Section 5
Selling Purchaser's notice.
5.2 TRANSFER EXEMPT FROM RIGHT OF FIRST REFUSAL. Anything to the
contrary contained herein notwithstanding, the following transactions shall be
exempt from the provisions of this section:
(A) A Purchaser's transfer to such Purchaser's Immediate Family.
(B) A transfer to any custodian or trustee for the account of
such Purchaser or such Purchaser's Immediate Family.
(C) A Purchaser's bona fide pledge or mortgage with a commercial
lending institution creating a mere security interest.
(D) A corporate Purchaser's transfer of any or all of its shares
of capital stock to its stockholders in accordance with their interest in the
corporation.
(E) A transfer by a Purchaser which is a partnership to any or
all of its partners or retired partners in accordance with partnership
interests.
(F) A transfer by a Purchaser to any Affiliate of that Purchaser.
(G) A transfer by a Purchaser which is a limited liability
company to its members in accordance with their interest in the limited
liability company.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this section, and there
shall be no further transfer of such stock except in accord with this section.
5.3 RIGHT OF FIRST REFUSAL AFTER A PUBLIC OFFERING. The foregoing
right of first refusal shall be modified after the closing of a Qualifying
Public Offering with respect to "public sales" pursuant to Rule 144 (including
Rule 144(k)) under the Securities Act such that the Company shall have
twenty-four (24) hours to decide to exercise its right to purchase the shares
specified in the notice and to notify the Purchasers of its election and the
Purchasers only twenty-four (24) hours after such notice is given to exercise
their election.
5.4 TRANSFER EXEMPT FROM FIRST REFUSAL RIGHT AFTER A PUBLIC OFFERING.
Anything to the contrary contained herein notwithstanding, any Transfer after
the closing of a Qualifying Public Offering by a Purchaser which in the
aggregate, over the term of this Agreement, amounts to no more than 10,000
shares of Series Preferred or Common Stock, shall be exempt from the provisions
of this Section 5.
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6. CO-SALE RIGHT.
6.1 NOTICE. At any time after the third anniversary of the date of
this Agreement, if a Purchaser holding Series Preferred or Common Stock proposes
to sell or transfer any shares of Series Preferred or Common Stock ("Co-Sale
Stock") then such Purchaser (a "Section 6 Selling Purchaser") shall promptly
give written notice (the "Notice") simultaneously to the Company and to each of
the other Purchasers holding Series Preferred or Common Stock at least thirty
(30) calendar days prior to the closing of such sale or transfer. The Notice
shall describe in reasonable detail the proposed sale or transfer including,
without limitation, the number of shares of Co-Sale Stock to be sold or
transferred, the nature of such sale or transfer, the total consideration to be
paid to the Section 6 Selling Purchaser (including any consideration for the
securities that is paid or to be paid under other arrangements with the Section
6 Selling Purchaser, including but not limited to, compensation for employment
or services in excess of the reasonable value of the Section 6 Selling
Purchaser's services), and the name and address of each prospective purchaser or
transferee.
6.2 NOTICE OF PARTICIPATION. Each Purchaser holding Series Preferred
or Common Stock shall have the right, exercisable upon written notice to the
Company within fifteen (15) calendar days after the Notice is given, to
participate in such sale of Co-Sale Stock on the same terms and conditions. Such
notice shall indicate the number of shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock or Common Stock such Purchaser wishes to sell under his or her
right to participate. To the extent one or more Purchasers exercises such right
of participation in accordance with the terms and conditions set forth in this
Section 6, the number of shares of Co-Sale Stock that may be sold in the
transaction shall be computed as set forth below. Each Purchaser desiring to
participate shall be referred to as a "Participant". If one or more Purchasers
become Participants, each Participant shall sell that number of shares of Series
Preferred or Common Stock equal to the product obtained by multiplying (a) the
aggregate number of shares of Co-Sale Stock by (b) a fraction the numerator of
which is the number of shares of Series Preferred or Common Stock owned by the
Participant or the Section 6 Selling Purchaser, as the case may be, at the time
of the sale of the transfer (on an as-converted to Common Stock basis) and the
denominator of which is the total number of shares of Series Preferred or Common
Stock owned by all Participants and the Section 6 Selling Purchaser at the time
of the sale or transfer (on an as-converted to Common Stock basis).
6.3 TRANSFER. Each Participant shall effect its participation in the
sale by promptly delivering to the Company for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer of the type
and number of shares of Series Preferred or Common Stock which such Participant
elects to sell. In the event the Participant holds the same type of stock as the
Section 6 Selling Purchaser intends to sell the Participant must sell that type
of stock.
6.4 ADDITIONAL TRANSFER PROVISIONS. The stock certificate or
certificates that the Participant delivers to the Company pursuant to Section
6.3 shall be transferred to the prospective purchaser in consummation of the
sale of the Series Preferred or Common Stock pursuant to the terms and
conditions specified in the Notice, and the Section 6 Selling Purchaser(s) shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise
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refuses to purchase shares or other securities from a Participant exercising its
rights of co-sale hereunder, such Section 6 Selling Purchaser(s) shall not sell
to such prospective purchaser or purchasers any Co-Sale Stock unless and until,
simultaneously with such sale, such Section 6 Selling Purchaser(s) shall
purchase such shares or other securities from such Participant on the same terms
and conditions specified in the Notice.
6.5 NO ELECTION TO PARTICIPATE. If none of the other Purchasers
holding Series Preferred or Common Stock to participate in the sale of the
Co-Sale Stock subject to the Notice, such Section 6 Selling Purchaser(s) may,
not later than sixty (60) calendar days following delivery to the Company of the
Notice, enter into an agreement providing for the closing of the transfer of the
Co-Sale Stock covered by the Notice within thirty (30) days of such agreement on
terms and conditions not more favorable to the transferor than those described
in the Notice. Any proposed transfer on terms and conditions more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Stock by a Section 6 Selling Purchaser(s), shall again be
subject to the co-sale rights of the Purchaser and shall require compliance by
such Section 6 Selling Purchaser(s) with the procedures described in this
Section 6.
6.6 TRANSFERS EXEMPT FROM CO-SALE RIGHT.
(A) Notwithstanding the foregoing, the co-sale rights of the
Purchaser shall not apply to (i) any transfer or transfers by a Section 6
Selling Purchaser(s) which in the aggregate, over the term of this Agreement,
amount to no more than 10,000 shares of Co-Sale Stock held by such holder, (ii)
any bona fide pledge or mortgage of Co-Sale Stock with a commercial lending
institution that creates a mere security interest, (iii) any transfer to the
Immediate Family of the holders of Co-Sale Stock, (iv) any transfer to a
custodian or trustee for the account of the holder of Co-Sale Stock or such
holder's Immediate Family, (v) any transfer or transfers by a holder of Co-Sale
Stock to another holder of Co-Sale Stock (the "Transferee-Holder") so long as
the Transferee-Holder is, at the time of the transfer, employed by, or acting as
a consultant or director of, the Company, (vi) any bona fide gift or (vii) any
transfer by any Purchaser to an Affiliate of such Purchaser; provided that in
the event of any transfer made pursuant to one of the exemptions provided by
clauses (ii), (iii), (iv), (v), (vi) and (vii), (A) the holder of Co-Sale Stock
shall inform the Purchasers of such pledge, transfer or gift prior to effecting
it and (B) the pledgee, transferee or donee shall furnish the Purchasers with a
written agreement to be bound by and comply with all provisions of Sections 6 of
this Agreement. Such transferred Co-Sale Stock shall remain "Restricted Stock"
hereunder.
(B) The co-sale rights of the Purchasers are subject to, and
shall in no manner limit the right which the Company may have to repurchase
securities from the holder of Co-Sale Stock pursuant to (i) a stock restriction
agreement or other agreement between the Company and the holder of Co-Sale Stock
and (ii) the Pre-Emptive Right set forth in Section 5 hereto.
6.7 TERMINATION OF CO-SALE RIGHTS. The provisions of Section 6 of
this Agreement shall not apply to sales pursuant to a registered public offering
or "public" sales pursuant to Rule 144 under the Securities Act after an initial
public offering.
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7. DRAG ALONG RIGHTS.
7.1 DRAG ALONG RIGHT. If BTI or its Affiliates (the "Initiating
Securityholder"), agree to sell or transfer (whether in a stock sale, merger or
other transaction) all or substantially all of their securities of the Company
or agree to the sale of all or substantially all of the assets of the Company to
a third party (whether for cash, securities or a combination of both), then all
Purchasers (including the holders of the Option Shares) ("Selling
Securityholders") will be required to sell all of their securities of the
Company held by them (and may be required to convert their Series Preferred into
Common Stock in connection with such sale) or acquiesce to the sale of the
assets of the Company.
7.2 CONSIDERATION. The consideration to be received by the Selling
Securityholders shall be the same consideration per share to be received by the
Initiating Securityholder for the corresponding class or series of stock (on an
as-converted basis, if applicable), or type of security, and the terms and
conditions of such sale shall be the same as those upon which the Initiating
Securityholder sells its securities; provided however, that any general
indemnity given by the Selling Securityholder, applicable to liabilities not
specific to a particular Selling Securityholder, to the purchaser in connection
with such sale shall be apportioned among the Selling Securityholder according
to the consideration received by each Selling Securityholder.
7.3 EXPENSES. The fees and expenses incurred in connection with a
sale under this Section 7 shall be shared by all the Purchasers on a pro rata
basis.
7.4 NOTICE. The Initiating Securityholder shall provide written
notice to the other Selling Securityholder setting forth the consideration to be
paid by the purchaser for the securities and the material terms of the sale
within ten (10) business days after such Initiating Securityholder exercises the
Drag Along Rights pursuant to Section 7.1 ("Drag Along Notice").
7.5 DELIVERY OF SECURITIES. Within ten (10) business days after the
date of the Drag Along Notice, each Selling Securityholder shall deliver to the
Company, the duly endorsed certificate or certificates representing the
securities held by such Selling Securityholder to be sold, and a limited
power-of-attorney authorizing the Company to take all actions necessary to sell
or otherwise dispose of such securities. In the event that a Selling
Securityholder should fail to deliver the securities, the Company shall cause
the books and records of the Company to show that such securities are bound by
the provisions of this Section 7 and that such securities may only be
transferred to the purchaser in such sale.
7.6 REMITTANCE OF CONSIDERATION. Promptly after the consummation of
the sale, the Purchaser shall remit directly to the Selling Securityholder the
consideration for the securities sold pursuant thereto.
8. BOARD OF DIRECTORS.
8.1 NOMINATION AND ELECTION OF DIRECTORS.
(A) SIZE. Commencing on the date of this Agreement, the Company
and the Purchasers agree to take any actions necessary so that the Board will be
comprised of seven (7) directors; provided, however, that in the event BTI
exercises all or any part of the Option, then the Board will be comprised of
nine (9) directors. The Company and the Purchasers agree to take any actions
necessary so that, at the First Closing, the Series F Directors shall consist of
Xxxxx
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X. Xxxxxx, Xxxxxxxxx Xxxxx, Xx. and Xxxx X. Xxxxxxx, the Other Series Directors
shall consist of Xxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxx, the Common Director
shall be Xxxxx X. Xxxxx and there shall be one vacancy. The Company and the
Purchasers also agree to take any actions necessary so that, after the First
Closing, an independent director nominated by Xx. Xxxxx and approved by the
Series F Directors (such approval not to be unreasonably withheld) is appointed
or elected to the Board.
(B) SERIES F AND BTI DIRECTORS.
(I) For so long at least 6,666,667 shares of Series F
Preferred Stock remain outstanding (subject to adjustment for any stock split,
reverse stock split and the like), the holders of Series F Preferred Stock shall
be entitled to elect and remove directors of the Company (the "Series F
Directors") pursuant to the Company's Restated Certificate.
(II) In the event that less than 6,666,667 shares of Series
F Preferred Stock remain outstanding (subject to adjustment for any stock split,
reverse stock split and the like), as a result of conversion or otherwise, but
BTI and its Affiliates beneficially own at least ten percent (10%) of the
outstanding Common Stock of the Company (assuming conversion of all Series
Preferred), BTI shall have the right to designate the number of persons to serve
as members of the Board of Directors (each a "BTI Nominee" and together, the
"BTI Nominees") equal to (A) the authorized size of the Board of Directors,
multiplied by (B) (1) the total number of shares of Common Stock beneficially
owned by BTI or its Affiliates (assuming conversion of all Series Preferred),
divided by (2) the total number of shares of Common Stock then outstanding
(assuming conversion of all Series Preferred), rounding up so that the BTI
Nominees will not represent less than such proportionate interest in the Company
calculated above; provided, however, that for purposes of this Section
8.1(b)(ii) only, the calculation of the total number of shares outstanding shall
exclude any equity securities issued by the Company after the date hereof (other
than the shares issued pursuant to the Option) if at such time (x) BTI has not
exercised any part of the Option and BTI and its Affiliates beneficially own
twenty percent (20%) or more of the outstanding Common Stock of the Company
(assuming conversion of all Series Preferred), or (y) BTI has exercised any part
of the Option and BTI and its Affiliates beneficially own thirty percent (30%)
or more of the outstanding Common Stock of the Company (assuming conversion of
all Series Preferred). The Company agrees to cause the BTI Nominees to be
nominated for election to the Board of Directors (the "BTI Directors"). A BTI
Director may be removed without cause only with the approval of BTI. In the
event a BTI Director dies, resigns or is removed, BTI shall be entitled to
appoint a successor director to the Board of Directors to fill the vacancy
created by such death, resignation or removal of the BTI Director.
(C) OTHER SERIES PREFERRED DIRECTORS. For so long as at least
8,532,394 shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock remain outstanding (subject to
adjustment for any stock split, reverse stock split and the like), the holders
of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, voting together as a single class, shall be
entitled to elect and remove directors of the Company (the "Other Series
Preferred Directors") pursuant to the Company's Restated Certificate. The
Purchasers of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock agree that for such time
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as Xxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxx are (i) employees of News-Press &
Gazette Company and Kansas City Equity Partners, respectively, (ii) are willing
to continue to serve on the Board of Directors, and (iii) do not violate their
fiduciary duties to the stockholders of the Company or otherwise demonstrate
that they are unfit to serve as members of the Board of Directors, that they
will continue to nominate and elect Xx. Xxxxxxx and Xx. Xxxxxx as their
representatives on the Board of Directors of the Company.
(D) COMMON AND CEO DIRECTOR.
(I) For so long as the conditions set forth in Sections
8.1(b)(i) and 8.1(c) are satisfied, the holders of Common Stock shall be
entitled to elect and remove a director of the Company (the "Common Director")
pursuant to the Company's Restated Certificate and the holders of the Common
Stock agree, that until such time as Xxxxx X. Xxxxx ceases to hold the position
of Chief Executive Officer of the Company, that they will nominate and elect Xx.
Xxxxx as their representative on the Board of Directors, and if Xx. Xxxxx ceases
to function as the Chief Executive Officer of the Company, the holders of the
Common Stock will nominate and elect another member of senior management of the
Company to replace Xx. Xxxxx.
(II) In the event the conditions set forth in either Section
8.1(b)(i) or 8.1(c) cease to be satisfied, the Company, for so long as Xx. Xxxxx
holds the position of Chief Executive Officer of the Company, shall nominate Xx.
Xxxxx for election to the Board of Directors (the "CEO Director").
(E) OTHER DIRECTORS. The Board of Directors shall nominate the
other members of the Board of Directors, if any, for election to the Board of
Directors (the "Other Directors").
(F) VOTING. Each Purchaser and any Affiliate of such Purchaser
owning shares of Series Preferred or Common Stock agree to cast the votes to
which they are entitled (whether at an annual or special meeting of stockholders
or by written consent in lieu of a meeting or otherwise) in such a manner as to
cause the BTI Nominees to be elected to the Board of Directors.
(G) EFFECTIVENESS. The Company and the Purchasers hereby
represent and warrant that the procedures established in this Section 8.1
relating to the size of the Board of Directors and for the designation,
nomination and election of the BTI Nominees is effective, under the terms of
Company's Restated Certificate and Bylaws, to ensure that at all times
subsequent to the date hereof and until the termination of this Agreement, the
BTI Nominees shall be members of the Board of Directors. The Company and
Purchasers covenant that if, at some point in the future, these procedures shall
prove to be ineffective in so providing, the Company and the Purchasers shall
take all steps within their respective power to provide for the designation,
nomination and election of the BTI Nominees to the Board of Directors. Upon the
request of BTI, the Company shall take all actions necessary to cause the Board
of Directors to appoint nominees of the Series F Preferred Stock or BTI, as
applicable, to the Boards of Directors of one or more Subsidiaries in proportion
to the representation of the Series F Preferred Stock or BTI, as applicable, on
the Company's Board of Directors.
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(H) PUBLIC SOLICITATION. After a registered offering to the
general public of the Company's equity securities, the Company shall use its
reasonable best efforts to solicit from the stockholders of the Company eligible
to vote for the election of directors proxies in favor of the nominees
designated in accordance with this Section 8.1. For purposes of this Section 8.1
and all other purposes of this Agreement, "beneficial ownership" or to
"beneficially own" shall be determined in a manner consistent with the meanings
assigned to such terms in Rule 13d-3 and Rule 13d-5 of the Securities Act.
8.2 BOARD COMMITTEES.
(A) The Company and the Purchasers agree that so long as BTI and
its Affiliates beneficially own at least ten percent (10%) of the outstanding
Common Stock of the Company (assuming conversion of all Series Preferred), the
Purchasers agree to take all actions necessary to cause the Board of Directors
to appoint no less than two of the Series F Directors or BTI Directors to any
committees of the Board of Directors, as requested by (i) the Purchasers holding
a majority of the votes of the Series F Preferred Stock (if the condition set
forth in Sections 8.1(b)(i) is satisfied), or (ii) BTI (if the condition set
forth in Sections 8.1(b)(i) is not satisfied).
(B) The Company and the Purchasers agree that so long as BTI and
its Affiliates beneficially own at least ten percent (10%) of the outstanding
Common Stock of the Company (assuming conversion of all Series Preferred), the
Company shall create an Audit Committee of the Board of Directors consisting of
four (4) members, two members of which shall be Series F Directors or BTI
Directors and the other two members of which shall not be employees of the
Company.
(C) The Company and the Purchasers agree that so long as BTI and
its Affiliates beneficially own at least ten percent (10%) of the outstanding
Common Stock of the Company (assuming conversion of all Series Preferred), the
Company shall create a Compensation Committee of the Board of Directors
consisting of four (4) members. Two members of such Compensation Committee shall
not be employees of the Company and one member shall be either the Chief
Executive Officer, the President, the Chief Operating Officer or a Senior Vice
President of the Company. No less than two of the Series F Directors or BTI
Directors shall serve on the Compensation Committee.
(D) Notwithstanding the foregoing, in the event BTI exercises its
Option, BTI's representation on, and the size of, such committees of the Board
of Directors shall be increased as appropriate to reflect BTI's proportionate
equity interest in the Company.
8.3 VETO RIGHTS. So long as BTI or its Affiliates beneficially owns
at least 6,666,667 shares of the Common Stock of the Company or shares of Series
F Preferred Stock representing such number of shares of Common on an
as-converted basis Stock (subject to adjustment for any stock split, reverse
stock split and the like), the approval of at least one of the BTI Nominees
shall be required for the Board of Directors of the Company or any Subsidiary to
approve and authorize any of the following with respect to the Company or any
Subsidiary:
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(A) Any increase or decrease in the total authorized shares of,
or issuance, sale, pledge or other disposition of, capital stock or any security
exchangeable or exerciseable for or convertible into capital stock;
(B) Any payment of any cash or non-cash dividends or other
distributions with respect to any capital stock;
(C) Any reclassification, combination, split, subdivision,
redemption, repurchase or other acquisition of any shares of capital stock
(excluding repurchases upon termination of services, the Company's exercise of
its rights under Section 5 hereof where BTI or its Affiliate is the Section 5
Selling Purchaser, the redemption of the Series E Preferred Stock, and the
redemption by the Company of up to 2,222,222 shares of Series C Preferred Stock
from Xxxxxxx X. Xxxxxx pursuant to the Stock Purchase Agreement dated July 12,
1999);
(D) Any individual incurrence or guarantee of indebtedness
(including draw downs on credit facilities) or the individual issuance of any
debt securities in excess of $5,000,000;
(E) Any change in the size or composition of the Board of
Directors or any committee of the Board of Directors or create any new committee
of the Board of Directors;
(F) Any transaction with an Affiliate or any entity in which an
Affiliate has an interest as a director, officer, employee or greater than 5%
stockholder or interest through a family relationship (excluding repurchases
upon termination of services, the Company's exercise of its rights under Section
5 hereof where BTI or its Affiliate is the Section 5 Selling Purchaser, the
redemption of the Series E Preferred Stock, and the redemption by the Company of
up to 2,222,222 shares of Series C Preferred Stock from Xxxxxxx X. Xxxxxx
pursuant to the Stock Repurchase Agreement dated July 12, 1999);
(G) Any hiring or termination of a chief executive officer or
other key officer;
(H) Any adoption or modification of the annual budget and
business plan;
(I) Any amendment or modification of any material provision of
the Indenture for the Company's Senior Notes, or the Company's main credit
facility or any other material contract;
(J) Any adoption, renewal or material modification of any
material compensation or benefit plan or arrangement;
(K) Any authorization of entering into a new line of business
provided as of the date hereof or the expansion outside of Missouri, Kansas or
Texas;
(L) Any consolidation, reorganization, share exchange,
recapitalization, business combination, merger or similar transaction other than
intra-Company transactions;
(M) Any sale, pledge, grant of security interest, lease,
transfer or other disposition of assets in excess of five million dollars
($5,000,000);
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(N) Any acquisition of assets or securities of any other person
or entity, except for acquisitions involving cash with an aggregate value of
less than five million dollars ($5,000,000) for any single acquisition or series
of related transactions;
(O) Any amendment to the Company's Restated Certificate or
Bylaws;
(P) Any voting or similar agreement concerning the Company's
capital stock;
(Q) Any payment, discharge or satisfaction of any material claim,
liability or obligation or the commencement of any material suit or proceeding;
(R) Any joint venture or similar profit sharing arrangement
involving material assets or the payment or receipt of more than five million
dollars ($5,000,000);
(S) Any material license, contract or agreement; or
(T) Any liquidation, dissolution or winding up of the Company.
8.4 OBSERVER RIGHTS. Subject to the provisions of this Section 8.4,
so long as Xxxxxxx X. Xxxxxx holds at least an aggregate of 2,054,678 shares of
the Company's Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock (subject to adjustment for any stock split, reverse stock split
and the like), he shall have the right to attend all meetings of the Company's
Board of Directors (other than Board committee meetings) in a nonvoting observer
capacity, to receive notice of such meetings and to receive all minutes,
consents and other materials, financial or otherwise, which the Company provides
to its Board of Directors ("Observer Rights"). Subject to the provisions of this
Section 8.4, so long as Advantage Capital Missouri Partners I, L.P., Advantage
Capital Missouri Partners II, L.P. and their Affiliates hold at least an
aggregate of 940,875 shares the Company's Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (subject to adjustment for any
stock split, reverse stock split and the like), they shall have the right to
appoint a total of one representative who shall have Observer Rights. Subject to
the provisions of this Section 8.4, so long as White Pines Limited Partnership I
and Pacific Capital, L.P. hold at least an aggregate of 1,104,526 shares the
Company's Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock (subject to adjustment for any stock split, reverse stock split
and the like), they shall have the right to appoint a total of one
representative who shall have Observer Rights. The Company may require as a
condition precedent to granting Observer Rights under this Section 8.4 that each
person proposing to attend any meeting of the Company's Board of Directors and
each person to have access to any of the information provided by the Company to
the Board of Directors shall agree to hold in confidence and trust and to act in
a fiduciary manner with respect to all information so received during such
meetings or otherwise. The Company also reserves the right not to provide
information and to exclude persons having Observer Rights from any meeting or
portion thereof (a) if the Company believes upon advice of counsel and with
reasonable notice to the persons having Observer Rights that attendance at such
meeting by such persons would adversely affect the attorney-client privilege or
the Board's fiduciary duties, or (b) to protect confidential or competitively
sensitive information. The Observer Rights set forth in this Section 8.4 shall
terminate upon the closing of a Qualifying Public Offering, unless terminated
sooner pursuant to the terms of this Section 8.4.
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9. MISCELLANEOUS.
9.1 GOVERNING LAW; PROCEEDINGS AND WAIVER OF JURY TRIAL. This
Agreement shall be governed in all respects by the laws of the State of New
York. All actions and proceedings arising our of or relating to this Agreement
shall be heard and determined in New York state or federal court located in New
York. Each party irrevocably waives all right to trial by jury in any action or
proceeding (including counterclaims) arising out of or relating to this
Agreement.
9.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. References to BTI in this Agreement shall be deemed to refer to
BTI and its Affiliates, including any affiliate of Kohlberg Kravis Xxxxxxx & Co.
L.P.
9.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER.
(A) This Agreement (including the Exhibits hereto) constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof; provided, that the parties to this Agreement
acknowledge and agree that the rights, restrictions and obligations set forth in
this Agreement are in addition to, and not in replacement of, the rights,
restrictions and obligations set forth in the Purchase Agreement, Restated
Certificate and the Management Stockholder Agreements.
(B) This Agreement may be amended or modified only upon the
written consent of the Company and Purchasers holding: (i) at least fifty
percent (50%) of the Common Shares, voting together as a single class; (ii) at
least fifty percent (50%) of the Series B Preferred, voting together as a single
class; (iii) at least fifty percent (50%) of the Series C Preferred Stock,
voting together as a single class; and (iv) at least fifty percent (50%) of the
Series D Preferred Stock, voting together as a single class; (v) at least fifty
percent (50%) of the Series E Preferred Stock, voting together as a single
class; and (vi) at least fifty percent (50%) of the Series F Preferred Stock,
voting together as a single class.
(C) The obligations of the Company and the rights of the holders
of any series of the Series Preferred or of the Common Stock under this
Agreement may be waived only with the written consent of Purchasers holding the
following percentage of that series of the Series Preferred or of the Common
Stock, as applicable: (i) at least fifty percent (50%) of the Common Shares,
voting together as a single class; (ii) at least fifty percent (50%) of the
Series B Preferred, voting together as a single class; (iii) at least fifty
percent (50%) of the Series C Preferred Stock, voting together as a single
class; (iv) at least fifty percent (50%) of the Series D Preferred Stock, voting
together as a single class; (v) at least fifty percent (50%) of the Series E
Preferred Stock, voting together as a single class; and (vi) at least fifty
percent (50%) of the Series F Preferred Stock, voting together as a single
class.
9.4 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a Holder, as indicated
on the list of Holders attached hereto as Exhibit A, or at
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such other address as such holder or permitted assignee shall have furnished to
the Company in writing, or (b) if to the Company, at such address or facsimile
number as the Company shall have furnished to each Holder in writing. All such
notices and other written communications shall be effective on the date of
mailing, facsimile transfer or delivery.
9.5 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
9.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein,
a Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
9.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
9.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement.
9.9 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURE. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. This
Agreement may be executed by facsimile signature(s).
9.10 BOARD MEETINGS/INFORMATION. The Board of Directors of the
Company shall meet at least quarterly at all times during the term of this
Agreement. In addition to the information rights set forth in the Purchase
Agreement, the Company shall provide the Directors as soon as available after
the end of each calendar month, copies of the unaudited interim financial
statements of the Company and its consolidated Subsidiaries as at the end of
such
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month or fiscal quarter, as the case may be, in each case in a form customarily
distributed to the officers of the Company.
9.11 RESTATED CERTIFICATE AND BYLAWS. The Company and the Purchasers
shall take or cause to be taken all lawful action necessary to ensure at all
times that the Company's Restated Certificate and Bylaws do not, at any time,
contradict the provisions of this Agreement.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Purchasers Rights Agreement effective as of the day and year first
above written.
BIRCH TELECOM, INC. PURCHASER:
BTI Ventures L.L.C.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxx Xxxxx
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Xxxxx X. Xxxxx, President
Name: Xxxx Xxxxx
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Title: Member
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SIGNATURE PAGE TO
AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT
