Exhibit 10.1(k)
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement") dated as of September 25,
1996, by and among The Mentus Group, Inc., a Delaware corporation (the
"Company"), each of 21st Century Communications Partners, L.P., a Delaware
limited partnership, 21st Century Communications T-E Partners, L.P., a Delaware
limited partnership, and 21st Century Communications Foreign Partners, L.P., a
Delaware limited partnership (collectively, the "Initial Investors"), Gerard
Joyce and Thomas P. Pugliese and certain other holders of shares of the
Company's Common Stock set forth on Schedule II hereto (collectively, the
"Initial Shareholders").
WHEREAS, the Company and the Initial Investors have entered into a
certain Stock Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), pursuant to which each of the Initial Investors, individually and
not jointly, is purchasing from the Company, simultaneously with the execution
and delivery of this Agreement on the date hereof, certain newly issued
securities of the Company;
WHEREAS, the Company's Board of Directors has determined that such
purchase is in the Company's best interests, and each Initial Investor has
concluded that such purchase is in its best interests;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements herein contained, in order to induce the Initial
Investors to enter into the Purchase Agreement and consummate the transactions
contemplated thereby and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Initial Shareholders and
the Company agree with the Initial Investors as follows:
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DEFINITIONS
1.1. Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings indicated:
Adjusted Net Income (Loss): For any period, the net income or net
loss, as the case may be, of the Company and its Subsidiaries for such period
from continuing operations as determined on a Consolidated basis in accordance
with GAAP, adjusted, to the extent included in calculating such net income or
net loss, as the case may be, by excluding without duplication (i) any gain or
loss attributable to the sale, conversion or other disposition of assets
otherwise than in the ordinary course of business, (ii) any other extraordinary
gain or loss, (iii) any gains resulting from the write-up of assets and any loss
resulting from the write-down of assets, (iv) any gain or loss on the repurchase
or redemption of any securities (including in connection with the early
retirement or defeasance of any Debt), (v) any foreign exchange gain or loss,
(vi) any other extraordinary or unusual items, (vii) the net income (or loss) of
any Person acquired in a pooling-of-interests transaction for any period prior
to the date of such transaction, (viii) all income of Persons accounted for by
the Company using the equity method of accounting except, in the case of any
such income, to the extent of dividends, interest or other cash distributions
actually received by the Company or a Consolidated Subsidiary from any such
Person, (ix) the net income (but not net loss) of any Subsidiary which is
subject to restrictions which prevent the payment of dividends or the making of
distributions to the Company or to any Subsidiary intermediate between the
Company and such Subsidiary, (x) any reversal of any liability of the Company or
any Subsidiary accrued in conformity with purchase accounting in connection with
any transaction and (xi) the noncash gains related to any cumulative effect of
changes in accounting principles.
Affiliate: With respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such first Person. The term "affiliated" (whether or not
capitalized) shall have a correlative meaning. For the purposes of this
definition, "control", as used with respect to any Person, shall mean the
possession, directly or indirectly through or with one or more intermediaries,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise. The terms "controlled by" and "under common control with" shall have
correlative meanings. For purposes of this Agreement, no Investor or group of
Investors (whether or not affiliated with or otherwise related to each other and
whether or not acting in concert with respect to any matter or matters) shall be
deemed to be an Affiliate of the Company, any Stockholder or any of their
respective Affiliates by reason of the ownership of any Covered Securities or
other securities or by reason of the possession or exercise of the right to
elect Directors of the Company or any other rights hereunder, under any other
Transaction Document or otherwise. For purposes of this Agreement, neither the
Company nor any Shareholder, nor any Affiliate of the Company or any Shareholder
shall be deemed to be an Affiliate of any Investor.
Agreement: This Stockholders' Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
Annualized Operating Cash Flow: As of any date of determination, either
(i) if Operating Cash Flow for the most-recent full Fiscal Quarter ending on or
prior to such date is positive, then the product of such Operating Cash Flow for
such Fiscal Quarter multiplied by four (4) or (ii) if Operating Cash Flow for
such Fiscal Quarter is not positive, then $1.00 (One Dollar).
Audit Committee: As defined in Section 3.13.
Beneficial Owner: A beneficial owner within the meaning of Rules 13d-3 and
13d-5 under the Exchange Act, as interpreted by the Securities and Exchange
Commission, including the provision of such Rules that a Person shall be deemed
to have beneficial ownership of all securities that such Person has a right to
acquire within 60 days, provided that a Person shall not be deemed a beneficial
owner of, or to own beneficially, any securities if such beneficial ownership
(i) arises solely as a result of a revocable proxy delivered in response to a
proxy or consent solicitation made pursuant to, and in accordance with, the
Exchange Act and the applicable rules and regulations thereunder and (ii) is not
also then reportable on Schedule 13D under the Exchange Act. The terms (whether
or not capitalized) "beneficially own" and "owned beneficially" shall have
correlative meanings.
Board of Directors: The board of directors of the Company.
Business Day: Any day other than a Saturday, a Sunday or a day on which
banking institutions in either New York, New York, or the city and state in
which the principal executive offices of the Company within the United States
are located are not open for business.
capital stock: "Capital stock" when used with respect to any corporation
and whether or not capitalized, shall mean (unless the context otherwise
indicates) any and all shares of capital stock of such corporation, including
each class and series of common stock and preferred stock of such corporation,
any and all stock appreciation rights and any and all equivalents of any of the
foregoing, in each case regardless of how denominated and whether or not
evidenced by any certificate, instrument or other document and whether voting or
nonvoting.
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Capitalized Lease Obligation: With respect to any Person for any period,
an obligation of such Person to pay rent or other amounts under a lease of (or
any other arrangement conveying the right to use) real or personal property that
is required to be capitalized for financial reporting purposes in accordance
with GAAP; and the amount of such obligation shall be the capitalized amount
thereof as determined in accordance with GAAP.
Change in Control: The occurrence of any of the following:
(i) any "person" (within the meaning of that term as used in the
Rules under Section 13(d) and 14(d) of the Exchange Act, as interpreted by
the Securities and Exchange Commission) other than any Investor or any
Affiliate of any Investor or any group of persons acting in concert which
includes any Investor or any Affiliate of any Investor and other than
Thomas Pugliese and Gerard Joyce, who was not, on the date hereof, the
Beneficial Owner, directly or indirectly, of 50% or more of the combined
voting power represented by all then outstanding Voting Equity of the
Company becomes (after such date) the Beneficial Owner, directly or
indirectly, of 50% or more of the combined voting power represented by all
outstanding Common Stock of the Company;
(ii) for any reason (including death or disability), Gerard Joyce or
Thomas Pugliese ceases to be the Beneficial Owners, directly or
indirectly, of 80% or more of the shares of Common Stock beneficially
owned by Gerard Joyce or Thomas Pugliese, respectively on the Closing Date
(as appropriately adjusted for any subdivision, combination,
reclassification, recapitalization, reorganization, merger or other change
of or in the outstanding Common Stock).
For purposes of determining the percentage of the combined voting power of the
outstanding Common Stock beneficially owned by any particular Person as of any
time, any Common Stock not actually outstanding but which is deemed to be
beneficially owned by a Person through the application of the definition of
"Beneficial Owner" above in this Section 1.1 shall be deemed to be outstanding,
but no Common Stock not actually outstanding but which is deemed to be
beneficially owned by any other Person through the application of such
definition shall not be deemed to be outstanding. For purposes of clause (ii) of
this definition, Mr. Joyce or Mr. Pugliese, as the case may be, shall be deemed
to continue to be the Beneficial Owner of shares of Common Stock transferred by
him for estate planning purposes to his spouse or minor children or to a trust
described in Section 664 of the Internal Revenue Code of 1986, as amended of
which the income beneficiaries consist exclusively of one or more of him, his
spouse and his minor children, so long as Mr. Joyce or Mr. Pugliese, as the case
may be, continues to have the power to vote and dispose or direct the voting or
disposition of such transferred shares.
Combined: In respect of any specified accounting or financial item as of
any time or for any period, such item determined, without duplication and after
eliminating intercompany accounts and transactions, by combining (i) such item
as determined for the Company as of such date or for such period with (ii) such
item as determined for each Subsidiary as of such date or for such period.
Combined Debt to Annualized Operating Cash Flow Ratio: As at any date of
determination, the ratio of (i) the aggregate amount of Debt of the Company and
its Subsidiaries on a Combined basis outstanding or deemed to be outstanding as
at the date of determination to (ii) Annualized Operating Cash Flow as at such
date. If any Debt is proposed to be incurred which requires a calculation of the
Combined Debt to Annualized Operating Cash Flow Ratio, the amount of Debt
proposed to be
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incurred will be deemed to be outstanding on the date of determination, and to
the extent that the proceeds of the Debt proposed to be incurred is to be used
to repay or retire other Debt actually outstanding, the amount of such Debt to
be repaid or retired with the proceeds of such Debt proposed to be incurred will
be presumed to have been repaid or retired on the date of determination.
Commission: The Securities and Exchange Commission.
Common Stock: The Common Stock, $0.01 par value per share, of the Company.
Company: The Mentus Group, Inc., a Delaware corporation, and its
successors.
Compensation Committee: As defined in Section 3.13.
Consolidation: The consolidation of the accounts of each of the
Subsidiaries with those of the Company, if and to the extent that the accounts
of each such Subsidiary would normally be consolidated with those of the Company
in accordance with GAAP. The term "Consolidated" shall have a correlative
meaning.
Contingent Obligation: As applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any Debt or
other obligation of another Person, if the purpose or intent of such Person in
incurring the Contingent Obligation or the effect of such Contingent Obligation
is to provide assurance to the obligee of such Debt or other obligation that
such Debt or other obligation will be paid or discharged, or that any agreement
relating thereto will be complied with, or that any holder of such Debt or other
obligation will be protected (in whole or in part) against loss in respect
thereof. Contingent Obligations of such Person include (i) the direct or
indirect guarantee, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another Person, (ii) any liability
of such Person for the obligations of another Person through any agreement
(contingent or otherwise) to (A) purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of a loan, advance, stock
purchase, capital contribution or otherwise), (B) maintain the solvency, working
capital, equity capital or other balance sheet item, level of income or
financial condition or liquidity of another Person, (C) make take-or-pay or
similar payments, if required, regardless of non-performance by any other party
or parties to an agreement, or (D) purchase property, securities or services, if
in the case of any agreement described under subclause (A), (B), (C) or (D) of
this sentence the primary purpose, intent or effect thereof is as described in
the immediately preceding sentence, and (iii) all obligations (contingent or
otherwise) to purchase or otherwise acquire or assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
any of clauses (i) through (ix), inclusive, of the definition of "Debt". For
purposes of this definition, the indemnification obligations of the Company
under the Purchase Agreement and the other Transaction Documents shall not be
considered Contingent Obligations of the Company. The amount of any Contingent
Obligation of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as reasonably determined by
such Person in good faith. If a Person holds any assessable capital stock in a
corporation or assessable equity interest in any other Entity or is or might
become otherwise obligated (absolutely or contingently) to make contributions to
the capital of any Entity, then the term Contingent Obligations also shall
include the maximum reasonably anticipated liability of such Person for
assessments or capital contributions as determined by such Person in good faith.
Contract: Any agreement, contract, commitment, indenture, lease, license,
instrument, note, bond, security, agreement in principle, letter of intent,
undertaking, promise, covenant, arrangement or
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understanding, whether written or oral.
Control Change Transaction: Any Proposed Restricted Disposition which, if
consummated, would or is reasonably likely to result in a Change in Control.
Debt: With respect to any Person, whether recourse is to all or a portion
of the property of such Person and whether or not matured, absolute or
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances, surety bonds, or
similar facilities issued for the account of such Person, (iv) every obligation
of such Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities arising in
the ordinary course of business, in each case which are payable on customary
terms and, are not overdue or which are being contested in good faith), (v)
every Capitalized Lease Obligation of such Person, (vi) the maximum fixed
redemption or repurchase price of Redeemable Equity of such Person at the time
of determination plus accrued but unpaid dividends, (vii) every obligation of
such Person under interest rate swap or similar agreements or foreign currency
hedge, exchange or similar agreements of such Person, (viii) every obligation of
such Person under any conditional sale or title retention arrangement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender in the event of default are limited to repossession or
sale of such property), (ix) every obligation of such Person or any other Person
secured by any lien or encumbrance on any asset of such Person, (x) every
Contingent Obligation of such Person and (xi) every obligation of the type
referred to in clauses (i) through (x) of this sentence of any other Person and
all dividends of another Person the payment of which, in either case, such
Person has Guaranteed.
DGCL: The Delaware General Corporation Law.
Director: Any individual who is a member of the Board of Directors of the
Company.
Disinterested Outside Director: Unless any such requirement is waived by
the Majority Investors, an individual who satisfies each of the following
requirements set forth in clauses (i), (ii) and (iii): (i) has either a
significant financial investment in the Company or a significant strategic
position or expertise relative to the business of the Company, (ii) is not (A)
an officer or employee of the Company or any of its Subsidiaries, (B) a
director, employee, partner, manager or other member of management of any of
Affiliate of the Company (except a director of a Subsidiary of the Company), (C)
a relative of any Person described in subclause (ii)(A) or (ii)(B) or (C) a
trustee of any trust or estate in which any Person described in subclause
(ii)(A), (ii)(B) or (ii)(C) is a beneficiary has a substantial beneficial
interest and (iii) does not have any other relationship which would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a Director of the Company.
Dispose of: With respect to any Common Stock, Right or other security, to
directly or indirectly, voluntarily or involuntarily, (i) sell, assign, make a
gift of, exchange, pledge, hypothecate, grant an option or other right for or
otherwise transfer (whether by merger or otherwise), encumber or subject to any
claim, lien, encumbrance or restriction any such Common Stock, Right or other
security or any interest therein, (ii) grant any voting or other rights with
respect to any such Common Stock, Right or other security or (iii) enter into
any agreement or arrangement regarding the acquisition, holding, disposition or
voting of any such Common Stock, Right or other security. The terms
"Disposition", "Disposing of" and similar variants shall have correlative
meanings. Without limiting the generality of the foregoing:
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(i) in the case of any Common Stock or Rights held by a Shareholder
which is an Entity, (A) any merger, consolidation, binding share exchange
or similar transaction to which such Shareholder is a party and in which
such Shareholder is not the surviving or continuing Entity shall be deemed
to be a Disposition of all of such Common Stock and Rights; and (B) any
issuance by such Shareholder of any shares of capital stock of or other
equity interests in such Shareholder or any options, warrants, convertible
securities or similar rights or securities with respect to any of the
foregoing (including any such issuance in connection with any merger,
consolidation, binding share exchange or similar transaction to which such
Shareholder is a party and in which such Shareholder is the surviving or
continuing Entity), or any Disposition by any Person who holds any capital
stock of or other equity interests in such Shareholder of any such capital
stock or other equity interests or of any options, warrants, convertible
securities or similar rights with respect thereto, shall in each case be
deemed to constitute a Disposition of (x) if the shares of capital stock
or other equity interests issued or transferred confer upon any Person
control of such Shareholder, all of the Common Stock and Rights held by
such Shareholder or (y) in all other cases, a number of shares of Common
Stock and Rights (the "Transferred Shares") held by such Shareholder
(determined consistently with Section 1.5) equal to the product of the
total number or amount of shares of Common Stock held by such Shareholder
(determined consistently with Section 1.5) multiplied by the percentage of
all outstanding assumed equity interests in such Shareholder (after giving
effect to such issuance or Disposition of capital stock or other equity
interests and the assumed exercise, exchange or conversion of all Rights,
if any, included in such equity interests) represented by such equity
interests issued or Disposed of (the "Transferred Equity Interests"), and,
for purposes of Article II the aggregate consideration for all such
Transferred Shares shall be deemed to be the product of (x) the percentage
of the Fair Market Value of all such outstanding equity interests in such
Shareholder represented by the Fair Market Value of all Common Stock held
by such Shareholder (determined consistently with Section 1.5), multiplied
by (y) the amount of consideration proposed to be paid for such
Transferred Equity Interests (including, in the case of Rights, any
additional consideration payable upon the exercise, exchange or conversion
thereof);
(ii) any redemption, purchase or other acquisition in any manner
(whether or not for any consideration) by the Company or any Subsidiary of
any Common Stock or Rights shall be deemed to be a Disposition of such
Common Stock or Rights except to the extent that such redemption, purchase
or other acquisition by the Company is of all holders of such Common Stock
or all holders of Rights of such class; and
(iii) if any Shareholder agrees to act in concert with one or more
other Shareholders or other Persons for the purpose of acquiring, holding,
voting or disposing of any Common Stock or Rights, and such Shareholder or
any of its Affiliates or Related Parties receives, directly or indirectly,
any form of consideration directly or indirectly attributable to such
agreement, then such Shareholder shall be deemed to have Disposed of all
Common Stock and Rights beneficially owned by him which are subject to
such agreement.
Any Disposition or Proposed Disposition at any time by any Shareholder of any
Right which is exercisable or exchangeable for or convertible into any Common
Stock shall be deemed for all purposes of this Agreement to be a Disposition or
Proposed Disposition of the maximum number of shares of Common Stock determined
as of such time, which would be issuable or deliverable upon the exercise,
exchange or conversion of such Right, whether or not such Right is then
exercisable, exchangeable or convertible.
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Electing Investors: As defined in Section 2.4(a).
Employee Option: Any option to purchase Common Stock for cash which is
granted by or with the approval of the Compensation Committee to any director,
officer, employee or consultant of the Company or any subsidiary of the Company
pursuant to either (i) the Company's 1993 Stock Option Plan or the Company's
1994 Stock Option Plan as in effect on the Closing Date or (ii) any other Option
Plan adopted by the Company after the Closing Date with the prior approval of
the Majority Investors, in each case as the same may be amended from time to
time with the prior approval of the Majority Investors.
Entity: Any corporation, limited liability company, general or limited
partnership, joint venture, association, joint stock company, trust, other
unincorporated business or organization or other Person which is not either a
natural person or a Governmental Authority.
Exchange Act: The Securities Exchange Act of 1934, as amended from time to
time, or any successor statute, and (unless the context otherwise requires) the
rules and regulations promulgated thereunder.
Exempt Transfer: (i) A sale of Common Stock by a Shareholder in accordance
with Article II hereof, to any Initial Investor or any Affiliate of any Initial
Investor, to the public pursuant to an effective registration statement under
the Securities Act or in a transaction, consummated while Common Stock of that
Class are registered under Section 12(b) or 12(g) of the Exchange Act, which
satisfies the requirements of the first sentence of paragraph (f) of Rule 144
under the Securities Act (as such sentence and paragraph are in effect on the
date hereof) and, if such transaction is a "brokers' transaction" referred to in
such paragraph of Rule 144, also satisfies the requirements of paragraph (g) of
Rule 144 under the Securities Act (as such paragraph is in effect on the date
hereof) and (ii) a transfer by a Shareholder who is a natural person to (A) an
Immediate Family Member or (B) a trust described in Section 664 of the Internal
Revenue Code of 1986, as amended of which the income beneficiaries consist
exclusively of one or more of such Shareholder and the Immediate Family Members
of such Shareholder, provided that in the case of each transfer pursuant to
subclause (ii)(A) or (ii)(B) such Disposition is made without consideration and
the transferee, by written instrument reasonably satisfactory to the Investors,
makes representations and warranties to the Investors equivalent to those set
forth in Section 3.10, becomes a party to this Agreement as a "Shareholder"
hereunder.
Expiration Date: As defined in Section 2.5(b).
Fair Market Value: With respect to any securities or property, the price
at which a willing seller would sell and a willing buyer would buy such property
having full knowledge of the facts, in an arm's-length auction transaction
without time constraints, and without being under any compulsion to buy or sell.
Fair Market Value, in the case of the Company, shall be determined on a going
concern or liquidation basis, whichever yields the highest value. In determining
the Fair Market Value of any shares of capital stock, there shall be no discount
due to lack of liquidity of such shares because of the absence of a significant
public market or due to the minority ownership position in the issuer
represented by such shares, nor any premium due to the majority or control
ownership position in the issuer represented by such shares.
Fiscal Quarter: A fiscal quarter of the Corporation, which (unless and
until the fiscal year of the Corporation is changed by the Board of Directors)
shall be a three-month period ending on the last day of any March, June,
September or December.
FTC: As defined in Section 3.11.
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GAAP: As of any date, generally accepted accounting principles in the
United States, consistently applied.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof and any court, panel, judge, board, bureau,
commission, agency or other entity, body or other Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Guarantee: Any Person means any direct or indirect obligation, contingent
or other, of such Person guaranteeing any Debt of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) any such Debt or to purchase (or advance or supply
funds for the purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the holder
of such Debt of the payment of such Debt or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt; provided,
however, that the Guarantee by any Person shall not include endorsement by such
Person of negotiable instruments for collection or deposit in the ordinary
course of business. The terms (whether or not capitalized) "guaranteed",
"guaranteeing" and "guarantor" shall have correlative meanings.
HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
HSR Report: As defined in Section 3.11.
Immediate Family Member: With respect to any specified natural person, any
other natural person related to such specified natural person by blood, marriage
or adoption not more remote than first cousin.
Incur: With respect to any Debt or other liability or obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable or obligated in respect of such Debt or
other obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and the terms "incurrence", "incurred",
"incurrable" and "incurring", whether or not capitalized, shall have meanings
correlative to the foregoing). For purposes of clause (viii) of Section 3.8,
Debt incurred by a Person before it becomes a Subsidiary shall be deemed to have
been incurred at the time it becomes a Subsidiary.
Initial Investors: As defined in the introductory paragraph of this
Agreement.
Initial Shareholders: As defined in the introductory paragraph of this
Agreement.
Investors: Any and all of the following Persons, in each case for so long
as such Person continues to own (i) for purposes of Section 3.8, any Series B
Preferred Stock or (ii) for purposes of any other provision of this Agreement,
any Common Stock or Rights to acquire any Common Stock:
(i) Each Initial Investor;
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(ii) any Qualified Institutional Investor who (A) at any time
acquires any Series B Preferred Stock, Common Stock or any Rights to
acquire Common Stock directly or indirectly from any Initial Investor or
an Affiliate of an Initial Investor, (B) is designated by the transferor
Investor, with the consent of a the Investor Representative, as an
"Investor" in a written designation delivered to the Company and (C) by
written instrument reasonably satisfactory to the Investor Representative
and the Company, becomes a party to this Agreement as an "Investor"
hereunder;
(iii) any Affiliate of any Investor under clause (i) or (ii) who (A)
at any time acquires any Series B Preferred Stock, Common Stock or any
Rights to acquire Common Stock directly or indirectly from such Investor,
(B) is designated by the transferor Investor, with the consent of a the
Investor Representative, as an "Investor" in a written designation
delivered to the Company and (C) by written instrument reasonably
satisfactory to the Investor Representative and the Company, becomes a
party to this Agreement as an "Investor" hereunder; and
(iv) in the case of any Investor which is a corporation, partnership
or other Entity, any stockholders, partners or other owners of such Entity
(or any liquidating or similar trust for their benefit) to whom any Series
B Preferred Stock, Common Stock or Rights to acquire Common Stock held by
such Entity are distributed or transferred in connection with the
liquidation, dissolution or winding up of such Entity or any other
required distribution pursuant to the provisions of the organizational or
other governing document of such Entity.
Investor Representative: Any Investor designated by the Majority Investors
as the representative of the Investors, collectively. The initial Investor
Representative shall be 21st Century Communications Partners, L.P. The Majority
Investors may, at any time by a written notice delivered to the Company, remove
and replace the Person then serving as the Investor Representative, without the
consent or approval of the Company or any Shareholder.
Judgment: Any order, judgment, writ, decree, award or other determination,
decision or ruling of any court, judge, justice or magistrate, any other
Governmental Authority or any arbitrator.
Junior Stock: (i) Each class or series of Common Stock, (ii) the Series A
Preferred Stock of the Company, (iii) any other class or series of capital stock
of the Company hereafter created, other than (A) any class or series of Parity
Stock (except to the extent provided under clause (iv) of this sentence) and (B)
any class or series of Senior Stock (except to the extent provided under clause
(iv) of this sentence), and (iv) any class or series of Parity Stock or Senior
Stock to the extent that it ranks junior to the Series B Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation, as the case may
be. For purposes of clause (iv) above, a class or series of Parity Stock or
Senior Stock shall rank junior to the Series A Preferred Stock as to dividend
rights, rights of redemption or rights on liquidation if the holders of shares
of Series B Preferred Stock shall be entitled to dividend payments, payments on
redemption or payments of amounts distributable upon dissolution, liquidation or
winding up of the Company, as the case may be, in preference or priority to the
holders of shares of such class or series.
Majority Investors: For purposes of Section 3.8, as of any time, any
Investor who holds, or Investors who hold in the aggregate, at least a majority
of the Series B Preferred Stock then held by all Investors. For purposes of any
other provision of this Agreement, as of any time, any Investor who holds, or
Investors who hold in the aggregate, at least a majority of the Common Stock
then held by all Investors (determined consistently with Section 1.5).
9
Majority Shareholders: As of any time, any Shareholder who holds, or
Shareholders who hold, in the aggregate, at least a majority of the Common Stock
then held by all Shareholders (determined consistently with Section 1.5).
Offer Consideration: As defined in Section 2.2.
Offer Notice: As defined in Section 2.2.
Offer Number: As defined in Section 2.2.
Offered Shares: As defined in Section 2.2.
Operating Cash Flow: For any Fiscal Quarter, (i) the Adjusted Net Income
(Loss) for such Fiscal Quarter plus all amounts deducted in calculating such
Adjusted Net Income (Loss) for such Fiscal Quarter in respect of depreciation,
amortization, interest expense and other financing costs and all income taxes,
whether or not deferred, applicable to such income period, all as determined on
a Combined basis in accordance with GAAP and without duplication. For purposes
of calculating Operating Cash Flow for the most-recent Fiscal Quarter ending at
or prior to any date on which any Debt is incurred or proposed to be incurred
which requires a calculation of the Combined Debt to Annualized Operating Cash
Flow Ratio, (i) any Person that is a Subsidiary on such date (or would become a
Subsidiary in connection with the transaction that requires the determination of
such ratio) shall be deemed to have been a Subsidiary at all times during such
Fiscal Quarter, (ii) any Person that is not a Subsidiary on such date (or would
cease to be a Subsidiary in connection with the transaction that requires the
determination of such ratio) shall be deemed not to have been a Subsidiary at
any time during such Fiscal Quarter, (ii) if the Company or any Subsidiary shall
have in any manner acquired (including through commencement of activities
constituting such operating business) or disposed (including through termination
or discontinuance of activities constituting such operating business) of any
operating business or assets during or subsequent to such Fiscal Quarter, such
calculation shall be made on a pro forma basis on the assumption that such
acquisition or disposition had been completed on the first day of such Fiscal
Quarter.
Other Purchase Agreements: The Stock Purchase Agreements, dated the date
hereof, among the Company and certain purchasers of Series B Preferred Stock as
the same may be amended from time to time in accordance with their respective
terms.
Parity Stock: (i) The Series B Preferred Stock and (ii) each class or
series of capital stock of the Company, if any, hereafter created with the
approval of the Investors and ranking on a parity basis with the Series B
Preferred Stock as to any of dividends, rights of redemption or rights on
liquidation. Capital stock of any class or series shall rank on a parity as to
dividends, rights of redemption or rights on liquidation with shares of Series B
Preferred Stock, whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share or sinking fund provisions, if any,
are different from those of the Series B Preferred Stock if the holders of such
stock shall be entitled to the receipt of dividends, amounts distributable upon
dissolution, liquidation or winding up of the Company or redemption payments, as
the case may be, in proportion to their respective dividend rates, liquidation
prices or redemption prices, respectively, without preference or priority, one
over the other, as between the holders of such stock and the holders of shares
of the Series B Preferred Stock. No class or series of capital stock that ranks
junior to the Series B Preferred Stock as to rights on liquidation shall rank or
be deemed to rank on a parity basis with the Series B Preferred Stock as to
dividend rights or rights of redemption, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly provides.
10
Per-Share Offer Consideration: As defined in Section 2.2.
Person: Any individual, corporation, limited liability company, general or
limited partnership, joint venture, association, joint stock company, trust,
unincorporated business or organization, Governmental Authority or other entity
or legal person, whether acting in an individual, fiduciary or other capacity.
Preemptive Rights Agreement: The Preemptive Rights Agreement dated the
date hereof among the Company and certain stockholders of the Company as the
same may be amended from time to time in accordance with its terms.
Preferred Stock: The Series A Preferred Stock and the Series B Preferred
Stock, as constituted on the date hereof and any capital stock into which such
Preferred Stock may thereafter be changed, the capital stock of the Company of
any other Class (regardless of how denominated) which is preferred as to the
payments of dividends or distributions or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of the Company over
capital stock of any other Class of the Company or which is subject or entitled
(absolutely or contingently) to redemption and except where the context
otherwise indicates, shares of preferred stock of any successor or acquiring
corporation received by or distributed to the holders of capital stock of the
Company in the circumstances contemplated by Section 7.4 of the Registration
Rights Agreement.
Proposed Restricted Disposition: As defined in Section 2.2.
Prospective Purchaser: As defined in Section 2.2.
Purchase Agreement: The Stock Purchase Agreement dated as of the date
hereof, among the Company and the Initial Investors, as the same may be amended
from time to time in accordance with its terms.
Purchase Notice: As defined in Section 2.5(b).
Qualified Institutional Investor: Any Person described in paragraph (a)(1)
of Rule 501 under Regulation D promulgated under the Securities Act, as in
effect on the date such Qualified Institutional Investor acquires any Covered
Securities or any Affiliate of any such Person.
Qualified IPO: Either (i) the consummation of an initial public offering
of the Company's Common Stock generating proceeds of at least $20 million on a
pre-money equity valuation of at least $308 per share of Common Stock (as
appropriately adjusted for stock splits, reverse splits, stock dividends or
other reclassifications, reorganizations or similar events affecting the capital
stock of the Company, the record date for which occurs after the Closing Date)
or (ii) the date (A) the Common Stock is registered under Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended or traded in an
over-the-counter market and quoted in an automated quotation system of the
National Association of Securities Dealers, Inc., (B) the Common Stock is listed
for trading on a national securities exchange registered under the Exchange Act
or traded in over-the counter market and quoted in an automated quotation system
of the National Association of Securities Dealers, Inc. (C) the average daily
trading volume of shares of the Common Stock reported by such exchange or
quotation systems for the period of 5 consecutive trading days prior to such
date of closing has exceeded, .7% of the number of shares of Common Stock
actually issued and outstanding on such date and (D) the average closing price
for the period of 20 consecutive trading days before such date
11
is at least $308 per share (as appropriately adjusted for stock splits, reverse
splits, stock dividends or other reclassifications, reorganizations or similar
events affecting the outstanding Common Stock, the record date for which occurs
after the Closing Date).
Registration Rights Agreement: The Registration Rights Agreement dated as
of the date hereof, among the Company, the Initial Investors and certain other
parties, as the same may be amended from time to time in accordance with its
terms.
Related Contract or Transaction: As defined in Section 2.2.
Related Party: With respect to any Person, (i) any Entity (other than the
Company or a Subsidiary) of which such Person is a Director, officer, partner,
manager or other member of management, or is, directly or indirectly, the
beneficial owner of ten percent (10%) or more of any class or series of equity
interests, and (ii) any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
capacity. If such Person is a natural person, such Person's "Related Parties"
shall also include such Person's parents, children, siblings and spouse, the
parents and siblings of such Person's spouse and the spouses of such Person's
children and any Entity (other than the Company or a Subsidiary), trust or
estate with which any such relative of such Person has any relationship
specified in clause (i) or (ii) of the first sentence of this definition.
Requirement of Law: With respect to any Person, all federal, state and
local laws, rules, regulations, Judgments, injunctions, standards, codes,
limitations, restrictions, conditions, prohibitions, notices, demands or other
requirements or determinations of a court or other Governmental Authority or an
arbitrator, applicable to or binding upon such Person, any of its property or
any business conducted by it or to which such Person, any of its assets or any
business conducted by it is subject.
Restricted Disposition: Any Disposition by any Shareholder, other than an
Exempt Transfer.
Restricted Person: (i) Any beneficial owner of 5% or more of any class or
series of equity interests in the Corporation, (ii) any Affiliate of the Company
other than a Wholly Owned Subsidiary, (iii) any director or officer of the
Company or any Subsidiary, (iv) any beneficial owner of 5% or more of any class
or series of equity interests in any Subsidiary and any director, officer or
Affiliate of any such owner, and (iv) any Related Party of any Person covered by
clause (i), (ii), (iii) or (iv) of this sentence; provided that in no event
shall any of the following Person be deemed to be a "Restricted Person": (x) any
Investor, any Affiliate or Related Party of any Investor or any Related Party of
any Affiliate of any Investor or (y) any Series B Director.
Rights: Any options, warrants, convertible or exchangeable securities or
other rights, however denominated, to subscribe for, purchase or otherwise
acquire any Common Stock, with or without payment of additional consideration in
cash or property, either immediately or upon the occurrence of a specified date
or a specified event or the satisfaction or happening of any other condition or
contingency.
Securities Act: The Securities Act of 1933, as amended from time to time,
or any successor statute, and (unless the context otherwise requires) the rules
and regulations promulgated thereunder.
Selling Stockholder: As defined in Section 2.2.
Senior Stock: Each class or series of capital stock of the Company, if
any, hereafter created with the
12
approval of the Investors and ranking prior to the Series B Preferred Stock as
to dividends, rights of redemption or rights on liquidation. Capital stock of
any class or series shall rank prior to the Series B Preferred Stock as to
dividends, upon redemption or upon liquidation if the holders of such class or
series shall be entitled to the receipt of dividends, payments on redemption or
payments of amounts distributable upon the dissolution, liquidation or winding
up of the Company, as the case may be, in preference or priority to the holders
of shares of Series B Preferred Stock. No class or series of capital stock that
ranks junior to the Series B Preferred Stock as to rights on liquidation shall
rank or be deemed to rank as senior to the Series B Preferred Stock as to
dividend rights or rights of redemption, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly provides.
Series A Preferred Stock: The 8.25% Convertible Series A Preferred Stock,
par value $1.00 per share, of the Company.
Series B Certificate of Designation: The Certificate of Designation in the
form of Exhibit E to the Purchase Agreement, filed with the Delaware Secretary
of State pursuant to Section 151 of the DGCL or any successor provisions of the
Company's Certificate of Incorporation.
Series B Director: As defined in Section 3.1.
Series B Preferred Stock: The Series B Senior Cumulative Compounding
Convertible Redeemable Preferred Stock, par value $1.00 per share, of the
Company.
Shareholder: Each Initial Shareholder and each other Person (except an
Investor or the Company) who becomes or is required to become a party to this
Agreement pursuant to Section 5.2 and the respective successors and permitted
assigns of any of the foregoing, in each case for so long as such Shareholder or
other Person continues to hold any Common Stock of any Class or any Rights to
acquire Common Stock of any Class.
Shareholder Representative: Any Shareholder designated by the Majority
Shareholders as the representative of the Shareholders, collectively. The
initial Shareholder Representative of the Shareholders shall be Thomas Pugliese.
The Majority Shareholders may at any time by written notice delivered to the
Company, remove and replace the Person then serving as the Shareholder
Representative, without the consent or approval of the Company or any Investor.
Stockholders: The Investors and the Shareholders.
Subsidiary: All corporations and all partnerships and other non-corporate
Entities in which the Company has an interest.
Tag-Along Rights: As defined in Section 2.2.
Tag-Along Securities: As defined in Section 2.4(a).
Tender Notice: As defined in Section 2.5(b).
Transaction Documents: As defined in the Purchase Agreement.
Underlying Securities: When used with reference to any Rights as of any
time, each class, series,
13
issue or other kind of equity interests or other securities issuable or
deliverable upon exercise, exchange or conversion of such Rights (whether or not
such Rights then are exercisable, exchangeable or convertible).
Valuation Committee: As defined in Section 3.13.
Voting Equity: Capital stock of and other equity interests in the Company
which ordinarily have voting power for the election of directors of the Company
generally, whether at all times or only so long as no other class or series of
equity interests has such voting power by reason of any contingency.
Wholly Owned Subsidiary: An Entity all of the equity interests of which
(other than directors' qualifying shares) at the time are owned beneficially and
of record by the Company, one or more Wholly Owned Subsidiaries of the Company
or the Company and one or more Wholly Owned Subsidiaries of the Company.
1.2. Terms Generally; Certain Rules of Construction. The definitions in
Section 1.1 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Agreement in its entirety and not to any part hereof unless
the context shall otherwise require. All references herein to Sections, Exhibits
and Schedules shall be deemed references to and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. Unless
otherwise expressly provided herein or unless the context shall otherwise
require, any references as of any time to the "Certificate of Incorporation",
"Articles of Incorporation", "charter", "organizational or constituent
documents" or "By-laws" of any Entity, to any agreement (including this
Agreement) or other Contract, instrument or document or to any statute or
regulation or any specific section or other provision thereof are to it as
amended and supplemented through such time (and, in the case of a statute or
regulation or specific section or other provision thereof, to any successor of
such statute, regulation, section or other provision). Any reference in this
Agreement to a "day" or number of "days" (without the explicit qualification of
"Business") shall be interpreted as a reference to a calendar day or number of
calendar days. If any action or notice is to be taken or given on or by a
particular calendar day, and such calendar day is not a Business Day, then such
action or notice shall be deferred until, or may be taken or given on, the next
Business Day. Unless otherwise expressly provided herein or unless the context
shall otherwise require, any provision of this Agreement using a defined term
(by way of example and without limitation, such as "Investors", "Majority
Investors", "Majority Shareholders", or "Shareholders") which is based on a
specified characteristic, qualification, feature or status shall, as of any
time, refer only to such Persons who have the specified characteristic,
qualification, feature or status as of that particular time. The word "property"
includes property and assets of any kind, whether real or personal, tangible or
intangible.
1.3. Outstanding Shares. Capital stock or other securities of any Class
held in treasury by the Company or held by any Subsidiary shall not be
considered to be outstanding for any purpose of this Agreement.
1.4. Capital Stock Includes Preferred Stock. As used in this Agreement,
the term "capital stock" includes any class or series of preferred stock,
however denominated and regardless of the characterization thereof for
accounting purposes under generally accepted accounting principles or the rules,
regulations, interpretations or releases of the Securities and Exchange
Commission.
14
1.5. Determining Shares of Common Stock Held. Unless otherwise expressly
provided, for purposes of this Agreement, any Person shall be deemed to hold, as
of any time, (i) all issued and outstanding shares of Common Stock or other
securities then held or deemed to be held by such Person, (ii) all additional
shares of Common Stock or other securities which would then be held by such
Person if it were assumed that all shares of Series B Preferred Stock, if any,
then held or deemed to be held by such Person had been duly and effectively
converted in full at and effective as of such time, (iii) all additional shares
of Common Stock or other securities which would then be held by such Person if
it were assumed that all Rights, if any, then held or deemed to be held by such
Person had been duly and effectively exercised in full at and effective as of
such time and (iv) all additional shares of Common Stock or other securities, if
any, which such Person then has a right to purchase pursuant to the Preemptive
Rights Agreement by virtue of any prior exercise of preemptive rights under such
agreement, assuming, in the case of each of clauses (ii) and (iii), that all
adjustments to the kind, number and amount of shares of capital stock or other
securities issuable upon exercise, exchange or conversion of any of the shares
of Series B Preferred Stock or other Rights referred to in such clause required
by reason of any event or transaction occurring at or prior to such time had
been duly and effectively made as and when required by the terms thereof.
II
TAG-ALONG RIGHTS
2.1. General. Unless and until complying with the provisions of this
Article II, no Shareholder shall consummate or enter into any binding Contract
for any Restricted Disposition; provided, however, for purposes of this Article
II, a binding Contract shall not include any Contract, the terms, rights,
obligations, and performance of which are specifically conditioned upon the
fulfillment by any Shareholder of its rights and obligations under this Article
II. The provisions of this Article II shall apply successively to each and every
Restricted Disposition and Proposed Restricted Disposition.
2.2. Notice.
(a) Any Shareholder (a "Selling Stockholder") who desires to consummate or
enter into a Contract for any Restricted Disposition (a "Proposed Restricted
Disposition") shall deliver to each Investor a written notice signed by such
Selling Stockholder (the "Offer Notice") which shall (i) identify the Person to
whom such Restricted Disposition is proposed to be made (the "Prospective
Purchaser"); (ii) specify the number of shares of Common Stock proposed to be
Disposed of (the "Offered Shares") and the manner of Restricted Disposition;
(iii) state the kind and aggregate amount of consideration proposed to be paid
or delivered by the Prospective Purchaser for the Offered Shares (the "Offer
Consideration") and the amount thereof allocable to each Offered Share (the
"Per-Share Offer Consideration"), and the timing of the payment or other
delivery thereof; (iv) describe any option or right of election which the
Selling Stockholder may have as to the kind or amount of consideration; (v)
describe the other material terms and conditions of the Proposed Restricted
Disposition to the Prospective Purchaser; (vi) describe any Contract or
transaction (including, but not limited to, any Restricted Disposition) between
the Selling Stockholder or any of its direct or indirect Affiliates, Related
Parties or designees or beneficiaries and the Prospective Purchaser or any of
its direct or indirect Affiliates, Related Parties or agents which was entered
into or consummated at any time within the past year or is proposed to be
entered into or consummated (each a "Related Contract or Transaction"); (vii)
state that such Selling Stockholder has informed the Prospective Purchaser of
the existence and requirements of this Article II; (viii) state whether such
Restricted Disposition will, to the knowledge or belief of the Selling
Stockholder, result in a Change in Control; and (ix) state the maximum number of
shares of Common Stock which such Prospective Purchaser is willing to purchase
from all participating sellers pursuant to this Article
15
II (such number so stated being referred to as the "Offer Number.") If any
Prospective Purchaser is not then subject to and in compliance with the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Offer
Notice must also be accompanied by a statement identifying each Person who, to
the best knowledge of the Selling Stockholder, is an Affiliate of such
Prospective Purchaser. The Selling Stockholder shall promptly provide such
additional information concerning the Prospective Purchaser and the Proposed
Restricted Disposition as any Investor reasonably may request and which the
Selling Stockholder possesses or can obtain without unreasonable effort or
expense. To the extent the Proposed Restricted Disposition consists of or
includes the purchase from the Selling Stockholder of Rights, rather than issued
and outstanding shares of Common Stock, the Offer Notice will so state and shall
also state whether the Offer Consideration reflects any discount or reduction
attributable to any requirement that an exercising holder of such Rights pay or
deliver additional consideration to the Company, and the Per Share Offer
Consideration stated in the Offer Notice must be the amount of Offer
Consideration allocable to each Offered Share increased by the amount of any
such discount or reduction allocable to each share of Common Stock covered by
such Rights.
(b) The giving of an Offer Notice shall constitute the representation and
warranty by the Selling Stockholder to each Investor that (i) neither the Offer
Consideration nor any other terms of the Proposed Restricted Disposition have
been established for the purpose of circumventing or impairing the tag-along
rights of the Investors pursuant to this Article II (the "Tag-Along Rights") or
increasing the probability that the Tag-Along Right of any Investor will not be
exercised in full, (ii) that the Proposed Restricted Disposition is not subject
to conditions, contingencies or material terms not disclosed in the Offer Notice
and (iii) that each Related Contract or Transaction described in such Offer
Notice was or is bona fide and in good faith and was not entered into or
proposed to be entered into for the purpose of circumventing or impairing an
Investor's Tag-Along Right pursuant to this Article II or increasing the
probability that any Investor's Tag-Along Right will not be exercised in full.
If any Prospective Purchaser, whether directly or indirectly, would, upon
consummation of the Proposed Restricted Disposition (individually or with one or
more other Proposed Restricted Dispositions) control the Company, then the term
"Related Contract or Transaction" shall be deemed to include any Contract or
transaction between the Selling Stockholder or any of its direct or indirect
Affiliates, Related Parties or designees or beneficiaries and the Company (or
any successor or acquiring Entity if it is proposed or contemplated that any
consolidation, merger or transfer of assets of the Company will be consummated
in connection with or following the Proposed Restricted Disposition) or any of
the respective direct or indirect Affiliates, Related Parties or agents of the
Company (or any such successor or acquiring Entity) which is proposed to be
entered into or consummated.
2.3. Valuation of Consideration.
(a) If the Offer Consideration does not consist entirely of cash, the
Offer Notice must state the good faith evaluation of the Selling Stockholder of
the Fair Market Value of such noncash consideration as of the date the Offer
Notice is given, together with a description of the method by which such
evaluation was made and copies of any appraisals or similar reports, if any, on
which such evaluation was based. Each statement of Fair Market Value of any
noncash consideration stated in the Offer Notice shall be binding on the
Prospective Purchaser, the Stockholders and the Investors for all purposes of
this Article II unless, within ten (10) days after the Offer Notice is given,
any Investor notifies the Selling Stockholder and the other Investors in writing
that it objects to any valuation so stated in the Offer Notice. If any Investor
makes such a written objection on a timely basis, the Selling Stockholder and
the Investors shall attempt in good faith to agree on the Fair Market Value of
such noncash consideration. If they are unable to so agree within ten (10)
Business Days after such notice of objection was given, then within five (5)
Business Days thereafter, the Selling Stockholder and the Investors shall select
one appraiser satisfying the requirements of Section 4.1 and
16
the Investors and the Selling Stockholder shall submit to such appraiser (and
each other) a brief written statement of their respective positions regarding
the matter in dispute and supporting arguments, and each shall be given a period
of five (5) Business Days thereafter to submit to the other and to the appraiser
a written response to such written statement of the other. Such appraiser shall,
within fifteen (15) days of the date of its selection, resolve such dispute by
choosing either the position of the Selling Stockholder set forth in such
written statement so submitted by the Selling Stockholder or the position of the
Investors set forth in such written statement so submitted by the Investors,
whichever in the opinion of the appraiser, in its sole discretion, is more
consistent with the purposes and intent of this Agreement. Decisions with
respect to such determination made pursuant to this Section 2.3(a) by the
Majority Investors shall be binding on all Investors. The determination of the
Fair Market Value of any such noncash consideration by agreement of the Selling
Stockholder and the Investors or by the appraiser appointed as provided in this
Section 2.3(a) and Article IV shall be final and conclusive for all purposes of
this Article II. Promptly after the Fair Market Value of any such noncash
consideration is finally determined in accordance with this Section 2.3(a), the
Selling Stockholder shall give each Investor a written notice stating such Fair
Market Value.
(b) If any Related Contract or Transaction was entered into or consummated
at any time within the past one (1) year or is proposed to be entered into or
consummated, the Offer Notice must also state the good faith evaluation of the
Selling Stockholder of the Fair Market Value, as of the date received or, if not
yet received, as of the date the Offer Notice is given, of the maximum aggregate
consideration and benefits received or to be received by the Selling Stockholder
or any of its direct or indirect Affiliates, Related Parties or designees or
beneficiaries by virtue of such Related Contract or Transaction and of the
minimum amount of property, services or other consideration received or to be
received by the Prospective Purchaser in consideration thereof, together with a
description of the method by which such evaluation was made and copies of any
appraisals or similar reports, if any, on which such evaluation was based. If
any Investor, within ten (10) days after any Offer Notice is given, notifies the
Selling Stockholder and the other Investors in writing that it believes, in good
faith, that either (i) the Per-Share Offer Consideration stated in the Offer
Notice has not been properly calculated in accordance with the last sentence of
Section 2.2(a) or (ii) absent any Related Contract or Transaction described in
the Offer Notice (or otherwise known to such Investor), the amount of
consideration which would be offered or paid for the Offered Shares would be
higher, so that the Per-Share Offer Consideration stated in the Offer Notice
should be increased to include all or part of the consideration and benefits
received or to be received by the Selling Stockholder or any of its direct or
indirect Affiliates, Related Parties or designees or beneficiaries by virtue of
such Related Contract or Transaction, then the Selling Stockholder and the
Investors shall attempt in good faith to resolve the issue. If they are unable
to so agree within ten (10) Business Days after such notice was given, then
within five (5) Business Days thereafter, the Selling Stockholder and the
Investors shall select one appraiser satisfying the requirements of Section 4.1
and the Investors and the Selling Stockholder shall submit to such appraiser
(and each other) a brief written statement of their position regarding the
matter in dispute and supporting arguments, and each shall be given a period of
five (5) Business Days thereafter to submit to the other and to the appraiser a
written response to such written statement of the other. Such appraiser shall,
within fifteen (15) days of the date of its selection, resolve such dispute by
choosing either the position of the Selling Stockholder set forth in such
written statement so submitted by the Selling Stockholder or the position of the
Investors set forth in such written statement so submitted by the Investors,
whichever in the opinion of the appraiser, in its sole discretion, is more
consistent with the purposes and intent of this Agreement. Decisions made
pursuant to this Section 2.3(b) by the Majority Investors shall be binding on
all Investors. The determination of any dispute referred to in this Section
2.3(b) by agreement of the Selling Stockholder and the Investors or by an
appraiser appointed as provided in this Section 2.3(b) and Article IV shall be
final and conclusive for all purposes of this Article II. If, after the
completion of the procedures specified above in this Section 2.3(b), it is
finally determined that the Per-Share Offer Consideration stated in the Offer
Notice
17
should be increased, then references hereinafter in this Agreement to the
"Per-Share Offer Consideration" shall be such stated Per-Share Offer
Consideration as so increased. Promptly after any dispute referred to in this
Section 2.3(b) is resolved as provided in this Section, the Selling Stockholder
shall give each Investor a written notice describing such resolution and, if the
Per-Share Offer Consideration stated in the Offer Notice was increased, stating
such increased Per-Share Offer Consideration.
(c) If more than one Shareholder proposes to Dispose of Common Stock or
Rights to the same Prospective Purchaser as part of a single transaction or a
number of concurrent transactions on substantially the same terms and
conditions, then such Shareholders shall be considered a single Selling
Stockholder for purposes of the provisions of this Article II.
2.4. Tag-Along Rights of Investors Absent Control Change Transaction.
(a) In the case of any Proposed Restricted Disposition which is not a
Control Change Transaction, a Selling Stockholder shall be permitted to dispose
of Offered Shares to the Prospective Purchaser only after compliance with
Section 2.2 and Section 2.3, only pursuant to a binding purchase agreement
between that Selling Stockholder and the Prospective Purchaser and only if the
terms and conditions of this Section 2.4 are satisfied. As used herein, the term
"Electing Investors" includes each Investor who gives to the Selling
Stockholder, within ten (10) Business Days after the later of (i) the date such
Selling Stockholder's Offer Notice was given and (ii) if one or more valuations
pursuant to Section 2.3(a) are required or if one or more disputes referred to
in Section 2.3(b) arise, the first date as of which all such valuations have
been completed in accordance with Section 2.3(a) and all such disputes have been
resolved in accordance with Section 2.3(b) and all notices required under the
last sentence of either such Section have been given, written notice of such
Investor's election to sell to the Prospective Purchaser pursuant to this
Article II such portion (which may be up to and including 100%) of the shares of
Common Stock held by such Investor as shall be specified in such notice (such
Electing Investor's "Tag-Along Shares"). Neither the Selling Stockholder nor any
Electing Investor shall enter into a binding purchase agreement with the
Prospective Purchaser prior to the expiration of such period of ten (10)
Business Days. If, within forty-five (45) days after such period of ten (10)
Business Days elapses, the Selling Stockholder enters into a binding purchase
agreement with the Prospective Purchaser, the Prospective Purchaser shall comply
with whichever of the following clauses is applicable:
(i) If the aggregate number of Offered Shares plus the Tag-Along
Shares of all of the Electing Investors is less than or equal to the Offer
Number, then the binding purchase agreement between the Prospective
Purchaser and the Selling Stockholder must provide for the purchase of all
Offered Securities and the Prospective Purchaser must, at the same time as
or within fifteen (15) days after entering into such binding purchase
agreement, also enter into a binding purchase agreement with each of the
Electing Investors to purchase all of such Electing Investor's Tag-Along
Shares of that Class.
(ii) If the aggregate number of Offered Shares plus the Tag-Along
Shares of all Electing Investors is greater than the Offer Number, then
the Prospective Purchaser must, at the same time as or within fifteen (15)
days after entering into such binding purchase agreement with the Selling
Stockholder, also enter into a binding purchase agreement with each of the
Electing Investors, and such binding agreements, collectively, must
provide (A) for the purchase from the Selling Stockholder of a number of
shares of Common Stock which is equal to the product of the Offer Number
multiplied by a fraction the numerator of which is the number of
18
shares of Common Stock held by the Selling Stockholder and the denominator
of which is the aggregate number of shares of Common Stock held by the
Selling Stockholders and all Electing Investors and (B) for the purchase
from each Electing Investor of a number of shares of Common Stock which is
equal to the product of the Offer Number multiplied by a fraction the
numerator of which is the number of shares of Common Stock held by such
Electing Investor and the denominator of which is the aggregate number of
Common Stock held by all Electing Investors and the Selling Stockholders.
(b) Subject to Section 2.4(c) and Section 2.4(d), each binding purchase
agreement entered into with any Investor pursuant to this Section 2.4 must
provide for the purchase from such Investor to be on substantially the same
terms and conditions as those applicable to the Proposed Restricted Disposition
by the Selling Stockholder and specified in the Offer Notice (without discount
or other discrimination based on differences in the number or amount of Common
Stock held). Without limiting the generality of the immediately preceding
sentence, each Electing Investor must be given the same options and rights of
election, if any, as to the kind or amount of consideration to be received as
the Selling Stockholder and, in addition, if the Offer Notice stated that the
Offer Consideration for any Offered Shares is to be paid in whole or in part
with consideration other than cash, then the Prospective Purchaser shall be
obligated to offer each Electing Investor the option of receiving cash in lieu
of, and in an amount equal to the Fair Market Value (determined pursuant to
Section 2.3) of, the noncash consideration which otherwise would be payable to
such Electing Investor.
(c) The price per share to be received by each Electing Investor for
Tag-Along Shares to be sold by it upon exercise of the Tag-Along Right pursuant
to this Section 2.4 shall be the Per-Share Offer Consideration for the Offered
Shares.
(d) No Electing Investor shall be required to make any covenant or
commitment to the Prospective Purchaser, except, to the extent that the Selling
Stockholder makes the same covenant, a covenant to sell, on the terms and
conditions stated in this Article II, its Tag-Along Securities (or portion
thereof determined as provided above) at the closing thereunder (assuming
satisfaction of all conditions to such closing), but the sole recourse of the
Prospective Purchaser, the Selling Stockholder and the other Investors in the
event of a failure by any Electing Investor to comply with such covenant shall
be the right of the Prospective Purchaser to purchase from the Selling
Stockholder and the complying Electing Investors, pro rata based on their
respective participations in the transaction as determined pursuant to Section
2.4(a), additional Covered Securities equal in kind and number or other relevant
amount to the Tag- Along Securities which such Electing Investor failed to
tender or deliver at the closing; provided however, that if the Prospective
Purchaser shall incur in connection with closing of the purchase and sale of the
Tag-Along Securities any additional out-of-pocket costs or expenses solely as a
result of any such substitution of sellers, then such Electing Investor which
failed to tender or deliver its Tag-Along Securities at the closing shall
reimburse the Prospective Purchaser for such additional reasonable out-of-pocket
costs and expenses. The obligation of the Prospective Purchaser to purchase any
Tag-Along Securities of any Electing Investor shall not be subject to any
conditions which such Electing Investor could not reasonably be expected to
satisfy (even if any such condition is one applicable to the purchase by the
Prospective Purchaser from the Selling Stockholder). Any representations and
warranties made by an Electing Investor shall consist solely of such
representations and warranties relating to (i) such Electing Investor's title to
the Tag-Along Securities (or portion thereof) to be sold by such Electing
Investor, (ii) such Electing Investor's power and authority to consummate the
sale thereof to the Prospective Purchaser and (iii) other similar
representations and warranties as are customarily given by similarly situated
holders of securities similar to those being sold by such Electing Investor in a
similar transaction, but no Electing Investor shall be required to give any such
representations or warranties which the Selling Stockholder does not give. The
representations, warranties, covenants and agreements of the participating
Electing Investors shall be several and not joint and shall
19
terminate upon the earlier of (i) the expiration of any representation or
warranty made by the Selling Stockholder or the Prospective Purchaser and (ii)
one year after closing. The closings of the purchases from the participating
Electing Investors and the Selling Stockholder shall occur simultaneously and
shall be conditioned upon each other, and, unless the Electing Investors
otherwise agree, such closing must occur not later than the ninetieth (90th) day
after the expiration of the period of ten (10) Business Days referred to in the
second sentence of Section 2.4(a) (subject to extension pursuant to subsection
(g) of this Section 2.4).
(e) If (i) the Prospective Purchaser does not, within the time period
provided in the last sentence of Section 2.4(a), enter into a binding purchase
agreement meeting the requirements of this Section 2.4 with the Selling
Stockholder, (ii) such an agreement is entered into within such time period but
the Prospective Purchaser does not tender for signature by each of the Electing
Investors an executed purchase agreement meeting the requirements set forth
above, (iii) if such an agreement with the Selling Stockholder is entered into
and such purchase agreements are so tendered to the Electing Investors, in each
case on a timely basis, but the Prospective Purchaser does not tender on the
closing date with respect to the Proposed Restricted Disposition, or does not
tender on the terms and conditions provided in this Section 2.4, to the Selling
Stockholder and each of the Electing Investors the full purchase price for all
of the Covered Securities which the Selling Stockholder, the Electing Investors
are entitled to Dispose of pursuant to this Article II or (iv) if for any other
reason the closing under such purchase agreement with the Selling Stockholder or
any Electing Investor who signed the purchase agreement tendered to it does not
occur (other than by reason of a material breach or violation by such Electing
Investor of its representations, warranties, covenants, agreements or
obligations under its purchase agreement with the Prospective Purchaser that are
a condition to the closing thereunder) not later than the ninetieth (90th) day
after the expiration of the period of ten (10) Business Days referred to in the
second sentence of Section 2.4(a) (as such may be extended pursuant to
subsection (g) of this Section 2.4), then the Selling Stockholder shall not be
entitled to Dispose of any Offered Securities in such Proposed Restricted
Disposition, whether pursuant to the transaction in question or otherwise,
without again complying with this Article II. No purchase agreement with any
Prospective Purchaser entered into by the Selling Stockholder shall contain any
terms or provisions inconsistent with this Article II.
2.5. Tag-Along Rights of Investors in a Control Change Transaction.
(a) In the case of any Proposed Restricted Disposition which is a Control
Change Transaction, a Selling Stockholder shall be permitted to dispose of
Offered Shares to the Prospective Purchaser only after compliance with Section
2.2 and Section 2.3 and only if the Prospective Purchaser, in accordance with
this Section 2.5, makes an offer (the "Purchase Offer") to purchase all shares
of Common Stock held by the Investors and purchases all such shares tendered for
purchase pursuant to the Offer.
(b) The Prospective Purchaser shall deliver to each Investor, promptly
after the later of (i) the date such Selling Stockholder's Offer Notice was
given and (ii) if one or more valuations pursuant to Section 2.3(a) or Section
2.5(c) are required or if one or more disputes referred to in Section 2.3(b)
arise, the first date as of which all such valuations have been completed in
accordance with Section 2.3(a) and all such disputes have been resolved in
accordance with Section 2.3(b) and all notices required under the last sentence
of either such Section have been given, a written notice (the "Purchase Notice")
making and setting forth the terms of the Purchase Offer. The Purchase Notice
shall specify an expiration date (the "Expiration Date") for the Purchase Offer,
which Expiration Date shall be a Business Day not less than 30 days nor more
than 60 days after the date the Purchase Notice is given. The Offer Notice must
be accompanied by an appropriate form (a "Tender Notice") by which each Investor
may elect, subject to the withdrawal rights hereinafter described, to tender any
or all of the shares of capital stock of the Company held by such Investor for
purchase pursuant to the Purchase Offer. No tendering holder, however, shall be
required to deliver any of such holder's shares
20
that he intends to tender prior to the Purchase Date. The Purchase Notice must
state that, unless the Purchase Offer is terminated as provided below, the
Prospective Purchaser will accept for payment and pay for, in accordance with
the provisions of this Agreement, all of the outstanding shares of capital stock
of the Company tendered for purchase on or prior to the Expiration Date. Any
tendering holder may, at any time prior to the close of business on the
Expiration Date, withdraw (in whole or in part) any election previously made to
tender such holders' shares. For a withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Prospective
Purchaser on or before the Expiration Date, and the Purchase Notice must specify
one or more addresses and facsimile telephone numbers for such purpose, as well
as for the giving of other notices, elections and other communications regarding
the Purchase Offer. The Purchase Offer may not be made subject to any condition
other than acceptance on or prior to the Expiration Date as provided herein. The
Prospective Purchaser may terminate the Purchase Offer on or prior to the
Expiration Date, provided that written notice to such effect shall be given,
promptly and in any event not later than the second Business Day after the
Expiration Date, to all Persons to whom the Purchase Notice was required to be
given, but in the event of such termination the Selling Stockholder may not
consummate any Proposed Restricted Disposition unless or until the requirements
of this Article IV are again complied with in full. If the Purchase Offer is not
terminated as provided above, then the Prospective Purchaser shall be deemed to
have accepted and agreed to pay for, in accordance with this Agreement, all of
the shares of capital stock of the Company tendered for purchase as provided
above, and the Offeror shall, promptly after the Expiration Date, give each
tendering Investor reasonable and appropriate instructions for delivering all of
such Investor's tendered shares for purchase and payment. Any shares delivered
by or on behalf of any Investor in connection with a tender for purchase
pursuant to a Purchase Offer which, for any reason, are not paid for as provided
herein shall promptly be redelivered to such Investor (without limitation of any
other rights or remedies such holder may have by reason of such failure of
payment).
(c) The purchase price for any shares of capital stock tendered for
purchase by any Investor pursuant to any Purchase Offer shall be paid in cash
and shall be an amount per share of each class or series of capital stock of the
Company so tendered equal to the highest of the following:
(i) if such class or series is the Common Stock, the Per-Share Offer
Consideration;
(ii) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
in order to acquire any shares of such class or series beneficially owned
by the Prospective Purchaser or any of its Affiliates which were acquired
within the two-year period immediately prior to the date the Purchase
Notice is given, appropriately adjusted to reflect any stock split, stock
dividend, reverse stock split or similar event which may have occurred
after the date such price was paid;
(iii) if applicable, the highest amount per share to which the
holders of shares of such class or series are entitled in the event of any
mandatory redemption of such shares (whether or not any of the conditions
to any such redemption have been satisfied); and
(iv) the Fair Market Value per share of such class or series on the
date the Purchase Notice is given.
The Fair Market Value per share of any class or series of capital stock of the
Company shall be determined as follows: Promptly after the Purchase Notice is
given, the Investor Representative and the Prospective Purchaser shall attempt
in good faith to arrive at unanimous agreement on such Fair Market Value. If
they are unable to so agree within ten days, each shall select one appraiser
satisfying the requirements of Section
21
4.1 and each shall submit to such appraiser (and each other) a brief written
statement of their respective positions regarding the matter in dispute and
supporting arguments, and each shall be given a period of five (5) Business Days
thereafter to submit to the other and to the appraiser a written response to
such written statement of the other. Such appraiser shall, within fifteen (15)
days of the date of its selection, resolve such dispute by choosing either the
position of the Investor Representative set forth in such written statement so
submitted by him or the position of the Prospective Purchaser set forth in such
written statement so submitted by the Prospective Purchaser, whichever in the
opinion of the appraiser, in its sole discretion, is more accurate. Decisions
with respect to such determination made pursuant to this Section 2.5(c) by the
Investor Representative shall be binding on all Investors. The determination of
the Fair Market Value of any such noncash consideration by agreement of the
Prospective Purchaser and the Investor Representative or by the appraiser
appointed as provided in this Section 2.5(c) and Article IV shall be final and
conclusive for all purposes of this Section 2.5.
(d) If the Prospective Purchaser does not comply with this Section 2.5 on
a timely basis, then the Selling Stockholder shall not be entitled to Dispose of
any Offered Shares in the Proposed Restricted Disposition in question or
otherwise without again complying with this Article II.
2.6. Election by Investor of Securities to be Sold. In any case where any
Investor has a right pursuant to this Article II to sell Common Stock which is
issuable to such Investor upon exercise of any Right, such Investor may elect,
in its sole discretion, to either exercise such Right and sell the Common Stock
issued upon such exercise or to sell such Right. If the Investor elects to sell
such Right, then the aggregate purchase price payable for such Right shall be
the aggregate purchase price which would be payable for the shares of Common
Stock issuable upon exercise of such Right if such Investor had elected to
exercise such Right and sell such shares, reduced by the aggregate amount of
cash which such Investor would have had to pay to the Company in order to
exercise such Right.
2.7. Multiple Classes of Voting Equity. The Company covenants to and
agrees with each Investor that, without the prior approval of the Investor
Representative (in addition to any other approvals required by law, the Series B
Certificate of Designation or the Company's Certificate of Incorporation) it
will not authorize, create (through any amendment of its Certificate of
Incorporation, any designation of authorized but undesignated shares, any
recapitalization or other change of the outstanding shares of Common Stock or
otherwise) or issue any class, series or other kind of Voting Equity other than
the Common Stock, and each Shareholder covenants to and agrees with each
Investor that it shall not acquire any such Voting Equity (or any options,
warrants, convertible securities or other rights to acquire any such Voting
Equity) unless, prior thereto, the Shareholders and the Company enter into an
agreement with the Investors, in form and substance reasonably satisfactory to
the Majority Investors, pursuant to which each Shareholder grants to the
Investors rights to participate in any Disposition or Proposed Disposition of
any class, series or other kind of Voting Equity (including the Common Stock),
notwithstanding that one or more Investors may not hold Voting Equity of that
particular class, series or kind, which are as nearly equivalent as practicable
to the provisions of Article II. In addition, the Company covenants to and
agrees with each Investor that, without the prior approval of the Investor
Representative (in addition to any other approvals required by law, the Series B
Certificate of Designation or the Company's Certificate of Incorporation) it
will not consummate, and each Shareholder covenants to and agrees with each
Investor that it shall not vote for, approve or otherwise authorize the Company
to consummate any covered business combination (as defined below) unless the
successor or acquiring corporation and the Shareholders enter into an agreement
with the Investors, in form and substance reasonably satisfactory to the
Majority Investors, pursuant to which each Shareholder grants to the Investors
rights to participate in any disposition or proposed disposition of any class,
series or other kind of common stock or other voting equity of such successor or
acquiring corporation,
22
notwithstanding that one or more Investors may not hold voting equity of that
particular class, series or kind, which are as nearly equivalent as practicable
to the provisions of Article II. For purposes of this Section, a "covered
business combination" is any consolidation, merger, binding share exchange or
reorganization to which the Company is a party or any sale, conveyance, transfer
or lease to another corporation of the properties of the Company as an entirety
or substantially as an entirety if as a result of such transaction the
outstanding Common Stock is exchanged for or converted into common stock or
other voting equity of a successor or acquiring corporation and if immediately
after consummation of such transaction the Shareholders collectively are the
Beneficial Owners of at least 50% of the combined voting power of all voting
equity of such successor or acquiring corporation. References to "voting equity"
of any such successor or acquiring corporation are intended to be interpreted
consistently with the definition of "Voting Equity" in Section 1.1.
2.8. Miscellaneous. No purchase or other agreement with any Prospective
Purchaser entered into by the Selling Stockholder shall contain any terms or
provisions inconsistent with this Article II. If any sale of shares of Common
Stock or other capital stock or securities to any Prospective Purchaser
requires, as a condition to the legal and valid transfer thereof to such
Prospective Purchaser, any consent, approval, waiver, or authorization of,
notice to or filing with, any Governmental Authority or the expiration of any
waiting period imposed by applicable law, then the date of such sale shall be
extended for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization, to give such notice or make such
filing and to obtain the termination of each such waiting period at the earliest
reasonably practicable time are diligently being made; provided, however, that
in no event shall the extension of any such closing date pursuant to this
Section 2.4(g) exceed ninety (90) days. Each party shall (and shall cause such
party's controlled Affiliates to) reasonably cooperate with the other parties in
obtaining any such consent, approval, waiver, or authorization, to give any such
notice or make any such filing and in obtaining the termination of any such
waiting period at the earliest practicable time.
III
CORPORATE GOVERNANCE; CERTAIN REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1. Board Representation. Each Stockholder severally covenants and agrees
that, such Stockholder shall vote, or cause to be voted, all Voting Equity from
time to time owned or controlled by such Stockholder and which such Stockholder
is entitled to vote for such purpose, as of the record date of any action of the
shareholders of the Company, whether by consent or at a meeting, at which
members of the Board of Directors are to be elected or to establish the number
of Directors of the Company, in favor of a Board of Directors comprised of seven
Directors designated as follows:
(a) Subject to Section 3.2 below, two Directors designated by the
Shareholder Representative.
(b) Subject to Section 3.2 below, four Disinterested Outside
Directors who either (A) represent a significant financial interest in the
Company or (B) have strategic expertise or a position relative to the
business of the Company which Disinterested Outside Directors are
nominated by the Shareholder Representative .
(c) The remaining Director of the Company (the "Series B Director")
elected by the holders of the Series B Preferred Stock as set forth in the
Series B Certificate of Designation. The
23
provisions of the Series B Certificate of Designation shall govern to
designation, election and removal of the Series B Director and filling of
any vacancy in the office of the Series B Director. The provisions of
Section 3.2, Section 3.3, Section 3.4, Section 3.5 and Section 3.6 shall
apply only to the other six Directors comprisingthe Board of Directors.
3.2. Termination of Right to Designate Directors. The right to designate
any Director pursuant to Section 3.1(a) and Section 3.1(b) and the designated
size of the Board set forth in the first sentence of Section 3.1 shall terminate
on the earlier of the date on which (i) all of the shares of Series B Preferred
Stock held by the Investors are converted into Common Stock of the Company in
accordance with the terms of the Series B Certificate of Designation or (ii) the
Investors no longer hold any shares of Series B Preferred Stock.
3.3. Term of Appointment. Subject to the earlier death, resignation or
removal of any Director designated hereunder, each Director elected or appointed
at any time as provided herein shall serve until the next annual meeting of the
Company's stockholders and until his or her successor shall have been elected as
provided herein or as provided in the Series B Certificate of Designation, as
the case may be.
3.4. Filling of Vacancy. In the event of any vacancy in the Board of
Directors of the Company occurring for any reason, each Stockholder severally
covenants and agrees to vote, or cause to be voted, all Voting Equity from time
to time owned or controlled by such Stockholder and which such Stockholder is
entitled to vote for such purpose to fill such vacancy in the manner set forth
in Section 3.1.
3.5. Intentionally omitted.
3.6. Consistent Bylaw and Charter Provisions. The Certificate of
Incorporation and the Bylaws of the Company shall at all times contain
provisions consistent with the provisions, purposes and intent of this Article
III.
3.7. Voting on Certain Matters. Each Shareholder agrees with and covenants
to each Investor that if any affirmative vote, consent, approval or other action
by any of the Company's stockholders, as such, is required in order to
authorize, or otherwise in connection with, the Company's observance of any of
the terms of, or the performance by the Company of any of the Company's
agreements, covenants, obligations or commitments under or with respect to any
Transaction Document, such Shareholder shall, in its capacity as a stockholder
of the Company, give such affirmative vote, consent or approval and take such
other action, including any such vote, consent, approval or other action
contemplated by this Article III or pursuant to the Series B Certificate of
Designation. Whenever any action is required to be taken by a Shareholder
pursuant to this Agreement, such Shareholder agrees to take all steps reasonably
necessary to implement such action including, without limitation, voting at any
meeting of stockholders all shares of capital stock held by such Shareholder in
favor of such action, and/or executing or causing to be executed, as promptly as
practicable, a consent in writing to the taking of such action. Any agreement by
a Shareholder to vote capital stock held by such Shareholder in a certain manner
shall be deemed, in each instance, to include an agreement by such Shareholder
to use its reasonable efforts to take all actions necessary to call, or to cause
the Company and the appropriate officers and Directors of the Company to call,
as promptly as practicable, a special or annual meeting of stockholders to
consider such action (and such Shareholder shall thereafter attend any such
annual or special meeting in person or by proxy), or to cause a written consent
to the taking of such action to be circulated among the stockholders of the
Company (and to execute and deliver any such consent to such action). Each
Shareholder further agrees to vote all of its shares of capital stock entitled
to vote, and to take all other actions necessary, to ensure that the Certificate
of Incorporation and Bylaws of the Company facilitate and do not at any time
prohibit the actions contemplated by this Agreement or any other Transaction
24
Document.
3.8. Restrictive Covenants.
(a) Other Consent Rights. Without the affirmative consent of the Majority
Investors:
(i) the Company will not amend, alter or repeal (whether by
amendment, merger, consolidation or otherwise) the Series B Certificate of
Designation;
(ii) the Company will not amend, alter or repeal (whether by
amendment, merger or consolidation or otherwise) any of the provisions of
its Certificate of Incorporation or By-laws, or any resolution of the
Board of Directors or any other instrument establishing and designating
the Series A Preferred Stock or any other capital stock of the Company now
or hereafter exiting and determining the relative rights, privileges,
powers or preferences thereof;
(iii) the Company will not (A) create, designate or issue any Senior
Stock, (B) create or designate any Parity Stock, (C) issue any shares of
Series B Preferred Stock other than pursuant to the Purchase Agreement or
Other Purchase Agreements or (D) issue or sell any shares of Common Stock
or any other equity interests of the Company or any rights to acquire or
securities convertible into any Common Stock or other equity interests of
the Company, whether upon exchange, conversion, exercise of purchase
rights or otherwise, except in the case of this subclause (D) for grants
of Employee Options approved by the Compensation Committee, the exercise
of existing Employee Options or the conversion of any share or shares of
Series A Preferred Stock or Series B Preferred Stock in accordance with
the terms thereof;
(iv) the Company will not, and will cause each Subsidiary not to,
(A) enter into any agreement with any Person which, in the absence of a
default thereunder, would prevent the Company from paying dividends or
making redemption payments on the Series B Preferred Stock in accordance
with the terms of the Series B Certificate of Designation or from fully
performing on a timely basis any of its obligations with respect to the
Series B Preferred Stock or, or would condition or otherwise limit or
restrict the ability of any Subsidiary to (1) pay dividends or make any
other distributions permitted by applicable law to the Company or any
other Subsidiary; (2) pay any Debt owed to the Company or any other
Subsidiary; (3) make loans or advances to the Company or any other
Subsidiary; or (4) transfer any of its property or assets to the Company
or any other Subsidiary; or (B) otherwise create or suffer to become
effective any consensual arrangement which would have any effect referred
to in subclause (A) of this clause (iv);
(v) the Company will not, and will cause each Subsidiary not to,
consolidate with, or merge with or into, any Person or enter into a
binding share exchange or similar transaction with any Person other than
(A) the merger of a Wholly Owned Subsidiary into the Company, with the
Company being the surviving Person or (B) a merger or consolidation
exclusively between Wholly Owned Subsidiaries;
(vi) the Company will not, and will cause each Subsidiary not to,
sell, transfer, convey, mortgage, pledge or otherwise dispose of or
encumber any of their respective properties (including any property
consisting of an equity interest or other investment or interest in any
Subsidiary), except for (A) transfers of assets by a Wholly Owned
Subsidiary to the Company or another Wholly Owned Subsidiary, (B) sales of
property (including sales of markets and options to purchase markets) in
the
25
ordinary course of business, consistent with past practices, in arm's
length transactions with non-affiliates, (C) encumbrances of assets
(including sales of markets and options to purchase markets) on customary
terms and consistent with past practices to secure indebtedness permitted
by clause (viii) of this sentence, and (D) the sale of property not
permitted by subclause (A), (B) or (C) of this clause (vi) if such sale is
to a non-Affiliate of the Corporation, is at a price not less than Fair
Market Value and the aggregate sale price for such sale and all other
sales (whether or not related) during any single fiscal year made in
reliance on this subclause (D) does not exceed $100,000;
(vii) the Company will not, and will cause each Subsidiary not to
dissolve, liquidate or wind-up its business or affairs or otherwise
terminate or permit the termination of its legal existence, provided that
the Company shall be permitted to cause Wholly Owned Subsidiary to
dissolve, liquidate or wind-up its business or affairs or otherwise
terminate or permit the termination of its legal existence if such act
would not violate clause (vi) hereof or otherwise require the approval of
the Majority Investors pursuant to any other provision of this Section
3.8.
(viii) the Company will not, and will cause each Subsidiary not to,
directly or indirectly Incur any Debt if (A) the Combined Debt to
Annualized Operating Cash Flow Ratio is or would (after giving effect to
such Incurrence) be greater than 3 to 1 and (B) the aggregate amount of
Debt of the Company and its Subsidiaries, determined on a Combined Basis,
is in excess of, or would (after giving effect to such Incurrence) exceed,
$5,000,000;
(ix) the Company will not, and will cause each Subsidiary not to,
declare or pay any dividend on, or declare or make any distribution to
holders of, or purchase, redeem or otherwise acquire for cash, property,
securities or any other form of property any capital stock or other equity
interests of the Company or any Subsidiary except as provided hereunder,
other than dividends and distributions by a Wholly Owned Subsidiary to the
Company or another Wholly Owned Subsidiary;
(x) the Company will not, and will cause each subsidiary not to,
make investments, purchase or otherwise acquire any property for any
consideration, except for (A) transfers of assets by a Wholly Owned
Subsidiary to the Company or another Wholly Owned Subsidiary, (B)
purchases of material property in the ordinary course of business,
consistent with past practices, in arm's length transactions with
non-Affiliates, and (C) purchases of property not permitted by subclause
(A) or (B) of this clause (x) if such purchase is from a non-Affiliate, is
at a price not greater than Fair Market Value and the aggregate purchase
or other acquisition price for such purchase and all other purchases
(whether or not related) during any single fiscal year made in reliance on
this subclause (C) does not exceed $100,000;
(xi) except as set forth on Schedule 3.8 hereto, the Company will
not, and will cause each Subsidiary not to, enter into any contract or
agreement with or for the benefit of, make any loan or advance to or
investment in, obtain any loan, advance or other extension of credit from,
sell, assign or otherwise transfer any assets to, purchase or otherwise
acquire any assets from, guarantee, assume or otherwise become liable for
any Debt or other liabilities or obligations of or engage in any other
transaction with or for the benefit of any Restricted Person, except
payment or provision of salaries and other employee compensation to
officers or directors of the Company or such Subsidiary commensurate with
compensation levels and deferred compensation amounts in effect on the
date of and disclosed pursuant to the Purchase Agreement or approved by
the Compensation Committee or pursuant to any employment agreement
disclosed pursuant to the Purchase Agreement or approved by the
Compensation Committee;
26
(xii) the Company will cause each Subsidiary not to issue or sell
any of its equity interests to any Person other than (A) issuances and
sales by a Wholly Owned Subsidiary to the Company or another Wholly Owned
Subsidiary or (B) issuances (otherwise than for value) by a Subsidiary
which is not a Wholly Owned Subsidiary to the Company or a Wholly Owned
Subsidiary;
(xiii) the Company will not, and will cause each Subsidiary not to,
establish any new employee benefit plans or modify any existing employee
benefit plan;
(xiv) the Company will not, and will cause each Subsidiary not to
dissolve, liquidate or wind-up its business or affairs or otherwise
terminate or permit the termination of its legal existence, provided that
the Company shall be permitted to cause any Wholly Owned Subsidiary to
dissolve, liquidate or wind-up its business or affairs or otherwise
terminate or permit the termination of its legal existence if such act
would not violate Section 3.8(a) hereof or otherwise require the approval
of the Majority Investors pursuant to any other provision of this Section
3.8(a);
(xv) the Company will not, and will cause each Subsidiary not to,
enter into or engage in, directly or indirectly, any line of business
other than the business of electronic out-of-home media; and
(xvi) the Company will not, and will cause each Subsidiary not to,
amend, abandon, terminate, waive or release any rights, or exercise any
rights not in the ordinary course of business, under any certificate of
incorporation, by-laws, partnership or joint venture agreement or other
charter, organizational, governing or constituent documents of any
Subsidiary where the result is any fundamental change in the
organizational or ownership structure of such Subsidiary or would involve
total payments or costs or a total value in excess of $500,000.
To the extent that the Company proposes to take any action or consummate any
transaction of any kind specified in any clause of the immediately preceding
sentence in order to redeem, or in connection with, redemption of all
outstanding shares of the Series B Preferred Stock required or permitted by
Section 6 of the Series B Certificate of Designation, the consent or approval of
the Majority Holder shall not be required to the extent that the Company
provides assurances, reasonably satisfactory to the Majority Investors, that
such action or transaction will not be taken or consummated unless such
redemption is first or simultaneously effected in accordance with all applicable
provisions of Section 6 of the Series B Certificate of Designation (including
the requirements of Section 6(f) of the Series B Certificate of Designation with
respect to the indefeasible deposit of the Redemption Price (as defined in the
Series B Certificate of Designation)) and all applicable requirements of law and
that the Company will not Incur any liability or obligation in the event that
such action or transaction is abandoned or any condition to the taking or
consummation thereof (including the redemption of the Series B Shares in
accordance with the terms of the Series B Certificate of Designation and as
required by this sentence) is not satisfied.
(b) Delivery of Certificate. In each instance in which the Company or any
of its Subsidiaries proposes to Incur Debt otherwise than with the approval of
the Majority Investors, no later than three Business Days prior to the proposed
date for such Incurrence, the Company shall deliver to each Investor a
certificate, signed by the Chief Financial Officer of the Company, setting forth
in reasonable detail the calculations and information necessary to establish
that such Incurrence would not require such approval pursuant to this Section
3.8.
27
(c) For purposes of this Section 3.8, the Majority Investors shall have 20
days from the later of (i) the date Company notifies the Investors of any of the
events or circumstances set forth in Section 3.8(a) or Section 3.8(b) or (ii)
the date of receipt by the Investors of all information reasonably requested by
the Investors in connection with such notice, to give their consent pursuant to
this Section 3.8. After the expiration of such 20 day period, such consent by
the Majority Investors shall be deemed to be given.
3.9. Reports; Access.
(a) The Company agrees to furnish each Investor, within 120 days after the
end of each fiscal year of the Company within 45 days after the end of each
Fiscal Quarter and within 30 days after the end of each month, an annual,
quarterly or monthly, as the case may be, consolidated balance sheet and related
statements of income and cash flows for the Company and its consolidated
Subsidiaries, certified (in the case of each annual and each quarterly balance
sheet and statement of income), by the chief financial officer of the Company as
having been prepared in accordance with generally accepted accounting principles
consistently applied and as fairly presenting the consolidated financial
condition and results of operations of the Company and such Subsidiaries as of
the date and for the periods covered thereby (and, in the case of such annual
financial statements, accompanied by an auditor's report, without qualification
as to the scope of the audit, of a nationally recognized independent accounting
firm), and any other information or reports furnished in writing to the holders
of the Company's Junior Stock, Parity Stock or Senior Stock, generally,
simultaneously with their delivery to such holders. Such financial statements
for any period shall be accompanied by a certificate, signed by the Chief
Financial Officer of the Company, setting forth in reasonable detail the
calculations of the Combined Debt to Annualized Operating Cash Flow Ratio as of
the end of such period. Such annual financial statements shall be accompanied by
a report of such independent certified public accountants confirming any
adjustments made pursuant to GAAP during the fiscal year covered by such
financial statements. The Corporation also shall furnish to each Investor any
other information concerning the business, affairs or condition of the Company
or any Subsidiary as such holder at any time or from time to time may reasonably
request for the purpose of securing or exercising the rights and benefits
intended to be conferred by this resolution or to ascertain whether the Company
is in compliance herewith.
(b) The Company will file on or before the required date all regular or
periodic reports and statements required to be filed by it with the Commission,
and will deliver to the Investor Representative, promptly upon filing, a copy of
each such report and statement and of each registration statement, prospectus or
written communication (other than transmittal letters) filed by the Company with
(i) the Commission, (ii) any securities exchange on which shares of Common Stock
are listed or (iii) the National Association of Securities Dealers, Inc.
(c) The Company shall cooperate with each Investor in supplying such
information as may be reasonably necessary for such Investor or holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from registration under the Securities Act for the sale or other transfer of any
securities of the Company held by such Investor. Without limiting the generality
of the immediately preceding sentence, each holder and prospective purchaser of
any such securities designated by such Investor will have the right to obtain
from the Corporation upon request by such holders or prospective purchasers,
during any period in which the Corporation is not subject to Section 13 or 15(d)
of the Exchange Act, the information required by paragraph d(4)(i) of Rule 144A
in connection with any transfer or proposed transfer of any such securities.
(d) At any reasonable time and at reasonable intervals, the Company shall
permit any Investor
28
who holds 5% or more of the outstanding shares of Series B Preferred Stock or
the outstanding shares of such class or series of Conversion Stock (as defined
in the Series B Certificate of Designation) and any authorized agent or
representative thereof to (i) visit the properties of the Company and any of its
subsidiaries and (ii) discuss the business affairs, finances and accounts of the
Company and any of its subsidiaries with any of their respective officers or
directors.
(e) Attendance at Stockholder Meetings. Each Investor will be entitled to
receive notice of and to attend all meetings of stockholders of the Company,
irrespective of whether such Investor shall be entitled to vote with respect to
any of the matters to be considered by the stockholders at such meeting. Notice
of stockholders' meetings shall be given to each Investor in the same manner as
such notice is required to be given to the stockholders entitled to vote at such
meeting, in accordance with the By-laws of the Company and applicable law.
3.10. Certain Representations and Covenants of Each Shareholder. Each
Shareholder, individually and not jointly, represents and warrants to and
covenants with each Investor as follows:
(a) Other than pursuant to the other Transaction Documents, such
Shareholder is not a party to or bound by, and the Common Stock and Rights held
by such Shareholder are not otherwise subject to, any Contract, Requirement of
Law or Judgment, or (in the case of any Shareholder which is an Entity) subject
to any restriction of any nature under any of its charter or other
organizational or constituent documents, which does or may prevent, impede or
delay the due and punctual performance by such Shareholder of its covenants,
agreements, obligations and commitments contained in this Agreement, and such
Shareholder will not enter into any such Contract nor take any other voluntary
action or voluntarily omit to take any action which would have any such effect.
(b) Such Shareholder is the sole record and beneficial owner of the shares
of Common Stock, Rights and other securities of the Company indicated on
Schedule II hereto and owns the same free and clear of all liens, claims,
encumbrances and restrictions of any nature whatsoever (including any claim,
right or interest of any spouse or former spouse under any community property or
similar law), other than any created by this Agreement or any other Transaction
Document. Except for this Agreement, there is no option, warrant, right, call,
proxy, or Contract that directly or indirectly calls for or might call for the
sale, pledge or other Restricted Disposition of any of such Common Stock, Rights
or other securities, any interest therein or any rights with respect thereto,
relates to the voting, Restricted Disposition or control of any thereof or
obligates or may obligate such Shareholder to grant, offer or enter into any of
the foregoing.
3.11. Regulatory Approvals; Hart-Scott-Rodino Act. Each of the Company and
the Shareholders, severally and not jointly, covenants and agrees with each
Investor that it shall, at its own expense, reasonably cooperate with each
Investor and each Prospective Purchaser in making any filings and obtaining any
consents, approvals, permits or authorizations required to be made or obtained
under any federal, state or foreign law or regulation and any consents,
approvals or waivers required to be obtained under loan agreements or other
Contracts material to the respective businesses of the Company and its
Subsidiaries in connection with any exercise of any Tag-Along Right pursuant to
Article II. Without limiting the generality of the foregoing, if any Investor is
advised by its own legal counsel that its intended exercise of any Tag-Along
Right pursuant to Article II would or might be subject to the HSR Act, each of
the Company and the Shareholders, with reasonable cooperation from such Investor
shall promptly comply with any applicable requirements under the HSR Act
relating to filing and furnishing of information (the "HSR Report") to the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice, such actions to include, without limitation, (i) filing
the HSR Report and taking all other action required by the HSR Act,
29
(ii) coordinating with respect to the filing of the HSR Reports of such
Investor, the Company and each other participant in the transaction required to
file an HSR Report, including exchanging drafts thereof, so as to present all
required HSR Reports to the FTC and the Department of Justice at the time
selected by such Investor and to avoid substantial errors or inconsistencies
among such HSR Reports in the description of the transaction, (iii) complying
with any additional request for documents or information made by the FTC or the
Department of Justice or by a court and assisting the other participants in the
transaction to so comply and (iv) causing all Persons which are part of the same
"person" (as defined for purposes of the HSR Act) as the Company or such
Shareholder (as the case may be) to cooperate and assist in such filing and
compliance. If any Investor is advised by its own legal counsel that its
intended exercise of any Tag-Along Right pursuant to Article II would or might
be subject to any other law, rule or regulation which requires any filing with
or review or approval by any Governmental Authority or agency, each of the
Company and the Shareholders shall promptly comply with any requirements of such
law, rule or regulation applicable to it and shall cooperate with such Investor
in such Person's efforts to comply with the requirements of such law, rule or
regulation applicable to it on a timely basis. Each party shall bear and pay any
costs or expenses that it incurs in complying with this Section 3.11, except
that the Company shall pay all filing fees under the HSR Act.
3.12. Continued Validity. Any Investor who is a holder of Conversion
Securities (as defined in the Series B Certificate of Designation) issued upon
the conversion of any shares of Series B Preferred Stock (other than an Investor
who acquires such Conversion Securities after the same have been publicly sold
pursuant to a registration statement under the Securities Act or sold pursuant
to Rule 144 thereunder) shall continue to be entitled with respect to such
Conversion Securities to all rights to which such holder would have been
entitled as an Investor under this Article III. The Company will, upon the
request of any such Investor, acknowledge in writing, in form reasonably
satisfactory to such Investor, the Company's continuing obligation to afford to
such Investor all such rights; provided, however, that if such holder shall fail
to make any such request or the Company shall fail to comply with any such
request made, such failure shall not affect the continuing obligation of the
Company to afford to such Investor all of such rights.
3.13. Audit and Compensation Committees. Unless the Majority Investors
otherwise agree, the Board of Directors shall have an audit committee (the
"Audit Committee"), a compensation committee (the "Compensation Committee") and
a valuation committee (the "Valuation Committee"), each of which shall have
three members one of whom shall be the Series B Director, at least one other of
whom shall be a Disinterested Outside Director and, so long as the directors of
the Company include directors designated pursuant to Section 3.1(a), one of the
directors designated pursuant to Section 3.1(a). The Audit Committee will have
the authority and responsibility for the selection, engagement or discharge of
independent auditors, reviewing with the independent auditors the plan and
results of the auditing engagement, reviewing the Company's systems of internal
accounting controls, directing investigations in matters within the scope of its
functions and performing any and all other such functions customarily performed
by audit committees of public companies. The Compensation Committee will have
the authority and responsibility for establishing and administering the stock,
incentive and other employee benefit plans of the Company, establishing and
changing the compensation of executive officers, approving or amending existing
and proposed employment agreements between the Company and its executive
officers and performing any and all other such functions customarily performed
by compensation committees of public companies. The Valuation Committee shall
have the authority and responsibilities as described in the Series B Certificate
of Designation. The requirement of the Board of Directors to designate each of
the Audit Committee, the Compensation Committee and the Valuation Committee as
set forth in this Section 3.13 shall terminate on the earlier of the date on
which (i) all of the shares of Series B Preferred Stock held by the Investors
are converted into Common Stock of the Company in accordance with the terms of
the Series B Certificate of Designation or (ii) the Investors no longer hold any
shares of Series B Preferred Stock.
30
IV
APPRAISAL PROCEDURES
4.1. Appraisals of Fair Market Value. Any appraiser appointed pursuant to
Section 2.3 or Section 2.5 shall be a nationally recognized appraiser or
investment banking firm which has substantial experience in making appraisals
similar to that being made, which is not directly or indirectly affiliated with
the Company or any other Person who is a party to or otherwise interested in the
event resulting in the need for such appraisal and which has no interest (other
than the receipt of customary fees) in such event. The fees and expenses of any
appraisers appointed pursuant to Article II shall be borne by the Person or
Persons by whom or on whose behalf the written statement not chosen by such
appraiser was submitted and if that statement was submitted by or on behalf of
the Investors, then the fees and expenses of such appraiser shall be borne by
the Investors pro rata based upon the number of shares of Common Stock held by
each.
4.2. Determinations Generally. Unless otherwise expressly provided herein,
all decisions and determinations required or permitted to be made hereunder by
any Investor, by the Majority Investors, by any Shareholder or by the Majority
Shareholders (including any decision as to whether to give any consent or
approval) shall be made by such Person or Persons in its or their sole
discretion. Any notice, consent, approval or other decision by or on behalf of
the Majority Investors or the Majority Shareholders required or permitted by
this Agreement shall be effective if expressed in a writing which is either (i)
executed by the Majority Investors or the Majority Shareholders, as the case may
be, or (ii) executed by the Investor Representative or the Shareholder
Representative, as the case may be, in which case the other parties may assume
that the Investor Representative or the Shareholder Representative, as the case
may be, has the power and authority to do so and may rely conclusively on such
writing as expressing the action of the Majority Investors or the Majority
Shareholders, as the case may be. No Investor Representative or former Investor
Representative shall be liable, in damages or otherwise, to the Company or any
of its Affiliates, stockholders, Directors, officers, employees or agents, to
any Stockholder, to any other Person except the Investors, for or by reason of
any act or failure to act in its capacity as Investor Representative. No
Investor Representative or former Investor Representative shall be liable, in
damages or otherwise, to any Investor for any act or failure to act in its
capacity as Investor Representative unless such act or failure to act was not
within the scope of the authority or discretion conferred on the Investor
Representative by this Agreement and constituted willful misconduct, and each
Investor Representative and former Investor Representative shall in any event be
fully protected with respect to any act or failure to act authorized, approved
or ratified by the Majority Investors. No Shareholder Representative or former
Shareholder Representative shall be liable in damages, or otherwise to the
Company or any of its Affiliates, stockholders, Directors, officers, employees
or agents, to any Investor or to any other Person except the Shareholders, for
or by reason of any act or failure to act in its capacity as Shareholder
Representative. No Shareholder Representative or former Shareholder
Representative shall be liable in damages, or otherwise to any Shareholder for
any act or failure to act in its capacity as Shareholder Representative unless
such act or failure to act was not within the scope of the authority or
discretion conferred on the Shareholder Representative by this Agreement and
constituted willful misconduct, and each Shareholder Representative and former
Shareholder Representative shall in any event be fully protected with respect to
any act or failure to act authorized, approved or ratified by the Majority
Shareholders.
V
31
MISCELLANEOUS
5.1. Legends.
(a) Each certificate or other instrument representing any Common Stock or
Rights held at any time or from time to time by any Shareholder shall bear the
following legend, in addition to any other legend required under applicable law
or by contract:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT, DATED SEPTEMBER 25,
1996, BY AND AMONG THE COMPANY AND THE STOCKHOLDERS OF THE COMPANY
SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. THE SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN IS
RESTRICTED BY SUCH AGREEMENT AND ANY SUCH SALE, PLEDGE, TRANSFER OR OTHER
DISPOSITION MAY BE MADE ONLY UPON COMPLIANCE THEREWITH. SUCH AGREEMENT
ALSO CONTAINS PROVISIONS RELATING TO THE EXERCISE OF CERTAIN VOTING AND
CONSENT RIGHTS, IF ANY, OF THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE."
(b) The Company shall not, and shall direct each registrar and transfer
agent of the Company not to, register any Disposition of any Common Stock or
Rights by any Shareholder which is not made in compliance with Article II,
Section 5.2 and the other applicable provisions of this Agreement.
5.2. Binding Effect; Assignability.
(a) This Agreement and all of the provisions hereof including the exhibits
hereto shall be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns, executors, administrators and heirs;
provided that, except as otherwise specifically permitted or required pursuant
to this Agreement, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by the Company or any Shareholder
without the prior written consent of the Majority Investors.
5.3. Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers of or consents to departures from the provisions hereof may not be
given unless approved in writing by the Company, the Majority Investors and the
Majority Shareholders.
5.4. Governing Law. This Agreement and the validity, interpretation and
performance of the terms and provisions hereof shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the provisions thereof relating to choice or conflict of laws, except to the
extent that the laws of the jurisdiction of incorporation of the Company shall
be mandatorily applicable.
5.5. Interpretation. The headings of the articles and 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.
5.6. Notices. All notices, requests, consents, demands, elections and
other communications required or permitted hereunder shall be in writing and
shall be given to the intended recipient at: (i) in the
32
case of any Investor or any Shareholder, to the Investor Representative or the
Shareholder Representative, as the case may be, at such address as such Investor
Representative or Shareholder Representative, as the case may be, may from time
to time specify by written notice to the Company; and (ii) in the case of the
Company, to the Company at its principal office at 9531 West 78th Street,
Minneapolis, Minnesota, 55344, or at such changed address as the Company may
from time to time specify in writing to the Investor Representative and the
Shareholder Representative. Any such notice, request, consent, demand, election
or other communication shall be deemed to have been duly given if personally
delivered or sent by registered or certified mail, return receipt requested,
Express Mail, Federal Express or similar overnight delivery service for next
Business Day delivery or by telegram, telex or facsimile transmission and will
be deemed given, unless earlier received: (1) if sent by certified or registered
mail, return receipt requested, five calendar days after being deposited in the
United States mail, postage prepaid; (2) if sent by Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery,
the next Business Day after being entrusted to such service, with delivery
charges prepaid or charged to the sender's account; (3) if sent by telegram or
telex or facsimile transmission, on the date sent; and (4) if delivered by hand,
on the date of delivery.
5.7. No Implied Waivers. 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 of
compliance with any representations, warranties, covenants or agreements
contained herein or made pursuant hereto. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
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.
5.8. Entire Agreement. This Agreement (together with the Schedules hereto)
constitutes the entire agreement of the parties with respect to the specific
subject matter hereof, and supersedes all prior agreements and undertakings,
both written and oral, among the parties with respect to such specific subject
matter.
5.9. Inspection. Copies of this Agreement will be available for inspection
or copying by any stockholder of the Company at the offices of the Company
through the secretary of the Company.
5.10. Counterparts. This Agreement may be executed in one or more
counterparts, 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.
5.11. Further Assurances. Each party shall cooperate and take such actions
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
5.12. Specific Performance; Injunctive Relief. In addition to any other
rights or remedies which may be available at law, in equity or by contract, any
Investor shall be entitled to obtain in any court of competent jurisdiction
specific performance of, or an injunction or other order restraining any act or
proposed act by the Company or any Shareholder which would result in a violation
of, any of the terms or provisions of any of the Company's or such Shareholder's
covenants, agreements or obligations hereunder, it being agreed by the parties
that the remedy at law, including monetary damages, for breach of such provision
will be inadequate compensation for any loss and that any defense in any action
for specific performance that a
33
remedy at law would be adequate is waived. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which any party would otherwise have pursuant to any other Transaction
Document, at law, in equity, by statute or otherwise.
5.13. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, provided, that if any provision hereof or the application
thereof shall be so held to be invalid, void or unenforceable by a court of
competent jurisdiction, then such court may substitute therefor a suitable and
equitable provision in order to carry out, so far as may be valid and
enforceable, the intent and purpose of the invalid, void or unenforceable
provision and, if such court shall fail to decline to do so, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision. To the extent that any provision shall be judicially unenforceable in
any one or more states, such provision shall not be affected with respect to any
other state, each provision with respect to each state being construed as
several and independent.
5.14. Rights and Obligations Several, Not Joint. No Investor or
Stockholder shall have any obligation or liability with respect to any other
Investor's or Shareholder's liabilities or obligations hereunder, and each
Investor and each Shareholder shall be separately and independently entitled to
rely on the representations and warranties of each other party made to the
Investors or such Investor or the Shareholders or such Shareholder in this
Agreement to the benefit of all agreements, covenants, obligations and
commitments of each other party made with or to the Investors or such Investor
or the Shareholders or such Shareholder or herein.
5.15. Consent to Jurisdiction; Service of Process. To the fullest extent
permitted by applicable law, each party hereto hereby irrevocably and
unconditionally (i) submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State or Federal court sitting in New York City
(and of any appellate court to which an appeal of any judgment, order, decree or
decision of any such court may be taken) in any suit, action or proceeding
arising out of or relating to this Agreement or for recognition or enforcement
of any judgment rendered in any such suit, action or proceeding, (ii) waives any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding in any such court, including any claim that any such
suit, action or proceeding has been brought in an inconvenient forum, (iii)
waives all rights to a trial by jury in any such suit, action or proceeding,
(iv) waives personal service of any summons, complaint or other process by any
means, manner or method other than in the manner provided for the giving of
notices to such party in Section 5.6, and agrees that any process served upon
such party in such manner provided for in Section 5.6 shall have the same
validity and legal force and effect as if served upon such party personally
within the State of New York and (iv) if any such party at any time is not a
resident of the State of New York, agrees to appoint and maintain the
appointment of an agent in the State of New York as such party's agent for
service and acceptance of legal process in connection with any such action, suit
or proceeding with the same validity and legal force and effect as if served
upon such party personally within the State of New York, and to notify promptly
each other such party of the name and address of such agent.
5.16. Facsimile Signatures. This Agreement may be executed by facsimile
signatures.
5.17. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, and in any action or proceeding otherwise arising
under or with respect to this Agreement, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to any other available
34
remedy.
5.18. Termination of Agreement. Unless otherwise set forth in this
Agreement, the rights and obligations of the parties set forth in Article III
shall terminate on the earlier of the date on which (i) all of the shares of
Series B Preferred Stock held by the Investors are converted into Common Stock
of the Company in accordance with the terms of the Series B Certificate of
Designation or (ii) the Investors no longer hold any shares of Series B
Preferred Stock and the remaining provisions of the Agreement shall terminate
with respect to any Investor or any Shareholder if such party shall cease to own
any shares of Common Stock, any shares of Series B Preferred Stock or any
Qualifying Rights (as such term is defined in the Preemptive Rights Agreement);
provided, however, that any obligations incurred by such party prior to the
termination of this Agreement pursuant to this subsection shall continue.
35
IN WITNESS WHEREOF, the parties have executed this Stockholders' Agreement
as of the date first above written.
THE MENTUS GROUP, INC.
By:
Name:
Title:
Gerard P. Joyce
Thomas P. Pugliese
21ST CENTURY COMMUNICATIONS T-E
PARTNERS, L.P.
By: SANDLER INVESTMENT
PARTNERS, L.P., General Partner
By: SANDLER CAPITAL
MANAGEMENT, General Partner
By: MJM MEDIA CORP., a General Partner
By:
Michael J. Marocco
President
36
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
By: SANDLER INVESTMENT
PARTNERS, L.P., General Partner
By: SANDLER CAPITAL
MANAGEMENT, General Partner
By: MJM MEDIA CORP., a General Partner
By:
Michael J. Marocco
President
21ST CENTURY COMMUNICATIONS
FOREIGN PARTNERS, L.P.
By: SANDLER INVESTMENT
PARTNERS, L.P., General Partner
By: SANDLER CAPITAL
MANAGEMENT, General Partner
By: MJM MEDIA CORP., a General Partner
By:
Michael J. Marocco
President
[Signature page to the Stockholders' Agreement]
37
Schedule I
Initial Investors and Addresses
Covered Securities
------------------
Series A Series B
Name and Address Common Stock Preferred Stock Preferred Stock
21st Century Communications 0 0 44,028
Partners, L.P.
General Motors Building
767 Fifth Avenue
New York, NY 10153
Attn: Hannah Stone
21st Century Communications 0 0 14,980
T-E Partners, L.P.
General Motors Building
767 Fifth Avenue
New York, NY 10153
Attn: Hannah Stone
21st Century Communications 0 0 5,927
Foreign Partners, L.P.
General Motors Building
767 Fifth Avenue
New York, NY 10153
Attn: Hannah Stone
38
Schedule II
Initial Stockholders, Covered Securities Owned and Addresses
Covered Securities
------------------
Series A Series B
Name and Address Common Stock Preferred Stock Preferred Stock
Gerald P. Joyce [___] [___] [__]
The Mentus Group, Inc.
9531 West 78th Street
Minneapolis, MN 55344
Thomas M. Pugliese [___] [___] [___]
The Mentus Group, Inc.
9531 West 78th Street
Minneapolis, MN 55344
[Stephen Adams]
[John Strauss]
39