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Exhibit 4.3
TELEUNIVERSITY, INC.
STOCKHOLDERS AGREEMENT
Stockholders
Agreement ("Agreement"), dated as of this 26th day of
November, 2003, among the institutional investors listed on
Schedule I hereto (the "New Investors"); the Persons whose
names and addresses appear from time to time on Schedule II
hereto (the "Management Investors"); the Persons whose names and
addresses appear from time to time on Schedule III hereto (the
"Other Investors"); and TeleUniversity Inc., Delaware
corporation (the "Company"). The New Investors, the Management
Investors and the Other Investors are hereinafter collectively
referred to as the "Investors".
R E C I T A L S
WHEREAS, the New
Investors have, pursuant to the terms of Securities Purchase
Agreement, dated November 26, 2003, with the Company (the
"Purchase Agreement") agreed to purchase shares of Series A
Convertible Preferred Stock, par value $0.01 per share of the
Company (the "Preferred Stock");
WHEREAS, the
Management Investors and Other Investors Own, pursuant to the terms
of certain agreements (collectively, the "Prior Agreements" and,
together with the Purchase Agreement, the "Subscription
Agreements") or the Purchase Agreement shares of Preferred Stock
and/or common stock, par value $0.0l per share, of the Company (the
"Common Stock" and together with the Preferred Stock, the "Shares")
or other Equity Securities of the Company (collectively, the
"Securities");
WHEREAS, it is
condition to the obligations of the New Investors under the
Purchase Agreement that the parties hereto enter into this
Agreement in its entirety; and
WHEREAS, the
Investors and the Company desire to promote their mutual interests
by agreeing to certain matters relating to the operations of the
Company and the disposition and voting of the Shares.
NOW, THEREFORE,
in consideration of the mutual covenants and agreements herein
contained the parties hereto hereby agree as follows:
1. COVENANTS OF THE
PARTIES.
(a)
Legends. The
certificates evidencing the Securities acquired by the Investors
pursuant to the Subscription Agreements will bear the following
legend reflecting the restrictions on the transfer of such
securities contained in this Agreement.
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"The securities evidenced hereby are subject to the terms of
that certain Stockholders Agreement, dated as of November 26,
2003, as amended, by and among the Company and certain investors
identified therein (the "Agreement"), including certain
restrictions on transfer. A copy of the Agreement has been filed
with the Secretary of the Company and is available upon
request."
As promptly as
practicable after the date hereof, the Investors shall deliver all
certificates representing any Securities held beneficially and of
record by such Investor to the Company to enable the Company to
place the foregoing legend on such certificates.
(b)
Additional Investors.
The parties hereto acknowledge that certain
employees of the Company and other Persons may become stockholders
or Security holders of the Company after the date hereof, pursuant
to the exercise of options or otherwise. As a condition to the
issuance of shares of capital stock of the Company or Securities to
them, such Persons shall, and the shares of capital stock of the
Company and Securities shall, immediately become subject to the
terms and provisions of this Agreement, by executing and delivering
to the Company a joinder agreement in substantially the form
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attached hereto as Exhibit A (a
"Joinder Agreement"), pursuant to which the such Persons will
thereupon become a party to, and be bound by and obligated to
comply with the terms and provisions of this Agreement.
(c)
Prior Agreements.
Each of the Management Investors and the
Other Investors who are parties to the Prior Agreements set forth
on Schedule IV hereto hereby acknowledges and agrees that this
Agreement and the Registration Rights Agreement (as defined in the
Purchase Agreement) constitute the entire understanding of the
parties hereto relating to the subject matter hereof and thereof
and supersede all prior understandings relating to such subject
matter, including the Prior Agreements, and that the provisions of
such Prior Agreements related to such subject matter and set forth
on Schedule IV are terminated and all rights thereunder waived
as of the date hereof, with no further liabilities or obligations
relating thereto on the part of any party thereto.
(d)
Chief Executive Officer.
Following the Initial Closing (as defined
in the Purchase Agreement), in the event the Board (as herein
defined) does not approve Warburg Pincus' nominee for Chief
Executive Officer of the Company, Warburg Pincus shall retain an
executive search firm acceptable to Warburg Pincus in its own
discretion, at its own expense, to identify additional candidates
for such position.
2. BOARD OF DIRECTORS.
(a)
Election of Directors.
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(i)
Initial Closing —As of the date hereof, the Board of
Directors of the Company (the "Board") will consist of Scott
Turner, Wayne Clugston and Ryan Craig. From and until the Second
Closing (as defined in the Purchase Agreement) of the first
issuance of the Second Closing Shares (as defined in the Purchase
Agreement), the Investors and the Company shall take all action
within their respective power, including but not limited to, the
voting of all shares of capital stock of the Company Owned by them,
required to cause the Board to consist of up to three
(3) members or such other number as the Board may from time to
time establish, and at all times throughout such period to include
(x) one (1) representative designated by Warburg Pincus
(a "Warburg Pincus Director"), (y) Scott Turner and
(z) Wayne Clugston.
(ii)
Second Closing —Following the Second Closing of the
first issuance of the Second Closing Shares until the Second
Closing of the second issuance of the Second Closing Shares, the
Investors and the Company shall take all action within their
respective power, including but not limited to, the voting of all
shares of capital stock of the Company Owned by them, required to
cause the Board to consist of up to four (4) members or such
other number as the Board may from time to time establish, and at
all times throughout such period to include (x) two
(2) Warburg Pincus Directors, (y) Scott Turner and
(z) the Chief Executive Officer of the Company. Following the
Second Closing relating to the second issuance of the Second
Closing Shares until the Third Closing (as defined in the Purchase
Agreement), the Investors and the Company shall take all action
within their respective power, including but not limited to, the
voting of all shares of capital stock of the Company Owned by them,
required to cause the Board to consist of up to five
(5) members or such other number as the Board may from time to
time establish, and at all times throughout such period to include
(x) the individuals specified in the foregoing sentence and
(y) one (1) representative mutually designated by Warburg
Pincus and the Management Investors (an "Independent
Director").
(iii)
Third Closing —From and after the Third Closing, the
Investors and the Company shall take all action within their
respective power, including but not limited to, the voting of all
shares of capital stock of the Company Owned by them, required to
cause the Board to consist of up to six (6) members or such
other number as the Board may from time to time establish, and at
all times throughout such period to include (i) three
(3) Warburg Pincus Directors, (ii) Scott Turner,
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(iii) the Chief Executive Officer of the
Company and (iv) one (1) Independent Director. Upon the
New Investors and the Subsequent Investors (as defined in the
Purchase Agreement) purchasing 6,333,333 shares of Preferred Stock
in the aggregate, Warburg Pincus shall have the right to designate
a majority of the members of the Board and the Investors and the
Company shall take all action within their respective power,
including but not limited to, the voting of all shares of capital
stock of the Company Owned by them, required to cause the Warburg
Pincus Directors to constitute a majority of the Board, including
increasing the number of members of the Board.
(iv)
Qualified Public Offering —From the date on which the
Company completes a Qualified Public Offering for shares of Common
Stock pursuant to a registration under the Securities Act, and for
as long as Warburg Pincus Owns at least twenty percent (20%) of the
Common Stock, the Company will nominate and use its best efforts to
have two individuals designated by Warburg Pincus and reasonably
acceptable to the Company elected to the Board. From the date on
which the Company completes its Qualified Public Offering and for
as long as Warburg Pincus Owns at least ten percent (10%) of the
outstanding shares of Common Stock, the Company will nominate and
use its best efforts to have one individual designated by Warburg
Pincus and reasonably acceptable to the Company elected to the
Board.
(b)
Replacement Directors.
In the event that any Warburg Pincus
Director, Scott Turner, the Chief Executive Officer of the Company
or Independent Director designated in the manner set forth in
Section 2(a) hereof is unable to serve, or once having
commenced to serve, is removed or withdraws from the Board (a
"Withdrawing Director"), such Withdrawing Director's replacement
(the "Substitute Director") will be designated by Warburg Pincus in
the case of any Warburg Directors, the Management Investors in the
case of Scott Turner or the Chief Executive Officer of the Company,
or mutually by Warburg Pincus and the Management Investors in the
case of an Independent Director. The Investors and the Company
agree to take all action within their respective power, including
but not limited to, the voting of capital stock of the Company
Owned by them, (i) to cause the election of such Substitute
Director promptly following his or her nomination pursuant to this
Section 2(b), (ii) upon the written request of Warburg
Pincus, to remove, with or without cause, the Warburg Pincus
Director, (iii) upon the written request of the Management
Investors, to remove, with or without cause, a Substitute Director
designated by the Management Investors or (iv) upon the
written request of Warburg Pincus and the Management Investors, to
remove, with or without cause, Scott Turner, the Chief Executive
Officer of the Company or the Independent Director. Notwithstanding
the foregoing, in the event Scott Turner is no longer employed by
the Company, the Investors and the Company shall take all action
within their respective power, including but not limited to, the
voting of all shares of capital stock of the Company Owned by them,
to remove Scott Turner from the Board and replace him pursuant to
this Section 2(b).
(c)
Board Observers.
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(i) (w)
Warburg Pincus shall have the right to appoint two
(2) observers (the "Warburg Pincus Observers"), (x) from
the date hereof until the 30-month anniversary of such date, Scott
Turner and Wayne Clugston shall have the right to appoint
themselves observers (each, a "Management Observer"), (y) from
the date hereof until the New Investors and the Subsequent
Investors purchase 15,333,333 shares of Preferred Stock in the
aggregate, the Other Investors Owning a majority of those shares of
Common Stock Owned by such Other Investors shall have the right to
appoint one (1) observer (the "Other Investor Observer") and
(z) Roberts Wesleyan College shall have the right to appoint
one (1) observer subject to the terms and conditions of the
Consent of Roberts Wesleyan College Including Amendment to License,
dated November 12, 2003, between Roberts Wesleyan College and
the Company (the "RWC Observer" and, together with the Warburg
Pincus Observers, the Management Observers and the Other Investor
Observer, the "Observers"), who, subject to their entering into a
confidentiality agreement substantially similar to Section 4
hereof, may attend and participate in all meetings of the Board or
the board of any
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subsidiary of the Company, and, in the case of
the Warburg Pincus Observers, any committees thereof; provided that
the aforementioned Investors will notify the Company from time to
time of the identity of their respective Observers and such
Observer's address (including facsimile) for communications; and
further provided that any Observer may be excluded from any such
meeting (unless such Observer is also a director serving on the
board in question at such time or, in the case of a Warburg Pincus
Observer, the committee in question) to the extent the board or
committee in question determines in good faith that such exclusion
is required to preserve any evidentiary privilege, or any portion
of any such meeting during which the respective interests of the
Company or the subsidiary in question and those of one or more of
the Investors who appointed the Observer in question conflict as to
the matter(s) to be discussed or actions to be taken (in the good
faith judgment of the board or committee in question).
(ii) The
Observers shall receive each of the following items at the same
time and in the same manner as such items are delivered to the
members of the Board and each subsidiary board, and, in the case of
the Warburg Pincus Observers, the members of the committees of such
boards:
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(A) notice
of each meeting of the Board and each subsidiary board, and, in the
case of the Warburg Pincus Observers, the committees thereof;
(B) minutes
of each meeting of the Board and each subsidiary board, and, in the
case of the Warburg Pincus Observers, the committees thereof;
and
(C) the
agenda and all other documents and materials distributed to the
members of the Board and each subsidiary board, and, in the case of
the Warburg Pincus Observers, the committees thereof, in connection
with any action to be taken by the Board or such subsidiary board,
and, in the case of the Warburg Pincus Observers, the committees
thereof, as applicable.
(d)
Board Committees.
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(i) From
the date hereof, the Board shall create and maintain a Compensation
Committee and an Audit Committee of the Board.
(ii) From
the date hereof, in the event the Board establishes any committee
thereof, including the Compensation Committee and Audit Committee,
(i) such committee shall have at least one (1) Warburg
Pincus Director as a member and (ii) following the Third
Closing, a majority of the members of such committee shall be
Warburg Pincus Directors.
(iii) From
the date hereof, in the event the Board and its Compensation
Committee establish a management equity plan under which options to
purchase shares of Common Stock shall be issued to management of
the Company, such plan shall contain customary vesting and other
provisions; provided however the strike price for such options
shall not be less than the quotient of $3,545,000 divided by the
number of shares of issued and outstanding Common Stock immediately
prior to the Initial Closing, excluding any and all issued and
outstanding options and warrants.
(e)
Board Meetings.
From and after the date hereof, the Company
shall cause the Board to hold meetings no less frequently than once
every two months; provided however, following the Third Closing and
upon the majority of the Board consisting of Warburg Pincus
Directors, subject to the approval of Warburg Pincus, such meetings
shall be held no less frequently than once every three months.
(f)
Director Compensation.
The parties hereto agree and acknowledge
that no Warburg Pincus Director shall receive any compensation or
expense reimbursement, including without limitation director fees
and reimbursement of out-of-pocket expenses, related to his
services as a director of the Company.
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3. TRANSFER OF
STOCK.
(a)
Resale of Securities.
No Investor shall Transfer any Securities,
including any rights thereunder, other than in accordance with the
provisions of this Section 3. Any Transfer or purported
Transfer made in violation of this Section 3 shall be null and
void and of no effect.
(b)
Restrictions on Transfer.
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(i) Unless
approved by the Board, no Management Investor or Other Investor
shall be permitted to Transfer, directly or indirectly, any
Securities Owned by him or it except to a Permitted Transferee,
provided that in each instance such Permitted Transferee agrees in
writing to be bound by the provisions of this Agreement as if such
Permitted Transferee were an original signatory hereto.
(ii) Notwithstanding
the foregoing subsection (i), (x) Louis Falcigno shall
have the right to Transfer up to 200,000 shares of Common Stock
Owned by him in the aggregate to Vecki Merila, provided that in
such instance Ms. Merila agrees in writing to be bound by the
provisions of this Agreement as if she were an original signatory
hereto, (y) Michael Clifford shall have the right to Transfer
up to 600,000 shares of Common Stock Owned by him in the aggregate
to Mr. Falcigno pursuant to the terms of a Pledge Agreement,
dated November 1, 2003, by and among such persons and
(z) William C. Turner, Trustee of the Turner Trust, dated
January 7, 1982, as amended, shall have the right-to transfer
any and all shares of Common Stock Owned by such trust in his
capacity as Trustee of said trust to Scott C. Turner.
(c)
Tag-Along Rights.
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(i) Following
the Third Closing, so long as Warburg Pincus Owns at least 50% of
the outstanding Common Stock, in the event Warburg Pincus intends
to Transfer more than 25% of any of its Shares (other then
Transfers to any Permitted Transferee or to the Company), Warburg
Pincus shall notify the other Investors (the "Tag-Along
Investors"), in writing, of such proposed Transfer and its terms
and conditions. Within ten (10) business days of the date of
such notice, each other Tag-Along Investor shall notify Warburg
Pincus if it elects to participate in such Transfer. Any Tag-Along
Investor that fails to notify Warburg Pincus within such ten
(10) business day period shall be deemed to have waived its
rights hereunder.
(ii) Each
Tag-Along Investor that so notifies Warburg Pincus shall have the
right to sell, (x) in the case of a proposed sale of Common
Stock, at the same price per share and on the same terms and
conditions as Warburg Pincus, a number of shares of Common Stock
equal to the number of shares of Common Stock the third party
actually proposes to purchase multiplied by a fraction, the
numerator of which shall be the number of Shares Owned by such
Tag-Along Investor and the denominator of which shall be the
aggregate number of Shares Owned by Warburg Pincus and each
Tag-Along Investor exercising its rights under this
Section 3(c) (assuming full conversion of all shares of
Preferred Stock held by Warburg Pincus and each Tag-Along Investor
exercising its rights under this Section 3(c)) and (y) in
the case of a proposed sale of Preferred Stock, (1) Tag-Along
Investors holding shares of Preferred Stock shall have the right to
sell such stock at the same price per share and on the same terms
and conditions as Warburg Pincus, a number of shares of Preferred
Stock which convert into the number of shares of Common Stock equal
to the number of shares of Preferred Stock the third party actually
proposes to purchase multiplied by a fraction, the numerator of
which shall be the number of Shares Owned by such Tag-Along
Investor and the denominator of which shall be the aggregate number
of Shares Owned by Warburg Pincus and each Tag-Along Investor
exercising its rights under this Section 3(c) (assuming full
conversion of all shares of Preferred Stock proposed to be sold and
all shares of Preferred Stock held by Warburg Pincus and each
Tag-Along Investor exercising its rights under this
Section 3(c)) and (2) Tag-Along Investors holding shares
of Common Stock, shall have the right to sell such stock at a price
per share equal to the proposed price per share of Preferred Stock
multiplied by a fraction, the
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numerator of which shall be one and the
denominator of which shall be the number of shares of Common Stock
into which each share of Preferred Stock converts, and on the same
terms and conditions as Warburg Pincus, a number of shares of
Common Stock equal to the number of shares of Preferred Stock the
third party actually proposes to purchase multiplied by a fraction,
the numerator of which shall be the number of Shares Owned by such
Tag-Along Investor and the denominator of which shall be the
aggregate number of Shares Owned by Warburg Pincus and each
Tag-Along Investor exercising its rights under this
Section 3(c) (assuming full conversion of all shares of
Preferred Stock proposed to be sold and all shares of Preferred
Stock held by Warburg Pincus and each Tag-Along Investor exercising
its rights under this Section 3(c)). Tag-Along Investors
holding both Preferred and Common Stock who elect to participate in
a sale of Preferred Stock shall be able to include such number of
Shares (assuming full conversion of all shares of Preferred Stock
being included in such sales by the Tag-Along Investor) as
calculated pursuant to (2) above with the Preferred Stock
being included having the same price per share of Preferred Stock
as Warburg Pincus, provided however, that such Tag-Along Investors
shall only transfer shares of Common Stock to the extent the number
of Shares allowed to be included in such Preferred Stock sale by
such an Investor exceeds the number of shares of Common Stock into
which such Investor's Preferred Stock converts at such price per
share calculated pursuant to (2) above.
(iii) Notwithstanding
anything contained in this Section 3(c),
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