INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
SIXTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
As of August 18, 1997
TABLE OF CONTENTS
Page
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1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Request for Registration . . . . . . . . . . . . . . . . . . . . 3
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Obligations of the Company . . . . . . . . . . . . . . . . . . . 5
1.5 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . 7
1.6 Expenses of Demand Registration. . . . . . . . . . . . . . . . . 7
1.7 Expenses of Company Registration . . . . . . . . . . . . . . . . 7
1.8 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . 7
1.9 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . 8
1.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11 Reports Under Securities Exchange Act of 1934. . . . . . . . . . 10
1.12 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights. . . . . . . . . . . . . . . . 12
1.14 Limitations on Subsequent Registration Rights;
Registration Rights Agreement. . . . . . . . . . . . . . . . . . 12
1.15 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . 13
1.16 Termination of Registration Rights . . . . . . . . . . . . . . . 13
2. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . 14
2.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Right of First Offer on Primary Sales. . . . . . . . . . . . . . 15
2.4 Restrictions on Sale or Other Disposition of Securities. . . . . 17
2.5 Right of First Offer on Certain Secondary Sales. . . . . . . . . 19
2.6 Board Representation . . . . . . . . . . . . . . . . . . . . . . 21
2.7 Observer Rights. . . . . . . . . . . . . . . . . . . . . . . . . 22
2.8 Co-Sale Rights . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.9 Stock Purchases by Employees, Officers, Directors
and Consultants. . . . . . . . . . . . . . . . . . . . . . . . . 27
2.10 Additional Liquidity Rights. . . . . . . . . . . . . . . . . . . 27
2.11 Termination of Certain Covenants . . . . . . . . . . . . . . . . 28
2A Toronto Dominion Regulatory Compliance. . . . . . . . . . 28
2A.1 Violation of BHCA or SBIA . . . . . . . . . . . . . . . . 28
2A.2 SBIC Requirements . . . . . . . . . . . . . . . . . . . . 28
2A.3 Acquisition of Securities . . . . . . . . . . . . . . . . 29
2A.4 BHCA Issue, SBIC Issue and SBIC Requirements Defined. . . 29
3. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 30
3.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 30
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3.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . 30
3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 31
3.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.9 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . 31
3.10 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . . . . 31
Schedule A Schedule of Investors
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SIXTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS SIXTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as
of the 18th day of August, 1997, by and among International Wireless
Communications Holdings, Inc., a Delaware corporation (the "Company"), and the
investors listed on SCHEDULE A hereto, each of which is herein referred to as an
"Investor."
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold
shares of the Company's Preferred Stock and/or shares of Common Stock issued
upon conversion thereof and/or other securities convertible or exchangeable into
the Company's Preferred Stock and possess registration rights, information
rights, rights of first offer, and other rights pursuant to the Fifth Amended
and Restated Investor Rights Agreement dated as of December 18, 1995, among the
Company and such Investors, as amended prior to the date hereof (as assigned to
and assumed by the Company pursuant to the Consent, Waiver, Amendment,
Assignment and Assumption Agreement executed by the Company, the "Prior
Agreement"); and
WHEREAS, certain of the Investors are lenders under the Loan Agreement
dated August 18, 1997 among the Company and the lenders named therein (the "IWCH
Loan Agreement") and under the Loan Agreement dated August 18, 1997 among
Pakistan Wireless Holdings Limited, a Mauritius Company ("PWH"), and the lenders
named therein (the "PWH Loan Agreement;" together with the IWCH Loan Agreement,
the "Loan Agreements"); and
WHEREAS, subject to certain terms and conditions, the Notes, as that
term is defined in the IWCH Loan Agreement (the "IWCH Notes") may be exchanged
for Series G-1 or Series G-2 Preferred Stock of the Company and the Notes, as
that term is defined in the PWH Loan Agreement (the "PWH Notes;" together with
the IWCH Notes, the "IWCH/PWH Notes") may be exchanged for shares of Series H-1
or Series H-2 Preferred Stock of the Company (the shares of Series G-1,
Series G-2, Series H-1 and Series H-2 Preferred Stock issuable upon exchange of
the IWCH/PWH Notes or the conversion of other shares of Series G-1, Series G-2,
Series H-1 or Series H-2 Preferred Stock being referred to as the "Series G/H
Preferred Shares"); and
WHEREAS, the Company has issued or may issue to certain of the
Investors the Warrants, as that term is defined in the IWCH Loan Agreement
(individually an "IWCH/PWH Warrant"; collectively, the "IWCH/PWH Warrants"); and
WHEREAS, the Company desires to grant certain information rights,
rights of first offer and other rights to holders of the Company's Preferred
and/or Common Stock issuable upon exchange or exercise of the IWCH/PWH Notes and
the IWCH/PWH Warrants or the conversion of the Series G/H Preferred Shares; and
WHEREAS, the Existing Investors desire to amend and restate the Prior
Agreement and to accept the rights created pursuant hereto in lieu of the rights
granted to them under the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1. DEFINITIONS. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof. For purposes of this Agreement, the holders of
securities which are convertible or exchangeable into Registrable Securities, or
which are convertible or exchangeable into other securities which are
convertible or exchangeable into Registrable Securities, shall be treated as
Holders of such underlying Registrable Securities, and references to Registrable
Securities held by such holders shall include such underlying Registrable
Securities.
(d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "register", "registered", and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common
Stock of the Company ("Common Stock") issuable or issued upon conversion of the
Series B, Series C, Series D, and Series E Preferred Stock of the Company,
(ii) the Common Stock issuable or issued upon conversion of Preferred Stock of
the Company issuable or issued (A) upon exercise of the warrants issued to
Vanguard pursuant to that certain Series C Preferred Stock Purchase Agreement
dated as of February 24, 1994, as such warrants are amended and restated
pursuant to the Warrant Amendment Agreement dated as of July 31, 1995 (the
"Vanguard Warrant Shares"), (B) upon the exercise of warrants issued to certain
Investors pursuant to that certain Note and Warrant Purchase Agreement dated as
of May 6, 1994 (the "1994 Warrant Shares"), (C) upon exercise of warrants (the
"1995 Warrant Shares") issued to certain Investors pursuant to that certain
Securities Purchase Agreement dated as of July 12,
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1995 (the "Securities Purchase Agreement"), (D) upon exercise of warrants issued
to Vanguard pursuant to the Note and Warrant Purchase Agreement dated as of July
31, 1995 (the "Additional Vanguard Warrant Shares"), and (E) upon exercise of
warrants issued to Toronto Dominion Investments, Inc. or its Affiliates
(collectively, "Toronto Dominion"), pursuant to the Note and Warrant Purchase
Agreement (the "TD Purchase Agreement") and the Loan Agreement, each dated as of
August 14, 1995 (the "TD Warrant Shares", together with Vanguard Warrant Shares,
the 1994 Warrant Shares, the 1995 Warrant Shares, and the Additional Vanguard
Warrant Shares, the "Warrant Shares"), (iii) [intentionally left blank],
(iv) the Common Stock issuable or issued upon conversion of Preferred Stock
issuable or issued upon conversion of the two $900,000 notes issued to Vanguard
pursuant to that certain Note Purchase Agreement dated as of October 26, 1994,
as amended by the Amendment to Note Purchase Agreement dated as of July 12, 1995
between the Company and Vanguard (collectively, the "Vanguard Notes"), and
(v) Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares referenced in (i) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which the related rights under
this Section 1 are not assigned pursuant to Section 1.13.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2. REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the
earlier of (i) December 31, 1997, or (ii) six (6) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of at least forty percent (40%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least forty percent (40%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$2,500,000), then the Company shall:
(i) within twenty (20) days of the receipt thereof,
give written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made
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pursuant to subsection 1.2(a) and the Company shall include such information in
the written notice referred to in subsection 1.2(a). The underwriter will be
selected by the Company and shall be reasonably acceptable to holders of a
majority of the Registrable Securities then held by Initiating Holders. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by holders of a majority of the
Registrable Securities then held by Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
subsection 1.4(e)) enter into an underwriting agreement in usual and customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company held by each Holder; provided, however, that, except as provided in
that certain Amended and Restated Registration Rights Agreement dated as of
August 18, 1997 among the Company and the holders of "Registrable Securities" as
defined therein (the "Registration Rights Agreement"), the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the Chief Executive Officer of the Company stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holders; provided, however, that
the Company may not utilize this right more than once in any twelve-month
period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
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(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3. COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4. OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such
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registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is
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customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
1.5. FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6. EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printing
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders selected by them) shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses on a pro rata basis
based on the number of Registrable Securities requested to be registered),
unless the Holders of a majority of the Registrable Securities requested to be
registered agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
1.7. EXPENSES OF COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing and qualification fees, printing and accounting fees
relating or apportionable thereto and the fees and disbursements of counsel for
the Company (including fees and disbursements of counsel for the Company in its
capacity as counsel to the selling Holders hereunder; if Company counsel does
not make itself available for this purpose, the Company will pay the reasonable
fees and disbursements of one counsel for the selling Holders selected by them),
but excluding underwriting discounts and commissions relating to Registrable
Securities.
1.8. UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be
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required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders)
but in no event, except as otherwise required by the Registration Rights
Agreement, shall (i) the amount of securities of the selling Holders included in
the offering be reduced below thirty percent (30%) of the total amount of
securities included in such offering, unless such offering is the initial public
offering of the Company's securities in which case the selling stockholders may
be excluded entirely if the underwriters make the determination described above
and no other stockholder's securities are included or (ii) notwithstanding (i)
above, any shares being sold by a stockholder exercising a demand registration
right similar to that granted in Section 1.2 be excluded from such offering.
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9. DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10. INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such
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registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, the
1934 Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.10(b) exceed the gross
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such
9
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.10, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed by
the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
10
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12. FORM S-3 REGISTRATION. In case the Company shall
receive from any Holder or Holders of at least 20% in the aggregate of
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; or (4) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
11
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company, unless the Company has within the 12 month period preceding the date of
such request paid the expenses incurred in connection with a registration
pursuant to Section 1.12, in which case the expenses shall be borne pro rata by
the Holder or Holders participating in the Form S-3 registration. Registrations
effected pursuant to this Section 1.12 shall not be counted as demands for
registration or registrations effected pursuant to Sections 1.2 or 1.3,
respectively.
1.13. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the transferee or assignee receives
at least 10,000 shares of Registrable Securities (subject to adjustment for
stock splits, stock dividends and the like) in the transfer of such securities;
(b) the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(c) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.15 below; and (d) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
1.14. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS;
REGISTRATION RIGHTS AGREEMENT. From and after the date of this Agreement, the
Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such securities in
any registration filed under Section 1.2 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 1.2(a) or within one hundred twenty
(120) days of the effective date of any registration effected pursuant to
Section 1.2. Notwithstanding anything herein to the contrary, the holders of
Registrable Securities acknowledge the terms and provisions of the Registration
Rights Agreement and agree that to the extent that this Agreement conflicts in
any respect with the Registration Rights Agreement, the terms and provisions of
the Registration Rights Agreement shall govern in all respects, including,
without limitation, the terms and provisions of Sections 2, 3, and 12 of the
Registration Rights Agreement governing the priorities of inclusion of
securities of the Company in a registration, whether such registration is by the
Company for
12
its own account or on behalf of any security holder of the Company (including
the Holders) exercising a demand or incidental registration right.
1.15. "MARKET STAND-OFF" AGREEMENT. Each Investor hereby
agrees that, during the period of duration specified by the Company and an
underwriter of common stock or other securities of the Company, following the
date of the first sale to the public pursuant to a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except common stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements;
(c) such market stand-off time period shall not exceed one
hundred and twenty (120) days; and
(d) such agreement shall not preclude transfer in a private
transaction to an institutional buyer who agrees to be bound by such agreement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a SEC Rule 145 transaction.
1.16. TERMINATION OF REGISTRATION RIGHTS. The right of any
Holder to request registration or inclusion in any registration pursuant to
Section 1.3 shall terminate on the closing of the first Company-initiated
registered public offering of Common Stock of the Company if all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period, or on
such date after the closing of the first Company-initiated registered public
offering of Common Stock of the Company as all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may immediately be
sold under Rule 144 during any 90-day period.
13
2. COVENANTS OF THE COMPANY
2.1. DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver
to each Investor:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, including notes thereto, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) within thirty (30) days of the end of each month, an
unaudited income statement, a balance sheet and a statement of cash flows for
and as of the end of such month, in reasonable detail;
(c) as soon as practicable, but in any event sixty
(60) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including income statements,
balance sheets and statements of cash flows for such months and, as soon as
prepared, any other budgets, including internally prepared quarterly budget
forecasts or revised budgets prepared by the Company;
(d) within fifteen (15) days of the end of each calendar
quarter, a quarterly operations reports summarizing activities during preceding
quarter;
(e) with respect to the financial statements called for in
subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(f) or any other subsection of Section 2.1 to provide information which it deems
in good faith to be a trade secret or similar confidential information.
2.2. INSPECTION. The Company will also permit each Investor and
its authorized representatives, at all reasonable times and as often as
reasonably requested, to visit and inspect, at the expense of such Investor, any
of the properties of the Company, to inspect its books and records and to make
extracts therefrom, and to discuss the affairs, finances and accounts of the
Company with its officers and consult with and advise the officers of the
Company as to the management of the Company, provided that the Investors shall
maintain the
14
confidentiality of any proprietary information of the Company thereby obtained
and provided further that the Investors shall conduct all such inspections in a
manner that is not disruptive to the employees or operations of the Company.
2.3. RIGHT OF FIRST OFFER ON PRIMARY SALES. Subject to the terms
and conditions specified in this Section 2.3, the Company hereby grants to each
Major Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Securities (as hereinafter defined). For
purposes of this Section 2.3, a Major Investor shall mean (i) any Investor who
is a Holder of at least 10% of either the Registrable Securities or the Other
Registrable Securities (as defined below) initially acquired by such Investor,
but in any event not less than 4000 shares of either the Registrable Securities
or the Other Registrable Securities and (ii) any person who acquires at least
10% in the aggregate of any of the Series B, Series C, Series D, Series E,
Series F, Series G or Series H Preferred Stock (or the Common Stock issued or
issuable upon conversion thereof) outstanding as of the date hereof. For
purposes of this Agreement, the term "Other Registrable Securities" and the term
"Holder" as used in relation thereto shall have the meanings given to the terms
"Registrable Securities" and "Holder" in the Registration Rights Agreement, and
the term "Affiliates" shall have the meaning given to such term in Section
2.4(e) below. For purposes of this Section 2.3, Investor includes any general
partners and Affiliates of an Investor. An Investor shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock or any debt securities ("Securities"), the Company shall first make an
offering of such Securities to each Major Investor in accordance with the
following provisions:
(a) The Company shall deliver a notice by certified mail
("Section 2.3 Notice") to each Major Investor stating (i) its bona fide
intention to offer such Securities, (ii) the number of such Securities to be
offered, and (iii) the price and terms, if any, upon which it proposes to offer
such Securities.
(b) By written notification received by the Company within
twenty (20) calendar days after receiving the Section 2.3 Notice, each Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Section 2.3 Notice, up to that portion of such Securities which
equals the total number of Securities multiplied by a fraction, (a) the
numerator of which is the sum of the number of Registrable Securities referred
to in clauses (i) and (iv) of Section 1.1(f) and the number of Other Registrable
Securities then held by such Major Investor, and (b) the denominator of which is
the total number of shares of Common Stock then outstanding (assuming full
conversion of all then outstanding securities that are convertible into and
exchangeable and exercisable for shares of Common Stock of the Company). The
Company shall promptly, in writing, inform each Major Investor which purchases
all of the Securities available to it under this Section 2.3 ("Fully Exercising
Investor") of any other Major Investor's failure to do likewise. During the ten
(10)-day period commencing after receipt of such information, each Fully
Exercising Investor shall be entitled to purchase up
15
to that portion of the Securities for which Major Investors were entitled to
subscribe but which were not subscribed for by the Major Investors which is
equal to the total number of unsubscribed Securities multiplied by a fraction,
(a) the numerator of which is the sum of the number of Registrable Securities
referred to in clauses (i) and (iv) of Section 1.1(f) and the number of Other
Registrable Securities, as the case may be, then held by such Fully Exercising
Investor, and (B) the denominator of which is the total number of Registrable
Securities referred to in clauses (i) and (iv) of Section 1.1(f) and the number
of Other Registrable Securities then held by all Fully Exercising Investors who
wish to purchase some of the unsubscribed shares.
(c) If all Securities which Investors are entitled to
purchase pursuant to subsection 2.3(b) are not elected to be purchased as
provided in subsection 2.3(b) hereof, the Company may, during the ninety (90)-
day period following the expiration of the period provided in subsection 2.3(b)
hereof, offer the remaining unsubscribed portion of such Securities to any
person or persons at a price not less than, and upon terms no more favorable to
the offeree than those specified in the Section 2.3 Notice. If the Company does
not enter into an agreement for the sale of the Securities within such period,
or if such agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Securities shall not be offered unless first reoffered to the Major Investors in
accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall
not be applicable (i) to the issuance or sale of up to 2,811,526 shares of
Common Stock (or such additional number of shares of Common Stock as may be
approved in writing by holders of a majority of the number of outstanding
Registrable Securities and holders of a majority of the Other Registrable
Securities at the time of such approval) (in each case, as appropriately
adjusted for any stock dividends, contributions, splits, reclassifications or
the like) to officers, directors and employees of and consultants to the Company
for the primary purpose of soliciting or retaining their services, provided each
such person executes an agreement, pursuant to which such person agrees to
resell to the Company at the original purchase price thereof all shares of the
Company's Common Stock that are not vested on the date of termination of such
employee's term of service with the Company and not to transfer any unvested
shares of the Company's Common Stock to any person except to members of his or
her immediate family or to a trust for the benefit of members of his or her
immediate family, or (ii) to or after consummation of a Threshold Public
Offering (as defined in the Amended and Restated Certificate of Incorporation of
the Company), (iii) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities (including the Warrant Shares
and the Series G/H Preferred Shares and the Common Stock issuable upon
conversion thereof and upon exercise of the IWCH/PWH Warrants), (iv) to the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, (v) to the issuance of stock, warrants or other
securities or rights to persons or entities with which the Company has business
relationships provided such issuances are for other than primarily equity
financing purposes (provided that no more than 1% of the total number of shares
of Common Stock then outstanding (assuming full conversion of all then
outstanding convertible securities of the Company) may be excluded from the
right of first
16
offer pursuant to this clause (v) during any twelve (12)-month period), and
(vi) to the issuance of Securities upon conversion of the Vanguard Notes and
exchange of the IWCH/PWH Notes.
(e) The right of first offer set forth in this Section 2.3
may not be assigned or transferred, except that (i) such right is assignable by
each Holder and each Holder (within the meaning of the Registration Rights
Agreement) of Other Registrable Securities (an "Other Holder") to any wholly
owned subsidiary or parent of, or to any corporation or entity that is, within
the meaning of the Act, controlling, controlled by or under common control with,
any such Holder or Other Holder, and (ii) such right may be transferred to a
third party who buys (x) at least 40,000 shares of the Registrable Securities or
Other Registrable Securities (subject to adjustment for stock splits, stock
dividends and the like) or (y) all shares held by an Investor.
2.4. RESTRICTIONS ON SALE OR OTHER DISPOSITION OF SECURITIES.
(a) No Investor shall, either directly or indirectly, sell, assign, mortgage,
hypothecate, transfer, pledge, create a security interest in or lien upon,
encumber, give, place in trust, or otherwise voluntarily or involuntarily
dispose of (collectively hereinafter sometimes referred to as "Transfer") any of
the shares of Capital Stock (as defined in the Securities Purchase Agreement (as
defined in the Registration Rights Agreement)) then owned or controlled by such
party except in accordance with Section 2.4(b), 2.4(d), 2.4(f), 2.5 or 2.8. No
Transfer of any shares of Capital Stock in violation of the provisions of this
Agreement shall be made or recorded on the books of the Corporation and any such
purported transfer shall be void and of no force or effect.
(b) Notwithstanding anything to the contrary contained in
this Agreement, any Investor shall have the right at any time to Transfer any of
its shares of Capital Stock of the Company to any Affiliate, upon such terms as
may be agreed upon by such party and its transferee; PROVIDED, HOWEVER, that
(i) any such Transfer shall be made in compliance with the Securities Act and
applicable state securities laws, or pursuant to an exemption therefrom, and
(ii) any such transferee shall (A) acquire the shares so transferred subject to
all the terms and conditions of this Agreement, (B) shall agree in writing, at
the time of the Transfer, to be bound by all of the provisions of this Agreement
which would be applicable to the Investor if it continued to own the shares so
transferred, and (C) shall be an "accredited investor" within the meaning of
Regulation D under the Securities Act. In addition to and subject to compliance
with the foregoing, Electra Investment Trust P.L.C. ("EIT") and Electra
Associates, Inc. (collectively, "Electra"), shall have the right to Transfer any
of its shares of Capital Stock of the Company to Electra Xxxxxxx Equity Partners
(provided that at the time of such Transfer such entity is an Affiliate of EIT).
Notwithstanding anything to the contrary in this Agreement, each Investor other
than a Section 2.5 Stockholder (as defined below) shall be permitted to Transfer
such Investor's shares of Capital Stock of the Company, subject only to
compliance with clauses (i) and (ii) of the proviso to the first sentence of
this Section 2.4(b). Notwithstanding anything to the contrary contained in this
Agreement, Toronto Dominion Investments, Inc. ("Toronto Dominion") shall have
the unrestricted right to assign or transfer any of its shares of Capital Stock
of the Company to an indirect or direct wholly or majority owned subsidiary of
the ultimate parent of Toronto Dominion including, without limitation, a
subsidiary established as (or which is expected by Toronto Dominion to become) a
small business investment company pursuant to the Small Business Investment Act
of 1958, as amended from time to time, subject to
17
compliance with clauses (i) and (ii) of the proviso to the first sentence of
this Section 2.4(b). Notwithstanding anything to the contrary contained in this
Agreement, Vanguard shall have the right at any time to Transfer any shares of
Capital Stock of the Company (whether now owned or hereafter acquired by
Vanguard) to the Vanguard Lenders (as defined below) pursuant to that certain
Amended and Restated Subsidiary Pledge Agreement dated as of December 23, 1994
between Vanguard and Toronto Dominion (Texas), Inc., as Collateral Agent, as
amended, subject to and in accordance with the Fourth Amended and Restated
Investor Rights Agreement dated as of July 31, 1995, among the Company and the
investors name therein (the "Fourth Amended and Restated Investor Rights
Agreement") and, Vanguard Lenders shall have the right to Transfer any such
shares acquired upon the exercise of their rights under such Amended and
Restated Subsidiary Pledge Agreement subject to and in accordance with the
Fourth Amended and Restated Investor Rights Agreement, in each case as if the
Prior Agreement were in full force and effect on the date of Transfer.
"Vanguard Lenders" shall have the meaning given to the term "Lenders" in that
certain Amended and Restated Loan Agreement dated as of December 23, 1994 among
Vanguard, the Lenders, and the other parties thereto. Any Transfer under this
Section 2.4(b) shall not be subject to the provisions of Section 2.5.
(c) In the event of any Transfer in accordance with the
provisions of Section 2.4(b), prompt written notice of the Transfer shall be
delivered by the Transferor to the Corporation, and, in the case of any Transfer
pursuant to Section 2.4 hereof, references herein to the Investor shall include,
from and after the date of such permitted transfer, each such permitted
transferee (transferees acquiring such shares pursuant to Section 2.4(b) are
hereinafter sometimes referred to as "Permitted Transferees").
(d) For so long as any shares of Series F Preferred Stock
shall remain outstanding, none of Xxxx X. Xxxxxxx, Xxxx X. X. XxXxxxx, Xxxxxxx
X. Xxxxxxxx, Xxxxxx Xxxx, Xxxxxxx Xxxxxxx, or Xxxxx Xxxxx (collectively,
"Management") may Transfer any Capital Stock of the Company owned at any time by
such individual. The foregoing transfer restrictions shall not (i) apply to any
member of Management (other than a director of the Company) who owns 20,000 or
fewer shares of Capital Stock of the Company or (ii) prevent any member of
Management (other than a director of the Company) who as of the date of this
Agreement owns 20,000 or fewer shares of Capital Stock of the Company and who
hereafter owns more than 20,000 shares of Capital Stock of the Company from
Transferring up to 20,000 shares of Capital Stock of the Company.
(e) For purposes of this Agreement, the term "Affiliate"
means, (i) with respect to any person, any other person (A) which directly or
indirectly of record or beneficially owns or holds fifty percent (50%) or more
of the equity interest of such person, or (B) fifty percent (50%) or more of the
equity interest which is owned or held, directly or indirectly, of record or
beneficially, by such person and (ii) with respect to any person that is an
investment fund, any other person which is an investment fund and which has as
its investment managers or adviser, the same investment manager or adviser as
such a person or an investment manager or adviser a majority of the individual
investment professionals of which are the same as the individual investment
professionals of the investment manager or adviser of such other person.
18
(f) Prior to the earlier of the second anniversary of the
date of this Agreement and the date on which any shares of Series F Preferred
Stock no longer remain outstanding, except as set forth in Section 2.4(b) above,
neither Vanguard nor any of its Affiliates may Transfer any of its Capital Stock
of the Company unless (i) immediately following such Transfer Vanguard and its
Affiliates collectively own not less than 30% of the then issued and outstanding
shares of Capital Stock of the Company and (ii) the consideration per share
received by Vanguard or such Affiliate of Vanguard, as the case may be, with
respect to such Transfer equals or exceeds 9.375 per share (as appropriately
adjusted for stock splits, stock dividends, combinations and other
recapitalizations).
2.5. RIGHT OF FIRST OFFER ON CERTAIN SECONDARY SALES. Subject to
the terms and conditions specified in this Section 2.5, each Investor who, as of
the date of this Agreement or hereafter, holds at least 100,000 shares of
Registrable Securities referred to in clauses (i) and (iv) of Section 1.1(f)
and/or Other Registrable Securities (as appropriately adjusted for any stock
dividends, contributions, splits, reclassifications or the like) (individually a
"Section 2.5 Stockholder," and collectively the "Section 2.5 Stockholders"),
hereby grants to each other Section 2.5 Stockholder (but excluding each holder
of Series A Preferred Stock) (individually a "Section 2.5 Rights Holder," and
collectively the "Section 2.5 Rights Holders") a right of first offer with
respect to future sales of Securities by such Section 2.5 Stockholder.
Notwithstanding any other provision of this Agreement, a Section 2.5
Stockholder; (i) includes any general partners and Affiliates of such Section
2.5 Stockholder; and (ii) excludes each Investor listed on SCHEDULE 1 attached
hereto, provided that each such Investor shall be excluded only for so long as
such Investor and its Affiliates own in the aggregate in excess of 800,000
shares of the Capital Stock of the Company (as appropriately adjusted for any
stock dividends, contributions, splits, reclassifications or the like). The
Section 2.5 Stockholder, shall be entitled to a portion of the right of first
offer hereby granted it among itself and its partners and Affiliate in such
proportions as it deems appropriate.
Each time a Section 2.5 Stockholder (an "Initiating Section 2.5
Stockholder") proposes to offer any Securities, except as provided in
Section 2.4(b) above, the Section 2.5 Stockholder shall first make an offering
of such shares to each other Section 2.5 Rights Holder in accordance with the
following provisions:
(a) The Initiating Section 2.5 Stockholder shall deliver a
written notice by certified mail ("Section 2.5 Notice") to the Section 2.5
Rights Holders stating (i) its bona fide intention to offer such Securities,
(ii) the number of Securities to be offered ("Section 2.5 Shares") and (iii) the
price and terms, if any, upon which it proposes to offer the Section 2.5 Shares.
(b) By written notification received by the Initiating
Section 2.5 Stockholder within ten (10) business days after receiving the
Section 2.5 Notice, each Section 2.5 Rights Holder may elect to purchase or
obtain, at the price and on the terms specified in the Section 2.5 Notice, up to
that number of the Section 2.5 Shares equal to the product of the total number
of Section 2.5 Shares multiplied by a fraction (A) the numerator of which is the
sum of the number of Registrable Securities referred to in clauses (i) and (iv)
of Section 1.1(f)
19
and the number of Other Registrable Securities, as the case may be, then held by
such Section 2.5 Rights Holder and (B) the denominator of which is the total
number of shares of Common Stock then outstanding (assuming full conversion of
all then outstanding securities that are convertible into and exchangeable and
exercisable for shares of Common Stock of the Company). The Initiating Section
2.5 Stockholder shall promptly, in writing, inform each Section 2.5 Rights
Holder which purchases all of the Section 2.5 Shares available to it ("Fully
Exercising Section 2.5 Rights Holder") of any other Section 2.5 Rights Holder's
failure to do likewise. During the ten (10) business day period commencing
after receipt of such information, each Fully Exercising Section 2.5 Rights
Holder shall be entitled to purchase up to that portion of the Section 2.5
Shares that the Section 2.5 Rights Holders were entitled to subscribe but which
were not subscribed for by the Section 2.5 Rights Holders which is equal to the
proportion that the sum of the number of Registrable Securities referred to in
clauses (i) and (iv) of Section 1.1(f) and the number of Other Registrable
Securities then held, by such Fully Exercising Section 2.5 Rights Holder bears
to the sum of the number of Registrable Securities referred to in clauses (i)
and (iv) of Section 1.1(f) and the number of Other Registrable Securities then
held, by all Fully Exercising Section 2.5 Rights Holders who wish to purchase
some of the unsubscribed Securities.
(c) If all of the Section 2.5 Shares which Section 2.5
Rights Holders are entitled to purchase pursuant to subsection 2.5(b) hereof are
not elected to be purchased as provided in such subsection and if such purchases
have not been consummated within thirty (30) days of the expiration of the
periods provided in such subsection 2.5(b), the Initiating Section 2.5
Stockholder may, during the sixty (60)-day period following the expiration of
the period provided in such subsection 2.5(b), offer the remaining unsubscribed
portion of such Section 2.5 Shares to the offeree at a price not less than, and
upon terms more favorable to the offeree than those specified in the Section 2.5
Notice. If the Initiating Section 2.5 Stockholder does not enter into an
agreement for the sale of such Section 2.5 Shares within such period, or if such
agreement is not consummated within the ninety (90)-day period following the
expiration of the period provided in such subsection 2.5(b), the right provided
herein shall be deemed to be revived in such Section 2.5 Shares shall not be
offered unless first reoffered to the Non-Initiating Section 2.5 Stockholders in
accordance herewith.
(d) The Company may, at its discretion, cause any
additional purchaser of Capital Stock of the Company to agree to comply with the
provisions of this Section 2.5 as a Section 2.5 Stockholder.
(e) Notwithstanding the foregoing, the provisions of this
Section 2.5 shall not apply to the sale of any Securities (i) to the public
pursuant to a registration statement filed with, and declared effective by, the
SEC under the Act or pursuant to Rule 144 or 701 under the Act or (ii) to the
Company.
Notwithstanding any other provision of this Agreement, each of Mitsui
& Co. Ltd. and its Affiliates and Mitsubishi Corporation and its Affiliates
(individually, a "Section 2.5A Stockholder;" collectively, the "Section 2.5A
Stockholders") may, at its sole
20
discretion, elect not to be a Section 2.5 Stockholder for purposes of this
Agreement if all of the following conditions are satisfied:
(i) the Company shall acquire a direct or indirect
interest in a United States PCS License ("License") or an entity that holds a
License;
(ii) at the time of such acquisition by the Company,
such Section 2.5A Stockholder holds a direct or indirect interest in a License
or an entity that holds a License;
(iii) as a result of such acquisition by the Company,
such Section 2.5A Stockholder would violate applicable United States federal or
state communications laws, including the United States Federal Communications
Act, or the rules and regulations thereunder, by continuing to hold both its
equity interest in the Company and a direct or indirect interest in a License or
an entity that holds a License; and
(iv) such Section 2.5A Stockholder notifies the Company
within sixty days after receiving notice from the Company that the Company has
acquired a direct or indirect interest in a License or an entity that holds a
License.
2.6. BOARD REPRESENTATION. (a) [intentionally left blank]
(b) From and after such time as the criteria set forth in
Section V.B.5(b) of the Company's Amended and Restated Certificate of
Incorporation with respect to the election of directors by the Series F Holders
are no longer satisfied, for so long as 20% of the Series F Conversion Shares
(as defined below) are held by Series F Holders, each Investor covenants to vote
his or its shares in favor of at least three (3) directors (the "Series F
Directors") designated by the holders of a majority of the Series F Conversion
Shares held by the Series F Holders at each annual meeting of stockholders of
the Corporation at which any director is elected or at the time of any written
consent to action in lieu of any such meeting; PROVIDED, that (i) for so long as
Electra (or its assignee) owns at least 213,360 Series F Conversion Shares (as
such number may be adjusted appropriately for stock splits, stock dividends,
combinations and other recapitalizations), Electra (or its assignee, provided
such assignee is an Affiliate of Electra) shall have the right to designate
one (1) of the directors (the "Electra Director") to be designated by the
holders of the Series F Conversion Shares, (ii) for so long as Central
Investment Holdings, Inc. ("CIH") (or its assignee) owns at least 213,360 Series
F Conversion Shares (as such number may be adjusted appropriately for stock
splits, stock dividends, combinations and other recapitalizations), CIH (or its
assignee, provided such assignee is an Affiliate of CIH) shall have the right to
designate one (1) of the directors to be designated by the holders of the Series
F Conversion Shares; and (iii) for so long as Toronto Dominion (or its assignee)
owns at least 213,360 Series F Conversion Shares (as such number may be adjusted
appropriately for stock splits, stock dividends, combinations and other
recapitalizations), Toronto Dominion (or its assignee, provided such assignee is
an Affiliate) shall have the right to designate one (1) of the directors to be
designated by the holders of the Series F Conversion Shares, PROVIDED, HOWEVER,
that Toronto Dominion or such Affiliate shall not be entitled to so designate
such director if exercising this right would be in violation of the Bank Holding
21
Company Act (as defined in Section 2A.4). At least one of the Series F
Directors, which shall be the Electra Director, if any, shall have the right to
be a member of the Audit and Compensation Committees of the Board, if any, or of
any committee of the Board performing comparable functions. For purposes of
this Section 2.6(b), "Series F Conversion Shares" shall mean the shares of
Common Stock issued or issuable upon conversion of the shares of Series F-1
Preferred Stock originally issued pursuant to the Series F Purchase Agreement or
shares of Common Stock issued or issuable upon conversion of the shares of
Series F-1 Preferred Stock issued upon conversion of the Series F-2 Preferred
Stock originally issued pursuant to the Series F Purchase Agreement.
No director(s) so designated by the holders of the Series F Conversion
Shares, or Electra, CIH or Toronto Dominion (or its respective assignee,
provided such assignee is a Section 2.4 Affiliate of Electra, CIH or Toronto
Dominion), as the case may be, may be removed without the prior consent, given
in person or by proxy, either in writing or at a special meeting called for that
purpose, of the holders of such Series F Conversion Shares, voting separately as
a class. In case of the death, resignation or other removal of any Series F
Director, including the Electra Director, the holders of a majority of the
Series F Conversion Shares held by the Series F Holders, or Electra (or its
assignee), as the case may be, shall have the right to designate a successor
director to hold such office for the unexpired term of such removed director.
Each Investor covenants and agrees to vote his or its shares, as promptly as
possible, either at a special meeting called for such purpose or by written
consent in lieu of a meeting, in favor of the election of such successor
designee.
Until the Company completes an initial public offering of its Common
Stock or is sold to or merges with another entity, none of Vanguard or Electra,
in their capacity as stockholders of the Company, will take any actions which
would result in the representative of BEA Associates, as the manager of certain
investment funds that are stockholders of the Company, being removed from the
Board of Directors of IWC, so long as such investment funds retain their current
level of ownership of Registrable Securities (as defined in Section 1.1(f)
hereof) and Registrable Securities (as defined in the Registration Rights
Agreement).
2.7. OBSERVER RIGHTS. Each Investor who is the Holder of not
less than either 80,000 Registrable Securities referred to in clauses (i), (iii)
and (iv) of Section 1.1(f) or the Holder (within the meaning of the Registration
Rights Agreement) of not less than 80,000 Other Registrable Securities (subject
to appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations) is entitled to have one representative designated by
such Investor attend all meetings of its Board in the capacity of a nonvoting,
observer who may participate in discussions and, in this respect, copies of all
notices, minutes, consents, and other materials that the Company provides to its
directors shall be given to such representative; provided, however, that such
representative shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided; and, provided
further, that the Company reserves the right to withhold any information and to
exclude such representative from any meeting or portion thereof if access to
such information or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or would result in
disclosure of trade secrets to such representative of if such Investor or its
representative
22
is a direct competitor of the Company. Each Investor that is an entity may
designate a representative to attend such meetings on its behalf. Each Investor
(or representative thereof) may designate an alternate to attend such meetings
on its behalf if such Investor (or representative thereof) is unable to attend.
The Company acknowledges that it is contractually required to comply with the
obligations of this Section 2.7.
2.8. CO-SALE RIGHTS.
(a) Any Section 2.5 Rights Holder which does not elect to
purchase any of the Section 2.5 Shares available to it may elect to participate
(a Section 2.5 Rights Holder so electing being herein a "Participant") in the
Initiating Section 2.5 Stockholder's sale of Securities in accordance with this
Section 2.8
(b) Subject to subsection 2.8(l) below, each Participant
shall have the right (the "Participation Right") to Transfer to the purchaser
and any Section 2.5 Rights Holders who has exercised the Right of First Offer
set forth in Section 2.5 above a number of Securities equal to the product of
(i) the aggregate number of Section 2.5 Shares and (ii) such Participant's Pro
Rata Percentage Amount (as defined below); PROVIDED, HOWEVER, that (A) with
respect to any Participant (other than an Original Series G/H Participant) which
is a holder of Series G/H Registrable Securities (as defined in the Registration
Rights Agreement), until such time as such Participant shall have received
proceeds upon the Transfer of Series G/H Registrable Securities and the
Preferred Stock of the Company underlying such Registrable Securities which
equals or exceeds the product of (x) the aggregate liquidation preference of all
such Series G/H Registrable Securities and underlying Preferred Stock acquired
by such participant (where the "liquidation preference" of Series G Preferred
Stock and Series H Preferred Stock means the Original Series G Issue Price and
the Original Series H Issue Price (as those terms are defined in the Company's
certificate of incorporation), respectively) and (y) 0.50, and (B) with respect
to any Participant which is a Series F Holder, until such time as such
Participant shall have received proceeds upon the Transfer of Series F
Registrable Securities (as defined in the Registration Rights Agreement) which
equals or exceeds the product of (x) the number of Series F Registrable
Securities purchased by such Participant, (y) $9.375 (as appropriately adjusted
for any stock dividends, combinations, splits or the like with respect to such
shares), and (z) .50, each such Participant specified in clause (A) and (B)
above shall have the right to Transfer a number of Securities equal to the
product of (i) the aggregate number of Section 2.5 Shares, (ii) such
Participant's Pro Rata Percentage Amount and (iii) 150%. For purposes of this
Section 2.8, a Participant's Pro Rata Percentage Amount shall be equal to the
fraction, the numerator of which is the number of shares of Common Stock owned
by such Participant at the time of the sale or transfer (assuming the full
conversion, exchange and exercise of all convertible, exchangeable and
exercisable securities of the Company then owned by such Participant) and the
denominator of which is the total number of shares of Common Stock owned by the
Initiating Section 2.5 Stockholder and all Participants at the time of the
Transfer (assuming the full conversion, exchange and exercise of all
convertible, exchangeable and exercisable securities of the Company then owned
by the Initiating Section 2.5 Stockholder and all Participants), and rounded to
the nearest whole number.
23
(c) Each Participant shall effect its participation in the
sale by promptly delivering to the Initiating Section 2.5 Stockholder for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock
which such Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is
at such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in subsection 2.8(c)(i) above. The Company agrees to
make any such conversion concurrent with the actual transfer of such shares to
the purchaser.
(d) The stock certificate or certificates that the
Participant delivers to the Initiating Section 2.5 Stockholder pursuant to
paragraph 2.8(c) shall be transferred to the prospective purchaser in
consummation of the sale of the Securities pursuant to the terms and conditions
specified in the Notice, and the Initiating Section 2.5 Stockholder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, the Initiating
Section 2.5 Stockholder shall not sell to such prospective purchaser or
purchasers any Securities unless and until, simultaneously with such sale, the
Initiating Section 2.5 Stockholder shall purchase such shares or other
securities from such Participant.
(e) The exercise or non-exercise of the rights of the
Participants hereunder to participate in one or more sales of Securities made by
an Initiating Section 2.5 Stockholder shall not adversely affect their rights to
participate in subsequent sales of Securities subject to this Section 2.8.
(f) Notwithstanding the foregoing, the co-sale rights of
the Investors shall not apply to (i) any pledge of Securities made pursuant to a
bona fide loan transaction that creates a mere security interest; (ii) any
transfer to the ancestors, descendants or spouse or to trusts for the benefit of
such persons of a Investor; (iii) any bona fide gift, provided that the
transferring Investor shall inform the other Investors of such pledge, transfer
or gift prior to effecting it; (iv) a transfer by an Investor that is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or (v) a transfer by any Investor to any Affiliate of
such Investor; provided that in each such case the pledgee, transferee or donee,
as the case may be, shall furnish to the Company and the other Investor a
written agreement to be bound by and comply with all the provisions of this
Section 2.8. Such transferred Securities shall remain "Securities" hereunder.
24
(g) Notwithstanding the foregoing, the provisions of this
Section 2.8 shall not apply to (A) the sale of any Securities (i) to the public
pursuant to a registration statement filed with, and declared effective by, the
SEC under the Act or pursuant to Rule 144 or 701 under the Act or (ii) to the
Company or (B) the Post-Exchange Sale (as that term is defined in the Exchange
Agreement).
(h) In the event an Initiating Section 2.5 Stockholder
should sell any Securities in contravention of the co-sale rights of the
Investor under this agreement (a "Prohibited Transfer"), the Investors, in
addition to such other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and the Initiating
Section 2.5 Stockholder shall be bound by the applicable provisions of such
option.
(i) In the event of a Prohibited Transfer, each Investor
shall have the right to sell to the Initiating Section 2.5 Stockholder the type
and number of Securities equal to the number of shares each Investor would have
been entitled to transfer to the purchaser had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall
be made on the following terms and conditions:
(i) The price per share at which the Securities are to
be sold to the Initiating Section 2.5 Stockholder shall be equal to the price
per share paid by the purchaser to the seller in the Prohibited Transfer. The
Initiating Section 2.5 Stockholder shall also reimburse each Investor for any
and all fees and expenses, including legal fees and expenses, incurred pursuant
to the exercise or the attempted exercise of the Investor's rights under this
Section 2.8.
(ii) Within 90 days after the later of the dates on
which the Investor (A) received notice of the Prohibited Transfer or
(B) otherwise become aware of the Prohibited Transfer, each Investor shall, if
exercising the option created hereby, deliver to the Initiating Section 2.5
Stockholder the certificate or certificates representing shares to be sold, each
certificate to be properly endorsed for transfer.
(iii) The Initiating Section 2.5 Stockholder shall, upon
receipt of the certificate or certificates for the shares to be sold by a
Investor, pursuant to this subsection 2.8(i), pay the aggregate purchase price
therefor and the amount of reimbursable fees and expense, as specified in clause
(i) of this subsection 2.8(i), in cash or by other means acceptable to the
Investor.
(iv) Notwithstanding the foregoing, any attempt by an
Initiating Section 2.5 Stockholder to transfer Securities in violation of this
Section 2.8 hereof shall be void and the Company agrees it will not effect such
a transfer nor will it treat any alleged transferee as the holder of such shares
without the written consent of a majority in interest of the Investors.
(j) Each certificate representing shares of Capital Stock
of the Company now or hereafter owned by each Investor or issued to any person
in connection with a
25
transfer pursuant to Subsections 2.8(d) and (i) hereof shall be endorsed with
the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS
OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(k) Each Investor agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in subsection 2.8(j) above to
enforce the provisions of this Agreement and the Company agrees to promptly do
so. The legend shall be removed upon termination of this Agreement.
(l) Each Original Series G/H Participant (as defined below)
shall have the right (the "Original Series G/H Participation Right") to transfer
to the purchaser and any Section 2.5 Rights Holders who have exercised the Right
of First Offer set forth in Section 2.5 above, Original Series G/H Registrable
Securities pro rata according to the respective Original Series G/H Pro Rata
Percentage Amounts (as defined below) of the Original Series G/H Participants
who exercise the Original Series G/H Participation Right with respect to such
transfer. The Original Series G/H Participation Right of each holder of
Original Series G/H Registrable Securities shall terminate when the aggregate
amount of the proceeds received by Original Series G/H Participants in respect
of Original Series G/H Registrable Securities that all Original Series G/H
Participants have included in Transfers pursuant to this subsection 2.8(l)
(regardless of whether such holders have exercised such right) is at least equal
to the aggregate principal amount of, and accrued but unpaid interest on, the
IWCH/PWH Notes exchanged for Series G and Series H Preferred Stock pursuant the
Exchange Agreement. The Original Series G/H Participation Right may be
exercised prior to and in preference over any Participation Right in subsection
2.8(b) hereof. For purposes of this subsection 2.8(l):
(i) "Original Series G/H Participant" means any holder of
Original Series G/H Registrable Securities;
(ii) "Original Series G/H Pro Rata Percentage Amount" for
any Original Series G/H Participant means the fraction, the numerator of which
is the number of Original Series G/H Registrable Securities owned by such
participant at the time of the Transfer and the denominator of which is the
total number of Original Series G/H Registrable Securities held by all Original
Series G/H Participants at such time; and
(iii) "Original Series G/H Registrable Securities" means (A)
all shares of Series G and Series H Preferred Stock that were acquired by the
holder thereof (or an Affiliate of such holder) pursuant to Sections 2, 2A or 3
of the Exchange Agreement and not
26
transferred to any third party (other than an Affiliate of such holder), (B) all
shares of Series G and Series H Preferred Stock held by such holder (or an
Affiliate thereof) and issued upon the conversion of any shares of Series G or
Series H Preferred Stock described in clause (A) above and (C) all shares of
Common Stock held by such holder (or an Affiliate thereof) and issued or
issuable upon conversion of such shares of Series G and Series H Preferred Stock
described in clause (A) or clause (B).
2.9. STOCK PURCHASES BY EMPLOYEES, OFFICERS, DIRECTORS AND
CONSULTANTS. Each employee who purchases any of the shares of the Company's
Common Stock that are subject to vesting and are reserved for issuance to
officers and employees of the Company shall execute and deliver to the Company
an employee stock purchase agreement committing each such person to resell to
the Company at the original purchase price thereof all shares of the Company's
Common Stock that are not vested on the date of termination of such employee's
term of employment with the Company, and restricting each such person from
transferring any unvested shares of the Company's Common Stock to any person
except to members of his or her immediate family or to a trust for the benefit
of members of his or her immediate family.
2.10. ADDITIONAL LIQUIDITY RIGHTS. Each Investor with a
representative on the Board shall cause such representative to take all steps
necessary to cause the Board to maintain a committee of the Board (the
"Committee") consisting of a representative of the Board designated by Vanguard
(as long as Vanguard or Affiliate thereof owns not less than fifty percent (50%)
of the shares of Series C Preferred Stock it holds as of the date hereof (or an
equivalent amount of Common Stock issued upon conversion thereof)), a Series F
Director (but only so long as the holders of Series F-1 Preferred stock shall be
entitled to elect the Series F Directors pursuant to subsection V.B.6(b) of the
Restated Certificate), which shall be the Electra Director, if any, a
representative of the Board designated by the other outside investors and a
representative of the Company's Executive Management. (If Vanguard shall at any
time fail the ownership requirements set forth in the preceding sentence, the
Board at its sole discretion may elect to the Committee a representative of the
Board not designated by Vanguard.) The Committee shall, from time to time at
the request of any member, consult with an investment banking firm of recognized
national standing that is unaffiliated with the Committee members. The
Committee shall request such investment banking firm to thereafter make a formal
presentation to the Committee as to the commercial reasonableness of proceeding
with an initial public offering of the Company's Common Stock ("IPO") in light
of then prevailing market conditions and the condition and performance of the
Company. Based on the recommendation of such investment banking firm, the
Committee shall make a recommendation to the full Board about proceeding with an
IPO. If the Board approves proceeding with an IPO, the Company shall, subject
to the rights of the Series F Holders under the Series F Registration Rights
Agreement, use commercially reasonable efforts to proceed with an IPO unless
three directors vote to oppose proceeding with the IPO. In such event, the
Company shall submit to binding arbitration to be completed within 30 days
whether it is commercially feasible to proceed with an IPO. Such arbitration
shall be conducted in accordance with the procedures set forth in Section 8.3 of
the Reorganization Agreement. The arbitrators shall be representatives of
nationally known investment banking firms unaffiliated with the Company. Upon a
finding of
27
commercial feasibility, the Company shall, subject to the rights of the Series F
Holders under the Series F Registration Rights Agreement, use commercially
reasonable efforts to proceed with an IPO. If no IPO occurs by December 31,
1996, the Committee shall then explore in good faith other means to provide
liquidity for all outside investors. The Committee shall again consult with an
investment banking firm of recognized national standing that is unaffiliated
with any of the Committee members and request such investment banking firm to
submit a written report to the Committee regarding liquidity alternatives,
including the sale of the Company, the repurchase of the Company's stock by all
electing investors and any other commercially feasible liquidity strategies.
2.11. TERMINATION OF CERTAIN COVENANTS. The covenants set
forth in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6(a), 2.7, 2.8, 2.9, and 2.10 shall
terminate and be of no further force or effect upon the consummation of a
Threshold Public Offering.
2A. TORONTO DOMINION REGULATORY COMPLIANCE.
2A.1 VIOLATION OF BHCA OR SBIA. If Toronto Dominion or an
affiliate of Toronto Dominion determines that it has a BHCA Issue (as defined
below) or an SBIC Issue (as defined below), the Company and all other Investors
agree to take all such actions as are reasonably requested by Toronto Dominion
or such affiliate in order to, at the option of Toronto Dominion or such
affiliate, either (a) permit Toronto Dominion or such affiliate to convert all
or any portion of any shares of Series F-1 Preferred Stock held by Toronto
Dominion or its affiliate into an equal number of shares of Series F-2 Preferred
Stock (which Series F-2 Preferred Stock shall be convertible back into Series
F-1 Preferred Stock on such terms as may be permitted by regulatory
considerations then prevailing) or (b) effectuate and facilitate a Transfer by
Toronto Dominion or such affiliate of all or a part of its interest in the
Company to a person or entity designated by Toronto Dominion or such affiliate,
provided that such assignment or transfer is in compliance with applicable
federal and state securities laws and the assignee or transferee agrees to be
bound by the Agreement.
2A.2 SBIC REQUIREMENTS.
(a) The Company and each Investor hereby agree to take all
action and execute all such instruments as may be reasonably required by Toronto
Dominion or its permitted assignee or transferee, in either case which may
hereafter become (or which is expected by Toronto Dominion to become) a small
business investment company (an "SBIC") subject to the SBIC Requirements, so
that such SBIC shall be entitled to legally hold its shares of Capital Stock of
the Company as a small business investment company under the SBIC Requirements.
Such actions shall be taken at the reasonable request of Toronto Dominion or
such affiliate within a reasonable time in advance of the earlier of (i) Toronto
Dominion or such affiliate becoming an SBIC or (ii) Toronto Dominion assigning
or transferring the shares of Capital Stock in the Company held by it to an SBIC
or an affiliate of Toronto Dominion which is expected by Toronto Dominion to
become an SBIC.
(b) Such actions referred to in clause (a) above shall include,
without limitation, an amendment to this Agreement providing for (i) the
provision of financial statements
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and other information by the Company as required by and on forms specified by
SBIC Requirements (including information with respect to the Company's use of
proceeds and to confirm the Company's size for purposes of eligibility under the
SBIC Requirements), (ii) in the event that the SBIC Requirements are not met for
such SBIC to legally hold such Capital Stock (including, without limitation, as
a result of a diversion of the proceeds from the reported use thereof or a
change in the Company's business activities), the SBIC's right to put its shares
of Capital Stock of the Company back to the Company for prompt payment at the
original purchase price of such shares and (iii) such other representations,
warranties and covenants for the benefit of such SBIC as may be reasonably
required by the SBIC Requirements. Notwithstanding any other provision of this
Agreement, SBIC's right under clause (ii) of the first sentence of this Section
2A.2(b) shall arise solely if (i) the Company shall become an ineligible
investment for SBIC (within the meaning of the SBIC Requirements) as a result of
(A) changing its business activity (within the meaning of the SBIC Requirements)
from that contemplated by the Memorandum or (B) using the proceeds from the sale
of Series F Preferred Stock pursuant to the Series F Purchase Agreement in a
manner different than that contemplated by the Memorandum (as defined in the
Series F Purchase Agreement) and the Series F Purchase Agreement and (ii) as a
result of such change in business activity or use of proceeds, SBIC would
violate the SBIC Requirements by maintaining its investment in the Company. In
addition, before exercising its rights under clause (ii) of the first sentence
of this Section 2A.2(b), SBIC shall use commercially reasonable efforts to
obtain approval of the Small Business Administration to permit it to maintain
its investment in the Company notwithstanding such change in business activity.
2A.3 ACQUISITION OF SECURITIES. Notwithstanding anything
contained in this Agreement to the contrary, Toronto Dominion shall not be
entitled to acquire any shares of Capital Stock of the Company hereunder,
including, without limitation, under Sections 2.3 and 2.5, if the acquisition of
such shares would cause Toronto Dominion to hold shares of Capital Stock in the
Company in excess of the amount permitted under the Bank Holding Company Act (as
defined below).
2A.4 BHCA ISSUE, SBIC ISSUE AND SBIC REQUIREMENTS DEFINED.
(a) For purposes of this Agreement, a "BHCA Issue" means any
facts or circumstances under which Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Bank Holding
Company Act of 1956, as amended from time to time (and any successor law
thereto), or the rules and regulations promulgated from time to time thereunder
(collectively, the "Bank Holding Company Act"), or any assertion by any
governmental regulatory agency that Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Bank Holding
Company Act by virtue of Toronto Dominion or an affiliate of Toronto Dominion
holding, or exercising any significant right with respect to, any Capital Stock
of the Company.
(b) For purposes of this Agreement, an "SBIC Issue" means any
facts or circumstances under which Toronto Dominion or an affiliate of Toronto
Dominion is or may be in violation or potential violation of the Small Business
Investment Act of 1958, as amended from time to time (and any successor law
thereto), or the rules and regulations promulgated thereunder
29
(collectively, the "Small Business Investment Act"), or any assertion by the
U.S. Small Business Administration or other governmental agency that Toronto
Dominion or an affiliate of Toronto Dominion is or may be in violation or
potential violation of the Small Business Investment Act or other laws or
regulations pertaining to small business investment companies by virtue of
Toronto Dominion or an affiliate of Toronto Dominion holding, or exercising any
significant right with respect to, any Capital Stock of the Company.
(c) For purposes of this Agreement, "SBIC Requirements" means
all of the requirements of the Small Business Investment Act relating to small
business investment companies and investments by small business investment
companies as in effect on the date hereof or as they may be amended or
supplemented from time to time.
3. MISCELLANEOUS.
3.1. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
3.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5. NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by at least ten (10) days' advance written notice to
the other parties.
3.6. EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
30
3.7. AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
seventy-five percent (75%) of the then outstanding Registrable Securities and
Holders (as defined in the Registration Rights Agreement) of a majority of the
Series F Registrable Securities and a majority of the Series G/H Registrable
Securities (as defined in the Registration Rights Agreement). Any amendment or
waiver effected in accordance with this Section 3.7 shall be binding upon each
Holder of any Registrable Securities, Series F Registrable Securities or
Series G/H Registrable Securities then outstanding, each future Holder of all
such Registrable Securities or the Series F Registrable Securities, and the
Company. Notwithstanding the foregoing, (i) the rights of Section 2.5
Stockholders pursuant to Section 2.5 hereof, (ii) the rights of Investors
pursuant to Section 2.7 hereof and (iii) the rights of Investors pursuant to
Section 2.10 hereof may not be amended without the written consent of Holders of
a majority of the Registrable Securities and seventy-five percent (75%) of the
Series F Registrable Securities and seventy-five percent (75%) of the Series G/H
Registrable Securities then held by the Section 2.5 Stockholders in the case of
clause (i) hereof, each Holder of at least 80,000 Registrable Securities in the
case of clause (ii) hereof, and Holders of a majority of the Registrable
Securities and Other Registrable Securities in the case of clause (iii) hereof.
By executing this Agreement, an Existing Investor hereby consents to amending
and restating the Prior Agreement in its entirety as set forth herein upon the
effectiveness of this Agreement and to waive any rights that would otherwise
arise under the Prior Agreement by virtue of the transactions contemplated by
the Loan Agreements.
3.8. SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9. AGGREGATION OF STOCK. All shares of Registrable Securities
and Other Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
3.10. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
hereby amends and restates the Prior Agreement in its entirety and any other
previous agreements among any of the parties hereto with respect to the subject
matter of this Agreement, and any such previous agreements shall be of no
further force and effect.
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IN WITNESS WHEREOF, the parties have executed this Fifth Amended and
Restated Investor Rights Agreement as of the date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: Executive Vice President
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Address: 000 Xx. Xx Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
INVESTOR
By:
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Name:
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Title:
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Address:
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
