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HIGHWAYMASTER COMMUNICATIONS, INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
DATED AS OF
SEPTEMBER 27, 1996
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TABLE OF CONTENTS
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Page
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. The Recapitalization; Amendment of Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Transfer of Securities . . . . . . . . . . . . . . . . . . 7
Section 4. Registration Rights. . . . . . . . . . . . . . . . . . . 10
Section 5. Governance . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 35
ii
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT ("AGREEMENT"), dated
as of September 27, 1996, amends and restates in its entirety that Stockholders'
Agreement, dated as of February 4, 1994 (the "Original Agreement"), by and among
HIGHWAYMASTER COMMUNICATIONS, INC., a Delaware corporation (previously named HM
HOLDING CORPORATION) (the "COMPANY"), and the other Persons (as hereinafter
defined) identified in Appendix A hereto, as the Original Agreement has been
amended by the amendments and addenda set forth in Appendix B hereto, adds an
additional party hereto, Southwestern Bell Wireless Holdings, Inc., a Delaware
corporation ("SBW") and provides that the Persons identified in Appendix C
hereto shall no longer be parties hereto.
RECITALS:
A. Simultaneously with the execution hereof, SBW is acquiring
certain shares of Series D Preferred Stock (as hereinafter defined) of the
Company pursuant to the Purchase Agreement dated as of the date hereof, by and
between the Company and SBW (the "PURCHASE AGREEMENT") and agreeing to provide
certain services to the Company pursuant to a separate technical services
agreement.
B. Certain of the parties hereto have effected, or agreed to effect,
the Recapitalization reflected in Sections 2(a), (b) and (c) hereof.
C. Pursuant to Section 7(h) of the Original Agreement with respect
to the terms hereof generally and Section 4(k) of the Original Agreement with
respect to the registration rights provisions, holders of a sufficient number of
Shares (as hereinafter defined) have executed this Agreement thereby amending
and restating the Original Agreement, as amended to date, in its entirety as set
forth herein, for the purpose of regulating certain aspects of the Stockholders'
relationships with regard to each other and the Company.
D. Immediately after the execution hereof, the Stockholders (as
hereinafter defined) will consist of (i) Carlyle HighwayMaster Investors, L.P.,
Carlyle HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC
Group, L.L.C., Mark D. Ein, Chase Manhattan Investment Holdings, Inc. and
Archery Partners (the "CARLYLE ENTITIES"), (ii) Clipper/Merban, L.P.,
Clipper/Merchant Partners, L.P. and Clipper
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Capital Associates, L.P. (the "CLIPPER ENTITIES"), (iii) Erin Mills
International Investment Corporation, The Erin Mills Investment Corporation
and The Erin Mills Development Corporation (the "ERIN MILLS COMPANIES"), (iv)
William C. Kennedy, Jr., Donald M. Kennedy, William C. Saunders, Robert S.
Folsom and Robert T. Hayes and (v) SBW.
E. Simultaneously with the execution hereof, the Company is issuing
to SBW a warrant certificate for warrants (the "Warrants") for 5,000,000 shares
of Common Stock (as hereinafter defined) in consideration for SBW entering into
the transactions contemplated by the Purchase Agreement and the other
Transaction Documents (as hereinafter defined).
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Company and
Stockholders agree as follows:
Section 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"AFFILIATE" of any specified person or entity means any person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such person or entity.
"ANTI-TAKEOVER PROVISION" shall have the meaning set forth in Section
5(g) hereto.
"BENEFICIALLY OWN" (and correlative terms) means, with respect to any
shares of Common Stock or other securities, to be entitled, directly or
indirectly through one or more intermediaries, to all material incidents of
ownership with respect to such securities, including, but not limited to, (i)
the right to vote such securities (in the case of voting securities), (ii)
subject to any transfer restrictions, the right to dispose of such securities
and to receive any proceeds realized from the disposition thereof and (iii) the
right to receive any dividends and other distributions with respect to such
securities.
"BY-WORD STOCKHOLDER" means each of William C. Kennedy, Jr., Donald M.
Kennedy, William C. Saunders, Robert T. Hayes and Robert S. Folsom.
"CARLYLE ENTITIES" shall have the meaning set forth in the Recitals
hereto.
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"CARLYLE STOCKHOLDER" means each of the Carlyle Entities and any
Permitted Assign (as hereinafter defined) who acquires shares of Common Stock
directly or indirectly from a Carlyle Stockholder and who executes a
supplemental agreement as contemplated in Section 6(b) hereof, in his, her or
its capacity as a holder of Common Stock.
"CLASS B COMMON STOCK" means the new class of Company Common Stock,
par value $0.01 per share, to be authorized as contemplated in Section 2(e)
hereof, the terms of which are set forth on Exhibit B to the Purchase Agreement.
"CLIPPER ENTITIES" shall have the meaning set forth in the Recitals
hereto.
"CLIPPER STOCKHOLDER" means each of the Clipper Entities.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of
the Company and any other capital stock of the Company into which such Common
Stock is reclassified or reconstituted.
"COMPANY COMMON STOCK" means the Common Stock and the Class B Common
Stock.
"DEMAND REGISTRATION" shall have the meaning set forth in Section 4(b)
hereof.
"DIRECTOR" means a member of the Board of Directors of the Company.
"ERIN MILLS COMPANIES" shall have the meaning set forth in the
Recitals hereto.
"ERIN MILLS STOCKHOLDER" means each of the Erin Mills Companies and
any Permitted Assign who acquires shares of Common Stock directly or indirectly
from an Erin Mills Company and who executes a supplemental agreement as
contemplated in Section 6(b) hereof and, solely for purposes of Section 4
hereof, Robert S. Folsom and Robert T. Hayes, in each case in his, her or its
capacity as a holder of Common Stock.
"EXCLUDED OPTIONS" means options, warrants, rights or obligations to
acquire Common Stock issued by any Person other than the Company.
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"EXCLUDED RELATED PARTY" means, with respect to any Stockholder, a
Related Party of such Stockholder which either (i) is a natural person or (ii)
is not an Affiliate of such Stockholder.
"EXEMPT TRANSFER" shall mean the meaning set forth in Section 3(d)
hereof.
"EXISTING LINE OF BUSINESS" shall have the meaning set forth in
Section 5(g) hereof.
"INCENTIVE STOCK OPTION PLAN" means the HM Holding Corporation 1994
Incentive Stock Option Plan, as adopted by the Company's Board of Directors and
as amended from time to time, providing for the grant to certain management
employees of the Company and its Subsidiaries of options to purchase shares of
Common Stock.
"MAJORITY IN INTEREST" means, with respect to any specified group of
Stockholders, Stockholders included in such group which hold more than fifty
percent (50%) of the aggregate shares of Common Stock held collectively by such
group of Stockholders on a Fully Diluted Basis (as hereinafter defined).
"ON A FULLY DILUTED BASIS" with respect to the Company's Common Stock
means on a basis that takes into account the number of shares of Common Stock
which are issued and outstanding plus the number of shares of Common Stock
issuable upon conversion of any outstanding Series D Preferred Stock and, once
authorized and issued, Class B Common Stock or pursuant to outstanding options,
warrants, rights or obligations to purchase or subscribe for shares of Common
Stock or securities of the Company which are exchangeable or exercisable into
shares of Common Stock as of the applicable date of determination, other than
the Warrants, Excluded Options and employee stock options.
"PERMITTED ASSIGN" shall have the meaning set forth in Section 6(b)
hereof.
"PERSON" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or department, agency or political subdivision thereof.
"PIGGYBACK REGISTRATION" shall have the meaning set forth in
Section 4(a) hereof.
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"PUBLIC TRANSFEREE" means any subsequent holder of Common Stock who
acquires Shares from a Stockholder pursuant to an effective registration
statement under the Securities Act (as hereinafter defined) or pursuant to
Rule 144 promulgated thereunder.
"RECAPITALIZATION AGREEMENT" means the Recapitalization Agreement,
dated as of the date hereof, among the Company, certain Erin Mills Stockholders,
Carlyle Stockholders and Clipper Stockholders, a copy of which is attached as
Exhibit A hereto.
"RECAPITALIZATION SHARES" shall have the meaning set forth in
Section 4(c) hereof.
"REGULATORY RELIEF" means that SBC Communications, Inc. or its
Affiliates, in their sole judgment, have obtained all necessary federal and
state regulatory approvals to provide landline, interLATA long-distance service
pursuant to the Communications Act of 1934, as amended by The Telecommunications
Act of 1996.
"RELATED PARTY" with respect to any Stockholder means: (A) an
Affiliate of such Stockholder; (B) a trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, or owners, or persons holding
a controlling interest of which consist of such Stockholder and/or its
Affiliates; (C) with respect to any Stockholder who is an individual, such
Stockholder's spouse, siblings, children or parents; (D) with respect to any
Stockholder which is a partnership, such Stockholders' partners as of the date
hereof; and (E) with respect to any Stockholder which is a corporation, such
Stockholder's stockholders as of the date hereof.
"SBW STOCKHOLDER" means SBW and any Affiliate of SBW who acquires
Shares from SBW and who executes a supplemental agreement as contemplated in
Section 6(b) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
"SERIES D PREFERRED STOCK" means the Series D Participating
Convertible Preferred Stock, par value $.01 per share, of the Company, the
Certificate of Designation for which is set forth in Exhibit A to the Purchase
Agreement.
"SHARES" means (i) any shares of the capital stock of the Company and
(ii) any securities convertible into, and any rights, options or warrants
exchangeable or
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exercisable for, any of the shares of the capital stock of the Company, in
either case, at any time outstanding.
"STOCKHOLDERS" means the By-Word Stockholders, the Carlyle
Stockholders, the Clipper Stockholders, the Erin Mills Stockholders and the SBW
Stockholders.
"SUBSIDIARY" of any specified person or entity means a corporation or
other entity of which a majority of the voting power of the equity securities or
other equity interests is owned, directly or indirectly, by such specified
person or entity or any Subsidiary of such specified person or entity.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"TRANSFER" shall have the meaning set forth in Section 3(a) hereof.
"WARRANTS" shall have the meaning set forth in the Recitals hereto.
Section 2. THE RECAPITALIZATION; AMENDMENT OF CERTIFICATE OF
INCORPORATION.
(a) ERIN MILLS COMPANIES.
(1) $10 MILLION INVESTMENT. Simultaneously with the execution
hereof, Erin Mills International Investment Corporation and one of its
affiliates are investing $10.0 million in cash in the Company in
exchange for 800,000 shares of Common Stock, as provided in the
Recapitalization Agreement.
(2) SERIES B PREFERRED STOCK. Simultaneously with the execution
hereof, the Series B Preferred Stock owned by The Erin Mills
Development Corporation and certain of its affiliates and by Robert S.
Folsom and Robert T. Hayes is being exchanged for 864,000 shares of
Common Stock, as provided in the Recapitalization Agreement.
(b) CARLYLE AND CLIPPER ENTITIES. Simultaneously with the execution
hereof, the promissory notes in the aggregate principal amount of approximately
$12.7 million held by certain Carlyle Stockholders and the Clipper Stockholders
together with accrued and unpaid interest in the amount of approximately
$63,000, which were issued by the Company pursuant to the Note Exchange and
Amendments Agreement, dated
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as of May 26, 1995, are being converted into shares of Common Stock at a
price of $12.50 per share, as provided in the Recapitalization Agreement.
(c) TERMINATION OF SUBSCRIPTION AGREEMENT. Simultaneously with the
execution hereof, the Company, certain Carlyle Stockholders and the Clipper
Stockholders are terminating certain provisions of the Subscription Agreement,
dated as of February 4, 1994, as provided in the Recapitalization Agreement.
(d) BYLAWS. Simultaneously with the execution hereof, the Company
has amended the Bylaws as set forth as Exhibit B hereto.
(e) AMENDMENT OF CERTIFICATE OF INCORPORATION. The Stockholders
listed on Appendix D have granted written consents and irrevocable proxies to
SBW covering the shares of Common Stock owned by them with respect to the
amendment of the Certificate of Incorporation as set forth on Exhibit B to the
Purchase Agreement and the issuance of the Common Stock pursuant to the exercise
of the Warrants, and SBW has delivered to the Company written consents covering
such shares, and immediately following the issuance of the Series D Preferred
Stock, will deliver to the Company a written consent covering such shares, each
approving such amendment. On the twentieth day following the mailing of an
information statement to the Company's stockholders in compliance with
Regulation 14C promulgated under the Securities Exchange Act of 1934, the
Company will cause the Certificate of Amendment to be filed with the Secretary
of State of the State of Delaware.
Section 3. TRANSFER OF SECURITIES
(a) GENERAL PROHIBITION ON TRANSFER. None of the Stockholders
shall sell, assign, transfer, pledge, encumber or in any way dispose
of ("TRANSFER") any Shares unless (i) such Stockholder shall have
delivered to the Company an opinion of counsel to such Stockholder, in
form and substance reasonably satisfactory to the Company, to the
effect that such Transfer is exempt from the registration requirements
of the Securities Act or (ii) the registration requirements of the
Securities Act have been complied with in connection with such
Transfer, provided, however, that the Company shall be entitled in its
sole discretion to waive the requirement that an opinion of counsel be
delivered pursuant to this Section 3(a) if it determines that a
Transfer is in accordance with applicable law.
(b) TRANSFER BY FIRST REFUSAL STOCKHOLDERS. None of the Carlyle
Stockholders, the Erin Mills Stockholders (other than Robert S. Folsom
and
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Robert T. Hayes), William C. Kennedy, Jr. or William C. Saunders
(collectively the "First Refusal Stockholders") shall Transfer any
Shares unless (i) such First Refusal Stockholder has complied with the
provisions of this Section 3(c) to the extent applicable to such
Transfer and (ii) the transferee (if other than a Public Transferee or
an Excluded Related Party) has agreed to become a party to, and be
bound by the terms of, Section 3 of this Agreement pursuant to a
supplemental agreement hereto in form and substance reasonably
satisfactory to the Company and SBW, executed by such transferee
(provided, however, that the requirement set forth in this clause (ii)
shall not apply to any transferee (other than a Permitted Assign or a
transferee pursuant to Section 3(d) who is not an Excluded Related
Party) acquiring Shares from a Seller (as hereinafter defined) after
the earlier of (A) the date of Regulatory Relief and (B) September 27,
1997 pursuant to a sale effected by such Seller in compliance with the
provisions of subsection (c) below). Notwithstanding the foregoing,
no First Refusal Stockholder shall be required to execute a
supplemental agreement.
(c) RIGHT OF FIRST REFUSAL.
(i) If any First Refusal Stockholder (a "SELLER") receives
a bona fide offer, which the Seller desires to accept ("Offer") to
purchase any or all of the Shares (the "TRANSFER STOCK") then owned by
such Seller from any person (an "Offeror"), such Seller shall notify
SBW in writing of the terms of such Offer, which notice shall identify
the Offeror, the price offered, and all the other material terms and
conditions of such Offer. In addition, if a Seller wishes to sell to
the public pursuant to a registration statement under the Securities
Act or pursuant to Rule 144 promulgated thereunder (a "Public Sale"),
the Seller shall notify SBW in writing of the proposed terms of the
Public Sale, which Public Sale shall also constitute an Offer for the
purposes hereof. The Seller shall provide a written notice (the
"NOTICE") of an Offer to SBW promptly, but in no event later than five
(5) business days following the determination by the Seller that it
desires to accept an Offer which does not relate to a Public Sale.
The Notice shall contain an irrevocable offer to sell the Transfer
Stock to SBW at a price equal to the price and upon substantially the
same terms as the terms contained in such Offer; provided, however,
that (A) if such Offer shall relate to a proposed Public Sale, the
Notice shall offer to sell the Transfer Stock at a price determined by
the Seller (which in the case of a registered public offering shall
not be higher than the price the Seller in good faith
8
believes can be obtained in such offering), minus, in the case of a
registered public offering pursuant to a firm commitment underwriting,
customary underwriting commissions, and (B) if the terms of the Offer
entitle the Offeror to purchase the Transfer Stock for securities of
such Offeror (the "OFFERED SECURITIES") or other property, SBW shall be
entitled to purchase the Transfer Stock for an amount of cash equal to
the fair market value of the Offered Securities or such other property.
SBW shall have the irrevocable right and option (the "RIGHT OF FIRST
REFUSAL"), to accept such irrevocable offer as to all Shares as to which
the Offer is made (except in the event of a Public Sale pursuant to Rule
144, in which event SBW may accept as to any number of Shares) by
providing the Seller with an irrevocable written notice of acceptance
within fifteen (15) business days, or, in the case of a Public Sale
pursuant to Rule 144, five (5) business days, after the date the Notice
is received (the "NOTICE PERIOD"). The closing of the purchases of the
Transfer Stock by SBW shall take place at the principal office of SBW no
later than the fifth (5th) business day after the acceptance by SBW. At
such closing, SBW shall deliver a certified check or checks or wire
transfer in the appropriate amount to the Seller against delivery of
certificates representing the Transfer Stock so purchased, duly endorsed
in blank by the person or persons in whose name a stock certificate is
registered or accompanied by a duly executed assignment separate from
the certificate with the signatures thereon guaranteed by a commercial
bank or trust company. If SBW does not elect to purchase the Transfer
Stock during the Notice Period or if SBW fails or refuses for any reason
(including, but not limited to, the existence of any requirement that
SBW obtain any required regulatory approval) to complete the closing of
the purchase of any Transfer Stock upon the day specified above, the
Seller shall have ninety (90) days from the end of the Notice Period
(the "SALES PERIOD") in which to Transfer all of the Transfer Stock
pursuant to the Offer to the Offeror or in a Public Sale, it being
understood that (A) in a registered public offering the sales price may
be greater than or less than the Offer price and (B) in any other
transaction the sales price and other terms of the Transfer may be more
favorable to the Seller than those set forth in the Notice. In
addition, Seller may not knowingly make a Public Sale to any purchaser
which Seller knows to own in excess of 5% of the Common Stock, provided
that this restriction shall not create any duty of inquiry on the part
of the Seller. Promptly after any sale pursuant to this Section 3(c),
the Seller shall notify SBW of the consummation thereof and shall
furnish such evidence of the completion (including time of completion)
of such sale
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and of the terms thereof as SBW may reasonably request. If, at the
termination of the Sales Period, the Seller has not completed the sale
of the Transfer Stock to the Offeror or in a Public Sale, all of the
restrictions on Transfer contained in this Section 3(c) shall again be
in effect with respect to all such Seller's Transfer Stock.
(d) EXEMPT TRANSFER. The following transactions shall
constitute "EXEMPT TRANSFERS" for the purpose of Section 3 and shall
be exempt from the requirements of subsection (c), but not subsections
(a) and (b): (i) a Transfer of Shares by a First Refusal Stockholder
to SBW, (ii) a Transfer by a Stockholder of Shares by will or
intestate succession to such Stockholder's executors, administrators,
testamentary trustees, legatees or beneficiaries, (iii) a Transfer of
Shares by a Stockholder to any Related Party of such Stockholder and
(iv) a Transfer of Shares (A) by any Carlyle Stockholder to any other
Carlyle Stockholder or to any Clipper Stockholder, (B) by any Erin
Mills Stockholder to any other Erin Mills Stockholder or (C) by
William C. Kennedy, Jr. or William C. Saunders to any By-Word
Stockholder, or (vi) a Transfer of Shares that has been approved in
writing by SBW as an Exempt Transfer.
(e) RESTRICTIONS ON SBW. No SBW Stockholder shall Transfer any
Series D Preferred Stock or Class B Common Stock except to an
Affiliate of SBW.
Section 4. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION RIGHTS.
(1) RIGHT TO PIGGYBACK. Subject to the last sentence of this
subsection (1), whenever the Company proposes to register any shares
of Common Stock (or securities convertible into or exchangeable for,
or options, warrants or other rights to acquire, Common Stock) with
the Securities and Exchange Commission (the "COMMISSION") under the
Securities Act (other than (A) registrations on Form S-4 or Form S-8
and (B) the registration of the Recapitalization Shares (as
hereinafter defined) pursuant to subsection (c) below) and the
registration form to be used may be used for the registration of the
Registrable Securities (as defined in subsection (k) below) (a
"PIGGYBACK REGISTRATION"), the Company will give written notice to all
Stockholders, at least thirty-five (35) days prior to the
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anticipated filing date, of its intention to effect such a registration,
which notice will specify the proposed offering price, the kind and
number of securities proposed to be registered, the distribution
arrangements and such other information that at the time would be
appropriate to include in such notice, and will, subject to subsection
(a)(2) below, include in such Piggyback Registration all Registrable
Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) business days after
the effectiveness of the Company's notice. Except as may otherwise be
provided in this Agreement, Registrable Securities with respect to which
such request for registration has been timely received will be
registered by the Company and offered to the public in a Piggyback
Registration pursuant to this Section 4 on terms and conditions at least
as favorable as those applicable to the registration of shares of Common
Stock (or securities convertible into or exchangeable or exercisable for
Common Stock) to be sold by the Company and by any other person selling
under such Piggyback Registration.
(2) PRIORITY ON PIGGYBACK REGISTRATIONS. If the managing
underwriter or underwriters, if any, advise the holders of Registrable
Securities in writing that in its or their reasonable opinion or, in
the case of a Piggyback Registration not being underwritten, the
Company shall reasonably determine (and notify the holders of
Registrable Securities of such determination), after consultation with
an investment banker of nationally recognized standing, that the
number or kind of securities proposed to be sold in such registration
(including Registrable Securities to be included pursuant to
subsection (a)(1) above) will materially adversely affect the success
of such offering (including, without limitation, a material impact on
the selling price), the Company will include in such registration the
number of securities, if any, which, in the opinion of such
underwriter or underwriters, or the Company, as the case may be, can
be sold, without having a material adverse effect on the success of
such offering, as follows: (i) first, the shares the Company proposes
to sell, (ii) second, the Registrable Securities requested to be
included in such registration by SBW, the Carlyle Stockholders, the
Clipper Stockholders and the Erin Mills Stockholders, pro rata among
such requesting Stockholders on the basis of their respective holdings
of Common Stock on a Fully Diluted Basis, and (iii) third, the
Registrable Securities requested to be included in such registration
by the By-Word Stockholders, pro rata among such requesting
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Stockholders on the basis of their respective holdings of Common Stock
on a Fully Diluted Basis.
(3) SELECTION OF UNDERWRITERS. If any Piggyback Registration is
an underwritten offering, the Company (by action of the Board of
Directors) will select a managing underwriter or underwriters to
administer the offering, which managing underwriter or underwriters
will be of nationally recognized standing and reasonably acceptable to
the holders of a majority of the Registrable Securities included
therein.
(b) DEMAND REGISTRATION RIGHTS.
(1) RIGHT TO DEMAND REGISTRATION. Each of (A) the Carlyle
Stockholders and the Clipper Stockholders as a group; (B) the Erin
Mills Stockholders as a group and (C) SBW (each referred to herein as
a "DEMANDING GROUP") shall have the right on the number of occasions
set forth in subsection (b)(2) to make a written request of the
Company for registration with the Commission, under and in accordance
with the provisions of the Securities Act, of all or part of their
Registrable Securities (a "DEMAND REGISTRATION"); PROVIDED, that (x)
the Company shall not effect a Demand Registration unless such Demand
Registration has been requested by persons holding at least a majority
of the Registrable Securities held by the Demanding Group on the date
of such written request and unless the number of Shares to be sold in
such Demand Registration by the Demanding Group is at least 1,000,000
shares of Common Stock, (y) if the Board of Directors determines in
the exercise of its reasonable judgment that, due to a pending or
contemplated acquisition or disposition, to effect such Demand
Registration at such time would have a material adverse effect on the
Company, the Company may defer such Demand Registration for a single
period not to exceed one hundred eighty (180) days (but if the Company
elects to defer any Demand Registration pursuant to the terms of this
sentence, no Demand Registration shall be deemed to have occurred for
purposes of this Agreement) and (z) the Company shall be obligated to
effect only the number of Demand Registrations set forth in subsection
4(b)(2) below. Within ten (10) days after receipt of the request for
a Demand Registration, the Company will send written notice (the
"NOTICE") of such registration request and its intention to comply
therewith to all Stockholders who are holders of Registrable
Securities and, subject to subsection (3) below, the Company will
include in such registration all
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Registrable Securities of such Stockholders with respect to which the
Company has received written requests for inclusion therein within
twenty (20) business days after the effectiveness of the Notice. All
requests made pursuant to this subsection (b)(1) will specify the
aggregate number of Registrable Securities requested to be registered
and will also specify the intended methods of disposition thereof.
(2) NUMBER OF DEMAND REGISTRATIONS. Each Demanding Group shall
be entitled to two (2) Demand Registrations, and the expenses of each
(including the fees and expenses of a total of one counsel for the
Demanding Group in accordance with subsection (f)(2) below) shall be
borne by the Company. A Demand Registration shall not be counted as a
Demand Registration hereunder until such Demand Registration has been
declared effective by the Commission and maintained continuously
effective for a period of at least three months or such shorter period
when all Registrable Securities included therein have been sold in
accordance with such Demand Registration.
If the Company elects to issue and sell and ultimately sells any
equity securities pursuant to any Registration Statement filed in
connection with a Demand Registration, then such Registration shall be
deemed not to be a Demand Registration for purposes of determining the
number of Demand Registrations granted by this Agreement.
(3) PRIORITY ON DEMAND REGISTRATIONS. If in any Demand
Registration the managing underwriter or underwriters thereof (or in
the case of a Demand Registration not being underwritten, the holders
of a majority of the Registrable Securities held by the Demanding
Group after consultation with an investment banker of nationally
recognized standing), advise the Company in writing that in its or
their reasonable opinion the number of securities proposed to be sold
in such Demand Registration exceeds the number that can be sold in
such offering without having a material adverse effect on the success
of the offering (including, without limitation, an impact on the
selling price), the Company will include in such registration only the
number of securities that, in the reasonable opinion of such
underwriter or underwriters (or such holders of Registrable Securities
held by the Demanding Group, as the case may be) can be sold without
having a material adverse effect on the success of the offering, as
follows: (i) first, the Registrable Securities requested to be
included in such Demand
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Registration by the Demanding Group, pro rata, among such Stockholders
on the basis of their respective holdings of Common Stock on a Fully
Diluted Basis, (ii) second, the Registrable Securities requested to be
included in such Demand Registration by the Erin Mills Stockholders and
SBW (if the Demanding Group is the Carlyle Stockholders and the Clipper
Stockholders), or the Carlyle Stockholders and the Clipper Stockholders,
as a group, and SBW (if the Demanding Group is the Erin Mills
Stockholders), or the Carlyle Stockholders and the Clipper Stockholders,
as a group, and the Erin Mills Stockholders (if the Demanding Group is
SBW), in all such cases pro rata among such Stockholders on the basis of
their respective holdings of Common Stock on a Fully Diluted Basis,
(iii) third, shares to be issued and sold by the Company and requested
to be included in such Demand Registration, and (iv) fourth, the
Registrable Securities requested to be included in such Demand
Registration by the By-Word Stockholders, pro rata among such requesting
Stockholders on the basis of their respective holdings of Common Stock
on a Fully Diluted Basis.
(4) SELECTION OF UNDERWRITERS. If a Demand Registration is an
underwritten offering, the holders of a majority of the Registrable
Securities to be included in such Demand Registration held by members
of the Demanding Group that initiated such Demand Registration will
select a managing underwriter or underwriters of recognized national
standing to administer the offering, which managing underwriter or
underwriters shall be reasonably acceptable to the Company.
(c) REGISTRATION OF RECAPITALIZATION SHARES. Within a reasonable
period prior to each Registration Date (as hereinafter defined), the Company
shall prepare and file with the Commission a registration statement on an
appropriate form in order to register the Recapitalization Shares under the
Securities Act for sale in one or more privately negotiated transactions or in
open market transactions effected on any stock exchange on which the Common
Stock is then listed, or if not so listed, on any automated quotation system to
which the Common Stock is then admitted to trading; provided, however, that if
the Board of Directors determines in the exercise of its reasonable judgment
that, due to a pending or contemplated acquisition or disposition, to effect
such registration at such time would have a material adverse effect on the
Company, the Company may defer such registration for a single period not to
exceed ninety (90) days. The Company shall use its reasonable best efforts to
have each such registration statement declared effective by the Commission as
promptly as reasonably practicable after the filing thereof with the Commission;
provided, however, that (i) no sales of Recapitalization Shares shall be
14
effected pursuant to any such registration statement prior to March 31, 1997 and
(ii) sales of an aggregate of no more than one-half of the total number of
Recapitalization Shares shall be effected pursuant to any such registration
statement prior to September 27, 1997, such dates being referred to as the
"Registration Dates". In addition, the Company shall use its reasonable best
efforts to keep such registration statement effective for a period of at least
three months after the applicable Registration Date. As used herein, the term
"Recapitalization Shares" shall mean the shares of Common Stock issued pursuant
to the Recapitalization Agreement to Erin Mills International Investment
Corporation as described in Section 2(a)(1) hereof and to certain Carlyle
Stockholders and Clipper Stockholders as described in Section 2(b) hereof.
(d) REGISTRATION PROCEDURES. With respect to any Piggyback
Registration or Demand Registration and (except as expressly provided in
subsection (c) above) the registration to be effected pursuant to subsection (c)
above (generically, a "REGISTRATION"), the Company will, subject to subsections
4(a)(2) and 4(b)(3), as expeditiously as practicable:
(1) prepare and file with the Commission, within 60 days after
mailing the applicable Notice, a registration statement or
registration statements (the "REGISTRATION STATEMENT") relating to the
applicable Registration on any appropriate form under the Securities
Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution thereof; PROVIDED that the Company will include in any
Registration Statement on a form other than Form S-1 all information
that the holders of the Registrable Securities so to be registered
shall reasonably request and shall include all financial statements
required by the Commission to be filed therewith, cooperate and assist
in any filings required to be made with the National Association of
Securities Dealers, Inc. ("NASD") or any securities exchange on which
the Common Stock may then be listed, and use its reasonable best
efforts to cause such Registration Statement to become effective
promptly; PROVIDED, FURTHER, that before filing a Registration
Statement or prospectus related thereto (a "PROSPECTUS") or any
amendments or supplements thereto, the Company will furnish to the
holders of the Registrable Securities covered by such Registration
Statement and the underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the
reasonable review of such holders and underwriters and their
respective counsel, and the Company will not file any Registration
Statement or amendment thereto or any Prospectus or any supplement
thereto to which
15
the holders of a majority of the Registrable Securities covered by such
Registration Statement, the Demanding Group, if a Demand Registration,
or the underwriters, if any, shall reasonably object;
(2) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep each Registration Statement effective for the
applicable period, or such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have
been sold; cause each Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus, PROVIDED, that the Company shall not be deemed to
have used its reasonable best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any
action that would result in selling holders of the Registrable
Securities covered thereby not being able to sell such Registrable
Securities during that period unless such action is required under
applicable law, and PROVIDED, FURTHER that the foregoing shall not
apply to actions taken by the Company in good faith and for valid
business reasons, including without limitation the acquisition or
divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of subsection (11) of this subsection
(d), if applicable;
(3) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such
person or entity) confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (B) of
any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (D) if at any time the
representations and warranties of the Company contemplated by
subsection (14) below cease to be true and correct, (E) of
16
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, (F) of any other correspondence from the Commission
with respect to the Registration and (G) of the happening of any event
which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue in
any material respect or which requires the making of any changes in the
Registration Statement, the Prospectus or any document incorporated
therein by reference in order to make the statements therein not
materially misleading;
(4) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at
the earliest possible moment;
(5) if requested by the managing underwriter or underwriters or
a holder of Registrable Securities being sold in connection with an
underwritten offering, promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing
underwriters and either the holders of a majority of the Registrable
Securities being sold or the Demanding Group, if a Demand
Registration, agree should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters the purchase
price being paid therefor by such underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such Prospectus supplement or post-
effective amendment promptly following notification of the matters to
be incorporated in such Prospectus supplement or post-effective
amendment;
(6) furnish to each selling holder of Registrable securities and
each managing underwriter, without charge, at least one signed copy of
the Registration Statement and any amendment thereto, including
financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by
reference);
17
(7) deliver to each selling holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such selling holder of Registrable Securities
and underwriters may reasonably request; the Company consents to the
use in accordance with applicable law of each Prospectus or any
amendment or supplement thereto by each of the selling holders of
Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
(8) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or
"blue sky" laws of such jurisdictions as any seller or underwriter
reasonably requests in writing, considering the amount of Registrable
Securities proposed to be sold in each such jurisdiction, and do any
and all other acts or things necessary or reasonably advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; PROVIDED that the
Company will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(9) cooperate in all reasonable respects with the selling
holders of Registrable Securities and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and to be in such denominations and registered in
such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the
underwriters;
(10) use its reasonable best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
18
(11) upon the occurrence of any event contemplated by subsection
(3)(F) above, prepare a supplement or post effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(12) cause all Registrable Securities covered by any Registration
Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or cause such
Registrable Securities to be authorized for trading on the Nasdaq
National Market if any similar securities issued by the Company are
then so authorized, if requested by the holders of a majority of such
Registrable Securities, the Demanding Group, if a Demand Registration,
or the managing underwriters, if any;
(13) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable Registration
Statement;
(14) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the Registration is an
underwritten Registration (A) make such representations and warranties
to the holders of such Registrable Securities and the underwriters, if
any, in form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings; (B) obtain opinions
of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the holders of
a majority of the Registrable Securities being sold) addressed to each
selling holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such holders
and underwriters; (C) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public accountants
addressed to the selling holders of Registrable Securities and the
underwriters, if any, such
19
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings; (D) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification
provisions and procedures set forth in subsection (f) below with respect
to all parties to be indemnified pursuant to said subsection; and (E) the
Company shall deliver such documents and certificates as may be requested
by the holders of a majority of the Registrable Securities being sold and
the managing underwriters, if any, to evidence compliance with subsection
3(G) of this subsection (d) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(15) make available (at reasonable times and places) for
inspection by a representative of the holders of a majority of the
Registrable Securities, any underwriter participating in any
disposition pursuant to such Registration, and any attorney or
accountant retained by the sellers or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such Registration Statement; PROVIDED, that any records, information
or documents that are designated by the company in writing as
confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required by
court or administrative order or any regulatory body having
jurisdiction;
(16) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve (12)-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm or best efforts underwritten offering, or
(B) if not sold to underwriters in such an offering, beginning with
the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statements
shall cover said twelve (12)-month periods; and
20
(17) promptly prior to the filing of any document that is to be
incorporated by reference into any Registration Statement or
Prospectus (after initial filing of the Registration Statement),
provide copies of such document to counsel to the selling holders of
Registrable Securities and to the managing underwriters, if any, make
the Company's representatives available for discussion of such
document and make such changes in such document prior to the filing
thereof as counsel for such selling holders or underwriters may
reasonably request.
The Company may require each seller of Registrable Securities as
to which any Registration is being effected to furnish to the Company
such information regarding the proposed distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in
subsection (3)(G) of this subsection (d), such holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
Registration Statement until such holder's receipt of copies of the
supplemented or amended Prospectus as contemplated by subsection (11)
of this subsection (d), or until it is advised in writing (the
"ADVICE") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus, and, if
so directed by the Company, such holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the Prospectus covering
such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time
periods referred to in subsection (2) of this subsection (d) shall be
extended by the number of days during the period from and including
the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or
amended prospectus contemplated by subsection (11) of this subsection
(d) or the Advice.
21
(e) RESTRICTIONS ON PUBLIC SALE.
(1) PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES. To the
extent not inconsistent with applicable law, each Stockholder, if
requested by the managing underwriter or underwriters for any Demand
Registration or Piggyback Registration, agrees not to effect any
public sale or distribution of Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock), including a
sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, during the 15 business days prior to, and
during the ninety (90)-day period (or such shorter period as may be
agreed to by such holders) beginning on, the effective date of the
applicable Registration Statement (except as part of such
Registration).
(2) PUBLIC SALE BY THE COMPANY AND OTHERS. If requested by the
managing underwriter or underwriters for any underwritten Demand
Registration or Piggyback Registration, (i) the Company will not
effect any public sale or distribution of Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock)
during the fifteen (15) business days prior to, and during the ninety
(90)-day period beginning on the effective date of such Registration
and (ii) the Company will cause each holder of Common Stock (or
securities convertible into or exchangeable or exercisable for Common
Stock) purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to
effect any public sale or distribution of any such securities during
such period described in clause (i) above (except as part of such
Registration, if otherwise permitted).
(3) OTHER REGISTRATIONS. If the Company has previously filed a
Registration Statement with respect to Registrable Securities, and if
such previous Registration has not been withdrawn or abandoned, the
Company will not file or cause to be effected any other registration
of any of its Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock) under the Securities Act
(except on Form S-8 or any similar successor form), whether on its own
behalf or at the request of any holder or holders of Common Stock (or
securities convertible into or exchangeable or exercisable for Common
Stock), until a period of at least three (3) months has elapsed from
the effective date of such previous Registration; provided, that if
the holders of fifty percent (50%) or
22
more of the aggregate number of Registrable Securities included in such
previous Registration shall agree in writing, such period may be shortened
to a period specified by such holders.
(f) REGISTRATION EXPENSES.
(1) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company,
including, without limitation, all registration and filing fees, the
fees and expenses of the counsel and accountants for the Company
(including the expenses of any "cold comfort" letters and special
audits required by or incident to the performance of such persons),
all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto)
and furnishing copies thereof and of the Prospectus included therein,
the costs and expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state securities
or "blue sky" laws of various jurisdictions, the costs and expenses
associated with filings required to be made with the NASD (including,
if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and
regulations of the NASD), the costs and expenses of listing the
Registrable Securities for trading on a securities exchange or
authorizing them for trading on NASDAQ and all other costs and
expenses incurred by the Company in connection with any Registration
hereunder; PROVIDED, that, except as otherwise provided in subsection
(2) below, each Stockholder shall bear the costs and expenses of any
underwriters' commissions, brokerage fees or transfer taxes relating
to the Registrable Securities sold by such Stockholders and the fees
and expenses of any counsel, accountants or other representative
retained by Stockholder.
(2) Notwithstanding the foregoing and except as provided below,
in connection with each Registration hereunder, the Company will
reimburse the Stockholders who are holders of Registrable Securities
being registered in any Registration hereunder for (i) the reasonable
fees and disbursements of not more than one counsel, which counsel
shall be chosen (x) by the holders of a majority of the Registrable
Securities to be included therein that are held by the Demanding
Group, in the case of a Demand Registration and (y) otherwise, by the
holders of a majority of all
23
Registrable Securities to be included therein, and (ii) the reasonable
out-of-pocket expenses (including travel costs) of the holders of
Registrable Securities in connection with such Registration.
(g) INDEMNIFICATION.
(1) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the full extent permitted by law, each Stockholder, its
officers, directors, partners and agents and each person who controls
such Stockholder (within the meaning of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")),
against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary Prospectus or
any omission or alleged omission to state therein a material fact
necessary to make the statements therein (in the case of a Prospectus
or any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are
caused by or contained in any information with respect to such
Stockholder furnished in writing to the Company by such Stockholder in
its capacity as a selling Stockholder expressly for use therein. The
Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating
in the distribution, their officers and directors and each person who
controls such persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification
of the holders of Registrable Securities; PROVIDED, HOWEVER, if
pursuant to an underwritten public offering of Registrable Securities,
the Company and any underwriters enter into an underwriting or
purchase agreement relating to such offering that contains provisions
relating to indemnification and contribution between the Company and
such underwriters, such provisions shall be deemed to govern
indemnification and contribution as between the Company and such
underwriters.
(2) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any Registration in which a Stockholder is
participating, each such Stockholder will furnish to the Company in
writing such information with respect to such Stockholder as the
Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, to the
full extent permitted by law, the
24
Company, the directors and officers of the Company signing the Registration
Statement and each person who controls the Company (within the meaning of
the Securities Act and the Exchange Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements in the Registration
Statement or Prospectus or preliminary Prospectus (in the case of the
Prospectus or any preliminary Prospectus, in light of the circumstances
under which they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in any
information with respect to such Stockholder so furnished in writing by
such Stockholder in its capacity as a selling Stockholder specifically for
inclusion therein. In no event shall the liability of any selling
holder of Registrable Securities hereunder be greater in amount than
the dollar amount of the net proceeds received by such holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same
extent as provided above with respect to information with respect to
such persons or entities so furnished in writing by such persons or
entities or their representatives specifically for inclusion in any
Prospectus or Registration Statement.
(3) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person or
entity entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party after the receipt by the
indemnified party of a written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in
writing for which such indemnified party will claim indemnification or
contribution pursuant to this Agreement; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding subparagraphs (1) and (2), except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement
25
made without its consent (but such consent will not be unreasonably
withheld). No indemnifying party will consent to the 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 of such
claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel in any one jurisdiction for
all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party
a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
(4) CONTRIBUTION. If for any reason the indemnification
provided for in the preceding subparagraphs (1) and (2) is unavailable
to an indemnified party as contemplated by the preceding clauses (1)
and (2), then the indemnifying party in lieu of indemnification shall
contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage, liability or expense in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations,
provided that no Stockholder shall be required to contribute in an
amount greater than the difference between the net proceeds received
by such Stockholder with respect to the sale of any Shares and all
amounts already contributed by such Stockholder with respect to such
claims, including amounts paid for any legal or other fees or expenses
incurred by such Stockholder.
(h) RULE 144. The Company agrees that at all times after it has
filed a registration statement pursuant to the requirements of the Securities
Act relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Exchange Act and will take such further action as any holder of
Registrable Securities may reasonably request in order that such holder may
effect sales of Common Stock pursuant to Rule 144. At any reasonable time and
upon request of any Stockholder, the Company will furnish such Stockholder and
others with such information as may be necessary to enable the Stockholder to
effect sales
26
of Common Stock pursuant to Rule 144 under the Securities Act and will
deliver to such Stockholder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, the Company may
deregister any class of its equity securities under Section 12 of the
Exchange Act or suspend its duty to file reports with respect to any class of
its securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder.
(i) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Stockholder may
participate in any underwritten Registration hereunder unless such Stockholder
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to select
the underwriter pursuant to subsections 4(a)(3) and (4)(b)(4) above, and (ii)
accurately completes in a timely manner and executes all questionnaires, powers
of attorney, underwriting agreements and other documents customarily required
under the terms of such underwriting arrangements.
(j) OTHER REGISTRATION RIGHTS. The Company will not grant to any
person (including the Stockholders) any demand or piggyback registration rights
with respect to the Common Stock of the Company (or securities convertible into
or exchangeable or exercisable for Common Stock) other than piggyback
registration rights that are not inconsistent with the terms of this Section 4.
To the extent that the Company grants to any person registration rights with
respect to any securities of the Company having provisions more favorable to the
holders thereof than the provisions contained in this Agreement, the Company
will confer comparable rights to the holders of Registrable Securities under
this Agreement. Except as provided herein, the Company will not grant any
registration rights that would permit any person or entity the right to
piggyback on any Demand Registration.
(k) DEFINITION OF REGISTRABLE SECURITIES. "REGISTRABLE SECURITIES"
means the shares of Common Stock now owned or hereafter acquired by any
Stockholder, but with respect to any share, only until such time as such share
(i) has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it or (ii) has been sold to
the public pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act and the Legend referred to in Section 6(a) has been removed
from the certificate representing such share (at which time such share shall
cease to be a Registrable Security).
(l) AMENDMENTS AND WAIVERS. The provisions of this Section 4,
including the provisions of this sentence, may not be amended, modified or
supplemented,
27
and waivers of or consents to departures from the provisions hereof may not be
given unless approved by the Company in writing and the Company has obtained
the written consent of Stockholders holding at least eighty-five percent
(85%) of the then outstanding Registrable Securities (including for such
purposes all securities convertible into or exchangeable for Registrable
Securities, other than the Warrants). Notwithstanding the foregoing, any
amendment, waiver or consent that materially and adversely affects any of the
By-Word Stockholders as a group, the Erin Mills Stockholders as a group, the
Carlyle Stockholders as a group, the Clipper Stockholders as a group or SBW
differently from the other Stockholders, shall require the prior written
approval of the holders of at least a Majority in Interest of Stockholders
who are then members of the group or the entity so affected.
Section 5. GOVERNANCE.
(a) Within fifteen days after the execution hereof, the total number
of members of the Board of Directors will be reduced to six, which number shall
be adjusted from time to time in order to give effect to the provisions of
subsection (b) below. The Company and the Stockholders hereby agree to take, at
any time and from time to time, all action necessary (including, without
limitation, voting the shares of Company Common Stock owned or controlled by
such Stockholder, calling special meetings of stockholders, executing and
delivering written consents and requiring designees to resign) to establish the
number of total number of directors as provided herein.
(b) At all times from and after fifteen days after the execution
hereof (except for the addition of a second Independent Director, which shall
occur no later than the date of the next annual meeting of the stockholders of
the Company), the Board of Directors of the Company (the "BOARD") shall be
composed of Directors to be designated in the manner set forth below. The
Company and each Stockholder hereby agree to take, at any time and from time to
time, all action necessary (including, without limitation, voting the shares of
the Company Common Stock owned or controlled by such Stockholder, calling
special meetings of stockholders and executing, delivering written consents and
requiring designees to resign) to elect Directors as provided herein. Prior to
the receipt of Regulatory Relief, the Board shall be composed of seven (7)
members, of which two (2) Directors shall be persons designated by a Majority in
Interest of the Erin Mills Stockholders, two (2) Directors shall be persons
designated by a Majority in Interest of the By-Word Stockholders (one of which
shall be the chief executive officer of the Company), one (1) Director shall be
a person designated by a Majority in Interest of the Carlyle Stockholders and
two (2) additional Directors (or, if determined by the Nominating Committee as
hereinafter provided, three (3) additional Directors) shall be persons who are
28
not employed by the Company or affiliated with any party to this Agreement
("Independent Directors"). SBW shall be entitled to designate one non-director
delegate who shall be entitled to receive notice of, in accordance with the
provisions of Section 11.6 of the Bylaws with respect to Class B Directors, and
to attend all meetings of the Board and to receive all materials received by
Directors, but who shall not be a member of the Board of Directors, shall have
no fiduciary duties to the Company, to the Board or stockholders of the Company
and shall not be entitled to vote at meetings of the Board. Upon the conversion
of the Series D Preferred Stock into Class B Common Stock, the number of
Directors shall be increased by one who shall be a person designated by SBW and
the right to a non-director delegate shall terminate. If SBW and its Affiliates
Beneficially Own 20% or more of the Common Stock (including Common Stock
issuable upon conversion of Series D Preferred Stock or Class B Common Stock or
other convertible securities or upon the exercise of any outstanding options,
warrants, rights or obligations, other than shares issuable upon exercise of the
Warrants and Excluded Options) on a Fully Diluted Basis, the number of Directors
shall further be increased by one and the additional Director shall also be a
designee of SBW. For so long as SBW or its Affiliates hold Class B Common
Stock, one or both of SBW's designees will be elected by SBW as the holder of
the Class B Common Stock and will be Class B Directors, with the rights set
forth in the terms of such Class B Common Stock and the Bylaws, and which
directors will have the corporate authority to sign a stockholder consent of SBW
on behalf of each of the SBW Stockholders.
All Independent Directors shall be nominated by a committee consisting
of one Director designated by the Erin Mills Stockholders, one Director
designated by the By-Word Stockholders, one Director designated by the Carlyle
Stockholders and, following receipt of Regulatory Relief, one Director
designated by SBW (the "Nominating Committee"). The Nominating Committee also
shall determine whether to increase the number of Independent Directors to
three (3).
Notwithstanding the foregoing, no Stockholder or group of Stockholders
shall be entitled to designate any Director or have such designee serve on the
Nominating Committee if the percentage of Common Stock (including Common Stock
issuable upon conversion of outstanding securities or upon the exercise of any
outstanding options, warrants, rights or obligations other than the Warrants and
Excluded Options) Beneficially Owned by such Stockholder or group of
Stockholders falls below 5% (or, with respect to the Erin Mills Stockholders and
By-Word Stockholders, 20% for the right to designate two Directors and 5% for
the right to designate one Director) on a Fully Diluted Basis. If By-Word has
only one designee, it shall be the chief executive officer of the Company if the
chief executive officer is a By-Word Stockholder. Upon the failure of any
Stockholder or
29
group of Stockholders to maintain the required percentage, the Stockholder or
group of Stockholders shall require its designee to resign and the size of
the Board may, in the determination of the Nominating Committee, either be
reduced to eliminate such the resulting vacancy on the Board or remain the
same (in which case, the resulting vacancy on the Board will be filled by a
Director nominated by the Nominating Committee), provided that the
Stockholders agree that if the chief executive officer is not a By-Word
designee, in accordance with the provisions hereof, the chief executive
officer shall be nominated by the Nominating Committee.
(c) Pursuant to Article VII of the Incentive Stock Option Plan, the
Board shall appoint a three-person Compensation Committee to administer the
Incentive Stock Option Plan. Following receipt of Regulatory Relief, a Director
designated by SBW shall serve on the Compensation Committee. The Compensation
Committee shall be comprised of only non-management Directors serving on the
Board. Each Stockholder hereby agrees to take, at any time and from time to
time, all action necessary (including, without limitation, voting the shares of
the Common Stock owned or controlled by such Stockholder, calling special
meetings of stockholders and executing and delivering written consents) to cause
the Board to appoint to the Compensation Committee the number of persons meeting
the requirements of this subsection.
(d) The Stockholders agree that no Director may be removed except at
the request of the holders of a majority of the shares of Common Stock entitled
to appoint such Director in accordance with Section 5(b), and each Stockholder
hereby agrees to take all action necessary (including, without limitation,
voting the shares of Common Stock owned or controlled by such Stockholder,
calling special meetings of stockholders and executing and delivering written
consents) for the purpose of accomplishing the purposes of this Agreement. If a
vacancy on the Board occurs by reason of the death, removal, resignation,
retirement or election not to serve of a designee, the remaining Directors and
the Company shall cause the vacancy thereby created to be filled by a new
designee as soon as possible (the "REPLACEMENT DIRECTOR"), who is designated in
the same manner and by the same persons specified in Section 5(b) as the
Director being replaced had been, and the Company and each Stockholder hereby
agrees to take, at any time and from time to time, all actions necessary to
accomplish the same; PROVIDED, HOWEVER, that if any group fails to designate a
representative in accordance with Section 5(b) above for a period of thirty (30)
consecutive days, then such vacancy shall be filled by the Nominating Committee
until such time as the Replacement Director is designated in accordance with
Section 5(b), at which time the term of the Director not elected in accordance
with Section 5(b) shall expire.
30
(e) In addition to any compensation to which the members of the Board
may be entitled, the Company shall reimburse each Director for the reasonable
out-of-pocket expenses incurred by such Director (including, without limitation,
reasonable fees and expenses of counsel, accountants, or representatives, if
any) involved with such Director's services as a member of the Company. In
addition, the Company shall obtain and maintain at all times during which this
Agreement remains in effect, at the cost and expense of the Company, director
liability insurance policies covering each member of the Board. Such director
liability insurance policies shall be provided by a reputable nationally
recognized insurance carrier and shall provide coverage in such amounts and on
such terms as may be reasonably acceptable to each member of the Board. Should
SBW so request, the Company will enter into contractual indemnification
arrangements with the Director reasonably satisfactory to SBW.
(f) In addition to any vote or consent of the Board of Directors or
its stockholders required by law or the Certificate of Incorporation, including
the terms of Series D Preferred Stock and the Class B Common Stock, the
affirmative vote of a majority of the entire Board of Directors (not merely a
quorum) shall be necessary for authorizing, effecting or validating the
following actions:
(i) the approval of any annual budget or business plan for the
Company or any Subsidiary of the Company or the deviation by the
Company or any such Subsidiary from any annual budget for the Company
or such Subsidiary approved by the Board of Directors by more than
five percent (5%);
(ii) any capital expenditure or expenditures by the Company or
any Subsidiary of the Company which, individually or in the aggregate,
exceeds $1,000,000;
(iii) the hiring or termination by the Company or any
Subsidiary of the Company of any officer or senior management employee
of the Company or such Subsidiary;
(iv) directly or indirectly redeem, purchase or make any payments
with respect to any stock appreciation rights, phantom stock plans or
similar rights or plans;
(v) (A) sell, lease, transfer or otherwise convey, or permit any
Subsidiary to sell, lease, transfer or otherwise convey, any assets
31
representing five percent (5%) or more of the consolidated assets of
the Company and its Subsidiaries, (B) consolidate or merge with, or
permit any Subsidiary to consolidate or merge with, any Person, (C)
reclassify or otherwise change, or permit any Subsidiary to reclassify
or otherwise change, any capital stock of the Company or any
Subsidiary or (D) dissolve, liquidate or wind-up the Company or permit
any Subsidiary to dissolve, liquidate or wind up such Subsidiary.
(vi) except as expressly contemplated by the Purchase Agreement
or the any of the Transaction Documents, authorize, issue or enter
into any agreement providing for the issuance, or permit any
Subsidiary to authorize, issue or enter into any agreement providing
for the issuance (contingent or otherwise) in excess of an aggregate
of $5,000,000 (A) any notes or debt securities containing equity
features (including, without limitation, any note or debt securities
convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or
other equity securities, or containing profit participation features)
or (B) any capital stock or other equity securities, or any securities
convertible into or exchangeable for any capital stock or other equity
securities, other than issuances pursuant to the Incentive Stock
Option Plan;
(vii) acquire, or permit any Subsidiary to acquire, in one
transaction or a series of related transactions, any capital stock,
other equity interests or assets of any Person for aggregate
consideration in excess of $5,000,000;
(viii) enter into, or permit any Subsidiary to enter into, any
agreement, contract, lease or commitment on the part of the Company or
such Subsidiary involving the payment or provision of consideration by
or to the Company or such Subsidiary, the fair market value of which
exceeds $1,000,000;
(ix) make any capital expenditure, or permit any Subsidiary to
make any capital expenditure, in excess of $1,000,000;
(x) except as expressly contemplated by the Purchase Agreement,
amend the Certificate of Incorporation, or the Company's bylaws or
file any resolution of the board of directors with the Secretary of
State of the State
32
of Delaware containing any provisions which would adversely affect or
otherwise impair the rights of the holders of the Common Stock;
(xi) enter into, or permit any Subsidiary to enter into, any
agreement, transaction, commitment or arrangement with any of its or
any Subsidiary's officers, directors, employees, stockholders or
Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which such
Person or individual own, in the aggregate, a more than 10% beneficial
interest, except for (A) customary employment arrangements and benefit
programs on arms' length terms and (B) agreements, transactions,
commitments or arrangements on arms' length terms and approved by a
majority of the Company's disinterested directors; or
(xii) enter into, or permit any Subsidiary to enter into, any
agreement to do or effect any of the foregoing.
(g) Following the receipt of Regulatory Relief, if SBW does not hold any
Series D Preferred Stock or Class B Common Stock but does own at least
1.6 million shares of Common Stock (including Common Stock issuable upon
conversion of outstanding securities or upon the exercise of any outstanding
options, warrants, rights or obligations, other than the Warrants and Excluded
Options) on a Fully Diluted Basis, the approval of SBW shall be required for the
following actions:
(i) the approval of any annual budget or business plan for the
Company or any Subsidiary of the Company or the deviation by the
Company or any such Subsidiary from any annual budget for the Company
or such Subsidiary approved by the Board of Directors by more than
five percent (5%);
(ii) issuance by the Company of any equity securities, including
securities convertible into equity securities (other than (A) the
grant of employee stock options (subject to the proviso set forth in
(D) below), (B) the issuance of equity securities in accordance with
the terms of the Purchase Agreement or any of the other Transaction
Documents), (C) the issuance of equity securities upon the exercise or
conversion of securities or employee stock options that are
outstanding as of the date hereof or (D) the issuance of equity
securities after giving effect to the consummation of the transactions
contemplated hereby or employee stock options granted
33
hereafter, PROVIDED, HOWEVER, that there shall not be outstanding at
any time employee stock options for more than 1.5 million shares of
Common Stock plus the options granted to William C. Kennedy, Jr. and
William C. Saunders that are outstanding at September 27, 1996) or
incurrence of any indebtedness for borrowed money or evidenced by
bonds, notes or debentures, provided that the Company can incur up to
$5 million in indebtedness in any year without the consent of SBW;
(iii) the hiring or termination by the Company of its chief
executive officer, chief operating officer or chief financial officer;
(iv) the Company's entering into any lines of business which is
not its Existing Line of Business (as hereinafter defined) or any
joint ventures, partnerships or similar arrangements;
(v) the Company's exiting its Existing Line of Business (as
hereinafter defined) or disposing of assets (other than
telecommunications equipment and other assets sold in the ordinary
course of business) in any year with a value in excess of $500,000 or
which are otherwise material to the Company's operations;
(vi) the adoption, implementation or acceptance (including the
failure to opt out) of any Anti-Takeover Provision not in effect as of
the date hereof that would be applicable to, and, in the reasonable
determination of SBW, adversely affect, SBW and its Affiliates; or
(vii) the taking of any corporate action that would reduce
the number of Shares held by SBW and its Affiliates to fewer than 1.6
million shares of Common Stock such that SBW no longer has the right
to approve any of the actions specified in this subsection (g).
As used in this subsection (g), the terms set forth below shall have
the following respective meanings;
"Anti-takeover Provision" means (i) any provision of the certificate
of incorporation or bylaws of the Company or any contract, agreement or plan to
which the Company is a party or by which it is bound or any statutory provision
enacted after the date hereof which is applicable to the Company which the
Company may opt out of if the effect of such provision would be to materially
delay, hinder or prevent a change in control of the
34
Company or (ii) a stockholder rights plan or "poison pill," including the
provisions of any preferred stock or common stock purchase rights issued
pursuant thereto; provided, however, that such term shall not include any
customary change of control provisions contained in employment agreements
between the Company and any of its directors, officers or other employees or
in any plans or agreements relating to stock options or other awards of
equity securities made by the Company to any such persons.
"Existing Line of Business" means a non-facilities based, enhanced
service provider that offers fleet management and/or status or information about
vehicles and/or location capabilities through mobile communications service.
(h) The Board shall hold, during the term of this Agreement,
regularly scheduled, in-person meetings no less frequently than six times per
year.
(i) At all times during which this Agreement remains in effect, each
Stockholder hereby agrees to take all action necessary (including, without
limitation, voting the shares of the Company's Common Stock owned or controlled
by such Stockholder, calling special meetings of stockholders and executing and
delivering written consents) to ensure that the By-Laws of the Company provide
that the information listed on Schedule A hereto shall be provided to each
member of the Board of Directors, at the time and in the manner required by the
provisions of Schedule A.
(j) The Company and each Stockholder agrees not to, and to cause its
designees on the Board not to, without the prior approval of SBW, alter, amend,
repeal or replace the Bylaws set forth on Exhibit B hereto or to enact any
Bylaws inconsistent therewith.
(k) For the purpose of this Section 5, Chase Manhattan Investment
Holdings, Inc., Archery Partners and their respective assigns shall not be
considered Carlyle Stockholders.
Section 6. MISCELLANEOUS.
(a) LEGEND. The certificates representing the capital stock of the
Company held by each of the Stockholders shall bear the following legend
(provided that with respect to SBW and any certificates issued after the date
hereof such legend shall refer to this Agreement):
35
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SECURITIES OR SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND ANY SIMILAR REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAW. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 4,
1994, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE SECRETARY OF THE
COMPANY."
If any capital stock of the Company becomes eligible for sale
pursuant to Rule 144(k) promulgated under the Securities Act, the Company
shall, subject to applicable law and upon the request of any holder of such
capital stock, remove the legend set forth in this Section 6(a) from the
certificates evidencing the shares of such capital stock held by such holder.
In addition, (i) in connection with any Transfer of shares of any capital
stock of the Company pursuant to any public offering registered under the
Securities Act or pursuant to Rule 144 (or any similar rule or rules then in
effect promulgated under the Securities Act) if such rule is available or
(ii) if the holder of any shares of capital stock of the Company delivers to
the Company an opinion of counsel reasonably acceptable to the Company that
no subsequent Transfer of such shares shall require registration under the
Securities Act, the Company shall promptly upon such Transfer deliver new
certificates for such shares which do not bear the legend set forth in this
Section 6(a).
(b) SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
legal representatives, heirs, legatees, successors and permitted assigns. The
only permitted assigns (each, a "Permitted Assign") are as follows: (i) each of
the Clipper Stockholders shall be entitled to assign any of its rights under
this Agreement to any other Clipper Stockholder; (ii) each of the Carlyle
Stockholders shall be entitled to assign any of its rights under this Agreement
to any other Carlyle Stockholder or any Related Party of a Carlyle Stockholder
(other than an Excluded Related Party); (iii) each of the By-Word Stockholders
shall be entitled to assign any of its rights under this Agreement to any other
By-Word Stockholder; (iv) each of the Erin Mills Stockholders shall be entitled
to assign any of its rights under this Agreement to any other Erin Mills
Stockholder or any Related Party of an Erin Mills Stockholder (other than an
Excluded Related Party) and (v) SBW shall be entitled to assign any of its
rights under this Agreement to any of its Affiliates. No party hereto shall be
entitled to assign any of its rights under this Agreement to any Person which
36
is otherwise a Permitted Assign hereunder unless, concurrently with such
assignment, such party is Transferring all or a portion of the Shares owned
by it to such Person in compliance with the terms and provisions set forth
herein and such Person executes a supplemental agreement hereto in form and
substance reasonably satisfactory to the Company pursuant to which such
Person agrees to become a party to, and be bound by, this Agreement.
(c) SPECIFIC PERFORMANCE, ETC. The Company and each Stockholder, in
addition to being entitled to exercise all rights provided herein, in the
Company's Certificate of Incorporation or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Stockholder agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal law of the State of Delaware without giving
effect to the conflict of laws provisions thereof.
(e) INTERPRETATION. The headings of the sections contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
(f) NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. SBW agrees to give the Company written notice when Regulatory Relief
has been obtained. Any such notice shall be deemed given when so delivered
personally, sent by facsimile transmission or, if mailed, three (3) business
days after the date of deposit in the United States mail, by certified mail
return receipt requested, as follows:
(i) If to the Company to:
HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 75248
Attention: William Kennedy
Telecopier: (972) 930-7263
37
with a copy (which shall not constitute notice) to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Geoffrey L. Newton
Telecopier: (214) 953-6503
(ii) If to any of the Carlyle Entitles, to
c/o The Carlyle Group, L.P.
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004-2505
Attention: Mark D. Ein
Telecopier: (202) 347-1818
with a copy (which shall not constitute notice) to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attention: Bruce E. Rosenblum, Esq.
Telecopier: (202) 637-2201
38
(iii) If to any of the Clipper Entities, to
The Clipper Group, L.P.
12 East 49th Street
New York, N.Y. 10017
Attention: Daniel V. Cahillane
Telecopier: (212) 318-1360
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue
New York, N.Y. 10153
Attention: Howard Chatzinoff
Telecopier: (212) 310-8007
(iv) If to any of the Erin Mills Companies, to
Erin Mills International
Trident House, Suite 204(a)
Broad Street
Bridgetown, Barbados
West Indies
Attention: Stephen Greaves
Telecopier: (809) 436-2120
with a copy (which shall not constitute notice) to:
7501 Keele Street, Suite 500
Concord, Ontario L4K 1Y2
Canada
Attention: Gerry C. Quinn
Telecopier: (416) 736-8373
39
(v) If to any of the By-Word Stockholders, to:
HighwayMaster Communications, Inc.
16479 Dallas Parkway
Suite 710
Dallas, Texas 75248
Attention: William Kennedy
Telecopier: (972) 930-7263
(vi) If to Chase Manhattan Investment Holdings, Inc. or Archery
Partners:
The Chase Manhattan Bank
One Chase Plaza
New York, NY 10081
Attention: William K. Luby
Telecopier: (212) 552-2958
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Emile Karafiol
Telecopier: (312) 861-2200
40
(vii) If to Southwestern Bell Wireless Holdings, Inc.
Southwestern Bell Wireless Holdings, Inc.
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Attention: President
Telecopier: (972) 733-2012
and to:
SBC Communications, Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: General Attorney, Mergers & Acquisitions
Telecopier: (210) 351-3488
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Janet T. Geldzahler
Telecopier: (212) 558-3588
Any party may change its address for notice by written notice to the other
parties in accordance with this provision.
(g) TERMINATION. This Agreement will terminate and the Original
Agreement, as in effect on the date prior to the date hereof, will be deemed to
be in effect if the Purchase Agreement is terminated pursuant to Section 2(c)
thereof. Sections 3(b) and (c) hereof shall terminate at that time that SBW and
its Affiliates cease to own at least 1.6 million shares of Common Stock
(including Common Stock issuable upon conversion of outstanding securities or
upon the exercise of any outstanding options, warrants, rights or obligations,
other than the Warrants and Excluded Options).
41
(h) INSPECTION AND COMPLIANCE WITH LAW. Copies of this Agreement
will be available for inspection or copying by any Stockholder at the offices of
the Company through the Secretary of the Company.
(i) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this paragraph (h), may not be amended, modified or
supplemented, and waivers of or consents to departures from the provisions
hereof may not be given, except by a written instrument executed by (i) the
Company, (ii) a Majority in Interest of the By-Word Stockholders, (iii) a
Majority in Interest of the Carlyle Stockholders and the Clipper Stockholders
acting as a group, (iv) a Majority in Interest of the Erin Mills Stockholders
and (v) SBW; PROVIDED, HOWEVER, that amendments of or modification to Section 4
will be subject to the requirements of Section 4(k). No action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as waiver of any preceding or
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
(j) TRANSFER VOID. Any Transfer of any security of the Company in
violation of this Agreement shall be null and void and the Company covenants and
agrees that it will not register or otherwise recognize a Transfer (whether for
the purposes of shareholder voting or in connection with the distribution of
dividends or other corporate assets) of any securities which it has reason to
believe was effected in violation of this Agreement.
(k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, by the original parties hereto and any successor in interest, each
of which shall be deemed to be an original and all of which together shall be
deemed to constitute one and the same agreement.
(l) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(m) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or
42
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired
thereby.
43
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HIGHWAYMASTER COMMUNICATIONS, INC.,
By: /s/ WILLIAM C. SAUNDERS
------------------------------------------------
Name: William C. Saunders
----------------------------------------------
Title: President
---------------------------------------------
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
By: /s/ STAN SIGMAN
------------------------------------------------
Name: Stan Sigman
----------------------------------------------
Title: President & Chief Executive Officer
---------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ MARK D. EIN
------------------------------------------------
Name: Mark D. Ein
----------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS II, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ MARK D. EIN
------------------------------------------------
Name: Mark D. Ein
----------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
44
H.M. RANA INVESTMENTS LIMITED
By: /s/ Fahad A. Almubarak
-----------------------------------------
By:
--------------------------------------
Name: Fahad A. Almubarak
-------------------------------
Title: President
------------------------------
TC GROUP, L.L.C.
By: /s/ MARK D. EIN
-----------------------------------------
Name: Mark D. Ein
-----------------------------------
Title: Vice-President of Managing Member
----------------------------------
/s/ MARK D. EIN
--------------------------------------------
Mark D. Ein
CHASE MANHATTAN INVESTMENT HOLDINGS, INC.
By: /s/ JEFFREY C. WALKER
-----------------------------------------
Name: Jeffrey C. Walker
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
ARCHERY PARTNERS
By: /s/ JEFFREY C. WALKER, Managing Partner
-----------------------------------------
its General Partner
By:
--------------------------------------
Name: Jeffrey C. Walker
---------------------------------
Title: Managing Partner
--------------------------------
45
CLIPPER CAPITAL ASSOCIATES, L.P.
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
------------------------------------
Name: Daniel V. Cahillane
-------------------------------
Title: Treasurer & Secretary
------------------------------
CLIPPER/MERCHANT PARTNERS, L.P.
By: Clipper Capital Associates, L.P.,
its General Partner
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
-------------------------------
Name: Daniel V. Cahillane
-----------------------------
Title: Treasurer & Secretary
----------------------------
CLIPPER/MERBAN, L.P.
By: Clipper Capital Associates, L.P.
its General Partner
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
-------------------------------
Name: Daniel V. Cahillane
-----------------------------
Title: Treasurer & Secretary
----------------------------
ERIN MILLS INTERNATIONAL INVESTMENT
CORPORATION
By: /s/ STEPHEN L. GREAVES
-----------------------------------------
Name: Stephen L. Greaves
-----------------------------------
46
Title: General Manager
----------------------------------
THE ERIN MILLS DEVELOPMENT CORPORATION
By: /s/ G. C. QUINN
-----------------------------------------
Name: G. C. Quinn
-----------------------------------
Title: Executive Vice-President
----------------------------------
THE ERIN MILLS INVESTMENT CORPORATION
By: /s/ G. C. QUINN
-----------------------------------------
Name: G. C. Quinn
-----------------------------------
Title: President
----------------------------------
/s/ WILLIAM C. KENNEDY, JR.
--------------------------------------------
William C. Kennedy, Jr.
--------------------------------------------
Donald M. Kennedy
/s/ WILLIAM C. SAUNDERS
--------------------------------------------
William C. Saunders
/s/ ROBERT T. HAYES by Douglas Dunlap
attorney-in-fact
--------------------------------------------
Robert T. Hayes
/s/ ROBERT S. FOLSOM by Haddon O. Winckler
attorney-in-fact
--------------------------------------------
Robert S. Folsom
47
The undersigned are executing this Agreement solely for the purpose of
evidencing their approval of the amendment and restatement of the Original
Agreement (as amended from time to time) in its entirety as set forth herein,
it being understood that the undersigned shall not be deemed Stockholders for
purposes of this Agreement and shall not have any rights or obligations
hereunder.
/s/ MARGARET D. FOLSOM
--------------------------------------------
Margaret D. Folsom
/s/ R. STEPHEN FOLSOM
--------------------------------------------
Steven R. Folsom
--------------------------------------------
Joann Hayes
/s/ CYNTHIA ANN HAYES
--------------------------------------------
Cynthia Ann Hayes
/s/ ALICIA ELLEN HAYES
--------------------------------------------
Alicia Ellen Hayes
48
APPENDIX A
ORIGINAL PARTIES
Carlyle-HighwayMaster Investors, L.P.
Carlyle-HighwayMaster Investors II, L.P.
Chase Manhattan Investment Holdings, Inc.
Clipper/Merban, L.P.
Clipper/Merchant Partners, L.P.
Clipper Capital Associates, L.P.
Erin Mills International Investment Corporation
FU Enterprises Ltd.
By-Word Technologies, Inc.
Robert S. Folsom
Robert T. Hayes
A-1
APPENDIX B
AMENDMENTS AND ADDENDA
1. Addendum No. 1 to Subscription Agreement and Stockholders
Agreement by and among HM Holding Corporation, Carlyle-HighwayMaster Investors,
L.P., Carlyle-HighwayMaster Investors II, L.P., H.M. Rana Investments Limited,
TC Group, L.L.C., Chase Manhattan Investment Holdings, Inc., Clipper/Merban,
L.P., Clipper Merchant Partners, L.P., Clipper Capital Associates, L.P., Erin
Mills International Investment Corporation, FU Enterprises Ltd., By-Word
Technologies, Inc., Robert S. Folsom and Robert T. Hayes.
2. Consent of Security Holders of HM Holding Corporation and Second
Amendment to Stockholders' Agreement, dated November, 1994, among HM Holding
Corporation, By-Word Technologies, Inc., the former shareholders of By-Word
Technologies, Inc. listed on EXHIBIT A, Clipper/Merban, L.P., Clipper Merchant
Partners, L.P., Clipper Capital Associates, L.P., Carlyle-HighwayMaster
Investors, L.P., Carlyle-HighwayMaster Investors II, L.P., TC Group, L.L.C.,
H.M. Rana Investments Limited, Chase Manhattan Investment Holdings, Inc., Erin
Mills International Investment Corporation, Robert S. Folsom and Robert T.
Hayes.
3. Joinder Agreement to Stockholders Agreement executed as of January 3,
1995 by Mark D. Ein.
4. Third Amendment to Stockholders Agreement, dated as of April 28, 1995,
among HighwayMaster Communications, Inc., Archery Partners, Chase Manhattan
Investment Holdings, Inc., Carlyle-HighwayMaster Investors, L.P., Carlyle-
HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC Group,
L.L.C., Clipper/Merban, L.P., Clipper Merchant Partners, L.P., Clipper Capital
Associates, L.P., Erin Mills International Investment Corporation, Robert S.
Folsom, Margaret D. Folsom, R. Stephen Folsom, Robert T. Hayes, Cynthia Ann
Hayes, Alicia Ellen Hayes, Joann Hayes, William C. Saunders, William C. Kennedy,
Jr. and Donald M. Kennedy.
5. Note Exchange and Amendments Agreement, dated as of May 26, 1995,
among HighwayMaster Communications, Inc., Archery Partners, Chase Manhattan
Investment Holdings, Inc., Carlyle-HighwayMaster Investors, L.P., Carlyle-
HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC Group,
L.L.C., Clipper/Merban, L.P., Clipper Merchant Partners, L.P., Clipper Capital
Associates, L.P.,
B-1
Erin Mills International Investment Corporation, Robert S. Folsom, Margaret
D. Folsom, R. Stephen Folsom, Robert T. Hayes, Cynthia Ann Hayes, Alicia
Ellen Hayes, Joann Hayes, William C. Saunders, William C. Kennedy, Jr.,
Donald M. Kennedy, Mark D. Ein and The Erin Mills Investment Corporation.
B-2
APPENDIX C
FORMER PARTIES
Margaret D. Folsom
R. Stephen Folsom
Joann Hayes
Cynthia Ann Hayes
Alicia Ellen Hayes
C-1
APPENDIX D
CERTAIN STOCKHOLDERS NUMBER OF SHARES
Erin Mills International Investment Corporation 8,141,706
William C. Kennedy, Jr. 2,029,318
Carlyle-HighwayMaster Investors, L.P. 1,805,727
William C. Saunders 892,015
Clipper/Merban, L.P. 530,930
Clipper/Merchant Partners, L.P. 524,209
H.M. Rana Investments Limited 423,802
T.C. Group, L.L.C. 291,315
Robert S. Folsom 280,000
Carlyle-HighwayMaster Investors II, L.P. 170,071
D-1