1
(Exhibit 1)
INVESTMENT AGREEMENT
Investment Agreement dated December 22, 1998 (this "Agreement"), among
Davel Communications, Inc., a Delaware corporation (the "Company"), Samstock,
L.L.C., a Delaware limited liability company, and EGI-Davel Investors, L.L.C., a
Delaware limited liability company (collectively, "Investor"), Xxxxx X. Xxxx, an
individual residing in the State of Florida ("Shareholder") and, solely for
purposes of consenting to the amendment and restatement of the Original
Agreement (as defined below), Davel Communications Group, Inc., an Illinois
corporation ("Old Davel"). Investor, Shareholder and Old Davel are parties to
an Investment Agreement dated as of June 29, 1998 (the "Original Agreement").
The parties desire to amend and restate the Original Agreement as set forth
herein for the purpose, among others, of substituting the Company for Old Davel
for all purposes of the Original Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Investor and Old Davel are parties to a Stock Purchase Agreement
dated May 14, 1998 (the "Company Stock Purchase Agreement") pursuant to which,
among other things, the Company issued and sold, and Investor purchased from the
Company, 1,000,000 shares of common stock, no par value, of Old Davel ("Old
Davel Common Stock");
WHEREAS, Investor and Shareholder are parties to a Stock Purchase agreement
dated May 14, 1998 (the "Shareholder Stock Purchase Agreement") pursuant to
which, among other things, Shareholder has sold, and Investor purchased from
Shareholder, 500,000 shares of Old Davel Common Stock;
WHEREAS, Investor and certain directors and members of management of the
Company (the "Management Shareholders") are parties to a Stock Purchase
Agreement pursuant to which, among other things, the Management Shareholders
sold, and Investor purchased from the Management Shareholders, 123,900 shares of
Common Stock (such Stock Purchase Agreement, together with the Company Stock
Purchase Agreement and the Shareholder Stock Purchase Agreement, the "Stock
Purchase Agreements");
WHEREAS, the closing of the transactions contemplated by each of the Stock
Purchase Agreements occurred concurrently with the execution and delivery of the
Original Agreement;
WHEREAS, concurrently with the execution and delivery of the Original
Agreement, Investor and Shareholder executed and delivered a Shareholders
Agreement of even date therewith (the "Shareholders Agreement");
WHEREAS, the Company Stock Purchase Agreement and the Shareholder Stock
Purchase Agreement require that the Original Agreement be executed and delivered
by the Company, Investor and Shareholder at or prior to the closing of the
transactions contemplated by such agreements; and
WHEREAS, as of the date of this Agreement, Old Davel has consummated a
business combination (the "Business Combination") pursuant to which it has
become an indirect, wholly owned subsidiary of the Company, all of the
outstanding shares of Old Davel Common Stock have been exchanged for shares of
common stock, par value $.01 per share, of the Company (the "Common Stock") and
the Company has succeeded to the business of Old Davel.
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(Exhibit 1)
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Affiliate" means, with respect to any person, any other person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such first person. As used in
this definition "control" (including, with correlative meanings, "controlled by"
and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies, whether through the ownership of securities or partnership or other
ownership interests, by contract or otherwise.
1.2 The terms "beneficial ownership," "person" and "group" shall have
the respective meanings ascribed to such terms pursuant to Regulation 13D-G
adopted by the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date hereof. The term "affiliate" shall have the meaning ascribed to
such term pursuant to Rule 12b-2 under the Exchange Act, as in effect on the
date hereof.
1.3 The "Combined Voting Power" at any measurement date shall mean the
total number of votes which could have been cast in an election of directors of
the Company had a meeting of the shareholders of the Company been duly held
based upon a record date as of the measurement date if all Company Voting
Securities then outstanding and entitled to vote at such meeting were present
and voted to the fullest extent possible at such meeting.
1.4 "Company Voting Securities" shall mean, collectively, Common Stock
(or any other security into which Common Stock is exchanged or converted), any
preferred stock of the Company (or any successor to the Company) that is
entitled to vote generally for the election of directors, any other class or
series of Company securities (or securities of any successor to the Company)
that is entitled to vote generally for the election of directors and any other
securities, warrants, options or rights of any nature (whether or not issued by
the Company or any successor to the Company) that are convertible into,
exchangeable for, or exercisable for the purchase of, or otherwise give the
holder thereof any rights in respect of, Common Stock (or any other security
into which Common Stock is exchanged or converted), preferred stock of the
Company (or any successor to the Company) that is entitled to vote generally for
the election of directors of the Company or any successor thereto, or any other
class or series of Company securities that is entitled to vote generally for the
election of directors of the Company or any successor thereto.
1.5 "Disinterested Director" means Independent Directors who, with
respect to any contract or transaction being considered or voted upon by the
Company's Board of Directors, have no financial interest in such contract or
transaction, either directly or by virtue of serving as an officer or director
of any other corporation, partnership, association or other organization that is
a party to such contract or transaction; provided, however, an Independent
Director shall not be deemed to have a financial interest in any contract or
transaction by virtue of holding Common Stock or options to acquire Common
Stock.
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(Exhibit 1)
1.6 "Effective Date" means the date of this Agreement.
1.7 "Independent Director" means a director of the Company who (i) is
not a current or former employee or officer of the Company, (ii) is not serving
as a designee of Investor or Shareholder pursuant to Section 4.3 or 4.4 hereof,
and (iii) does not beneficially own 5% or more of any class of capital stock of
the Company.
1.8 "Investor Group" means (i) Investor, (ii) any member of Investor
and (iii) any Affiliate of Investor (other than the Company) or any member of
Investor; provided, however, that publicly-held entities that would otherwise
fall within this definition (a "Public Investor Affiliate") shall not be treated
as members of the Investor Group hereunder unless any member of the Investor
Group (which, for purposes hereof, shall exclude such publicly-held entity) took
any action, directly or indirectly, to assist, encourage or induce such entity
in taking the relevant action to be attributed to the Investor Group hereunder.
1.9 "Shareholder Group" means (i) Shareholder and (ii) any Affiliate or
Shareholder Family Entity (as defined in the Shareholder's Agreement) of
Shareholder (other than the Company).
1.10 "Shares" means all shares of Company Voting Securities, whether now
owned or hereafter acquired.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Investor represents and warrants to the Company and Shareholder as
follows:
(a) Investor is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Investor has the requisite power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) This Agreement has been duly authorized by all necessary action on
the part of Investor, duly executed and delivered by Investor and constitutes
the legal, valid and binding obligation of Investor, enforceable against it in
accordance with its terms hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance by Investor of its obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under (i) the organizational documents of Investor, or (ii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Investor or its properties or assets, other than, in the case of clause (ii),
any such conflicts, violations or defaults that, individually or in the
aggregate, would not prevent Investor from performing its obligations under this
Agreement in any material respect.
(d) As of the date hereof, Investor beneficially owns the number of
Shares set forth opposite Investor's name on Exhibit A to the Shareholders
Agreement.
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(Exhibit 1)
2.2 Shareholder represents and warrants to the Company and Investor as
follows:
(a) This Agreement has been duly authorized by all necessary action on
the part of Shareholder, duly executed and delivered by Shareholder and
constitutes a valid and binding obligation of Investor, enforceable against him
in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
performance by Shareholder of his obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse or time,
or both) under any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Shareholder or his properties or assets, other than any
such conflicts, violations or defaults that, individually or in the aggregate,
would not prevent Shareholder from performing his obligations under this
Agreement in any material respect.
(c) As of the date hereof (and giving effect to the closing of the
transactions contemplated by the Shareholder Stock Purchase Agreement),
Shareholder beneficially owns the number of Shares and options to purchase
Shares that are set forth opposite Shareholder's name on Exhibit A to the
Shareholders Agreement.
2.3 The Company represents and warrants to Investor and Shareholder as
follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized.
The Company has the requisite power and authority to enter into this Agreement
and perform its obligations hereunder.
(b) This Agreement has been duly authorized by all necessary action on
the part of the Company, duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
it in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder will conflict with, or
result in any violation of, or default (with or without notice or lapse or time,
or both) under any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets, other than any
such conflicts, violations or defaults that, individually or in the aggregate,
would not prevent the Company from performing its obligations under this
Agreement in any material respect.
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(Exhibit 1)
ARTICLE III
STANDSTILL AGREEMENT
3.1 Acquisition of Company Voting Securities. Except as the same may
be approved by a majority of the Disinterested Directors in a specific
resolution to that effect adopted prior to the taking of such action, prior to
the third anniversary of the date of the Original Agreement, neither the
Investor Group nor the Shareholder Group shall, directly or indirectly, acquire,
offer to acquire, agree to acquire, make any proposal to acquire, become the
beneficial owner of or obtain any rights in respect of any Company Voting
Securities, by purchase or otherwise, or take any action in furtherance thereof,
if the effect of such acquisition, agreement or other action would be (either
immediately or upon consummation of any such acquisition, agreement or other
action, or expiration of any period of time provided in any such acquisition,
agreement or other action) to increase the aggregate beneficial ownership of
Company Voting Securities by the Investor Group or the Shareholder Group to such
number of Company Voting Securities that represents or possesses greater than
33.7 percent of the Combined Voting Power, in the case of the Investor Group,
and 37.0 percent of the Combined Voting Power of all Company Voting Securities,
in the case of the Shareholder Group. Notwithstanding the foregoing maximum
limitations, (a) no member of the Investor Group or the Shareholder Group shall
be obligated to dispose of any Company Voting Securities beneficially owned that
exceed such maximum limitations if, and solely to the extent that, its
beneficial ownership is or will be increased solely as a result of (i) a
repurchase of any Company Voting Securities by the Company or any of its
subsidiaries if such repurchase was approved by a majority of the Disinterested
Directors or (ii) in the case of any member of the Investor Group, the purchase
of Company Voting Securities by any Public Investor Affiliate unless any member
of the Investor Group took any action, directly or indirectly, to assist,
encourage or induce such Public Investor Affiliate to make such purchase and (b)
the foregoing shall not prohibit any purchase of Company Voting Securities
directly from the Company pursuant to the exercise of any rights, over
subscription rights or standby purchase obligations in connection with rights
offerings by the Company or exercise of any stock options granted by the Company
or pursuant to any rights set forth in the Shareholders Agreement. For purposes
of calculating the maximum limitations specified above, all Company Voting
Securities that are the subject of an agreement, arrangement or understanding
pursuant to which the Investor Group (or any member thereof) or the Shareholder
Group (or any member thereof) has the right to obtain beneficial ownership of
such securities in the future shall also be deemed to be outstanding and
beneficially owned by the Investor Group (or the applicable member thereof) or
the Shareholder Group (or the applicable member thereof), respectively.
3.2 Proxy Solicitations, Etc. Prior to the third anniversary of the
date of the Original Agreement, no member of the Investor Group or the
Shareholder Group shall, in any way, participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in Regulation 14A
promulgated under the Exchange Act) to vote or consent with respect to any
Company Voting Securities or become a "participant" in an "election contest" (as
such terms are used in Rule 14a-11 under the Exchange Act) with respect to the
Company, except, in each case, with the prior approval of the Disinterested
Directors; provided, however, that members of the Shareholder Group may
participate in the solicitation of proxies with respect to matters recommended
by the Company's Board of Directors.
3.3 No Groups, Voting Trusts, Etc. Except as the same may be approved
by a majority of the Disinterested Directors in a specific resolution to that
effect adopted prior to the taking of
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(Exhibit 1)
such action, prior to the third anniversary of the date of the Original
Agreement, neither the Investor Group nor the Shareholder Group shall (a) form,
join in or participate in the formation of a group with respect to any Company
Voting Securities, other than (i) in the case of the Investor Group, a group
consisting solely of the members of the Investor Group, (ii) in the case of the
Shareholder Group, a group consisting solely of the members of the Shareholder
Group, and (iii) any group that may be deemed to exist by virtue of the
Shareholders Agreement; or (b) deposit any Company Voting Securities into a
voting trust or subject any Company Voting Securities to any arrangement or
agreement with respect to the voting thereof, other than (i) the Shareholders
Agreement, (ii) in the case of the Investor Group, any such trust, arrangement
or agreement the only parties to, or beneficiaries of, which are members of the
Investor Group or Permitted Transferees (as defined in the Shareholders
Agreement) of Investor and (iii) in the case of the Shareholder Group, any such
trust, arrangement or agreement the only parties to, or beneficiaries of, which
are members of the Shareholder Group or Permitted Transferees of Shareholder.
3.4 No Solicitation of Bidders. Prior to the third anniversary of the
date of the Original Agreement, neither the Investor Group nor the Shareholder
Group shall, directly or indirectly, assist, encourage or induce any other
person to bid for or acquire outstanding Company Voting Securities in any
transaction or series of related transactions, unless the consummation of such
transaction or series of related transactions requires approval of a majority of
the Board of Directors.
3.5 Non-Circumvention. Except as the same may be approved by a
majority of the Disinterested Directors in a specific resolution to that effect
adopted prior to the taking of such action, prior to the third anniversary of
the date of the Original Agreement, neither the Investor Group nor the
Shareholder Group shall take any action, alone or in concert with any other
person to circumvent the limitations set forth in Sections 3.1, 3.2, 3.3 and 3.4
of this Agreement.
3.6 Investor Nominees. If, for any reason, (i) any person designated
by Investor as a director of the Company pursuant to Article IV hereof is not
nominated by the Company's Board of Directors for election to the Company's
Board of Directors or the Company's Board of Directors does not recommend such
person to serve as a director of the Company, or (ii) the Board of Directors of
the Company shall change the size of the Board of Directors of the Company from
eight directors (or from seven directors after such time as Xxxxxx Xxxxxxxxx no
longer serves as a director) at such time as Investor is entitled to designate
two directors of the Company's Board of Directors in accordance with the
provisions of Section 4.3 hereof or Shareholder is entitled to designate three
directors of such Board in accordance with Section 4.4 hereof, then, upon the
happening of such event, all of the provisions of this Article III shall lapse
and no longer be of any force or effect; provided, however, that the obligations
of a party under this Article III shall not lapse and cease to be of any force
or effect with respect to either the Investor Group or the Shareholder Group if
any of its respective members shall have breached any provision of this
Agreement and as a result thereof, one of the events described in clause (i) or
(ii) above shall have occurred.
3.7 Shareholder Nominees. If, for any reason, (i) any person
designated by Shareholder as a director of the Company pursuant to Article IV
hereof is not nominated by the Company's Board of Directors for election to the
Company's Board of Directors or the Company's Board of Directors does not
recommend such person to serve as a director of the Company, or (ii) the Board
of Directors of the Company shall change the size of the Board of Directors of
the Company from eight directors (or from seven directors after such time as
Xxxxxx Xxxxxxxxx no
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(Exhibit 1)
longer serves as a director) at such time as Investor is entitled to designate
two directors of the Company's Board of Directors in accordance with the
provisions of Section 4.3 hereof or Shareholder is entitled to designate three
directors of such Board in accordance with Section 4.4 hereof, then, upon the
happening of such event, all of the provisions of this Article III shall lapse
and no longer be of any force or effect; provided, however, that the obligations
of a party under this Article III shall not lapse and cease to be of any force
or effect with respect to either the Investor Group or the Shareholder Group if
any of its respective members shall have breached any provision of this
Agreement and as a result thereof, one of the events described in clause (i) or
(ii) above shall have occurred.
3.8 Acquisitions by Investor. Prior to the later of (i) such time as
Investor no longer has any rights under Section 4.3 or (ii) the third
anniversary of the date of the Original Agreement, the Investor Group shall not
solicit, encourage, enter into substantive discussions or negotiations with
respect to, or effect any acquisition of any entity the principal business of
which is the operation of a network of payphones or of any material amount of
assets of any such entity; provided, however, that (i) the Investor Group may
solicit, encourage or enter into discussions or negotiations of which the
Company is generally aware with respect to any such acquisition with the intent
of effecting such acquisition through the Company and (ii) the Investor Group
shall not be prohibited from purchasing and owning equity securities of any such
entity so long as such securities in the aggregate represent no more than five
percent of the outstanding equity securities of such entity. Investor
represents and warrants that from May 14, 1998 through the date of the Original
Agreement, the Investor Group did not solicit, encourage or enter into
substantive discussions or negotiations with respect to any such acquisition
except with the intent of effecting such acquisition through the Company.
ARTICLE IV
VOTING OF COMPANY VOTING SECURITIES AND RELATED MATTERS
-------------------------------------------------------
4.1 Shareholder Meetings. So long as Shareholder is entitled to
designate three directors of the Company's Board of Directors in accordance with
Section 4.4 hereof, each member of the Investor Group that is a holder of record
of Company Voting Securities shall be present, and each member of the Investor
Group that is a beneficial owner of Company Voting Securities shall cause the
holder of record of such Company Voting Securities to be present, in person or
by proxy, at all meetings of shareholders of the Company so that all Company
Voting Securities owned of record or beneficially by the Investor Group may be
counted for the purpose of determining the presence of a quorum at such
meetings. So long as Investor is entitled to designate two directors of the
Company's Board of Directors in accordance with Section 4.3 hereof, each member
of the Shareholder Group that is a holder of record of Company Voting Securities
shall be present, and each member of the Shareholder Group that is a beneficial
owner of Company Voting Securities shall cause the holder of record of such
Company Voting Securities to be present, in person or by proxy, at all meetings
of shareholders of the Company so that all Company Voting Securities owned of
record or beneficially by the Shareholder Group may be counted for the purpose
of determining the presence of a quorum at such meetings.
4.2 Election of Board of Directors. (a) So long as Investor is
entitled to designate two directors of the Company's Board of Directors in
accordance with the provisions of Section 4.3 hereof, except to the extent
otherwise provided herein, the Company shall take all reasonably necessary or
appropriate action to assist in the nomination and election as directors of the
two individuals designated by Investor to be elected as directors of the
Company.
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(Exhibit 1)
(b) So long as Shareholder is entitled to designate three
directors of the Company's Board of Directors in accordance with the provisions
of Section 4.4 hereof, except to the extent otherwise provided herein, the
Company shall take all reasonably necessary or appropriate action to assist in
the nomination and election as directors of the three individuals specified in
Section 4.4 below designated by Shareholder to be elected as directors of the
Company.
(c) So long as Investor is entitled to designate two directors of
the Company's Board of Directors in accordance with the provisions of Section
4.3 hereof or Shareholder is entitled to designate three directors of such Board
pursuant to Section 4.4 hereof, none of Investor, Shareholder or the Company
shall take any action to decrease the size of such Board to less than eight
directors (or from seven directors at such time as Xxxxxx Xxxxxxxxx no longer
serves as a director) or to increase the size of such Board to more than eight
directors (or from seven directors at such time as Xxxxxx Xxxxxxxxx no longer
serves as a director).
(d) So long as Shareholder, individually, or Shareholder and
Investor, acting jointly, are entitled to designate three Independent Directors
(or two Independent Directors at such time as Xxxxxx Xxxxxxxxx no longer serves
as a director) in accordance with the provisions of Section 4.5 hereof, except
to the extent otherwise provided herein, the Company shall take all necessary or
appropriate action to assist in the nomination and election as directors of the
two persons designated by Shareholder or Shareholder and Investor, as the case
may be, to be elected as Independent Directors.
(e) So long as Investor is entitled to designate two directors of
the Company's Board of Directors in accordance with the provisions of Section
4.3 hereof (each such director, an "Investor Designee") and Shareholder is
entitled to designate three directors of the Company's Board of Directors in
accordance with Section 4.4 hereof (each such director, a "Shareholder
Designee"), each committee of the Board of Directors shall consist of at least
three directors, and (other than any committee consisting entirely of
Independent Directors and other than the Executive Committee) shall include no
more than one Investor Designee and no more than one Shareholder Designee. The
Executive Committee shall include no more than one Investor Designee, but may
include more than one Shareholder Designee.
4.3 Investor Board Nominees. So long as the Investor Group
beneficially owns at least 10% of the Combined Voting Power of all Company
Voting Securities, Investor shall have the right to designate two directors of
the Company; provided, however, that at such time as the Investor Group shall no
longer beneficially own at least 10% of the Combined Voting Power of all Company
Voting Securities, (i) Investor shall cease to have the right to designate any
directors of the Company, (ii) Investor's rights under this Article IV shall
terminate and (iii) Investor shall cause its two designees to resign from the
Board of Directors of the Company.
4.4 Shareholder Board Nominees. So long as the Shareholder Group
beneficially owns at least 10% of the Combined Voting Power of all Company
Voting Securities, Shareholder shall have the right to designate three directors
of the Company; provided, however, that at such time as the Shareholder Group
shall no longer beneficially own at least 10% of the Combined Voting Power of
all Company Voting Securities, (i) Shareholder shall cease to have the right to
designate any directors of the Company, (ii) Shareholder's rights under this
Article IV shall terminate and (iii) Shareholder shall cause its three designees
to resign from the Board of Directors of the Company.
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(Exhibit 1)
4.5 Independent Directors. Prior to the first anniversary of the date
of the Original Agreement, Shareholder shall be entitled to designate two
persons to be elected as Independent Directors, provided that such designees are
reasonably acceptable to Investor (it being understood that at least one
non-employee director of the Company holding such position as of May 14, 1998
shall be acceptable to Investor). Following the first anniversary of the date
of the Original Agreement, Investor and Shareholder shall jointly designate the
two persons to be elected as Independent Directors. Investor and Shareholder
shall cause their designees on the Board of Directors of the Company to take all
reasonably necessary or appropriate action to assist in the nomination and
election as directors of all such nominees as may be selected to serve as
Independent Directors in the manner described above. From and after the date of
this Agreement and until the first anniversary of the date of this Agreement,
Xxxxxx Xxxxxxxxx will serve as a third Independent Director as a designee of UBS
Capital II LLC.
ARTICLE V
REGISTRATION RIGHTS
5.1 Definitions. For purposes of this Article V:
(a) The term "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act").
(b) The term "Registrable Securities" means shares of Common Stock
held, from time to time, by any member of the Investor Group.
(c) The term "Holder" means any member of the Investor Group or (other
than for purposes of Section 5.2) the Shareholder Group that owns of record
Registrable Securities.
(d) The term "Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Act.
(e) The term "Shelf Registration Statement" means a registration
statement intended to effect a shelf registration in connection with a Rule 415
Offering.
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(Exhibit 1)
5.2 Shelf Registrations. No later than ninety (90) days after the
Company becomes eligible to use Form S-3 under the Act to register Shares for
resale by shareholders, the Company shall, upon the written request of Investor,
prepare and file with the SEC a Shelf Registration Statement (which shall
include pledgees of any selling shareholder under the caption "plan of
distribution" contained in such Shelf Registration Statement) with respect to
all Shares acquired by Investor pursuant to the Purchase Agreements and use its
reasonable efforts to cause such Shelf Registration Statement to become
effective and keep such registration statement effective until such time as such
Shares have been sold or disposed of thereunder or sold, transferred or
otherwise disposed of (other than pursuant to a pledge of such Registrable
Securities) to a person that is not a Holder. Notwithstanding the foregoing, if
the Company shall furnish to Investor a certificate signed by the Chief
Executive, Chief Operating, or Chief Financial Officer of the Company stating
that, in the good faith judgment of a majority of the Disinterested Directors,
it would be materially detrimental to the Company for such registration
statement to be filed, the Company shall have the right to defer such filing for
a period of not more than 120 days after receipt of Investor's request;
provided, however, that the Company may not utilize this right more than once in
any 12-month period.
5.3 Incidental Registration. If the Company proposes to register any
of its voting securities ("Other Securities") for public sale under the
Securities Act, on a form and in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give prompt written notice to each Holder of its intention to do so, and upon
the written request of a Holder delivered to the Company within fifteen Business
Days after the giving of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof) the Company will use its best efforts to
effect, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Holder, to the extent required
to permit the disposition (in accordance with the intended method or methods
thereof as aforesaid) of the Registrable Securities so to be registered,
provided that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date
of the registration statement filed in connection with such registration,
the managing underwriters of such offering or offerings determine that the
aggregate amount of shares to be registered by the Holders of the
Registrable Securities could materially and adversely affect such offering,
then the Company may reduce the number of Registrable Securities of such
Holders to be included in such offering; provided, that such Holders will
be entitled to register the maximum number of Registrable Securities,
together with those shares of Common Stock held by any other person
exercising registration rights, which the underwriters deem advisable and
the Company will allocate the number of Registrable Shares to be registered
for each such Holder on a pro rata basis in accordance with the number of
shares each Holder initially requested to be sold;
(b) the Company shall not be required to effect any registration of
Registrable Securities under this Section 5.3 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option
or other employee benefit plans; and
(c) Holder, cumulatively, shall have the right to exercise
registration rights pursuant to this Section 5.3 without limit during the
term hereof.
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(Exhibit 1)
No registration of Registrable Securities effected under this Section 5.3 shall
relieve the Company of its obligation to effect registrations of Registrable
Securities pursuant to Section 5.2.
5.4 Additional Obligations of the Company. Whenever the Company is
required to effect a registration statement pursuant to Section 5.2 or 5.3, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered thereby.
(b) 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 covered by such
registration statement owned by them.
(c) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or other jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions where it is not so subject.
(d) 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, and then
use its best efforts to promptly correct such statement or omission.
Notwithstanding the foregoing and anything to the contrary set forth in this
Section 5.4, each Holder acknowledges that the Company shall have the right to
suspend the use of the prospectus forming a part of a registration statement if
such offering would interfere with a pending corporate transaction or for other
reasons until such time as an amendment to the registration statement has been
filed by the Company and declared effective by the SEC, or until such time as
the Company has filed an appropriate report with the SEC pursuant to the
Exchange Act. Each Holder hereby covenants that it will (a) keep any such
notice strictly confidential, and (b) not sell any shares of Common Stock
pursuant to such prospectus during the period commencing at the time at which
the Company gives the Holder notice of the suspension of the use of such
prospectus and ending at the time the Company gives the Holder notice that it
may thereafter effect sales pursuant to such prospectus. The Company shall only
be able to suspend the use of such prospectus for periods aggregating no more
than 90 days in respect of any registration.
5.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article V 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 and as may be required from time to time to keep such registration
current.
Page 22 of 60
12
(Exhibit 1)
5.6 Expenses of Registration. All expenses incurred by or on behalf of
the Company in connection with registrations, filings or qualifications pursuant
to Section 5.3 including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company. In no event shall the
Company be obligated to bear any underwriting discounts or commissions or
brokerage fees or commissions relating to Registrable Securities or the fees and
expenses of counsel to the selling Holders.
5.7 Indemnification. In the event registration of any Registrable
Securities hereunder:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder and the affiliates of such Holder, and their respective
directors, officers, general and limited partners, agents and representatives
(and the directors, officers, affiliates and controlling persons thereof), and
each other person, if any, who controls such Holder within the meaning of the
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, the Exchange 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 registration statement, including any preliminary prospectus (but only if
such statement is not corrected in the 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 (but only if such omission is not
corrected in the final prospectus), or (iii) any violation or alleged violation
by the Company in connection with the registration of Registrable Securities
under the Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, affiliate 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 Section 5.7(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
or on behalf of any such Holder or its Affiliates or controlling person. Each
indemnified party shall furnish such information regarding itself or the claim
in question as an indemnifying party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(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 Exchange 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
Page 23 of 60
13
(Exhibit 1)
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 Section 5.7(b) in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 5.7(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 such Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 5.7(b) exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
5.7 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 5.7, 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. The failure to deliver written notice to the
indemnifying party within a reasonable time after the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 5.7 to the extent of such prejudice, 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 5.7.
The indemnified party shall have the right, but not the obligation, to
participate in the defense of any action referred to above through counsel of
its own choosing and shall have the right, but not the obligation, to assert any
and all separate defenses, cross claims or counterclaims which it may have, and
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel has been
specifically authorized in advance by the indemnifying party, (ii) there is a
conflict of interest that prevents counsel for the indemnifying party from
adequately representing the interests of the indemnified party or there are
defenses available to the indemnified party that are different from, or
additional to, the defenses that are available to the indemnifying party, (iii)
the indemnifying party does not employ counsel that is reasonably satisfactory
to the indemnified party within a reasonable period of time, or (iv) the
indemnifying party fails to assume the defense or does not reasonably contest
such action in good faith, in which case, if the indemnified party notifies the
indemnifying party that it elects to employ separate counsel, the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the indemnified party and the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party; provided, however, that, the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to, to the extent
reasonably necessary to employ local counsel, one firm acting as local counsel)
for all indemnified parties.
(d) The obligations of the Company and the Holders under this Section
5.7 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article V.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Registrable Securities are in conflict with the foregoing provisions, the
provisions in such underwriting agreement shall control.
Page 24 of 60
14
(Exhibit 1)
5.8 Reports Under the Exchange Act. With a view to making available to
the holders the benefits of Rule 144 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) use its reasonable best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;
(b) use its reasonable best efforts to file with the SEC in a timely
manner all reports and other documents required under the Act and the Exchange
Act; and
(c) furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144, or as to whether it qualifies as a registrant whose securities may be
resold pursuant to Form S-3, (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 (and the Company shall take such
action) 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.
5.9 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Article V may only be
assigned by a Holder to a transferee or assignee of any Registrable Securities
if such transferee or assignee is a member of the Investor Group or the
Shareholder Group, as the case may be.
5.10 Waiver Procedures. The observance by the Company of any provision
of this Article V may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent of the
Holders of a majority of the Registrable Securities, and any waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities.
5.11 "Market Stand-off" Agreement. Any Holder of Registrable
Securities, if requested by an underwriter of any registered public offering of
Company securities being sold in a firm commitment underwriting, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other Company
Voting Securities) held by such Holder other than shares of Registrable
Securities included in the registration during the seven days prior to, and
during a period of up to 180 days following, the effective date of the
registration statement. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restriction until the end of the required stand-off period.
Page 25 of 60
15
(Exhibit 1)
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement; Certain Provisions Regarding Termination.
Unless this Agreement specifically provides for earlier or later termination
with respect to any particular right or obligation, this Agreement shall
terminate (a) in the case of the Investor Group, if the Investor Group
beneficially owns Company Voting Securities in the aggregate representing less
than 5% of the Combined Voting Power of all Company Voting Securities, and (b)
in the case of the Shareholder Group, if the Shareholder Group beneficially owns
Company Voting Securities in the aggregate representing less than 5% of the
Combined Voting Power of all Company Voting Securities.
6.2 Legend and Stop Transfer Order. To assist in effectuating the
provisions of this Agreement, each of Investor and Shareholder hereby consents
to the placement, in connection with the transactions contemplated by the
Purchase Agreement or otherwise within 10 business days after any Company Voting
Securities become subject to the provisions of this Agreement, of the legend set
forth below on all certificates representing ownership of Company Voting
Securities owned of record or beneficially by any member of the Investor Group
or the Shareholder Group, until such shares are sold, transferred or disposed in
a manner permitted hereby to a person who is not then a member of either such
group:
"The shares represented by this certificate have not been registered under
the Federal Securities Act of 1933, as amended (the "Act") or any state
securities laws of any jurisdiction. No sale, offer to sell, assignment,
pledge, hypothecation, gift, transfer or other disposition of the shares
represented by this certificate may be made unless a registration statement
under the Act with respect to such shares is then in effect or an exemption
from the registration requirements of the Act is available with respect to
said transfer and the requirements of applicable state laws are satisfied.
The sale, assignment, pledge, hypothecation, gift, transfer or other
disposition of the shares represented by this certificate is subject to
certain restrictions pursuant to an Investment Agreement dated December 22,
1998 and a Shareholders Agreement dated December 22, 1998, in each case, by
and among the Company and certain of its shareholders, copies of which may
be obtained from the Company upon request."
The Company agrees to remove promptly all legends and stop transfer orders with
respect to the transfer of Company Voting Securities being made to a person who
is not then a member of the Investor Group or the Shareholder Group in
compliance with the provisions of this Agreement.
6.3 Remedies.
(a) Each party recognizes and acknowledges that a breach by it of
Article III, Article IV or Article V of this Agreement would cause the other
parties to sustain damages for which they would not have an adequate remedy at
law for money damages, and therefore each party agrees that in the event of any
such breach any of the other parties shall be entitled to seek the remedy of
specific performance of such Article III, Article IV or Article V and injunctive
relief and other equitable relief in addition to any other remedy to which it
may be entitled, at law or in equity.
Page 26 of 60
16
(Exhibit 1)
(b) In addition to any other remedy the Company may have under this
Agreement or in law or equity, if any member of the Investor Group or the
Shareholder Group, as the case may be, shall acquire or transfer any Company
Voting Securities in violation of this Agreement, such Company Voting Securities
which are in excess of the number permitted to be owned or controlled by the
Investor Group or Shareholder Group, as the case may be, or which have been
transferred by a member of the Investor Group or the Shareholder Group in
violation of the provisions of this Agreement, will not be voted with respect to
any matter by such member either in person or by proxy.
6.4 Additional Investor Group Parties; Several Obligations. Each
member of the Investor Group or the Shareholder Group that shall become or have
the right to become the record owner of Company Voting Securities shall,
promptly upon becoming such record owner, execute and deliver to the Company a
joinder agreement, agreeing to be legally bound by the terms of this Agreement
to the same extent as if it had signed this Agreement as an original signatory
as Investor or Shareholder, as the case may be; provided that failure to execute
such an agreement
Page 27 of 60
17
shall not excuse such member's non-compliance with any provision of this
Agreement. No member of the Investor Group or the Shareholder Group shall
transfer securities to another member of its group unless the transferee shall
agree to be bound by this Agreement in the manner specified above in this
Section 7.4.
6.5 Notices. All notices, and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy, to
the appropriate address or telecopy number set forth below (or at such other
address or telecopy number for a party as shall be specified by like notice):
if to Investor:
Samstock, L.L.C.
Two X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: F. Xxxxxx Xxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Two X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: President
Telecopy Number: (000) 000-0000
if to the Company:
Davel Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: R. Xxxxx Xxxx
Telecopy Number: (000) 000-0000
with an additional copy to:
Davel Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxxx, Xx.
Telecopy Number: (000) 000-0000
Page 28 of 60
18
(Exhibit 1)
If to Shareholder:
Xxxxx X. Xxxx
0000 Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
6.6 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
6.7 Amendments; Waivers. (a) This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by each party
hereto.
(b) The failure of any party hereto to comply with any
representation, warranty, covenant or agreement contained in this Agreement may
be waived only by a written instrument signed by the party granting such waiver.
No action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained in this Agreement, and no failure by any party to take any
action with respect to any breach of this Agreement or default by any other
party shall constitute a waiver of such party's right to enforce any provision
hereof or to take any such action. The waiver by any party hereto of a breach
of any provision hereunder shall not operate as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
6.8 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Illinois regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
6.9 Interpretation. The headings contained in this Agreement are
inserted for convenience of reference only and shall not affect in anyway the
meaning or interpretation of this Agreement. All references to a Section,
Article, Schedule or Exhibit contained herein mean Sections, Articles, Schedules
or Exhibits of this Agreement unless otherwise stated. All capitalized terms
defined herein are equally applicable to both the singular and plural forms of
such terms.
Whenever the words "include", includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
6.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
6.11 Assignability. Neither this Agreement nor any of the rights,
interest or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Investor may assign any of or
all of its rights and obligations under this Agreement to any person that is an
Affiliate of Xxxxxx Xxxx or an Affiliate of any one or more trusts established
for the benefit of Xxxxxx Xxxx and/or members of his family without the consent
of any other party and Shareholder may assign
Page 29 of 60
19
(Exhibit 1)
any or all of his rights and obligations under this Agreement to one or more
Affiliates of Shareholder (including any Shareholder Family Entity) without the
consent of any other party; provided that, in each case, such person or persons
shall have executed and delivered a joinder to this Agreement and agreed to be
bound by the terms and conditions hereof. Subject to the preceding sentence,
this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.
6.12 Consent to Jurisdiction. Each party hereto irrevocably submits to
the nonexclusive jurisdiction of (a) the state courts of the State of Illinois
and (b) any federal district court located in the State of Illinois for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby.
Page 30 of 60
20
(Exhibit 1)
IN WITNESS WHEREOF, each of Investor, Shareholder, the Company and Old
Davel have executed this Investment Agreement as of the date first above
written.
INVESTOR:
SAMSTOCK, L.L.C.
_______________________________________
By:
EGI-DAVEL INVESTORS, L.L.C.
_______________________________________
By:
SHAREHOLDER:
_______________________________________
Xxxxx X. Xxxx, individually
COMPANY:
DAVEL COMMUNICATIONS, INC.
_______________________________________
By:
OLD DAVEL:
DAVEL COMMUNICATIONS GROUP, INC.
_______________________________________
By:
Page 31 of 60
