Exhibit 10.5

 

 

 

INVESTORS RIGHTS AGREEMENT

by and between

Lumos Networks Corp.

and

Lumos Investment Holdings, Ltd.

 

 

Dated as of August 6, 2015

 

 

 

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Table of Contents

 

1.  

Certain Definitions

     1    2.  

Shelf Registration Statements

     5    3.  

Additional Demand Registrations

     7    4.  

Piggyback Registrations

     9    5.  

Other Registrations

     10    6.  

Selection of Underwriters

     10    7.  

Holdback Agreements

     10    8.  

Procedures

     11    9.  

Registration Expenses

     16    10.  

Indemnification

     17    11.  

Rule 144

     18    12.  

Transfer of Registration Rights

     19    13.  

Conversion of Other Securities

     19    14.  

Board of Directors

     20    15.  

Miscellaneous

     23   

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INVESTORS RIGHTS AGREEMENT dated as of August 6, 2015, by and between Lumos
Networks Corp., a Delaware corporation (the “Company”) and Lumos Investment
Holdings, Ltd., Cayman Islands exempted company (the “Initial Stockholder”).

WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company and the Initial Stockholder entered into that certain Warrants Purchase
Agreement (as defined below);

WHEREAS, pursuant to the Warrants Purchase Agreement, the Initial Stockholder
acquired a warrant to purchase 5,500,000 shares (subject to adjustment) of the
Company’s Common Stock (as defined below); and

WHEREAS, the parties hereto wish to enter into this Agreement on the date hereof
in order to set forth their relative rights with regard to the registration of
the Company’s securities, election of the Company’s Board of Directors (the
“Board”) and certain other matters.

In consideration of the mutual covenants and agreements herein contained and
other good and valid consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

  1. Certain Definitions.

In addition to the terms defined elsewhere in this Agreement, the following
terms shall have the following meanings:

“Affiliate” of any Person means any other Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlling,” “controlled by” and “under common control with”) as used with
respect to any Person means the possession, direct or indirect, 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. In
addition to the foregoing (and for the avoidance of doubt), with respect to the
Initial Stockholder, an Affiliate of the Initial Stockholder shall include any
Person controlled by, or under common control with, Pamplona Capital Management
or any fund advised by Pamplona Capital Management.

“Agreement” means this Investors Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to this Investors Rights Agreement as the same may be
in effect at the time such reference becomes operative.

“Blackout Period” has the meaning set forth in Section 8(e) hereof.

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“Business Day” means any day, except a Saturday, Sunday or legal holiday on
which banking institutions in the City of New York are authorized or obligated
by law or executive order to close.

“By-laws” has the meaning set forth in Section 14(a) hereof.

“Closing Date” has the meaning set forth in the Warrants Purchase Agreement.

“Common Stock” means the common stock, par value $0.01 per share, of the
Company.

“Company” has the meaning set forth in the introductory paragraph and includes
any other person referred to in the second sentence of Section 15(c) hereof.

“Company Related Parties” has the meaning set forth in Section 15(i) hereof.

“Delay Period” means a Demand Delay Period and a Shelf Delay Period.

“Demand Delay Period” has the meaning set forth in Section 3(d) hereof.

“Demand Registration” has the meaning set forth in Section 3(a) hereof.

“Demand Stockholder” means, as of the date of determination, any Stockholder
holding (a) Warrants that are exercisable for 10% or more of the Warrant Shares
issued and outstanding as of such date or issuable upon exercise of all
outstanding Warrants as of such date or (b) 10% or more of the Warrant Shares
issued and outstanding as of such date or issuable all outstanding Warrants as
of such date.

“Demand Registration Statement” has the meaning set forth in Section 3(a)
hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Full Cooperation” means, in connection with any underwritten offering, where,
in addition to the cooperation otherwise required by this Agreement, (a) members
of senior management of the Company (including the chief executive officer and
chief financial officer) fully and reasonably cooperate with the underwriter(s)
in connection therewith and make themselves reasonably available to participate
in “road-show” and other customary marketing activities in such locations
(domestic and foreign) as recommended by the underwriter(s) (including
one-on-one meetings with prospective purchasers of the Registrable Securities);
provided that such activities shall not unreasonably interfere with the duties
of such members of senior management in the ordinary course of the Company’s
business and (b) the Company prepares preliminary and final prospectuses
(preliminary and final prospectus supplements in the case of an offering
pursuant to the Shelf Registration Statement) for use in connection therewith
containing such additional information as reasonably requested by the
underwriter(s) (in addition to the minimum amount of information required by
law, rule or regulation).

 

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“Fully Marketed Underwritten Offering” means an underwritten offering in which
there is Full Cooperation.

“Governmental Entity” means any national, federal, state, municipal, local,
territorial, foreign or other government or any department, commission, board,
bureau, agency, regulatory authority or instrumentality thereof, or any court,
judicial, administrative or arbitral body or public or private tribunal.

“Initial Stockholder” has the meaning set forth in the introductory paragraph.

“Joinder” has the meaning set forth in Section 12(a) hereof.

“Notes” means the Company’s 8% Notes due 2022 issued to Lumos Debt Holdings,
L.P. on the date hereof (or any replacement thereof).

“Original Principal Amount” means US$150,000,000.

“Permitted Transferee” has the meaning set forth in Section 12(a) hereof.

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, Governmental
Entity or any other entity.

“Piggyback Registration” has the meaning set forth in Section 4(a) hereof.

“Piggyback Registration Statement” has the meaning set forth in Section 4(a)
hereof.

“Prospectus” means the prospectus or prospectuses included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus or prospectuses.

“Registrable Securities” means (i) the Warrants Shares, (ii) any other shares of
Common Stock of the Company (or any successor to the Company) acquired after the
date hereof by the Initial Stockholder and (iii) any shares of Common Stock
issued as a distribution with respect to, in exchange for, upon exercise of, or
in replacement of any such Warrant Shares or Common Stock, in each case held by
such Stockholder; provided, however, that such securities shall cease to be
Registrable Securities when (x) a registration statement registering such
securities under the Securities Act has been declared effective

 

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and such securities have been sold or otherwise transferred by the holder
thereof pursuant to such effective registration statement or (y) such securities
are sold in accordance with Rule 144.

“Registration Expenses” has the meaning set forth in Section 9(a) hereof.

“Registration Statement” means any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement.

“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act,
as such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such rule.

“Rule 415” means Rule 415 promulgated by the SEC pursuant to the Securities Act,
as such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC as a replacement thereto having substantially the
same effect as such rule.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Delay Period” has the meaning set forth in Section 2(d) hereof.

“Shelf Registration Statement” has the meaning set forth in Section 2(a) hereof.

“Significant Event” means (i) entry (or announcement of any intention enter) by
the Company in, or recommendation of the Company of, any transaction that would,
if consummated, result in any third party acquiring, or having the right to
acquire, 33% or more of the Company’s voting securities, (ii) the majority of
the Board being comprised, at any time, of persons that were initially nominated
by any person other than by the nominating committee of the Board (or such
committee performing such function) (“Dissident Directors”); provided that,
persons nominated or designated by such Dissident Directors or a committee
comprised of Dissident Directors, shall be deemed Dissident Directors other than
nominees initially proposed by any third party (other than the Initial
Stockholder or the Company), or (iii) any adoption by the Board of any plan of
liquidation or dissolution of the Company.

“Stockholders” means (i) the Initial Stockholder and (ii) each Permitted
Transferee who becomes a party to or bound by the provisions of this Agreement
in accordance with the terms hereof.

 

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“Stockholder Related Parties” has the meaning set forth in Section 15(i) hereof.

“Suspension Notice” has the meaning set forth in Section 8(e) hereof.

“Underwritten registration or underwritten offering” means an offering in which
securities of the Company are sold to one or more underwriters (as defined in
Section 2(a)(ii) of the Securities Act) for resale to the public.

“Warrants” means the Warrant issued on the date hereof pursuant to the Warrants
Purchase Agreement and all Warrants issued upon transfer, division or
combination of, or in substitution for, such Warrant, or any other Warrant
subsequently issued to the holders of the Warrants.

“Warrants Purchase Agreement” means the Warrants Purchase Agreement, dated as of
August 6, 2015, by and between the Company and the Initial Stockholder.

“Warrant Shares” means 5,500,000 shares of the Company’s Common Stock issued or
issuable upon the exercise of the Warrants, subject to adjustment in accordance
with the Warrants.

 

  2. Shelf Registration Statements.

(a) Right to Request Registration. At the request of any Demand Stockholder, the
Company shall use its best efforts to promptly file a registration statement on
Form S-3 or such other form under the Securities Act then available to the
Company providing for the resale pursuant to Rule 415 from time to time by such
Demand Stockholder of such number of shares of Registrable Securities requested
by such Demand Stockholder to be registered thereby (including the Prospectus,
amendments and supplements to the shelf registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference, if
any, in such shelf registration statement, the “Shelf Registration Statement”).
The Company shall use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective by the SEC as promptly as
practicable following such filing. The Company shall use its reasonable best
efforts to maintain the effectiveness of the Shelf Registration Statement for a
period of at least eighteen (18) months in the aggregate plus the duration of
any Blackout Period or Shelf Delay Period, or such shorter period that shall
terminate when all of the Registrable Securities covered by such Shelf
Registration Statement have been sold pursuant to such Shelf Registration
Statement in accordance with the plan of distribution set forth therein. The
plan of distribution contained in the Shelf Registration Statement shall be in
the form attached as Exhibit A hereto, unless otherwise determined by such
Stockholders.

(b) Number of Fully Marketed Underwritten Offerings. The Demand Stockholders,
collectively, shall be entitled to request an aggregate of three (3) Fully
Marketed Underwritten Offerings pursuant to the Shelf Registration Statement. If
any Demand

 

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Stockholder requests a Fully Marketed Underwritten Offering, the Company shall
cause there to occur promptly Full Cooperation in connection therewith. An
underwritten offering shall not count as one of the permitted Fully Marketed
Underwritten Offerings if there is not Full Cooperation in connection therewith
or such Demand Stockholders are not able to sell at least 50% in the aggregate
of the Registrable Securities desired to be sold in such Fully Marketed
Underwritten Offering. Except as provided in this Section 2(b), there shall be
no limitation on the number of takedowns off the Shelf Registration Statement.

(c) Priority on Fully Marketed Underwritten Offerings. If in connection with a
Fully Marketed Underwritten Offering pursuant to this Section 2 the managing
underwriter shall advise the Company that in its opinion the number of
securities requested to be included in such offering exceeds the number that can
be sold in such offering without having an adverse effect on such offering,
including the price at which such securities can be sold, then the Company shall
include in such Fully Marketed Underwritten Offering the maximum number of
securities that such underwriter advises can be so sold without having such
effect, allocated (i) first, to Registrable Securities requested by the Demand
Stockholders to be included in such Fully Marketed Underwritten Offering and
(ii) second, among all securities requested to be included in such registration
by any other Persons (including securities to be sold for the account of the
Company) allocated among such Persons in such manner as they may agree.

(d) Restrictions on Shelf Registrations and Fully Marketed Underwritten
Offerings. The Company may postpone the filing or effectiveness of a Shelf
Registration Statement or the commencement of any Fully Marketed Underwritten
Offering pursuant to a Shelf Registration Statement if, based on the good faith
judgment of the Company’s Board, such postponement is necessary in order to
avoid premature disclosure of a matter the Board has determined would not be in
the best interest of the Company to be disclosed at such time; provided,
however, that the Demand Stockholder requesting such Shelf Registration
Statement or Fully Marketed Underwritten Offering shall be entitled, at any time
after receiving notice of such postponement, to withdraw such request and, if
such request is withdrawn, such Shelf Registration Statement or Fully Marketed
Underwritten Offering thereunder shall not count as one of the permitted Fully
Marketed Underwritten Offerings contemplated in Section 2(b). The Company shall
provide written notice to the Demand Stockholder of (x) any postponement of the
filing or effectiveness of the Shelf Registration Statement or a Fully Marketed
Underwritten Offering pursuant to this Section 2(d) and (y) the Company’s
decision to file or seek effectiveness of such Shelf Registration Statement or
commence such Fully Marketed Underwritten Offering following such postponement
and (z) the effectiveness of such Shelf Registration Statement. The Company may
defer the filing or effectiveness of such Shelf Registration Statement or the
commencement of a particular Fully Marketed Underwritten Offering pursuant to
this Section 2(d) only once during any 12-month period. Notwithstanding the
provisions of this Section 2(d), the Company may not postpone the filing or
effectiveness of a Shelf Registration Statement or the commencement of a Fully
Marketed Underwritten

 

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Offering past the date that is the earliest of (a) the date upon which any
disclosure of a matter the Board has determined would not be in the best
interest of the Company to be disclosed is disclosed to the public or ceases to
be material, (b) forty-five (45) days after the date upon which the Board has
determined such matter should not be disclosed and (c) such date that, if such
postponement continued, would result in there being more than sixty (60) days in
the aggregate in any 12 month period during which the filing or effectiveness of
the Shelf Registration Statement or the commencement of one or more Fully
Marketed Underwritten Offerings has been so postponed. The period during which
filing or effectiveness of a Shelf Registration Statement or commencement of a
Fully Marketed Underwritten Offering is so postponed hereunder is referred to as
a “Shelf Delay Period.”

 

  3. Additional Demand Registrations.

(a) Right to Request Registration. If at any time during this Agreement, the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3 or other registration form for a shelf offering to be made from time
to time pursuant to Rule 415 or if Rule 415 is otherwise not available to the
Company for the offer and sale of the Registrable Securities, the Registrable
Securities may be registered separate from a Shelf Registration Statement. Any
time after the date hereof and subject to foregoing sentence and Section 2(a),
any Demand Stockholder may request registration for resale under the Securities
Act of all or part of the Registrable Securities pursuant to a Registration
Statement separate from the Shelf Registration Statement (a “Demand
Registration”). As promptly as practicable after such request, but in any event
within fifteen (15) days of such request by a Demand Stockholder, the Company
shall file a registration statement registering for resale such number of shares
of Registrable Securities held by such Demand Stockholders as requested to be so
registered (including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement,
a “Demand Registration Statement”). In connection with each such Demand
Registration involving an underwritten offering, the Company shall cause there
to occur promptly Full Cooperation.

(b) Number of Demand Registrations. The Demand Stockholders, collectively, will
be entitled to request a total of three (3) Demand Registrations pursuant to
Section 3(a), minus the number of Fully Marketed Underwritten Offerings
completed off of the Shelf Registration Statement. A registration shall not
count as one of the permitted Demand Registrations pursuant to Section 3(a)(i)
until the related Demand Registration Statement has become effective, (ii) if
the Demand Stockholders are not able to register and sell at least 50% of the
aggregate Registrable Securities requested to be included in such registration,
(iii) if there was not Full Cooperation in connection therewith or (iv) in the
case of a Demand Registration that would be the last permitted Demand
Registration requested pursuant to Section 3(a), if the Demand Stockholders are
not able to register and sell all of the Registrable Securities requested to be
included in such registration.

 

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(c) Priority on Demand Registrations. If a Demand Registration pursuant to this
Section 3 involves an underwritten offering and the managing underwriter shall
advise the Company that in its opinion the number of securities requested to be
included in such registration exceeds the number that can be sold in such
offering without having an adverse effect on such offering, including the price
at which such securities can be sold, then the Company shall include in such
registration the maximum number of securities that such underwriter advises can
be so sold without having such effect, allocated (i) first, to Registrable
Securities requested by the Demand Stockholders to be included in such
registration and (ii) second, among all securities requested to be included in
such registration by any other Persons (including securities to be sold for the
account of the Company) allocated among such Persons in such manner as they may
agree.

(d) Restrictions on Demand Registrations. The Company may postpone the filing or
the effectiveness of a Demand Registration Statement if, based on the good faith
judgment of the Company’s Board, such postponement is necessary in order to
avoid premature disclosure of a matter the Board has determined would not be in
the best interest of the Company to be disclosed at such time; provided,
however, that the Demand Stockholder requesting such Demand Registration
Statement shall be entitled, at any time after receiving notice of such
postponement and before such Demand Registration Statement becomes effective, to
withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Demand Registrations. The
Company shall provide written notice to the Demand Stockholders of (x) any
postponement of the filing or effectiveness of a Demand Registration Statement
pursuant to this Section 3(d), (y) the Company’s decision to file or seek
effectiveness of such Demand Registration Statement following such postponement
and (z) the effectiveness of such Demand Registration Statement. The Company may
defer the filing or effectiveness of a particular Demand Registration Statement
pursuant to this Section 3(d) only once during any 12-month period.
Notwithstanding the provisions of this Section 3(d), the Company may not
postpone the filing or effectiveness of a Demand Registration Statement past the
date that is the earliest of (a) the date upon which any disclosure of a matter
the Board has determined would not be in the best interest of the Company to be
disclosed is disclosed to the public or ceases to be material, (b) forty-five
(45) days after the date upon which the Board has determined such matter should
not be disclosed and (c) such date that, if such postponement continued, would
result in there being more than sixty (60) days in the aggregate in any 12 month
period during which the filing or effectiveness of one or more Registration
Statements has been so postponed. The period during which filing or
effectiveness is so postponed hereunder is referred to as a “Demand Delay
Period.”

(e) Effective Period of Demand Registrations. After any Demand Registration
filed pursuant to this Agreement has become effective, the Company shall use its
reasonable best efforts to keep such Demand Registration Statement effective for
a period of at least one hundred and eighty (180) days from the date on which
the SEC declares such Demand Registration Statement effective plus the duration
of any Demand Delay Period and any Blackout Period, or such shorter period that
shall terminate when all of

 

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the Registrable Securities covered by such Demand Registration Statement have
been sold pursuant to such Demand Registration Statement in accordance with the
plan of distribution set forth therein.

 

  4. Piggyback Registrations.

(a) Right to Piggyback. Whenever the Company proposes to publicly sell or
register for sale any of its common equity securities pursuant to a registration
statement (a “Piggyback Registration Statement”) under the Securities Act (other
than a registration statement on Form S-8 or any similar successor forms
thereto), whether for its own account or for the account of one or more
securityholders of the Company which permits the inclusion of a Stockholder’s
Registrable Securities (a “Piggyback Registration”), the Company shall give
prompt written notice to each Stockholder of its intention to effect such sale
or registration and, subject to Sections 4(b) and 4(c), shall include in such
transaction all Registrable Securities with respect to which the Company has
received a written request from the Stockholders for inclusion therein within
fifteen (15) days after the receipt of the Company’s notice. The Company may
postpone or withdraw the filing or the effectiveness of a Piggyback Registration
at any time in its sole discretion, without prejudice to the Stockholders’ right
to immediately request a Demand Registration or Shelf Registration Statement
hereunder. A Piggyback Registration shall not be considered a Demand
Registration for purposes of Section 3 of this Agreement or a Shelf Registration
Statement for purposes of Section 2 of this Agreement.

(b) Priority on Primary Registrations. If a Piggyback Registration is initiated
as an underwritten primary registration on behalf of the Company, and the
managing underwriter advises the Company in writing that in its opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without having an adverse effect on
such offering, including the price at which such securities can be sold, then
the Company shall include in such registration the maximum number of shares that
such underwriter advises can be so sold without having such effect, allocated
(i) first, to the securities the Company proposes to sell and (ii) second, to
the Registrable Securities and other securities requested to be included in such
registration by the Stockholders and other security holders of the Company, pro
rata among the holders of such securities on the basis of the number of shares,
including Registrable Securities, requested to be registered by such holders so
long as no other registration rights remain outstanding.

(c) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten registration on behalf of a holder of the Company’s
securities other than Registrable Securities and such registration permits the
inclusion of a Stockholder’s Registrable Securities, and the managing
underwriter advises the Company in writing that in its opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering without having an adverse effect on such offering,
including the price at which such securities can be sold, then the Company

 

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shall include in such registration the maximum number of shares that such
underwriter advises can be so sold without having such effect, allocated
(i) first, to the securities requested to be included therein by the holder(s)
requesting such registration and (ii) the Registrable Securities and other
securities requested to be included in such registration by the Stockholders,
other security holders and the Company, pro rata among the Stockholders, such
other security holders and the Company on the basis of the number of shares
requested to be registered by them so long as no other registration rights
remain outstanding.

 

  5. Other Registrations

Following the date of this Agreement, the Company shall not grant to any Person
the right, other than as set forth herein and except to employees of the Company
with respect to registrations on Form S-8 (or any successor forms thereto), to
request the Company to register any securities of the Company except such rights
as are not more favorable than or inconsistent with the rights granted to the
Stockholders and that do not adversely affect the priorities set forth herein of
the Stockholders.

 

  6. Selection of Underwriters.

If any of the Registrable Securities covered by a Demand Registration Statement
or a Shelf Registration Statement is to be sold in an underwritten offering, the
Stockholders shall have the right to select the managing underwriter(s) to
administer the offering subject to the prior approval of the Company, which
approval shall not be unreasonably withheld or delayed.

 

  7. Holdback Agreements.

(a) The Company agrees not to, and shall exercise its reasonable best efforts to
obtain agreements (in the underwriters’ customary form) from its directors,
executive officers and beneficial owners of 5% or more of the Company’s
outstanding voting securities not to, directly or indirectly offer, sell,
pledge, contract to sell, (including any short sale), grant any option to
purchase or otherwise dispose of any equity securities of the Company or enter
into any hedging transaction relating to any equity securities of the Company
during the ninety (90) days beginning on the pricing date of any underwritten
offering pursuant to a Registration Statement (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or S-4 or any
successor forms thereto) unless the underwriter managing the offering otherwise
agrees to a shorter period.

(b) So long as the Initial Stockholder has any designees on the Company’s Board,
if (i) the Company proposes to offer and sell any of its common equity
securities for its own account in an underwritten public offering and
(ii) reasonably requested by the lead managing underwriter, the Initial
Stockholder shall, only upon providing its prior consent (such consent not to be
unreasonably withheld), enter into a reasonable and customary

 

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“lock up” agreement with the representatives of the underwriters for the
offering; provided that the terms of such lock up agreement shall be no more
restrictive than any lock up agreement signed by any director, officer or
stockholder of the Company.

 

  8. Procedures.

(a) Whenever one or more Stockholders request that any Registrable Securities be
registered or sold pursuant to this Agreement, the Company shall use its
reasonable best efforts to effect the registration of such Registrable
Securities in accordance with the intended methods of disposition thereof, and
pursuant thereto the Company shall as promptly as reasonably possible:

(i) prepare and file with the SEC a Registration Statement with respect to such
Registrable Securities and use its reasonable best efforts to cause such
Registration Statement to become effective as soon as practicable thereafter;
and before filing a Registration Statement or Prospectus or any amendments or
supplements thereto (including any prospectus supplement for a shelf takedown),
furnish to the Stockholders participating in such Registration Statements and
the underwriter(s), if any, copies of all such documents proposed to be filed,
including documents incorporated by reference in the Prospectus and, if
requested by such Stockholders, the exhibits incorporated by reference,
provided, that any such item which is available on the SEC’s EDGAR system (or
successor thereto) need not be furnished, and such Stockholders (and the
underwriter(s), if any) shall have the opportunity to review and comment thereon
(other than such documents incorporated by reference in the Prospectus), and the
Company will not file such Registration Statement or Prospectus or any amendment
or supplement thereto in a form to which the Stockholders (and the
underwriter(s), if any) reasonably objects;

(ii) prepare and file with the SEC such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for a period of not less
than one hundred and eighty (180) days, in the case of a Demand Registration
Statement or an aggregate of eighteen (18) months, in the case of a Shelf
Registration Statement (plus, in each case, the duration of any Delay Period and
any Blackout Period), or in each case such shorter period as is necessary to
complete the distribution of the securities covered by such Registration
Statement and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by such
Stockholders thereof set forth in such Registration Statement and, in the case
of the Shelf Registration Statement, prepare such prospectus supplements

 

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containing such disclosures as may be reasonably requested by such Stockholders
or any underwriter(s) in connection with each shelf takedown; provided that the
Company shall not have any obligation to include such requested disclosure if
the Company reasonably expects that doing so would cause the applicable
Prospectus to contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

(iii) furnish to such Stockholders such number of copies of such Registration
Statement, each amendment and supplement thereto, the Prospectus included in
such Registration Statement (including each preliminary Prospectus) and such
other documents as such Stockholders and any underwriter(s) may reasonably
request in order to facilitate the disposition of the Registrable Securities,
provided, however, that the Company shall have no obligation to furnish copies
of a final prospectus if the conditions of Rule 172(c) under the Securities Act
are satisfied by the Company;

(iv) use its reasonable best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
(domestic or foreign) as such Stockholders and any underwriter(s) reasonably
requests and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Stockholders and any underwriter(s) to
consummate the disposition in such jurisdictions of the Registrable Securities
(provided, that the Company will not be required to (1) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph (iv), (2) subject itself to taxation in any such
jurisdiction or (3) consent to general service of process in any such
jurisdiction);

(v) notify such Stockholders and any underwriter(s), at any time when a
Prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of any event as a result of which the Prospectus included
in such Registration Statement contains an untrue statement of a material fact
or omits any material fact necessary to make the statements therein not
misleading, and, at the request of such Stockholders or any underwriter(s), the
Company shall prepare a supplement or amendment to such Prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;

 

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(vi) in the case of an underwritten offering, (i) enter into such customary
agreements (including underwriting agreements in customary form), (ii) take all
such other actions as such Stockholders or the underwriter(s) reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities (including, without limitation, causing senior management and other
Company personnel to cooperate with such Stockholders and the underwriter(s) in
connection with performing due diligence) and (iii) cause its counsel to issue
opinions of counsel in form, substance and scope as are customary in primary
underwritten offerings, addressed and delivered to the underwriter(s) and such
Stockholders;

(vii) in connection with each Demand Registration requested by the Demand
Stockholders pursuant to Section 3 and each Fully Marketed Underwritten Offering
requested by the Stockholders pursuant to Section 2, cause there to occur Full
Cooperation and, in all other cases, cause members of senior management of the
Company to be reasonably available to participate in, and to reasonably
cooperate with the underwriter(s) in connection with customary marketing
activities (including select conference calls and one-on-one meetings with
prospective purchasers); provided that such activities shall not unreasonably
interfere with the duties of such senior management in the ordinary course of
the Company’s business;

(viii) make available for inspection by such Stockholders, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by such Stockholders or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company’s officers, managers, employees
and independent accountants to supply all information reasonably requested by
such Stockholders, underwriter, attorney, accountant or agent in connection with
such Registration Statement;

(ix) provide a transfer agent and registrar for all such Registrable Securities
not later than the effective date of such Registration Statement;

(x) if requested by underwriter(s) in connection with an underwritten offering,
cause to be delivered, immediately prior to the pricing of such underwritten
offering and at the time of closing of the sale of Registrable Securities
pursuant to such underwritten offering, letters from the Company’s independent
registered public accountants and any other accountants whose reports are
included or incorporated by reference in

 

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such Registration Statement addressed to such Stockholders and each underwriter,
if any, stating that such accountants are independent public accountants within
the meaning of the Securities Act and the applicable rules and regulations
adopted by the SEC thereunder, and otherwise in customary form and covering such
financial and accounting matters as are customarily covered by letters of the
independent registered public accountants delivered in connection with primary
underwritten public offerings;

(xi) make generally available to its securityholders a consolidated earnings
statement (which need not be audited) for the twelve (12) months beginning after
the effective date of a Registration Statement as soon as reasonably practicable
after the end of such period, which earnings statement shall satisfy the
requirements of an earnings statement under Section 11(a) of the Securities Act;
and

(xii) promptly notify such Stockholders and the underwriter or underwriters, if
any:

(1) when the Registration Statement, any pre-effective amendment, the Prospectus
or any Prospectus supplement or post-effective amendment to the Registration
Statement has been filed and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective;

(2) of any written request by the SEC for amendments or supplements to the
Registration Statement or Prospectus;

(3) of the notification to the Company by the SEC of its initiation of any
proceeding with respect to the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement; and

(4) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction.

(b) The Company represents and warrants that no Registration Statement
(including any amendments or supplements thereto and Prospectuses contained
therein) shall contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein, or necessary to make the
statements therein not misleading (except that the Company makes no
representation or warranty with respect to information relating to a Stockholder
furnished to the Company by or on behalf of such Stockholder specifically for
use therein).

 

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(c) The Company shall make available to the Stockholders (and the underwriters,
if any) (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of each Registration
Statement and any amendment thereto, each preliminary Prospectus and Prospectus
and each amendment or supplement thereto, each letter written by or on behalf of
the Company to the SEC or the staff of the SEC (or other governmental agency or
self-regulatory body or other body having jurisdiction, including any domestic
or foreign securities exchange), and each item of correspondence from the SEC or
the staff of the SEC (or other governmental agency or self-regulatory body or
other body having jurisdiction, including any domestic or foreign securities
exchange), in each case relating to a Shelf Registration Statement or a Demand
Registration Statement, and (ii) such number of copies of a Prospectus,
including a preliminary Prospectus, and all amendments and supplements thereto
and such other documents as any Stockholder or any underwriter may reasonably
request in order to facilitate the disposition of the Registrable Securities.
The Company will promptly notify the Stockholders of the effectiveness of each
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review.

(d) The Company may require the Stockholders to furnish to the Company any other
information regarding such Stockholders and the distribution of such securities
as the Company reasonably determines, based on the advice of counsel, is
required to be included in any Registration Statement. Additionally, each
Stockholder agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder. Each Stockholder agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it or an
exemption therefrom in connection with sales of Registrable Securities pursuant
to a Registration Statement.

(e) Each Stockholder agrees that, upon notice from the Company of the happening
of any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading (a “Suspension
Notice”), such Stockholder will forthwith discontinue disposition of Registrable
Securities pursuant to such Registration Statement for a reasonable length of
time not to exceed ten (10) days (thirty (30) days in the case of an event
described in Section 3(d)) until such Stockholder is advised in writing by the
Company that the use of the Prospectus may be resumed and is furnished with a
supplemented or amended Prospectus as contemplated by Section 8(a) hereof;
provided, however, that such postponement of sales of Registrable Securities by
such Stockholder shall not exceed forty-five (45) days in the aggregate in any
six-month period. If the Company shall give the Stockholders any Suspension
Notice, the Company

 

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shall extend the period of time during which the Company is required to maintain
the applicable Registration Statements effective pursuant to this Agreement by
the number of days during the period from and including the date of the giving
of such Suspension Notice to and including the date the Stockholders either are
advised by the Company that the use of the Prospectus may be resumed or receive
copies of the supplemented or amended Prospectus contemplated by Section 8(a) (a
“Blackout Period”). In any event, the Company shall not be entitled to deliver
more than a total of three (3) Suspension Notices in any twelve (12) month
period.

(f) The Company shall not permit any officer, manager, underwriter, broker or
any other person acting on behalf of the Company to use any free writing
prospectus (as defined in Rule 405 under the Securities Act) in connection with
any registration statement covering Registrable Securities, without the prior
written consent of the Stockholders and any underwriter.

(g) In no event shall the Company be required to effect more than one
underwritten offering hereunder within any six-month period, whether as a Fully
Marketed Underwritten Offering pursuant to the Shelf Registration Statement or,
in the event the Company is not eligible for registration under the Shelf
Registration Statement, as an underwritten offering pursuant to a Demand
Registration.

 

  9. Registration Expenses.

(a) All expenses incident to the Company’s performance of or compliance with
this Agreement, including, without limitation, all registration and filing fees
(including SEC registration fees and FINRA filing fees), fees and expenses of
compliance with securities or blue sky laws, listing application fees, printing
expenses, transfer agent’s and registrar’s fees, cost of distributing
Prospectuses in preliminary and final form as well as any supplements thereto,
and fees and disbursements of counsel for the Company and all accountants and
other Persons retained by the Company (all such expenses being herein called
“Registration Expenses”) (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of Registrable
Securities), shall be borne by the Company. In addition, the Company shall pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which they are to be listed.

(b) In connection with each registration initiated hereunder (whether a Demand
Registration, Shelf Registration Statement or a Piggyback Registration), the
Company shall pay, or shall reimburse the Stockholders for, the reasonable fees
and disbursements of one law firm chosen by the Stockholders as their counsel.

(c) The obligation of the Company to bear the expenses described in Section 9(a)
and to pay or reimburse the Stockholders for the expenses described in
Section 9(b) shall apply irrespective of whether a registration, once properly
demanded, if applicable, becomes effective, is withdrawn or suspended, is
converted to another form of registration and irrespective of when any of the
foregoing shall occur.

 

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  10. Indemnification.

(a) The Company shall indemnify, to the fullest extent permitted by law, each
Stockholder and its officers, directors, employees and Affiliates and each
Person who controls a Stockholder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses arising out of or
based upon any untrue or alleged untrue statement of material fact contained in
any Registration Statement, Prospectus or preliminary Prospectus or any “issuer
free writing prospectus” (as defined in Securities Act Rule 433) or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or any violation or alleged violation by the Company of
the Securities Act, the Exchange Act or applicable “blue sky” laws, except
insofar as the same are made in reliance and in conformity with information
relating to a Stockholder furnished in writing to the Company by such
Stockholder expressly for use therein. In connection with an underwritten
offering, the Company shall indemnify such underwriter(s), their officers,
employees and directors and each Person who controls such underwriter(s) (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Stockholders.

(b) In connection with any Registration Statement in which a Stockholder is
participating, such Stockholder shall furnish to the Company in writing such
information as the Company reasonably determines, based on the advice of
counsel, is required to be included in, any such Registration Statement or
Prospectus and, shall indemnify, to the fullest extent permitted by law, the
Company, its officers, employees, directors, Affiliates, and each Person who
controls the Company (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses arising out of or based upon
any untrue or alleged untrue statement of material fact contained in the
Registration Statement, Prospectus, preliminary Prospectus, any “free writing
prospectus” (as defined in Securities Act Rule 433) or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that the same are made in reliance and in
conformity with information relating to such Stockholder furnished in writing to
the Company by such Stockholder expressly for use therein.

(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to

 

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such claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel (in addition to any local
counsel) for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party there may
be one or more legal or equitable defenses available to such indemnified party
that are in addition to or may conflict with those available to another
indemnified party with respect to such claim. Failure to give prompt written
notice shall not release the indemnifying party from its obligations hereunder.

(d) The indemnification provided for under this Agreement shall remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.

(e) If the indemnification provided for in or pursuant to this Section 10 is due
in accordance with the terms hereof, but is held by a court to be unavailable or
unenforceable in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified Person as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that result in
such losses, claims, damages, liabilities or expenses as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
on the one hand and of the indemnified Person on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party, and by such party’s relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. In
no event shall the liability of a Stockholder be greater in amount than the
amount of net proceeds received by such Stockholder upon such sale.

 

  11. Rule 144.

The Company covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and it will take such further action as the
Stockholders may reasonably request to make available adequate current public
information with respect to the Company meeting the current public information
requirements of Rule 144(c) under the Securities Act, to the extent required to
enable the Stockholders to sell Registrable Securities

 

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without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of the Stockholders, the Company will
deliver to the Stockholders a written statement as to whether it has complied
with such information and requirements.

 

  12. Transfer of Registration Rights.

(a) Each Stockholder may in its sole discretion transfer all or any portion of
its then-remaining registration rights under Sections 2 through 11 of this
Agreement to (i) any Affiliate of such Stockholder or (ii) any transferee who
would satisfy the definition of a “Demand Stockholder” as a result of the
acquisition of Warrants or Warrant Shares (other than, in the case of the
Warrant Shares, pursuant to an effective Registration Statement) (each, a
“Permitted Transferee”). Any transfer of registration rights pursuant to this
Section 12(a) shall be effective upon receipt by the Company of (x) written
notice from the Stockholder stating the name and address of any Permitted
Transferee and identifying the amount of Registrable Securities with respect to
which the rights under this Agreement are being transferred and the nature of
the rights so transferred and (y) a joinder, in the form attached as Exhibit B
hereto (the “Joinder”), providing that the Permitted Transferee shall be bound
by and shall fully comply with the terms of this Agreement (including the
provisions of this Section 12) or another written agreement from the transferee
to be bound by the terms of this Agreement. In connection with any such
transfer, the term “Stockholders” as used in this Agreement shall, where
appropriate to assign such rights to such Permitted Transferee, be deemed to
include the Permitted Transferee holder of such Registrable Securities. The
Stockholders and such Permitted Transferees may exercise the registration rights
hereunder in such proportion (not to exceed the then-remaining registration
rights hereunder) as they shall agree among themselves.

(b) After such transfer, the transferring Stockholder shall retain its rights
under this Agreement with respect to all other Registrable Securities owned by
such Stockholder. Upon request of the transferring Stockholder, the Company
shall execute a Joinder or another investor rights agreement with such Permitted
Transferee or a proposed transferee substantially similar to the applicable
sections of this Agreement.

 

  13. Conversion of Other Securities.

If a Stockholder offers Registrable Securities by forward sale, or any options,
rights, warrants or other securities issued by it or any other person that are
offered with, convertible into or exercisable or exchangeable for any
Registrable Securities, the Registrable Securities subject to such forward sale
or underlying such options, rights, warrants or other securities shall be
eligible for registration pursuant to Sections 2, 3 and 4 of this Agreement.

 

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  14. Board of Directors.

(a) Composition. Prior to the execution of this Agreement, the Company has taken
all actions (including by amendment of the Amended and Restated Bylaws of the
Company (the “By-laws”), if required) necessary to increase the number of
directors that shall constitute the entire board to nine (9) and, effective as
of the date hereof, has appointed to the Board of the Company each of William
Pruellage and Peter Aquino as a director to serve until his successor is elected
and qualified or his resignation or removal in accordance with the By-laws. For
so long as the Initial Stockholder maintains the right to designate one or more
directors pursuant to Section 14(b), the Company shall not support any increase
in the number of directors of more than ten (10) total directors without the
Initial Stockholder’s prior written consent.

(b) Designation of Directors. Until the date on which all Warrants have been
sold or otherwise transferred by the Initial Stockholder (other than to an
Affiliate) or the underlying Common Stock has been sold or transferred (other
than to an Affiliate), the Initial Stockholder (or an Affiliate of the Initial
Stockholder in the event the Initial Stockholder sells or otherwise transfers
all or a part of the Warrants or the underlying Common Stock to an Affiliate)
shall have the right to designate to the Board two (2) directors, the identity
of such director designees to be at the discretion of the Initial Stockholder so
long as any such director designees are not restricted from serving on the board
of directors of a U.S. public company and shall satisfy the corporate governance
guidelines of the Company and NASDAQ; provided, however, that following any
(x) transfer by any Affiliate of the Initial Stockholder and/or the Initial
Stockholder, as applicable, of the Notes or (y) any repayment of the Notes
(i) if the Initial Stockholder, collectively with any of its Affiliates
(including the initial holder thereof) retains the Notes representing between
65% and 35% of the Original Principal Amount (calculated by reference to the
then principal amount of the Notes plus accrued and unpaid interest held by any
such Affiliate of the Initial Stockholder and/or the Initial Stockholder, as
applicable), the Initial Stockholder shall be entitled to designate to the Board
one (1) director (for the avoidance of doubt, if the amounts so retained exceed
65%, the Initial Stockholder shall retain the right to designate to the Board
two (2) directors) and (ii) if the Initial Stockholder retains the Notes
representing less than 35% of the Original Principal Amount (calculated by
reference to the then principal amount of the Notes plus accrued and unpaid
interest held by any such Affiliate of the Initial Stockholder and/or the
Initial Stockholder, as applicable), then the Initial Stockholder’s designation
right will terminate. The Initial Stockholder’s right to designate directors
shall not be transferrable (other than to any commonly controlled Affiliates)
without the prior written consent of the Company.

(c) Election of Directors. The Company shall nominate and take all action within
its power to cause all nominees designated pursuant to Section 14(b) to be
included in the slate of nominees recommended by the Board to the Company’s
stockholders for election as directors at each annual or special meeting of the
stockholders of the Company at which directors are to be elected to the Board
(and/or in connection with any election

 

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by written consent) and the Company shall use all reasonable best efforts to
cause the election of each such nominee, including recommending and soliciting
proxies in favor of the election of such nominees.

(d) Replacement of Directors. In the event that a vacancy is created at any time
by the death, disability, retirement, resignation or removal (with or without
cause) of a director nominated pursuant to Section 14(b) or designated pursuant
to this Section 14(d), or in the event of the failure of any such nominee to be
elected, the Initial Stockholder shall have the right to designate a replacement
to fill such vacancy, provided that any such nominee shall not be restricted
from serving on the board of directors of a U.S. public company and shall
satisfy the corporate governance guidelines of the Company and NASDAQ. The
Company shall take all action within its power to cause such vacancy to be
filled by the replacement so designated, and the Board shall promptly elect such
designee to the Board. Upon the written request of the Initial Stockholder, the
Company shall take all action within its power to submit to a vote of
stockholders of the Company, and use reasonable best efforts to cause (including
through the solicitation of proxies), the removal, with or without cause, any
Director previously nominated pursuant to Section 8(b) or designated pursuant to
this Section 14(d), and to elect any replacement director designated by the
Initial Stockholder as provided in the first sentence of this Section 14(d).

(e) Committees. The Company shall take all action within its power to cause any
committee of the Board to include in its membership at least one of the Initial
Stockholder’s designated directors, except to the extent that such membership
would violate applicable securities laws or stock exchange or stock market
rules.

(f) No Limitation. The provisions of this Section 14 are intended to provide the
Initial Stockholder with the minimum Board representation rights set forth
herein. Nothing in this Agreement shall prevent the Company from having a
greater number of Initial Stockholder nominees or designees on the Board than
otherwise provided herein.

(g) Indemnification, Expense Reimbursement and Insurance. Any director
designated or nominated by the Initial Stockholder that serves on the Board
shall be entitled to all benefits and rights under any indemnification,
exculpation and reimbursement agreement, policy and provision of any
organizational document (including as to advancement or reimbursement of
expenses), as well as any director and officer insurance policy maintained by
the Company, in each case to the fullest extent made available to any other
director of the Board. Without limiting the foregoing, (i) the benefits and
rights referenced in the previous sentence shall not be amended, repealed or
otherwise modified in any manner that would adversely affect the rights
thereunder of any director designated or nominated by the Initial Stockholder
without the Initial Stockholder’s prior written consent and (ii) the Company
shall at all times maintain in full force and effect a policy or policies of
director and officer liability insurance, issued by insurers of recognized

 

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responsibility, insuring against such losses and risks, and in such amounts, as
are at least as favorable as are maintained by the Company as of the date
hereof. Notwithstanding anything to the contrary in the Company’s certificate of
incorporation or By-laws or in this clause (g), and without limiting any of the
rights set forth therein, the Company shall indemnify and hold harmless any
director designated or nominated by the Initial Stockholder that serves on the
Board to the fullest extent permitted by applicable law with respect to any
losses arising from or related to the fact that such director is or was a
director of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of the Company or another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, or by reason of anything done or not
done by such director in any such capacity. The Company hereby agrees to enter
into a customary indemnification agreement with the director designated or
nominated by the Initial Stockholder as soon as reasonably practicable after the
date hereof.

(h) No Impairment. The Company shall not take any action to cause the amendment
of its certificate of incorporation and by-laws such that the Initial
Stockholder’s rights under this Section 14 would not be given effect; provided,
that, for the avoidance of doubt, the foregoing shall not prohibit any increase
or decrease in the size of the Board subject to the rights of the Initial
Stockholder upon any increase set forth in clause (a) above.

(i) Standstill. The Initial Stockholder (or any Affiliate of the Initial
Stockholder in the event the Initial Stockholder sells or otherwise transfers
all or a part of the Warrants or the Warrant Shares to an Affiliate) agrees
that, for the period beginning on the date of this Agreement and ending on the
earliest to occur of (x) the occurrence of a Significant Event, (y) such date
that the Initial Stockholder (or any Affiliate thereof) no longer has the right
to designate at least one director pursuant to the terms of Section 14(b) of
this Agreement and (z) the date following the annual meeting of the stockholders
of the Company at which the Initial Stockholder has declined to nominate a
designee to the Board at such meeting and the Initial Stockholder has delivered
written notice to the Company that is has irrevocably waived and relinquished
its right to nominate any designees to the Board pursuant to the provisions of
Section 14(b) of this Agreement in the future, unless otherwise agreed or
consented to by the Board, neither the Initial Stockholder nor any of its
Affiliates or representatives acting at the direction and on behalf of the
Initial Stockholder will (the “Standstill Period”), (a) effect or affirmatively
seek, publicly offer or publicly propose to effect or cause, or knowingly and
actively assist any third party to effect, offer or publicly propose to effect
(i) any acquisition of any voting equity securities of the Company other than
(x) the acquisition by the Initial Stockholder (or any of its Affiliates) of
beneficial ownership of (A) any of the Warrant Shares or securities issued by
the Company in respect of (whether by dividend or otherwise) any warrant shares,
(B) additional voting equity securities of the Company not to exceed, in the
aggregate, 1% of the issued and outstanding shares of the Company’s outstanding
voting securities at the time of measurement and (3) any voting equity
securities issued by the

 

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Company to the Initial Stockholder’s nominees to the Board (which shall not be
included in the calculation of the 1% in clause (B) above); (ii) any tender or
exchange offer, merger, consolidation involving the acquisition of the Company
other than any such transaction made or agreed to or recommended by the Company;
(iii) any recapitalization, restructuring, liquidation, dissolution with respect
to the Company or any material portion of the Company’s business (other than as
may be proposed by the Company) or (iv) any knowing “solicitation” of “proxies”
(as such terms are used in the proxy rules of the Securities and Exchange
Commission ) or consents to vote any voting securities of the Company with
respect to any matter not proposed or recommended (other than with respect to
its nominees to the Board and other than with respect to any matter that has
been recommended by the Company or its Board); (b) form or knowingly and
intentionally join a “group” (as defined under the 1934 Act) with respect to the
voting equity securities of the Company (other than any “group” formed solely
among the Initial Stockholder and its Affiliates). For purposes of this section
“Affiliates” shall not include any of the Initial Stockholder’s designees or
nominees to the Board. Nothing shall restrict such directors from exercising
their respective fiduciary duties as members of the Board. Nothing shall
restrict or prohibit the Initial Stockholder from (x) engaging or seeking to
engage in discussions (or, with the consent of the Company, negotiations) with
the Company regarding any of the transactions or actions of the type prohibited
or restricted by the foregoing so long as the Initial Stockholder seeks to do so
on a direct and consensual basis (and the Company may, from time to time, as
determined in its sole discretion, grant any waiver of the restrictions or
prohibitions set forth in this Section 14(i)(a) and no such waiver shall require
a written amendment to this Agreement)). Nothing in this Agreement shall
prohibit or limit the Initial Stockholder or any of its Affiliates from making
any public disclosure or filing that such person reasonably determines in good
faith, after consultation with counsel, is required pursuant to the 1934 Act or
the rules and regulations promulgated thereunder or any form or schedule filed
pursuant thereto (provided that, the foregoing shall not include Schedule TO to
the extent the prohibitions and restrictions set forth in clause (a)(ii) of the
first sentence of this Section 14(i) remain in effect).

(j) Notwithstanding anything to the contrary in this Agreement, but without
limiting the effect of any waiver that may be granted by the Company pursuant to
the application of Section 14(i) above, the terms and conditions of this
Section 14 may only be amended or modified with the prior written consent of
both the Company and the Initial Stockholder.

 

  15. Miscellaneous.

(a) Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be hand delivered or mailed
postage prepaid by registered or certified mail or by e-mail,

 

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If to the Company:

Lumos Networks Corp.

One Lumos Plaza

Waynesboro, Virginia 22980

Attention: Mary McDermott

Email: mcdermottm@lumosnet.com

with a copy to (which shall not constitute notice):

Troutman Sanders LLP

1001 Haxall Point

Richmond, Virginia 23219

Attention:    David M. Carter    R. Mason Bayler, Jr.

Email:    david.carter@troutmansanders.com    mason.bayler@troutmansanders.com

If to the Initial Stockholder:

Lumos Investment Holdings, Ltd.

c/o Pamplona Capital Management LLC

375 Park Avenue, 17th Floor

New York, NY 10152

Attention:    William Pruellage    Jordan Lee E-mail:   
wpruellage@pamplonafunds.com    jlee@pamplonafunds.com

With a copy to (which shall not constitute notice):

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036-6522

Attention:    Kenneth M. Wolff    Michael J. Schwartz

Email:    kenneth.wolff@skadden.com    michael.schwartz@skadden.com

 

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If to a Permitted Transferee, to the address of such Permitted Transferee set
forth in the transfer documentation provided to the Company;

or at such other address as such party each may specify by written notice to the
others, and each such notice, request, consent and other communication shall for
all purposes of the Agreement be treated as being effective or having been given
when delivered personally or transmitted by e-mail, upon one Business Day after
being deposited with a courier if delivered by courier, upon receipt of
facsimile confirmation if transmitted by facsimile, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and postage prepaid as aforesaid.

(b) No Waivers. No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a 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.

(c) Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. If the Company’s outstanding Common Stock is converted
into or exchanged or substituted for other securities issued by any other
Person, as a condition to the effectiveness of a merger, consolidation,
reclassification, share exchange or other transaction pursuant to which such
conversion, exchange, substitution or other transaction takes place, such other
Person shall automatically become bound hereby with respect to such other
securities constituting Registrable Securities and, if requested by the
Stockholders or a Permitted Transferee, shall further evidence such obligation
by executing and delivering to the Stockholders and such transferee of any
Stockholder a written agreement to such effect in form and substance
satisfactory to such Stockholder.

(d) Governing Law. The internal laws, and not the laws of conflicts (other than
Section 5-1401 of the General Obligations Law of the State of New York), of New
York shall govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.

(e) Exclusive Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may only be brought in
any federal or state court located in the County and State of New York, and each
of the parties hereby consents to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient

 

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forum. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 15(a) shall be deemed effective service of
process on such party.

(f) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(g) Counterparts; Effectiveness. This Agreement may be executed in any number of
counterparts (including by facsimile) and by different parties hereto in
separate counterparts, with the same effect as if all parties had signed the
same document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.

(h) Entire Agreement. This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes and
replaces all other prior agreements, written or oral, among the parties hereto
with respect to the subject matter hereof.

(i) No Recourse. This Agreement may only be enforced against, and any action
that may be based upon, arise out of or relate to this Agreement, or the
negotiation, execution or performance of this Agreement may only be made against
the entities that are expressly identified as parties hereto (or their
successors and permitted assigns, or any third party beneficiaries hereto) and
none of (a) the Stockholders or any of their respective Affiliates’ (other than
the Stockholders), members, managers, directors, officers, employees, agents,
representatives or assignees of any of the foregoing (collectively, the
“Stockholder Related Parties”) or (b) the Company’s or any of its Affiliates’
stockholders (other than the Company), members, managers, directors, officers,
employees, agents, representatives or assignees of any of the foregoing
(collectively, the “Company Related Parties”), in each case, shall have any
liability for any obligations or liabilities of the other parties to this
Agreement or for any action (whether in tort, contract or otherwise) based on,
in respect of, or by reason of, the transactions contemplated hereby or in
respect of any oral representations made or alleged to be made in connection
herewith. Without limiting the rights of the parties hereunder against the other
parties to this Agreement, in no event shall (i) the Company or any of its
Affiliates, and the Company agrees not to and to cause its Affiliates not to,
seek to enforce this Agreement against, commence any actions for breach of this
Agreement against, or seek to recover monetary damages from, any Stockholder
Related Party, or (ii) the Stockholder or any of its Affiliates, and the
Stockholder agrees not to and to cause its Affiliates not to, seek to enforce
this Agreement against, commence any actions for breach of this Agreement
against, or seek to recover monetary damages from, any Company Related Party.

 

26

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(j) Captions. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any provision of this Agreement.

(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to affect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

(l) Amendments. Except as otherwise provided in Section 14(j), the provisions of
this Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, without the written consent of (i) the
Company and (ii) the Stockholders collectively then holding Warrants and Warrant
Shares representing more than 50% of the total number of Warrant Shares then
held by the Stockholders (calculated as the sum of all issued and outstanding
Warrant Shares plus all Warrant Shares issuable upon exercise of all outstanding
Warrants); provided that so long as the Initial Stockholder continues to hold
Warrants and Warrant Shares representing at least 10% of the total number of
Warrant Shares then held by the Stockholders (calculated as the sum of all
issued and outstanding Warrant Shares plus all Warrant Shares issuable upon
exercise of all outstanding Warrants), in the aggregate, any such amendment
shall also require the prior written consent of the Initial Stockholder.

(m) Aggregation of Stock. All Registrable Securities held by or acquired by any
Affiliated Persons will be aggregated together for the purpose of determining
the availability of any rights under this Agreement.

(n) Equitable Relief. The parties hereto, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
Accordingly, each party acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the other parties, by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, each
party acknowledges that the remedy at law for a breach of its obligations under
this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by such party of the provisions of this Agreement, that the
other parties hereto

 

27

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shall be entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.
In any action or proceeding brought to enforce any provision of this Agreement
or where any provision hereof is validly asserted as a defense, the successful
party to such action or proceeding shall be entitled to recover reasonable
attorneys’ fees in addition to any other available remedy.

[Execution Page Follows]

 

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IN WITNESS WHEREOF, this Investors Rights Agreement has been duly executed by
each of the parties hereto as of the date first written above.

 

LUMOS NETWORKS CORP. By:  

/s/ Timothy G. Biltz

  Name:   Timothy G. Biltz   Title:   President and Chief Executive Officer
LUMOS INVESTMENT HOLDINGS, LTD. By:  

/s/ William Pruellage

  Name:   William Pruellage   Title:   Attorney-in-Fact

 

29

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Exhibit A

Plan of Distribution

Each selling stockholder may sell the securities being offered hereby in one or
more of the following ways from time to time:

 

  •   to underwriters or dealers for resale to the public or to institutional
investors;

 

  •   directly to institutional investors;

 

  •   directly to a limited number of purchasers or to a single purchaser;

 

  •   through agents to the public or to institutional investors; or

 

  •   through a combination of any of these methods of sale.

The prospectus supplement with respect to each series of securities will state
the terms of the offering of the securities, including:

 

  •   the offering terms, including the name or names of any underwriters,
dealers or agents;

 

  •   the purchase price of the securities and the net proceeds to be received
by the selling stockholder from the sale;

 

  •   any underwriting discounts or agency fees and other items constituting
underwriters’ or agents’ compensation;

 

  •   any public offering price;

 

  •   any discounts or concessions allowed or reallowed or paid to dealers; and

 

  •   any securities exchange on which the securities may be listed.

If the selling stockholders use underwriters or dealers in the sale, the
securities will be acquired by the underwriters or dealers for their own account
and may be resold from time to time in one or more transactions, including:

 

  •   privately negotiated transactions;

 

  •   at a fixed public offering price or prices, which may be changed;

 

  •   in “at the market offerings” within the meaning of Rule 415(a)(4) of the
Securities Act;

 

  •   at prices related to prevailing market prices; or

 

  •   at negotiated prices.

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Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.

If underwriters are used in the sale of any securities, the securities may be
offered either to the public through underwriting syndicates represented by
managing underwriters, or directly by underwriters. Generally, the underwriters’
obligations to purchase the securities will be subject to certain conditions
precedent. The underwriters will be obligated to purchase all of the securities
if they purchase any of the securities.

We may enter into derivative transactions with third parties, or sell securities
not covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection
with those derivatives, the third parties may sell securities covered by this
prospectus and the applicable prospectus supplement, including short sale
transactions. If so, the third party may use securities pledged by the selling
stockholder or borrowed from the selling stockholder or others to settle those
sales or to close out any related open borrowings of common shares, and may use
securities received from the selling stockholder in settlement of those
derivatives to close out any related open borrowings of common shares. The third
party in such sale transactions will be an underwriter and, if not identified in
this prospectus, will be identified in the applicable prospectus supplement or a
post-effective amendment to this registration statement.

If indicated in an applicable prospectus supplement, the selling stockholder may
sell the securities through agents from time to time. The applicable prospectus
supplement will name any agent involved in the offer or sale of the securities
and any commissions the selling stockholder pay to them. Generally, any agent
will be acting on a best efforts basis for the period of its appointment. The
selling stockholder may authorize underwriters, dealers or agents to solicit
offers by certain purchasers to purchase the securities from the selling
stockholder at the public offering price set forth in the applicable prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. The delayed delivery contracts will
be subject only to those conditions set forth in the applicable prospectus
supplement, and the applicable prospectus supplement will set forth any
commissions the selling stockholder pay for solicitation of these delayed
delivery contracts.

Offered securities may also be offered and sold, if so indicated in the
applicable prospectus supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more remarketing firms, acting as principals for their
own accounts or as agents for the selling stockholder. Any remarketing firm will
be identified and the terms of its agreements, if any, with the selling
stockholder and its compensation will be described in the applicable prospectus
supplement.

Agents, underwriters and other third parties described above may be entitled to
indemnification by the Company and the selling stockholder against certain civil
liabilities under the Securities Act, or to contribution with respect to
payments which the agents or underwriters may be required to make in respect
thereof. Agents, underwriters and such other third parties may be customers of,
engage in transactions with, or perform services for the Company or the selling
stockholder in the ordinary course of business.

 

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Each series of securities will be a new issue of securities and will have no
established trading market, other than our common stock, which is listed on
NASDAQ. Any common stock sold will be listed on NASDAQ. The securities other
than the common stock may or may not be listed on a national securities
exchange. Any underwriters to whom securities are sold by the selling
stockholder for public offering and sale may make a market in the securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice.

 

3

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Exhibit B

Form of Joinder

JOINDER AGREEMENT

to

INVESTORS RIGHTS AGREEMENT

            , 20    

Reference is made to that certain Investors Rights Agreement, dated as of
August 6, 2015, by and between Lumos Networks Corp., a Delaware corporation (the
“Company”) and Lumos Investment Holdings, Ltd., a Cayman limited partnership
(the “Initial Stockholder”) (as amended from time to time, the “Investors Rights
Agreement”). Capitalized terms used herein but not defined herein shall have the
meanings set forth in the Investors Rights Agreement. This Joinder Agreement is
being delivered to the Company in accordance with Section 12(a) of the Investors
Rights Agreement.

By executing and delivering this Joinder Agreement, [●], confirms to and agrees
to (i) become a party to the Investors Rights Agreement as a Stockholder and
(ii) be bound by, and comply with, the terms and provisions of the Investors
Rights Agreement applicable to Stockholders thereunder.

By executing and delivering this Joinder Agreement, the Company,
(i) acknowledges that this Joinder Agreement is satisfactory to fulfill all
requirements for the acceptance of [●] as Stockholder pursuant to Section 12(a)
of the Investors Rights Agreement and (ii) confirms [●] is hereby admitted as a
Stockholder of the Company.

This Joinder Agreement may be executed in any number of counterparts, each of
which shall be considered an original and all of which shall together constitute
one and the same instrument.

This Joinder Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.

[Signature Page Follows]

 

4

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IN WITNESS WHEREOF, the parties hereto have caused this Joinder Agreement to be
executed as of the date first above written.

 

Stockholder: [●]   By:  

 

  Name:   Title: Company Lumos Networks Corp., a Delaware corporation By:  

 

  Name:   Title:

 

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