Exhibit 99.1
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[Exhibit A to Merger Agreement]
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GOVERNANCE AGREEMENT
Among
ITC/\DeltaCom, Inc.,
The WCAS Securityholders
and
The Other Holders
Dated as of [_____ __], 2003
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.......................................................1
SECTION 1.1. Definitions ................................................1
ARTICLE II RESTRICTIONS ON PURCHASES OF VOTING SECURITIES....................9
SECTION 2.1. Restrictions on Transfers. .................................9
SECTION 2.2. Restrictions on Transfer to Competitors. ..................10
SECTION 2.3. Other Transfer Restrictions. ..............................10
SECTION 2.4. Other Stockholder Tag-Along. ..............................11
SECTION 2.5. Effect of Transfers .......................................12
SECTION 2.6. Transfers in Violation of Agreement Void ..................12
ARTICLE III ACQUISITIONS OF VOTING SECURITIES AND BUSINESS
COMBINATIONS.....................................................13
SECTION 3.1. Purchases of Voting Securities ............................13
SECTION 3.2. Squeeze-Outs and Business Combinations. ...................13
SECTION 3.3. Interested Transactions. ..................................14
ARTICLE IV CORPORATE GOVERNANCE.............................................14
SECTION 4.1. Composition of the Board of Directors. ....................14
SECTION 4.2. Voting. ...................................................15
SECTION 4.3. Vacancies. ................................................16
SECTION 4.4. Board Committees ..........................................17
SECTION 4.5. Subsidiary Boards of Directors and Committees .............18
SECTION 4.6. Director Expenses; Indemnity and Exculpation ..............19
SECTION 4.7. No Amendment of Certificate of Incorporation or
Bylaws; Board Observers ...................................19
ARTICLE V LISTING MATTERS..................................................20
SECTION 5.1. Listing ...................................................20
ARTICLE VI LEGEND............................................................21
ARTICLE VII MISCELLANEOUS....................................................21
SECTION 7.1. Notices ...................................................21
SECTION 7.2. No Waivers; Amendments ....................................23
SECTION 7.3. Further Assurances ........................................23
SECTION 7.4. Enforcement of this Agreement .............................23
SECTION 7.5. Severability ..............................................23
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SECTION 7.6. Entire Agreement; Assignment ..............................24
SECTION 7.7. Parties in Interest .......................................24
SECTION 7.8. Remedies. .................................................24
SECTION 7.9. Governing Law; Consent to Jurisdiction ....................24
SECTION 7.10. Recapitalization, etc. ....................................25
SECTION 7.11. Public Statements .........................................25
SECTION 7.12. Portfolio Company Actions .................................25
SECTION 7.13. HSR Filing Fees and Expenses ..............................25
SECTION 7.14. Non-Solicitation ..........................................25
SECTION 7.15. Headings ..................................................26
SECTION 7.16. Counterparts ..............................................26
SECTION 7.17. Effectiveness; Termination ................................26
SECTION 7.18. Obligations Imposed By Law ................................26
SECTION 7.19. Definition of Stockholder .................................26
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GOVERNANCE AGREEMENT, dated as of [_____ __], 2003 (this "Agreement"),
between ITC/\DeltaCom, Inc., a Delaware corporation ("Parent"), and each Person
listed on the signature pages hereof under the heading "WCAS Securityholders"
(each a "WCAS Securityholder" and collectively, "W") and each Other Holder (as
defined in Section 1.1).
WHEREAS, Parent, 8DBC1 Corp., a North Carolina corporation and direct
wholly-owned subsidiary of Parent ("Merger Co."), W and BTI Telecom Corp., a
North Carolina corporation ("BTI"), have entered into an Agreement and Plan of
Merger dated as of [_____ __], 2003 (as amended from time to time, the "Merger
Agreement") pursuant to which (i) Parent will acquire BTI through the merger
(the "Merger") of Merger Co. with and into BTI and pursuant to which certain
WCAS Securityholders will acquire [ ] shares of Common Stock of Parent and [ ]
Common Stock Purchase Warrants of Parent and (ii) certain WCAS Securityholders
will acquire [ ] shares of Series B Preferred Stock of Parent;
WHEREAS, immediately after the Effective Time (as defined in the
Merger Agreement), W will beneficially own the shares of Common Stock, shares of
Series B Preferred Stock and Common Stock Purchase Warrants of Parent set forth
on Annex A attached hereto;
WHEREAS, the Other Holders are the owners of shares of Common Stock,
shares of Series A Preferred Stock and Common Stock Purchase Warrants of Parent;
and
WHEREAS, W and Parent desire to establish in this Agreement certain
terms and conditions concerning the corporate governance of Parent after the
Effective Time of the Merger and certain terms and conditions concerning the
acquisition and disposition of securities of Parent by W and the Other Holders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Affiliate" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act as in effect on the date hereof; provided that, for purposes of
this Agreement (i) Parent and any Subsidiary of Parent shall not be treated as
an Affiliate of any other party hereto and (ii) Affiliate shall not include any
portfolio company of W or its Affiliates.
"Agreement" is defined in the preamble.
"Article IV Breach" means any material breach by Parent of any
material provision of Article IV if (i) W has provided Parent with written
notice of such breach, (ii) Parent has not cured such breach within 30 days
after receipt of such notice by W, and (iii) in the
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event of any unresolved dispute between Parent and W regarding the existence of
any such material breach (or whether Parent has cured such breach), Parent and W
have submitted such dispute to binding arbitration pursuant to the procedures
described in Annex B hereto, and the arbitration panel has rendered a decision
that Parent has committed such breach and has not cured such breach within the
period provided in clause (ii).
"Associate" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act as in effect on the date hereof.
"Beneficial owner" and to "beneficially own" has the same meaning as
in Rule 13d-3 promulgated under the Exchange Act as in effect on the date
hereof; provided that in determining beneficial ownership for purposes of this
Agreement, a Person shall be deemed to be the beneficial owner of any Voting
Securities which may be acquired by such Person upon the conversion, exchange or
exercise of any Voting Security Equivalents irrespective of whether such Voting
Security Equivalents are exercisable within 60 days.
"Board of Directors" means the Board of Directors of Parent.
"Change of Control" means (i) the consummation of a Qualifying Asset
Sale; (ii) the consummation of any transaction or series of related transactions
(including any merger or consolidation) as a result of which any Person or Group
of Persons, other than W and its Affiliates, becomes the beneficial owner,
directly or indirectly, of more than 50% of the Voting Power (other than any
such transaction or series of related transactions subject to Section 2.3 or any
such transaction or series of related transactions that would violate any
provision of this Agreement); and (iii) at any time that W and its Affiliates do
not beneficially own more than 50% of the Voting Power, the first day on which a
majority of the Directors are not Continuing Directors, provided that none of W
or its Affiliates shall have engaged in any Contest that caused a majority of
the Directors not to be Continuing Directors.
"Committee of Independent Directors" means a standing committee of the
Board of Directors comprised of all of the Independent Directors; provided that
each Series A Designee which has a Disqualifying Relationship (whether or not
such Series A Designee is an "independent director" within the meaning of the
rules and regulations of any national securities exchange or Interdealer
Quotation System on which Parent's securities may be listed or traded) shall
serve (unless such Series A Designee declines to serve) on the Committee of
Independent Directors unless the Committee of Independent Directors (other than
any Series A Designee who has a Disqualifying Relationship) determines in its
good faith judgment, after considering advice of outside legal counsel, that
such Series A Designee's ability to exercise independent judgment in carrying
out his or her responsibilities as a Director has been compromised in a material
respect as a result of a change in circumstances subsequent to the date hereof
relating to such Director's Disqualifying Relationship.
"Common Stock" means the common stock, par value $0.01 per share, of
Parent.
"Competitor" means any Person who is or, based on the publicly
announced intention or plan of such Person, is reasonably likely to become a
competitor of Parent or any
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subsidiary of Parent in the business of providing retail or wholesale
telecommunications services.
"Contest" means any action by a Person, whether such Person acts alone
or in concert with any other Person, (i) seeking to elect an individual to, or
place a representative on, the Board of Directors who is not a Continuing
Director, (ii) seeking to remove (other than for cause) from the Board of
Directors any individual who is a Continuing Director, or (iii) opposing the
recommendation of a majority of the Continuing Directors with respect to the
nomination, appointment or election of any individual as a Director; provided
that any action by W or its Affiliates with respect to the nomination,
designation, election or removal of any WCAS Designee, any other Director
employed by W or any of its Affiliates or any Director elected by the holders of
the Series B Preferred Stock pursuant to the certificate of designations of the
Series B Preferred Stock (including the nomination, designation or election of
any successor to any WCAS Designee or any such Director) shall, in each case,
not be deemed a "Contest."
"Continuing Directors" means the Directors immediately following the
Effective Time; provided that any individual becoming a Director during any year
shall be considered to be a Continuing Director if such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Continuing Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors, after the giving of a sufficient notice to each
Continuing Director so as to provide a reasonable opportunity for each such
Continuing Director to be present at such meeting. For purposes of this
definition, any Director elected by the holders of the Series A Preferred Stock
pursuant to the certificate of designations of the Series A Preferred Stock and
any Director elected by the holders of the Series B Preferred Stock pursuant to
the certificate of designations of the Series B Preferred Stock shall be deemed
to be a Continuing Director.
"Control," as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Determination of the Committee of Independent Directors" means, with
respect to any matter, a determination made in good faith, on the basis of such
relevant factors as the Committee of Independent Directors consider, in their
judgment, appropriate, by a vote of the majority of the members of the Committee
of Independent Directors present at a meeting of the Committee of Independent
Directors called for such purpose, a quorum being present, or without a meeting
if all members of the Committee of Independent Directors consent to such
determination in writing. For these purposes, a majority of all members of the
Committee of Independent Directors, acting at a meeting duly assembled, shall
constitute a quorum for the making of any such determination at such meeting. In
connection with any specific determination to be made by the Committee of
Independent Directors, a Director serving on the Committee of Independent
Directors shall not be deemed to be an Independent Director for purposes of
participating in such determination of the Committee of Independent Directors,
and shall not be entitled to participate in such determination, if, in the
judgment of the Committee of Independent Directors (other than such Director),
such Director has an interest in the matter
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subject to determination that would interfere with such Director's exercise of
independent judgment in carrying out his or her responsibilities as a Director.
"Director" means a member of the Board of Directors.
"Disinterested Stockholders" mean the holders of Voting Securities
and/or Voting Security Equivalents that (i) are not (A) W or Affiliates or
Associates of W or (B) portfolio companies of W or its Affiliates, and (ii) are
not officers or employees of Parent or its Subsidiaries.
"Disqualifying Relationship" between a Director and Parent means any
of the following relationships: (i) such Director is, or during any of the past
three fiscal years of Parent was, employed by Parent or by any parent or
subsidiary of Parent; (ii) such Director has accepted or has a Family Member who
has accepted any payments from Parent or any parent or subsidiary of Parent in
excess of $60,000 during the current fiscal year or any of the past three fiscal
years of Parent, other than compensation for board service, payments arising
solely from investments in Parent's securities, compensation paid to a Family
Member who is an employee of Parent or a parent or subsidiary of Parent (but not
if such person is an executive officer of Parent or any parent or subsidiary of
Parent), benefits under a tax-qualified retirement plan, or non-discretionary
compensation; (iii) such Director is a Family Member of an individual who is, or
during any of the past three fiscal years of Parent was, employed by Parent or
by any parent or subsidiary of Parent as an executive officer; (iv) such
Director is a partner in, or a controlling shareholder or an executive officer
of, any organization to which Parent made, or from which Parent received,
payments (other than those arising solely from investments in Parent's
securities) that exceed 5% of the recipient's consolidated gross revenues for
that year, or $200,000, whichever is more, in the current fiscal year or any of
the past three fiscal years of Parent; (v) such Director is employed as an
executive officer of another entity where any of the executive officers of
Parent serve on the compensation committee of such other entity, or if such
relationship existed during any of the past three fiscal years of Parent; or
(vi) such Director is or was a partner or employee of Parent's outside auditor,
and worked on Parent's audit, during any of the past three fiscal years of
Parent. For purposes of this definition, each three year "look back" period
referenced above shall instead be the period since the Effective Time, and
"subsidiary" shall include BTI and any subsidiary of BTI. For the avoidance of
doubt, ownership of any class of capital stock of Parent alone shall not
constitute a Disqualifying Relationship.
"Effective Time" has the same meaning as in the Merger Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Family Member" of any person means any other person who is a relative
of such first person by blood, marriage or adoption or who has the same
residence as such first person.
"Group" has the same meaning as in Rule 13d-3 promulgated under the
Exchange Act as in effect on the date hereof; provided that for purposes of this
Agreement, a "Group" shall not include any Group the formation of which has not
been publicly announced and with respect
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to which there is no publicly available information indicating that Persons are
acting as part of such Group unless W knows of the existence of such Group.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Independent Director" means (i) if Parent has securities listed or
traded on any national securities exchange or Interdealer Quotation System, a
Director of Parent that (A) is not an Affiliate or Associate of W, (B) is not an
officer or employee of Parent or its Subsidiaries and (C) is otherwise an
"independent director" within the meaning of the rules or regulations of such
national securities exchange or Interdealer Quotation System and (ii) if Parent
does not have securities so listed or traded, a Director of Parent that (A) is
not an Affiliate or Associate of W, (B) is not an officer or employee of Parent
or its Subsidiaries and (C) does not have any relationship with Parent which, in
the opinion of the Board of Directors and a Determination of the Committee of
Independent Directors at the time of the nomination, appointment or election of
such Director, would interfere with such Director's exercise of independent
judgment in carrying out his or her responsibilities as a Director. Persons who
have a Disqualifying Relationship with Parent shall not qualify as Independent
Directors.
"Initial Other Holder Position" means, with respect to any Other
Holder, the number of shares of Common Stock beneficially owned by such Other
Holder immediately following the Effective Time. For purposes of this
definition, the number of shares of Common Stock beneficially owned by such
Other Holder immediately following the Effective Time shall be calculated
assuming the conversion, exchange or exercise into or for shares of Common Stock
of all Voting Securities beneficially owned by such Other Holder at such time.
"Initial Ownership Percentage" means the Ownership Percentage
represented by the number of shares of Common Stock beneficially owned by W
immediately following the Effective Time. For purposes of this definition, the
number of shares of Common Stock beneficially owned by W immediately following
the Effective Time shall be calculated assuming the conversion, exchange or
exercise into or for shares of Common Stock of all Voting Securities
beneficially owned by W at such time.
"Initial W Position" means the sum of (i) the number of shares of
Common Stock beneficially owned by W and its Affiliates immediately prior to the
Closing, (ii) the number of shares of Common Stock issued to W at the Closing
pursuant to Section 8.09 of the Merger Agreement, (iii) the number of shares of
Common Stock received by W and its Affiliates as Merger Consideration (as
defined in the Merger Agreement), (iv) the number of shares of Common Stock into
which the shares of Series B Preferred Stock beneficially owned by W and its
Affiliates immediately following the Effective Time are convertible immediately
following the Effective Time, and (v) the number of shares of Common Stock into
which any shares of Series B Preferred Stock purchased by W and its Affiliates
pursuant to Section 8.21 of the Merger Agreement are convertible after the
Effective Time.
"Interdealer Quotation System" means any of (i) the NASDAQ National
Market, (ii) the NASDAQ SmallCap Market and (iii) the NASDAQ BBX (Bulletin Board
Exchange), unless NASDAQ shall be registered as a national securities exchange
after the date hereof.
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"NASDAQ" means The NASDAQ Stock Market, Inc.
"Other Holder" means each Person listed on the signature pages hereof
under the heading "Other Holders," provided that any employee of Parent or any
Subsidiary of Parent shall be deemed to be an Other Holder solely in his or her
capacity as a holder of Voting Securities and/or Voting Security Equivalents,
and provided, further, that, for the avoidance of doubt, no director shall be
required to take any action that would violate such director's fiduciary duty.
"Ownership Percentage" means, with respect to the number of shares of
Common Stock (other than Post-Closing Shares) beneficially owned by any Person
on any date (the "Designated Securities"), the percentage of all shares of
Common Stock (other than Post-Closing Shares) outstanding on such date that is
represented by the Designated Securities. For purposes of this definition, the
number of shares of Common Stock beneficially owned by any Person or outstanding
on any date shall be calculated assuming the conversion, exchange or exercise
into or for shares of Common Stock of all Voting Securities beneficially owned
by such Person on such date or outstanding on such date, as the case may be.
"Permitted Transferee" means:
(i) with respect to any WCAS Securityholder and any Permitted
Transferee of a WCAS Securityholder, (A) any other WCAS Securityholder, (B) any
direct or indirect wholly-owned subsidiary of any WCAS Securityholder, (C) in
connection with a Transfer by a WCAS Securityholder to its partners, members or
shareholders for no consideration pro rata based on their respective percentage
interests in the applicable WCAS Securityholder, which Transfer is effected in
accordance with the terms of the partnership agreement or other organizational
document of such WCAS Securityholder, such partners, members or shareholders in
such WCAS Securityholder (a "W Distribution In Kind"), (D) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any WCAS
Securityholder or Permitted Transferee of a WCAS Securityholder and (E) a trust,
corporation, partnership or other entity substantially all of the economic
interests of which are held by or for the benefit of any WCAS Securityholder,
Permitted Transferee of a WCAS Securityholder, their spouses or their children
(whether by birth or adoption); and
(ii) with respect to any Other Holder and any Permitted Transferee of
any Other Holder, (A) any other Other Holder, (B) any direct or indirect
wholly-owned subsidiary of any Other Holder, (C) in connection with a Transfer
by any Other Holder to its partners, members or shareholders for no
consideration pro rata based on their respective percentage interests in such
Other Holder, which Transfer is effected in accordance with the terms of the
partnership agreement or other organizational document of such Other Holder,
such partners, members or shareholders in such Other Holder (an "Other Holder
Distribution In Kind"), (D) the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of such Other Holder or Permitted Transferee
of such Other Holder and (E) a trust, corporation, partnership or other entity
substantially all of the economic interests of which are held by or for the
benefit of such Other Holder, Permitted Transferee of such Other Holder, their
spouses or their children (whether by birth or adoption).
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"Person" means any individual, corporation, partnership, limited
liability company, limited partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government body.
"Post-Closing Shares" means Voting Securities acquired by W after the
date hereof pursuant to Article 10 or Section 8.21 of the Merger Agreement.
"Primary Voting Power" means, as of any date, the aggregate number of
votes that may be cast on such date by the holders of Voting Securities
generally (other than in connection with the election of Directors). In
determining the Primary Voting Power of a particular Person that beneficially
owns Voting Securities, as of any date, the Primary Voting Power represented by
such Voting Securities shall exclude any votes that may be cast upon the
acquisition by such Person of Voting Securities upon the conversion, exchange or
exercise of any Voting Security Equivalents beneficially owned by such Person on
such date.
"Qualifying Asset Sale" means the sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions, of all or
substantially all of the property and assets of Parent and its Subsidiaries,
taken as a whole, including goodwill and corporate franchises, to any Person or
Group of Persons (other than any Subsidiary of Parent); provided that in no
event shall any such sale be deemed to be a Qualifying Asset Sale unless the
property and assets involved produced more than two-thirds of Parent's
consolidated annual revenues in at least two of the prior three fiscal years or
more than two-thirds of Parent's consolidated annual earnings before interest,
taxes, depreciation and amortization in at least two of the prior three fiscal
years.
"Rule 13e-3 Transaction" means a Rule 13e-3 transaction as defined in
Rule 13e-3 promulgated under the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series A Designee" means ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and any Director thereafter appointed to the Board of Directors or
elected by the holders of the Series A Preferred Stock, voting as a separate
class, pursuant to the Certificate of Designations of the Series A Preferred
Stock.
"Series A Preferred Stock" means the 8% Series A Convertible
Redeemable Preferred Stock, par value $0.01 per share, of Parent.
"Series B Designee" means the Director or Directors who are appointed
to the Board of Directors as of the Effective Time as the Series B Designees and
any Director thereafter appointed to the Board of Directors or elected by the
holders of the Series B Preferred Stock, voting as a separate class, pursuant to
the Certificate of Designations of the Series B Preferred Stock.
"Series B Preferred Stock" means the 8% Series B Convertible
Redeemable Preferred Stock, par value $0.01 per share, of Parent.
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"Subsidiary" has the same meaning as in Rule 12b-2 promulgated under
the Exchange Act as in effect on the date hereof.
"Transfer" means, directly or indirectly, to sell, transfer, assign,
distribute, pledge, encumber, hypothecate, or similarly dispose of, either
voluntarily or involuntarily, or to enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, assignment,
distribution, pledge, encumbrance, hypothecation or similar disposition of,
whether by operation of law or otherwise, any Voting Securities or Voting
Security Equivalents or any interest in any Voting Securities or Voting Security
Equivalents; provided that any liquidation, dissolution or other termination of
a holder of Voting Securities or Voting Security Equivalents, shall not be
deemed a "Transfer" of any Voting Securities or Voting Security Equivalents or
any interest in any Voting Securities or Voting Security Equivalents owned by
such holder.
"Voting Power" means, as of any date, the aggregate number of votes
that may be cast on such date by the holders of Voting Securities generally
(other than in connection with the election of Directors). In determining the
Voting Power of a particular Person that beneficially owns Voting Securities, as
of any date, the Voting Power represented by such Voting Securities shall
include, without limitation, any votes that may be cast upon the acquisition by
such Person of Voting Securities upon the conversion, exchange or exercise of
any Voting Security Equivalents beneficially owned by such Person on such date.
"Voting Securities" means securities of Parent the holders of which
are generally entitled to vote for members of the Board of Directors and any
securities issued in respect thereof, or in substitution therefor, in connection
with any stock split, dividend or combination, or any reclassification,
recapitalization, merger, consolidation, exchange or similar reorganization. For
purposes of this definition, each share of Common Stock, each share of Series A
Preferred Stock and each share of Series B Preferred Stock shall at all times be
considered Voting Securities.
"Voting Security Equivalents" means any warrants (including, without
limitation, the Warrants), options, rights or securities convertible into, or
exchangeable or exercisable for, Voting Securities.
"Warrant Agreement" means the Warrant Agreement, dated as of [ ],
2003, as amended from time to time, between Parent and Mellon Investor Services
LLC, as Warrant Agent.
"Warrants" means the Common Stock Purchase Warrants of Parent issued
pursuant to the Merger Agreement and the Warrant Agreement and any Common Stock
Purchase Warrants issued in exchange, replacement or substitution therefor.
"WCAS CP III" means WCAS Capital Partners III, L.P.
"WCAS Designee" means any Director designated for nomination for
election to the Board of Directors by W or its Affiliates (including, without
limitation, WCAS VIII or WCAS CP III) pursuant to this Agreement.
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"WCAS VIII" means Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P.
ARTICLE II
RESTRICTIONS ON PURCHASES OF VOTING SECURITIES
SECTION 2.1. Restrictions on Transfers.
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(a) W agrees and covenants that for two years following the date of
the Effective Time (the "Transfer Restriction Period"), W shall not Transfer any
Voting Securities or Voting Security Equivalents, except that during the
Transfer Restriction Period W may, subject to Sections 2.2 and 2.3, Transfer
Voting Securities and Voting Security Equivalents representing up to 10% of the
Initial W Position pursuant to (i) sales made in compliance with Rule 144 under
the Securities Act, (ii) any privately negotiated transaction or transactions
made in compliance with the Securities Act or (iii) a public offering in
accordance with the registration rights provided for in the registration rights
agreement dated as of [ ], 2003, as amended from time to time, between Parent
and the other parties thereto (the "Registration Rights Agreement"); provided
that the foregoing restrictions on Transfer shall not be applicable to any of
the following Transfers (which shall not be counted in calculating such 10%
limitation): (i) any Transfer of Voting Securities pursuant to W's "piggy-back"
registration rights pursuant to the Registration Rights Agreement; (ii) any
Transfer between W and its Permitted Transferees (or among W's Permitted
Transferees, provided that any such Permitted Transferee shall be subject to the
terms and conditions of this Agreement as if such Permitted Transferee were a
party hereto) in accordance with the terms of this Agreement (except that W
shall not make any W Distributions In Kind during the Transfer Restriction
Period); (iii) any Transfer pursuant to a merger or consolidation in which
Parent is a constituent corporation; (iv) any Transfer pursuant to a bona fide
tender offer or exchange offer; (v) any Transfer pursuant to a business
combination or other sale of or involving Parent; (vi) any Transfer by W made
solely to satisfy any of its indemnification obligations under Article 10 of the
Merger Agreement; or (vii) any Transfer of Warrants exercisable for up to
850,000 shares of Common Stock to any Person specified in Annex C attached
hereto; provided, further, that, in the case of clauses (iii) through (v) of
this proviso, W is in compliance with Article III.
(b) Each Other Holder agrees and covenants that during the Transfer
Restriction Period, such Other Holder shall not Transfer any Voting Securities
or Voting Security Equivalents, except that during the Transfer Restriction
Period such Other Holder may, subject to Section 2.3, Transfer Voting Securities
and Voting Security Equivalents representing up to 10% of the Initial Other
Holder Position pursuant to (i) sales made in compliance with Rule 144 under the
Securities Act, (ii) any privately negotiated transaction or transactions made
in compliance with the Securities Act or (iii) a public offering in accordance
with the registration rights provided for in the registration rights agreement
dated as of October 29, 2002, as amended from time to time, between Parent and
the other parties thereto (the "Existing Registration Rights Agreement");
provided that the foregoing restrictions on Transfer shall not be applicable to
any of the following Transfers (which shall not be counted in calculating such
10% limitation): (i) any Transfer of Voting Securities pursuant to such Other
Holder's "piggy-back" registration rights pursuant to the Existing Registration
Rights Agreement; (ii) any Transfer between such
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Other Holder and its Permitted Transferees (or among such Other Holder's
Permitted Transferees, provided that any such Permitted Transferee shall be
subject to the terms and conditions of this Agreement as if such Permitted
Transferee were a party hereto) in accordance with the terms of this Agreement
(except that such Other Holder shall not make any Other Holder Distributions In
Kind during the Transfer Restriction Period); (iii) any Transfer pursuant to a
merger or consolidation in which Parent is a constituent corporation; (iv) any
Transfer pursuant to a bona fide tender offer or exchange offer; or (v) any
Transfer pursuant to a business combination or other sale of or involving
Parent.
(c) For purposes of this Section 2.1, any Transfer of Voting
Securities or Voting Security Equivalents shall be treated as a Transfer of the
number of shares of Common Stock into or for which such Voting Securities or
Voting Security Equivalents are then convertible, exchangeable or exercisable.
SECTION 2.2. Restrictions on Transfer to Competitors.
W shall not Transfer any Voting Securities or Voting Security
Equivalents to any Person who is a Competitor if W has actual knowledge that
such Competitor would (when taken together with such Person's Affiliates and
Associates and with any Group of which such Person forms a part) beneficially
own Voting Securities representing 10% or more of the outstanding Voting Power
immediately after such Transfer.
SECTION 2.3. Other Transfer Restrictions.
(a) Any Permitted Transferee of any party hereto shall be subject to
the terms and conditions of this Agreement as if such Permitted Transferee were
such party hereto. Prior to the initial acquisition of beneficial ownership of
Voting Securities by a Permitted Transferee, and as a condition thereto, each
party hereto (other than Parent) agrees (i) to cause its Permitted Transferee to
agree in writing with Parent to be bound by the terms and conditions of this
Agreement and (ii) that such party hereto shall remain directly liable for its
own performance and the performance of its Permitted Transferee of all
obligations of it and such Permitted Transferee under this Agreement. Each party
hereto agrees not to cause or permit any of its Permitted Transferees (other
than any Permitted Transferee that is a natural person, that is described in
clause (i)(D) or (ii)(D) of the definition of "Permitted Transferee" or that is
a trust described in clause (i)(E) or (ii)(E) of the definition of "Permitted
Transferee") to cease to be an Affiliate of such party (other than as a result
of a liquidation, dissolution or other termination of such party or such
Permitted Transferee) so long as such Permitted Transferee beneficially owns any
Voting Securities, and if such Permitted Transferee shall cease to be an
Affiliate of such party, such Permitted Transferee shall automatically upon the
occurrence of such event cease to be a Permitted Transferee for any purpose
under this Agreement; provided that this sentence shall not apply to any
Permitted Transferee of any party that is a Permitted Transferee of such party
described in clause (i)(C) or (ii)(C) of the definition of "Permitted
Transferee." W agrees not to Transfer any Voting Securities or Voting Security
Equivalents to any Affiliate other than a Permitted Transferee. Notwithstanding
the foregoing provisions of this Section 2.3, but subject to Section 2.3(b), any
Permitted Transferee of Voting Securities or Voting Security Equivalents shall
not be subject to the provisions of this Agreement to the extent that the
Transfer to such Permitted Transferee is in connection with (x) a W Distribution
In Kind unless W elects to cause
11
such Permitted Transferee to become bound by the provisions of this Agreement or
(y) an Other Holder Distribution In Kind unless such Other Holder elects to
cause such Permitted Transferee to become bound by the provisions of this
Agreement; provided that, in each case, such Transfer is otherwise in compliance
with this Agreement.
(b) No transferee of Voting Securities or Voting Security Equivalents
(other than a Permitted Transferee of any party that is a Permitted Transferee
described in clause (i)(C) or (ii)(C) of the definition of "Permitted
Transferee") shall have any rights or obligations under this Agreement, except
that if W has actual knowledge that such transferee (together with its
Affiliates and with any Group of which it forms a part) would beneficially own,
immediately after such Transfer, Voting Securities representing (i) 20% or more
of the outstanding Voting Power and (ii) more of the outstanding Voting Power
than the Voting Power that is represented by Voting Securities beneficially
owned by any other Person (or Group of Persons) (any such person, a "Section 2.3
Transferee"), then such Section 2.3 Transferee shall be required, as a condition
to the effectiveness of such Transfer, to agree to be bound by Section 2.4 and
Articles III, IV and V to the same extent as W. To the extent a Section 2.3
Transferee is not an "ultimate parent entity" (as determined in accordance with
the HSR Act and the regulations promulgated thereunder), the ultimate parent
entity or entities of such Section 2.3 Transferee shall agree in writing to be
directly liable for the performance by such Section 2.3 Transferee hereunder to
the same extent that a party hereto would be liable for its Permitted
Transferees hereunder.
SECTION 2.4. Other Stockholder Tag-Along.
(a) If W or one of its Affiliates shall propose to Transfer any
Voting Securities beneficially owned by W or its Affiliates ("Tag-Along
Securities") to any Person or Group (other than a Permitted Transferee) that, to
the actual knowledge of W, would (when taken together with such Person's or
Group's Affiliates) beneficially own Voting Securities representing (i) 30% or
more of the outstanding Voting Power and (ii) more of the outstanding Voting
Power than the Voting Power that is represented by Voting Securities
beneficially owned by any other Person (or Group of Persons) immediately after
such Transfer (a "Tag-Along Transfer"), W shall give not less than 20 days prior
written notice of such Tag-Along Transfer to each other holder of record of
Voting Securities and/or Voting Security Equivalents (each, a "Tag-Along
Offeree"). Such notice (the "Tag-Along Notice") shall set forth the material
terms and material conditions of such proposed Tag-Along Transfer, including the
name of the proposed transferee, the number of Tag-Along Securities to be
Transferred, the purchase price per share proposed to be paid therefor and the
payment terms and type of Transfer to be effectuated.
(b) Within 10 days after delivery of the Tag-Along Notice by W to the
Tag-Along Offerees, each such Tag-Along Offeree shall, by written notice to W,
have the opportunity and right, as a condition to the effectiveness of such
Tag-Along Transfer, to Transfer to the transferee in such proposed Tag-Along
Transfer (on the same terms and conditions and at the same price per share (on a
Common Stock equivalent basis) as W and its Affiliates) up to the number of
Common Shares beneficially owned by such Tag-Along Offeree as shall equal the
product of (x) a fraction, the numerator of which is the number of Common Shares
represented by the Tag-Along Securities, measured on an as-converted,
as-exercised basis, and the denominator of which is the aggregate number of
Common Shares beneficially owned by W and
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its Affiliates as of the date of the Tag-Along Notice, multiplied by (y) the
number of Common Shares beneficially owned by such Tag-Along Offeree as of the
date of the Tag-Along Notice. At the conclusion of the 10-day period following
delivery of the Tag-Along Notice, each Tag-Along Offeree that has not delivered
to W written notice of its election to exercise its right pursuant to this
Section 2.4 shall be deemed to have rejected the offer to participate in the
Tag-Along Transfer. If the proposed transferee is unwilling to purchase, in the
aggregate, more than a specified number of Common Shares, then, if necessary,
the maximum number of Voting Securities and/or Voting Security Equivalents that
each holder of Voting Securities or Voting Security Equivalents of Parent,
including W or one of its Affiliates, may Transfer in accordance with this
Section 2.4 shall be reduced to the product of the maximum number of Common
Shares that the proposed transferee is willing to purchase, multiplied by a
fraction, the numerator of which is the number of Common Shares that such holder
proposes to Transfer hereunder (subject to the maximum amount for each holder
calculated pursuant to the preceding sentence) and the denominator of which is
the aggregate number of Common Shares that all of the holders of Voting
Securities and/or Voting Security Equivalents exercising rights under this
Section 2.4, including W and its Affiliates, propose to Transfer hereunder;
provided that, for purposes of this Section 2.4(b), "Common Shares" shall
include Voting Securities and/or Voting Security Equivalents convertible,
exchangeable or exercisable into or for shares of Common Stock, measured on an
as-converted, as-exercised basis. Notwithstanding anything contained in this
Section 2.4, there shall be no liability on the part of W or its Affiliates to
the Tag-Along Offerees under this Agreement if W or its Affiliates or the
proposed transferee in any Tag-Along Transfer determines, for any reason, not to
effect a Transfer that would obligate it hereunder to consummate a Tag-Along
Transfer. The determination of whether to effect a Transfer that would obligate
W or its Affiliates hereunder to consummate a Tag-Along Transfer shall be in the
sole and absolute discretion of W and its Affiliates.
(c) The notice, timing, disclosure and other procedural requirements
applicable to Tag-Along Transfers set forth in this Section 2.4 shall be
modified to the extent required to comply with any applicable laws.
SECTION 2.5. Effect of Transfers. Following the Transfer Restriction
Period, each WCAS Securityholder shall use its commercially reasonable efforts
to effect (i) any Transfers of Voting Securities and Voting Security Equivalents
that are part of a W Distribution In Kind and (ii) any Transfers of Voting
Securities or Voting Security Equivalents in an unregistered open market sale,
in the case of each of clauses (i) and (ii), that are otherwise permitted by
this Article II, in a manner that minimizes the impact of such Transfers on the
market price of the Voting Securities.
SECTION 2.6. Transfers in Violation of Agreement Void. Any Transfer
or attempted Transfer of Voting Securities or Voting Security Equivalents in
violation of any provision of this Agreement shall be void, and Parent shall not
record any such Transfer on its books or treat any purported transferee of such
Voting Securities or Voting Security Equivalents as the owner of such Voting
Securities or Voting Security Equivalents for any purpose.
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ARTICLE III
ACQUISITIONS OF VOTING SECURITIES AND BUSINESS COMBINATIONS
SECTION 3.1. Purchases of Voting Securities. W agrees and covenants
that following the Effective Time W shall not, and shall cause each of its
Affiliates not to, acquire, offer or propose to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, beneficial ownership of any
Voting Securities, except (i) as approved by a Determination of the Committee of
Independent Directors, (ii) upon exercise or conversion of any Voting Securities
or Voting Security Equivalents then owned by W and its Affiliates, (iii) upon
the issuance of any Voting Securities or Voting Security Equivalents, as
dividends or otherwise, in respect of securities beneficially owned by W or its
Affiliates on the date of the Effective Time or in substitution therefor, or in
connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or similar
reorganization, (iv) as contemplated by Section 8.21 or Article 10 of the Merger
Agreement, (v) during the Transfer Restriction Period, W and its Affiliates may
acquire, in addition to any acquisitions pursuant to clauses (i) through (iv),
in the open market or through privately negotiated transactions or from Parent,
beneficial ownership of Voting Securities as long as W and its Affiliates do
not, following any such acquisition, have an aggregate Ownership Percentage in
excess of the sum of the Initial Ownership Percentage, plus 5%, or (vi)
following the Transfer Restriction Period, W and its Affiliates may acquire, in
addition to any acquisitions pursuant to clauses (i) through (iv), in the open
market or through privately negotiated transactions or from Parent, beneficial
ownership of Voting Securities as long as W and its Affiliates do not, following
any such acquisition, have an aggregate Ownership Percentage in excess of the
sum of the Initial Ownership Percentage, plus 15%.
SECTION 3.2. Squeeze-Outs and Business Combinations.
(a) W agrees and covenants that it and its Affiliates shall not,
directly or indirectly, propose or effect any purchase or other acquisition of
Voting Securities or Voting Security Equivalents that they do not beneficially
own as of the Effective Time by tender offer, exchange offer, merger or other
business combination or other purchase of Voting Securities or Voting Security
Equivalents that would result in a Rule 13e-3 Transaction (other than as
permitted pursuant to Section 3.1 unless such purchases or acquisitions pursuant
to Section 3.1 would result in a Rule 13e-3 Transaction) (each, a "Squeeze-Out
Transaction") unless (i) such Squeeze-Out Transaction is approved by a
Determination of the Committee of Independent Directors and (ii) for three years
after the Effective Time, such Squeeze-Out Transaction is also conditioned upon
obtaining the approval of a majority of the Disinterested Stockholders and such
condition is satisfied.
(b) W agrees and covenants that it and its Affiliates shall not,
directly or indirectly, propose or effect any merger or other business
combination between Parent and any Affiliate of W unless (i) such merger or
other business combination is approved by a Determination of the Committee of
Independent Directors and (ii) for three years after the Effective Time, such
merger or other business combination is also conditioned upon obtaining the
approval of a majority of the Disinterested Stockholders and such condition is
satisfied.
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SECTION 3.3. Interested Transactions.
(a) Parent and W hereby agree and covenant that any issuance of
shares of capital stock of Parent or any of its Subsidiaries (other than
issuances contemplated by the terms of the Merger Agreement or required under
the terms of the Voting Securities or the Voting Security Equivalents owned by W
or its Affiliates) or sales of assets by Parent or any of the Subsidiaries of
Parent to W or any Affiliate of W shall require a Determination of the Committee
of Independent Directors to approve such issuance or sale. In addition, any
enforcement or modification, amendment or waiver of any provision of this
Agreement, the Merger Agreement, the Warrant Agreement or the Registration
Rights Agreement (collectively, the "Transaction Documents") by Parent shall
require a Determination of the Committee of Independent Directors to approve
such enforcement or modification, amendment or waiver.
(b) Any other transactions between Parent or any of its Subsidiaries
and W or any of its Affiliates not referred to in Section 3.3(a), including,
without limitation, loans or payments of fees (but excluding (i) transactions
referred to in Sections 3.2(a) and 3.2(b), which shall be governed by Section
3.2(a) or 3.2(b), as the case may be, and (ii) any other transactions
contemplated by the terms of the Transaction Documents or the certificate of
incorporation or the bylaws of Parent or required under the terms of Voting
Securities or Voting Security Equivalents owned by W or its Affiliates) shall
require the approval of the audit committee of the Board of Directors; provided
that this Section 3.3(b) shall not apply to any transaction involving Common
Stock beneficially owned by W or its Affiliates to the extent that W and its
Affiliates, as applicable, are treated in the same manner in connection with
such transaction as all other holders of Common Stock, and W and its Affiliates
have no interest in the transaction apart from their interest as holders of
Common Stock or their interest in the Common Stock underlying any Voting
Securities beneficially owned by W or its Affiliates.
(c) Any condition or requirement for the approval of a majority of
the Disinterested Stockholders, Determination of the Committee of Independent
Directors or approval of the audit committee as provided in this Agreement shall
be in addition to any other vote or approval required by applicable law or
otherwise.
ARTICLE IV
CORPORATE GOVERNANCE
SECTION 4.1. Composition of the Board of Directors.
(a) Each of Parent and W shall use its best efforts to take such
action as is required under applicable law to cause to be appointed to the Board
of Directors, effective as of the Effective Time, the Directors referred to in
Sections 4.1(b)(i), 4.1(b)(ii) and 4.1(b)(v).
(b) For a period of 15 months following the date of the Effective
Time (the "Initial Governance Period"), (i) WCAS VIII shall be entitled to
designate one Director for nomination for election to the Board of Directors,
(ii) WCAS CP III shall be entitled to designate one Director for nomination for
election to the Board of Directors, (iii) the holders of the Series
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B Preferred Stock shall be entitled to elect Directors for so long as such
holders are entitled, voting as a separate class, to elect such Directors
pursuant to the Certificate of Designation of the Series B Preferred Stock, (iv)
the holders of the Series A Preferred Stock shall be entitled to elect Directors
for so long as such holders are entitled, voting as a separate class, to elect
such Directors pursuant to the Certificate of Designation of the Series A
Preferred Stock, (v) the chief executive officer of Parent shall be nominated
for election as a Director and (vi) the remaining Directors to be nominated
shall be designated by the remaining members of the Board of Directors (other
than employee members of the Board of Directors) on the date hereof (or, in the
case of clause (vi), any replacement thereof nominated or elected by such
Directors then in office).
(c) Following the Initial Governance Period, each of WCAS VIII and
WCAS CP III shall be entitled to designate one member for nomination for
election to the Board of Directors for so long as W and its Affiliates
beneficially own Voting Securities representing a majority of the outstanding
Primary Voting Power. Following the Initial Governance Period, W shall use its
reasonable best efforts to cause its WCAS Designees to nominate, and W shall
vote in favor of, and take all other necessary or desirable actions (including,
without limitation, attending all meetings in person or by proxy for purposes of
obtaining a quorum and executing all written consents in lieu of meetings) to
cause the election of, at least three Independent Directors.
(d) During the Initial Governance Period, the parties hereto agree
not to take any action that would cause the Board of Directors to consist of
other than 11 members. Following the Initial Governance Period, each of Parent
and W agree not to take any action that would cause the Board of Directors to
have more than 15 members prior to the third anniversary of the date of the
Effective Time.
(e) Notwithstanding anything in this Agreement to the contrary, for
so long as W and its Affiliates beneficially own Voting Securities representing
a majority of the outstanding Primary Voting Power, Parent agrees that,
following receipt of written notice from WCAS VIII and WCAS CP III, Parent
promptly shall initiate all actions necessary to increase the size of the Board
of Directors to the number specified in such written notice (subject to the
limitations set forth in Section 4.1(d)).
SECTION 4.2. Voting.
(a) W agrees to vote (and use its reasonable best efforts to cause
each of its Affiliates to vote, if applicable), or to act by written consent
with respect to (and use its reasonable best efforts to cause each of its
Affiliates to act by written consent, if applicable), and shall use its
reasonable best efforts to take all other necessary or desirable actions
(including, without limitation, attending all meetings in person or by proxy for
purposes of obtaining a quorum and executing all written consents in lieu of
meetings) to cause the Directors to be designated or nominated in accordance
with Sections 4.1 and 4.3 to the Board of Directors. Parent agrees to use its
reasonable best efforts to take all necessary actions to cause the Directors be
nominated in accordance with Sections 4.1 and 4.3 to the Board of Directors.
Each of Parent and W agrees to use its reasonable best efforts to cause the
election of each such Director to the Board of Directors, including, without
limitation, by nominating such individuals to be elected as
16
members of the Board of Directors as provided herein and calling an annual or
special meeting of stockholders in order to ensure that the composition of the
Board of Directors shall be as set forth in this Article IV and otherwise to
give effect to the provisions of this Article IV. Each party hereto shall take
(and shall use its reasonable best efforts to cause each of its Affiliates to
take, if applicable) all other actions necessary to ensure that the certificate
of incorporation and bylaws of Parent facilitate and do not at any time conflict
with any provision of this Agreement.
(b) Parent agrees to vote (and use its reasonable best efforts to
cause each of its Affiliates to vote, if applicable), or to act by written
consent with respect to (and use its reasonable best efforts to cause each of
its Affiliates to act by written consent, if applicable), and shall use its
reasonable best efforts to take all other necessary or desirable actions
(including, without limitation, attending all meetings in person or by proxy for
purposes of obtaining a quorum and executing all written consents in lieu of
meetings) to cause the directors to be designated or nominated in accordance
with Section 4.5 to the board of directors of each of Parent's subsidiaries
(each, a "Subsidiary Board"), and Parent agrees to use its reasonable best
efforts to cause the election of each such director to each Subsidiary Board,
including, without limitation, by nominating such individuals to be elected as
members of each Subsidiary Board as provided herein and calling an annual or
special meeting of stockholders in order to ensure that the composition of each
Subsidiary Board shall be as set forth in this Article IV and otherwise to give
effect to the provisions of this Article IV. Each party hereto shall take (and
shall use its reasonable best efforts to cause each of its Affiliates to take,
if applicable) all other actions necessary to ensure that the organizational
documents of each of Parent's subsidiaries facilitate and do not at any time
conflict with any provision of this Agreement.
(c) During the Initial Governance Period, each of the Other Holders
agrees to vote (and use its reasonable best efforts to cause each of its
Affiliates to vote, if applicable), or to act by written consent with respect to
(and use its reasonable best efforts to cause each of its Affiliates to act by
written consent, if applicable), and shall use its reasonable best efforts to
take all other necessary or desirable actions (including, without limitation,
attending all meetings in person or by proxy for purposes of obtaining a quorum
and executing all written consents in lieu of meetings) to cause the election of
all WCAS Designees to the Board of Directors.
SECTION 4.3. Vacancies.
(a) During the Initial Governance Period, in the event that a vacancy
is created at any time by the death, disability, retirement, resignation or
removal (with or without cause) of any Director (other than any Series A
Designee, Series B Designee or WCAS Designee), the Committee of Independent
Directors, acting pursuant to a Determination of the Committee of Independent
Directors, shall have the right to designate a replacement to fill such vacancy
pursuant to a Determination of the Committee of Independent Directors (provided,
that, if the Director being replaced is the chief executive officer of Parent,
such Director designee shall be the successor chief executive officer of
Parent), and each of Parent, W and the Other Holders shall use its reasonable
best efforts to take such action as may be required and permitted under
applicable law to cause the Directors designated pursuant to the Determination
of the Committee of Independent Directors to be appointed or elected including,
without limitation, in the case of W and the Other Holders, by using its
reasonable best efforts to cause Directors designated by or affiliated with such
party to vote in favor of the appointment of the Director
17
designated pursuant to such Determination of the Committee of Independent
Directors. To the extent requested pursuant to a Determination of the Committee
of Independent Directors, each of W and the Other Holders shall vote (and use
its reasonable best efforts to cause each of its Affiliates to vote, if
applicable), or act by written consent with respect to (and use its reasonable
best efforts to cause each of its Affiliates to act by written consent, if
applicable, with respect to), and shall use its reasonable best efforts to take
all other necessary or desirable actions (including, without limitation,
attending all meetings in person or by proxy for purposes of obtaining a quorum
and executing all written consents in lieu of meetings) to cause the election of
any replacement Director designated as provided in the first sentence of this
Section 4.3(a). During the Initial Governance Period, W shall not (and shall use
its reasonable best efforts to cause its Affiliates not to) take any action to
cause the removal of any Director not designated or employed by W or any of its
Affiliates or elected by the holders of the Series B Preferred Stock, or
appointed to the Board of Directors, pursuant to the certificate of designations
of the Series B Preferred Stock without cause unless it is directed to do so by
a Determination of the Committee of Independent Directors, and if W is so
directed, W shall use its reasonable best efforts to take (and shall use its
reasonable best efforts to cause its Affiliates to take) all actions necessary
to effect such removal and to elect a replacement Director as provided in the
first sentence of this Section 4.3(a). For purposes of this Section 4.3, "cause"
shall mean the willful and continuous failure of a Director to substantially
perform such Director's duties to Parent or the willful engaging by a Director
in gross misconduct materially and demonstrably injurious to Parent.
(b) For so long as W and its Affiliates beneficially own Voting
Securities representing a majority of the Primary Voting Power, in the event
that a vacancy is created at any time by death, disability, retirement,
resignation or removal (with or without cause) of any WCAS Designee, or in the
event that the size of the Board of Directors is increased pursuant to Section
4.1(e) or Section 3.01 of the bylaws of Parent, the WCAS Securityholder entitled
to designate such Director for nomination for election to the Board of Directors
(or, if no particular WCAS Securityholder is so entitled, then all WCAS
Securityholders) or the remaining WCAS Designees (even though less than a
quorum) shall have the right to designate a replacement to fill such vacancy,
and each of W, Parent and the Other Holders shall use its reasonable best
efforts to take (and shall use its reasonable best efforts to cause its
Affiliates to take, if applicable) all necessary or desirable actions as may be
required under applicable law to cause the individuals designated by such WCAS
Securityholders or WCAS Designees to be appointed or elected including, without
limitation, by using its reasonable best efforts to cause Directors designated
for nomination by such party to vote in favor of the individuals designated by
the WCAS Securityholders or remaining WCAS Designees. For so long as W and its
Affiliates beneficially own Voting Securities representing a majority of the
Primary Voting Power, Parent and the Other Holders shall not take any action
(and shall not support the taking of any action by any other Person) to cause
the removal of any WCAS Designee without cause unless it is directed to do so by
a WCAS Securityholder, and if Parent or any Other Holder is so directed, such
party shall use its reasonable best efforts to take (and shall use its
reasonable best efforts to cause its Affiliates to take) all actions necessary
to effect such removal and to elect a replacement WCAS Designee as provided in
the immediately preceding sentence.
SECTION 4.4. Board Committees. (a) Parent shall maintain, and W shall
support (and shall use its reasonable best efforts to cause the WCAS Designees
to support)
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Parent's maintenance of, an audit committee and a compensation committee
performing functions comparable to those customarily performed by such
committees of boards of directors of public companies in the United States and
as otherwise required by applicable law. Subject to applicable law and the
requirements of any national securities exchange or Interdealer Quotation System
on which any of Parent's securities are listed or traded, the parties hereto
shall use their reasonable best efforts to cause at least one Director
designated by W to be appointed to the compensation committee and each other
committee of the Board of Directors other than the audit committee and the
Committee of Independent Directors, and the remaining members of the
compensation committee and any other committee of the Board of Directors other
than the audit committee shall be Independent Directors and, with solely respect
to the Committee of Independent Directors, the Directors referred to in the
definition of "Committee of Independent Directors." Each of Parent and W shall
use its reasonable best efforts to take all actions to cause the audit committee
to be composed solely of Independent Directors who also qualify as independent
directors within the meaning of Section 301 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
and the rules and regulations promulgated thereunder or pursuant thereto by any
national securities exchange or Interdealer Quotation System on which any of
Parent's securities are listed or traded. W shall use its reasonable best
efforts to take all actions to support, including, without limitation, by using
its reasonable best efforts to cause the WCAS Designees to support, the
constitution of the audit committee as provided in the immediately preceding
sentence. Notwithstanding anything to the contrary contained in this Agreement,
any appointment of any Director to a committee shall be subject to applicable
law and the requirements of any national securities exchange or Interdealer
Quotation System on which any of Parent's securities are listed or traded.
(b) W shall use its reasonable best efforts to take such action as
may be required under applicable law to cooperate with the Board of Directors in
connection with the formation of the Committee of Independent Directors
including, without limitation, by using its reasonable best efforts to cause the
WCAS Designees (i) to vote in favor of the formation of such committee, (ii) to
authorize such committee to retain legal, financial and other advisors without
seeking approval of such retention by the Board of Directors and (iii) to
provide that Parent shall provide appropriate funding, as determined by such
committee, for payment of the compensation of any advisors retained by such
committee. Parent shall maintain, and W shall support (and shall use its
reasonable best efforts to cause the WCAS Designees to support) Parent's
maintenance of, the Committee of Independent Directors.
SECTION 4.5. Subsidiary Boards of Directors and Committees. The
composition requirements of each Subsidiary Board, and of each committee of each
such Subsidiary Board, shall be proportionate to the composition requirements of
the Board of Directors and of each committee thereof (other than the audit
committee), such that the WCAS Designees and the Independent Directors shall
have proportionate representation (rounded to the nearest whole number of
directors) on each such Subsidiary Board and committee thereof. The quorum and
action requirements of each Subsidiary Board, and of each committee of each such
Subsidiary Board, shall be the same as the quorum and action requirements of the
Board of Directors and of each committee thereof.
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SECTION 4.6. Director Expenses; Indemnity and Exculpation. Parent or
its Subsidiaries shall pay all of the reasonable out-of-pocket expenses incurred
by each Director in connection with attending the meetings of the Board of
Directors and any committee thereof and by each director in connection with
attending the meetings of each Subsidiary Board and any committee thereof, in
each case, in accordance with Parent's standard policy for travel by senior
executives. During the term of this Agreement, the certificate of incorporation
and bylaws of Parent and the certificate or articles of incorporation and bylaws
of each of Parent's Subsidiaries shall provide for indemnification and
exculpation of members of the Board of Directors and each Subsidiary Board to
the fullest extent permitted under applicable law.
SECTION 4.7. No Amendment of Certificate of Incorporation or Bylaws;
Board Observers. (b) During the Initial Governance Period, W shall not (and
shall cause its Affiliates not to) take any action to amend the bylaws of Parent
(other than the amendment contemplated by the Merger Agreement) unless such
amendment is approved by a Determination of the Committee of Independent
Directors. In addition, both during and after the Initial Governance Period, W
shall not (and shall cause its Affiliates not to) take any action to amend the
certificate of incorporation or bylaws of Parent (other than any amendment
contemplated by the Merger Agreement) in a manner that would modify the rights
of the parties pursuant to this Agreement in any respect, unless such amendment
is approved by a Determination of the Committee of Independent Directors.
(b) For so long as any WCAS Securityholder is subject to this
Agreement, and in addition to any other vote required by law, Parent agrees that
it shall not alter, amend or repeal, or propose to alter, amend or repeal,
whether directly or indirectly, Sections 8(B), 8(C) or 8(E) of the certificate
of incorporation of Parent, or this Section 4.7(b), if any such alteration,
amendment or repeal would (i) adversely affect the rights or obligations of any
WCAS Securityholder under Sections 8(B), 8(C) or 8(E) of the certificate of
incorporation of Parent or this Section 4.7(b) or (ii) modify or change the
rights of any WCAS Securityholder under, or modify or change the provisions of,
the bylaws of Parent or this Agreement. In addition, for so long as any WCAS
Securityholder is subject to this Agreement, and in addition to any other vote
required by law, Parent agrees that it shall not alter, amend or repeal, or
propose to alter, amend or repeal, whether directly or indirectly, any of
Section 2.03, 2.05, 2.09, 3.01, 3.04, 3.05, 3.06 or 5.02 of the bylaws of Parent
or this Section 4.7(b) if any such alteration, amendment or repeal would
adversely affect the rights or obligations of any WCAS Securityholder under the
bylaws of Parent or this Agreement.
(c) During the periods described below in this Section 4.7(c), WCAS
VIII and WCAS CP III shall each have the right to appoint one representative
(collectively, the "Representatives") to attend each meeting of the Board of
Directors as a non-voting observer, whether such meeting is conducted in person
or by teleconference. The Representatives shall have the right to present
matters for consideration by the Board of Directors and to speak on matters
presented by others. Subject to the confidentiality provisions of this Section
4.7(c), Parent shall cause the Representatives to be provided with all
communications and materials that are provided by Parent or its consultants to
the members of the Board of Directors generally, at the same time and in the
same manner that such communications and materials are provided to such members,
including all notices, board packages, reports, presentations, minutes and
20
consents. The Representatives shall be entitled to meet and consult with the
senior executive management team of Parent on a quarterly basis to discuss the
quarterly and annual business plans of Parent and Parent's Subsidiaries and to
review the progress of Parent and Parent's Subsidiaries in achieving their
plans. In addition, upon request to the Chief Executive Officer of Parent, the
members of the senior executive management team of Parent shall make themselves
available during normal business hours to meet with the Representatives on an
interim basis, as the Representatives may reasonably request from time to time.
Parent shall use its reasonable best efforts to notify the Representatives of
any significant business issues or initiatives affecting Parent or Parent's
Subsidiaries, such as changes in Parent's capital structure, incurrence of any
significant indebtedness, significant business acquisitions, dispositions or
similar transactions, developments or proposals entailing a potentially
significant liability, nomination of directors, appointment or election of
senior management personnel, and adoption of contracts, plans or other
compensation arrangements covering senior management personnel. Whenever
reasonably practicable, such notice shall be provided to the Representatives in
a manner that affords the Representatives an opportunity to consult with Parent
prior to any significant action on such issues or initiatives. Upon reasonable
request by the Representatives to the Chief Executive Officer of Parent, the
Representatives shall be entitled, at their cost and expense, to inspect the
books and records and the facilities of Parent and Parent's Subsidiaries during
normal business hours and to request and receive reasonable information
regarding the financial condition and operations of Parent and Parent's
Subsidiaries. The right of each of WCAS VIII and WCAS CP III (each, a "Fund") to
appoint a Representative, and the rights of that Representative described above,
shall exist (i) solely during the periods, if any, in which such Fund does not
have the right to designate any member for nomination for election to the Board
of Directors or no person designated for nomination by such Fund under Sections
4.1(b) or 4.1(c) is serving as a member of the Board of Directors and (ii)
solely for so long as each Fund is intended to qualify as a "venture capital
operating company" under U.S. Department of Labor Regulation 29 C.F.R. Section
2510.3-101. Notwithstanding any other provision of this Section 4.7(c) to the
contrary, the Board of Directors shall have the right to keep confidential from
the Representatives for such period of time as the Board of Directors deems
reasonable any information and copies of written materials Parent is required by
law or agreement with a third party to keep confidential. As a condition of the
exercise of their rights under this Section 4.7(c), the Representatives shall
enter into such agreements or undertakings with Parent to maintain the
confidentiality of information provided to them in connection with the exercise
of such rights as Parent may reasonably request.
ARTICLE V
LISTING MATTERS
SECTION 5.1. Listing. Parent shall use its reasonable best efforts to
cause the shares of Common Stock comprising the Parent Transaction Securities
(as defined in the Merger Agreement) to be approved for quotation on NASDAQ,
subject to official notice of issuance, if and to the extent that the Common
Stock is already approved for quotation on NASDAQ.
21
ARTICLE VI
LEGEND
Each certificate representing Voting Securities and Voting Security
Equivalents beneficially owned by the parties hereto (other than Parent) shall,
except as otherwise provided in this Article VI, be stamped or otherwise
imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS AND ARE SUBJECT TO CERTAIN LIMITATIONS ON TRANSFER SET
FORTH IN AN AGREEMENT DATED AS OF [ ], 2003 BETWEEN ITC/\DELTACOM,
INC. AND THE OTHER PARTIES THERETO. A COPY OF SUCH AGREEMENT IS ON
FILE WITH THE SECRETARY OF ITC/\DELTACOM, INC. EXCEPT FOR A
DISPOSITION OF SECURITIES PERMITTED BY THE PROVISIONS OF ARTICLE II OF
SUCH AGREEMENT IF THE PROVISIONS OF SUCH ARTICLE ARE THEN IN EFFECT,
SUCH STOP TRANSFER INSTRUCTIONS SHALL BE APPLICABLE TO ANY DISPOSITION
OF SUCH SECURITIES AND THIS LEGEND SHALL BE STAMPED OR OTHERWISE
IMPRINTED ON ANY CERTIFICATE REPRESENTING SUCH SECURITIES.
A certificate shall not bear such legend if (i) the holder thereof shall provide
evidence reasonably satisfactory to Parent (which at Parent's election may
include an opinion of counsel) that the Voting Securities or Voting Security
Equivalents being sold thereby may be publicly sold without registration under
the Securities Act and in compliance with the provisions of this Agreement or
(ii) the Voting Securities or Voting Security Equivalents represented by such
certificate are Transferred in a transaction registered under the Securities
Act. If any Voting Securities or Voting Security Equivalents shall cease to be
subject to the restrictions set forth in this Agreement, Parent shall, upon the
written request of the holder thereof, issue to such holder a new certificate
evidencing such Voting Securities or Voting Security Equivalents without the
second sentence of the legend (or the reference therein to this Agreement) set
forth above.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by facsimile, hand delivery,
by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express,
22
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses:
if to W, to:
W
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. Rather
▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Parent, to:
ITC/\DeltaCom, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
ITC/\DeltaCom, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to any other party hereto, to the address set forth under the name of
such party on the signature pages hereof.
23
SECTION 7.2. No Waivers; Amendments. No modification, amendment or
waiver of any provision of this Agreement shall be effective against Parent or
any other party hereto, unless such modification, amendment or waiver is
approved in writing by Parent and each other party hereto (other than the Other
Holders), provided that (i) any modification, amendment or waiver approved by
Parent shall not be effective without a Determination of the Committee of
Independent Directors to approve such modification, amendment or waiver, (ii)
any modification, amendment or waiver approved by the holders of a majority of
the Voting Power represented by the Voting Securities beneficially owned by W
and its Affiliates shall be effective against each WCAS Securityholder, and
(iii) the consent of each Other Holder shall be required with respect to any
modification, amendment or waiver of Section 2.1 or Article IV to the extent
that, in each case, such Other Holder remains subject to the provisions of
Section 2.1 or Article IV, as the case may be, and either (A) the obligations of
such Other Holder are increased or (B) the rights of such Other Holder are
adversely affected. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 7.3. Further Assurances. At any time or from time to time
after the date hereof, the parties agree to cooperate with each other, and at
the request of any other party, to execute and deliver any further instruments
or documents and to take all such further action as such other party may
reasonably request in order to evidence or effectuate the consummation of the
transactions contemplated by this Agreement and to otherwise carry out the
intent of the parties hereunder.
SECTION 7.4. Enforcement of this Agreement. The Board of Directors
shall take such action as is required under applicable law, if any, to ensure
that the Determination of the Committee of Independent Directors shall be
required for Parent to seek to enforce the terms of this Agreement. The
Committee of Independent Directors, acting pursuant to a Determination of the
Committee of Independent Directors, shall have the right to enforce this
Agreement and the other Transaction Documents on behalf of Parent. Attached as
Annex D hereto is a form of resolutions to be adopted by the Board of Directors
which will authorize the Committee of Independent Directors to enforce this
Agreement and the other Transaction Documents on behalf of Parent. W agrees and
covenants that it will use its reasonable best efforts to cause its WCAS
Designees not to repeal, rescind or modify such resolutions.
SECTION 7.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement and the other
Transaction Documents is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement and the other Transaction Documents
be consummated as originally contemplated to the fullest extent possible.
24
SECTION 7.6. Entire Agreement; Assignment. This Agreement, the other
Transaction Documents and the Existing Registration Rights Agreement constitute
the entire agreement among the parties with respect to the subject matter hereof
and thereof and supersede, except as set forth in such agreements, all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise; provided that, notwithstanding
anything to the contrary contained in this Agreement, this Agreement may be
assigned by Parent to any entity by operation of law or in connection with the
sale of all or substantially all of the assets or Parent or other business
combination involving Parent, subject to Section 7.10.
SECTION 7.7. Parties in Interest. This Agreement shall be binding
upon and inure to the benefit of each party hereto and their respective
successors and permitted assigns.
SECTION 7.8. Remedies.
(a) Each party hereto acknowledges that money damages would not be an
adequate remedy in the event that any of the covenants or agreements in this
Agreement are not performed in accordance with its terms, and it is therefore
agreed that, in addition to and without limiting any other remedy or right it
may have, the non-breaching party will have the right to an injunction,
temporary restraining order or other equitable relief in any court of competent
jurisdiction enjoining any such breach and enforcing specifically the terms and
provisions hereof.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
SECTION 7.9. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware without giving effect to principles of conflicts of law. Except as
otherwise contemplated by the definition of "Article IV Breach" and Annex B,
each of the parties hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of New York and
of the United States of America, in each case located in the County of New York,
for any action, proceeding or investigation in any court or before any
governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court, and each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND
25
ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 7.10. Recapitalization, etc. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Voting Securities or Voting Security Equivalents by reason
of any reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up, sale of assets, distribution to holders of Voting Securities and/or
Voting Security Equivalents or combination of the Voting Securities or Voting
Security Equivalents or any other change in capital structure of Parent,
appropriate adjustments shall be made with respect to the relevant provisions of
this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
SECTION 7.11. Public Statements. Parent agrees, and agrees to cause
its subsidiaries, not to use or make reference to, the name of any WCAS
Securityholder or any of its Affiliates in any public statement, announcement or
filing, in each case without the prior written consent of WCAS VIII, except as
may be required (i) by applicable law, rule or regulation, including the
Securities Act, the Exchange Act and the rules of any national securities
exchange or Interdealer Quotation System, (ii) pursuant to the rules of any
regulatory entity in the regular course of Parent's dealings with such entity as
long as such entity is advised of the confidential nature, if any, of such
information or (iii) by legal process.
SECTION 7.12. Portfolio Company Actions. Notwithstanding any provision
of this Agreement to the contrary, (i) each WCAS Securityholder agrees that it
shall use its reasonable best efforts not to (and shall use its reasonable best
efforts to cause its Affiliates not to) direct, encourage or facilitate the
taking of any action by any portfolio company of such WCAS Securityholder or
Affiliate of such WCAS Securityholder to the extent that such action would be
prohibited by the terms of this Agreement if taken directly by such WCAS
Securityholder, and (ii) no provision of this Agreement shall bind any portfolio
company of any WCAS Securityholder and, except as provided in clause (i) above,
no WCAS Securityholder shall be liable for any actions taken by any such
portfolio company that are not caused or induced by any WCAS Securityholder or
its Affiliates.
SECTION 7.13. HSR Filing Fees and Expenses. Parent covenants and
agrees that, in the event that any WCAS Securityholder or any of its Affiliates
is required to make a filing under the HSR Act in connection with any
transaction to which Parent is a party because such WCAS Securityholder or such
Affiliate thereof is the "ultimate parent entity" (as determined in accordance
with the HSR Act and the regulations promulgated thereunder) of Parent or the
applicable Affiliate of Parent involved in such transaction, Parent shall pay
the reasonable fees and expenses of counsel to such WCAS Securityholder or
Affiliate in preparing such filing, together with all related filing fees.
SECTION 7.14. Non-Solicitation. W shall not, and shall cause each of
its Affiliates not to, for a period commencing on the date hereof and ending on
the third anniversary of the date hereof, without the prior written approval of
Parent, directly or indirectly solicit, encourage, entice or induce, for
employment or hire as an employee or consultant any person
26
who was an employee of BTI or any Subsidiary of BTI at any time between the date
of the Merger Agreement and the date hereof; provided that the foregoing shall
not apply to any actions taken by any portfolio company of W or any of W's
affiliated investment funds that are not caused or induced by any WCAS
Securityholder or its Affiliates. If it is ever held that the restriction placed
on W by this Section 7.14 is too onerous and is not necessary for the protection
of Parent, W agrees that any court of competent jurisdiction may impose lesser
restrictions, which such court may consider necessary or appropriate to properly
protect Parent.
SECTION 7.15. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 7.16. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 7.17. Effectiveness; Termination. This Agreement shall be
effective as of the Effective Time. This Agreement shall terminate at the
earliest of (a) such time as W and its Affiliates no longer beneficially own
Voting Securities representing at least 20% of the outstanding Voting Power, (b)
a Change of Control of Parent and (c) an Article IV Breach; provided that the
covenants contained in Section 4.2 shall terminate as to each Other Holder at
the expiration of the Initial Governance Period; and provided, further, that
this Agreement shall terminate as to each Other Holder who is an employee of
Parent or any Subsidiary of Parent as of the date of this Agreement at the time
that such Other Holder ceases to be employed by Parent.
SECTION 7.18. Obligations Imposed By Law. Any obligation imposed upon
Parent or W hereunder shall not be exclusive of, or otherwise relieve such party
of, any obligation imposed upon Parent or W by the laws of the State of
Delaware.
SECTION 7.19. Definition of Stockholder. As used herein, the word
"stockholder" shall mean the holder of any Voting Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ITC/\DELTACOM, INC.
By:
------------------------------------
Name:
--------------------------------
Title:
-------------------------------
WCAS SECURITYHOLDERS:
WCAS CAPITAL PARTNERS III, L.P.
By: WCAS CP III Associates L.L.C.,
General Partner
By:
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Managing Member
WELSH, CARSON,▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII,L.P.
By: WCAS VIII Associates LLC, General
Partner
By:
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Managing Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners, General Partner
By:
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Attorney-in-fact
Individual investors and trusts:
By:
------------------------------------
▇▇▇▇▇▇▇▇ ▇. Rather, as
Attorney-in-fact for the individual
investors listed below:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
The Estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇▇ ▇. Rather
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ f/b/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ f/b/o ▇▇▇▇▇▇▇▇ ▇. Rather
OTHER HOLDERS:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
By:
------------------------------------
ANNEX A
Number of Shares/Warrants Owned by W
------------------------------------
Shares of Common Stock
Shares of Series B Preferred Stock 350,000
Common Stock Purchase Warrants 3,000,000/1/
----------
/1/ W will offer ▇▇▇▇▇ ▇▇▇▇▇▇ the right to purchase 850,000 of such
warrants for services rendered by ▇▇. ▇▇▇▇▇▇ and subject to ▇▇. ▇▇▇▇▇▇
executing a release of certain parties.
ANNEX B
ARBITRATION PROCEDURES
In the event of any unresolved dispute between Parent and W regarding
the termination of the Governance Agreement pursuant to Section 7.17(c) thereof,
Parent and W shall jointly submit such dispute to binding arbitration in New
York, New York, or such other location as mutually agreed upon by Parent and W,
in accordance with the Rules for Non-Administered Arbitration of the CPR
Institute for Dispute Resolution (the "CPR").
Each of Parent and W shall select one arbitrator. If either party
fails to make a selection, the CPR shall select one arbitrator on behalf of such
party. The two arbitrators so selected will choose within 20 days after their
selection a third arbitrator (or, if they fail to make choice, the CPR shall
choose a third arbitrator). All three arbitrators (the "Arbitrators") shall be
neutral arbitrators and subject to CPR Rules. In connection with any such
arbitration, the following rules shall apply: (i) each of Parent and W shall
furnish to the Arbitrators such documents and information as the Arbitrators may
reasonably request and will be afforded the opportunity to present to the
Arbitrators any material relevant to the existence of any material breach by
Parent of any material provision of Article IV of the Governance Agreement and
whether Parent has cured such breach within 30 days after the receipt by Parent
of written notice of such breach from W; (ii) each of Parent and W shall have
the right to have counsel represent such party at the arbitration hearing and in
pre-arbitration proceedings; (iii) pre-hearing discovery shall be limited to
exchange or production of documents; (iv) the Arbitrators shall have the
authority to resolve any discovery disputes and to invoke an action to cease or
permit further discovery; (v) each party shall have the right to a written
transcript made of the arbitration proceedings and submit a post-hearing brief
within 20 days after the conclusion of the arbitration hearing; (vi) the
Arbitrators shall have no power or authority, under the CPR Rules or otherwise,
to (A) modify or disregard any provision of the Governance Agreement, including
this Annex B, or (B) address or resolve any issue other than the dispute
submitted to such arbitration.
The agreed upon decision of any two of the Arbitrators shall
constitute the binding decision of the arbitration panel with respect to the
dispute (the "Arbitration Decision"). The Arbitration Decision shall be in
writing and made available to both Parent and W. Such decision need not state
the reasoning of the Arbitrators in reaching their decision. The Arbitrators
shall conduct the arbitration so that the Arbitration Decision is made or
rendered as soon as practicable, but in no event later than 30 days after the
submission of the post-hearing briefs nor later than 30 days following the
completion of the hearing, unless either period is reduced or extended by
agreement of the parties, or by the Arbitrators for cause.
The Arbitrators shall award the costs and expenses of the arbitration,
including reasonable attorneys' fees, disbursements, and fees and expenses of
the Arbitrators and CPR, to the prevailing party as the Arbitrators see fit. Any
amount awarded in the final decision of the Arbitrators shall be paid by the
party responsible therefor to the other party within 10 business days of
rendering the Arbitrators' Decision. Each party shall have the right to enforce
the decision of the Arbitrators in any judicial proceeding.
ANNEX C
Transferee of Warrants: ▇▇▇▇▇ ▇▇▇▇▇▇ and/or his Affiliates
ANNEX D
Resolutions Proposed for Adoption
by the Board of Directors of ITC/\DeltaCom, Inc.
WHEREAS, ITC/\DeltaCom, Inc., a Delaware corporation (the
"Corporation"), has entered into the governance agreement attached hereto as
Exhibit A (the "Governance Agreement");
WHEREAS, pursuant to Section 7.4 of the Governance Agreement, the
Committee of Independent Directors (as defined in the Governance Agreement)
shall have the right to enforce the Governance Agreement and certain other
documents on behalf of the Corporation.
NOW, THEREFORE, BE IT RESOLVED, that the Committee of Independent
Directors (as defined in the Governance Agreement), acting pursuant to a
Determination of the Committee of Independent Directors (as defined in the
Governance Agreement), are hereby authorized to enforce the Governance Agreement
and the other Transaction Documents (as defined in the Governance Agreement) on
behalf of the Corporation; and
RESOLVED, FURTHER, that the Committee of Independent Directors (as
defined in the Governance Agreement), acting pursuant to a Determination of the
Committee of Independent Directors (as defined in the Governance Agreement), is
hereby authorized to take all such actions, including the initiation of
litigation or any other dispute resolution process and the enforcement of the
indemnification provisions set forth in the Merger Agreement (as defined in the
Governance Agreement), and to execute, deliver and file all such other
agreements, documents, notices and instruments, as may be determined by such
Committee of Independent Directors to be necessary or advisable in connection
with the enforcement of the Governance Agreement or any other Transaction
Document (as defined in the Governance Agreement") on behalf of the Corporation.