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SHAREHOLDER AGREEMENT
Dated as of August 20, 2007
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..................................................1
1.1 Certain Defined Terms...........................................1
ARTICLE II CORPORATE GOVERNANCE AND INFORMATION RIGHTS..................6
2.1 Board Representation............................................6
2.2 Investor Shareholder Director Fees and Expenses.................9
ARTICLE III STANDSTILL AND TRANSFERS.....................................9
3.1 Standstill Agreement............................................9
3.2 Transfer Restrictions..........................................10
3.3 Right of First Refusal to Investor Shareholders................11
3.4 Company's Right of First Refusal...............................13
3.5 Securities Law Compliance; Reporting Obligations...............14
ARTICLE IV MISCELLANEOUS...............................................14
4.1 Termination....................................................14
4.2 Expenses.......................................................14
4.3 Assignment; Benefits...........................................15
4.4 Entire Agreement...............................................15
4.5 Severability...................................................15
4.6 Amendments and Waivers.........................................15
4.7 Notices........................................................15
4.8 Governing Law..................................................16
4.9 Submission to Jurisdiction; Waiver of Jury Trial...............16
4.10 Counterparts...................................................16
4.11 Further Assurances.............................................16
4.12 Recapitalization, etc..........................................16
4.13 Remedies for Breach; Specific Performance......................16
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SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and entered into
this 20th day of August 2007 among (i) ▇▇▇▇▇▇ + ▇▇▇▇▇▇, Inc., a Delaware
corporation (the "Company"); (ii) each of the shareholders set forth on Schedule
I (the "Schedule of Investor Shareholders") attached hereto; (iii) each of the
shareholders set forth on Schedule II (the "Schedule of Existing Shareholders")
attached hereto; and (iv) each Person that subsequently becomes a party hereto
pursuant to a Permitted Transfer.
RECITALS
WHEREAS, this Agreement is made pursuant to (i) the Stock Purchase
Agreement, dated April 25, 2007, by and among the Company and the purchasers
named therein (the "Investor Purchase Agreement"), which provides for the
issuance by the Company to the Investor Shareholders of an aggregate of
40,000,000 shares (the "Investor Shares") of the Common Stock and (ii) the Stock
Purchase Agreement, dated by and among the Company and the Existing Shareholders
dated August 20, 2007, (the "Placement Purchase Agreement", and, together with
the Investor Purchase Agreement, the "Purchase Agreements"), which provides for
the issuance by the Company to the Existing Shareholders of an aggregate of
40,000,000 shares (together with all other shares of Common Stock owned by the
Existing Shareholders or their Affiliates, the "Existing Shareholder Shares").
The execution of this Agreement is a condition to the closing under the Purchase
Agreements.
WHEREAS, the parties hereto desire to enter into certain arrangements
relating to the Company and the Shares.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms shall have
the following meanings:
"Affiliate" means, with respect to any Person, (i) a manager or managing
member if such Person is a limited liability company, a trustee if such Person
is a trust, a general partner if such Person is a limited partnership, (ii) a
director or executive officer of such Person, (iii) a spouse, parent, sibling or
descendant of such Person (or a spouse, parent, sibling or descendant of any
Person identified in (i) and (ii) hereof), and (iv) any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"Affiliate Transaction" means any action of either the Company or any
Subsidiary of the Company, direct or indirect, to (i) make or effect any payment
to any Affiliate of either the Company or a Subsidiary of the Company, (ii)
sell, lease, transfer or otherwise dispose of any of the Company's or any of its
Subsidiaries' respective properties or assets to any Affiliate of either the
Company or a Subsidiary of the Company, or (iii) enter into, make, amend, renew
or extend any transaction, contract, agreement, understanding, loan, advance or
guarantee with any Affiliate of either the Company or a Subsidiary of the
Company, other than employment agreements approved by the Board in connection
with satisfying its obligations under the Investor Purchase Agreement and
agreements relating to grants of stock options or other equity awards approved
by the Board and permitted by Section 2.1(d)(i) hereof.
"Agreement" has the meaning assigned to such term in the preamble.
"Agreement Termination Date" means the first date after the Closing Date
on which the Investor Shareholders own of record less than 16,000,000 shares of
Common Stock (subject to adjustments for stock splits, subdivisions,
combinations, stock dividends or similar reclassifications of the Common Stock).
"beneficial owner(ship)" and "beneficially own" shall be determined in
accordance with Rule 13d-3 under the Exchange Act; provided, however, that a
Person shall be deemed to beneficially own any securities that such Person or
any of such Person's Affiliates has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (written or oral), or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or otherwise
(it being understood that such Person shall also be deemed to be the beneficial
owner of the securities convertible into or exchangeable for such securities.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of New
York.
"Capital Stock" means, with respect to any Person at any time, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited) or equivalent ownership interests in or issued by such
Person, and with respect to the Company includes, without limitation, any and
all shares of Common Stock.
"Change of Control" means the occurrence of any of the following events:
(i) any Person or group is or becomes the beneficial owner of Voting
Securities representing more than 50% of the Total Voting Power; or
(ii) a merger, consolidation, reorganization or similar transaction
in which the shareholders of the Company immediately prior to the
transaction possess less than 50% of the Voting Power of the surviving
entity (or its parent) immediately after the transaction; or
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(iii) during any one-year period, individuals who at the beginning
of such period constituted the Board (together with any new Directors
whose election by the Board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
Directors then still in office who were either Directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board
then in office.
"Closing" has the meaning assigned to such term in the Purchase
Agreements.
"Closing Date" has the meaning assigned to such term in the Investor
Purchase Agreement.
"Committee" means each of the Audit Committee and the Compensation
Committee.
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company and any securities issued in respect thereof, or in substitution
therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other
similar reorganization.
"Company" has the meaning assigned to such term in the preamble.
"Competitor" shall mean any Person with a division, department or
Subsidiary principally engaged in a financial planning business, brokerage
business, or tax services business that is competitive with the Company.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise.
"Director" means any member of the Board.
"Equity Securities" means (a) with respect to a corporation, any and all
shares of Capital Stock and any securities of such corporation convertible into,
or exchangeable or exercisable for, such shares of Capital Stock, and options,
warrants or other rights to acquire such shares of Capital Stock, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership/limited liability company
interests, and any units or interests of such partnership, limited liability
company, trust or similar Person convertible into, or exchangeable or
exercisable for, such units or interests, and options, warrants or other rights
to acquire such units or interests, and (c) any other equity ownership or
participation in a Person.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Existing Shareholder Directors" has the meaning assigned to such term in
Section 2.1.
"Existing Shareholders" means each of the Existing Shareholders and each
Person receiving Common Stock from an Existing Shareholder as a result of a
Permitted Transfer.
"Existing Shareholder Shares" has the meaning assigned to such term in the
recitals.
"Future Securities" shall have the meaning set forth in Section 3.2.
"Investor Shares" has the meaning assigned to such term in the recitals.
"Independent Director" shall have the meaning set forth under the NASD
Marketplace Rules.
"Investor Director" means any Director designated or nominated for
election to the Board by the Investor Shareholders pursuant to Section 2.1 of
this Agreement.
"Investor Shareholders" means each of the Investor Shareholders and each
Person receiving Common Stock from an Investor Shareholder as a result of a
Permitted Transfer.
"Permitted Transfer" means a Transfer by (a) any Investor Shareholder to
(i) any partner of or member in the Investor Shareholders in connection with a
distribution to such partner or member of Investor Shares or (ii) any Affiliate
of the Investor Shareholders, or (b) any Existing Shareholder to any Affiliate
of the Existing Shareholders, in each case (a) or (b), who agrees to be bound by
the terms of this Agreement if, as a result of such Transfer, such partner or
member or Affiliate would own at least 5% of the Total Voting Power.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, governmental authority
or other entity.
"Placement Purchase Agreement" has the meaning assigned to such term in
the recitals.
"Placement Shares" has the meaning assigned to such term in the recitals.
"Purchase Agreements" has the meaning assigned to such term in the
recitals.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, between the Company and the Investor Shareholders.
"SEC" means the U.S. Securities and Exchange Commission or any other
federal agency then administering the Securities Act or the Exchange Act and
other federal securities laws.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" has the meaning assigned to such term in the recitals.
"Subsidiary" means, with respect to a party, any corporation, partnership,
trust, limited liability company or other entity in which such party (and/or one
or more Subsidiaries of such party) holds stock or other ownership interests
representing (a) more that 50% of the voting power of all outstanding stock or
ownership interests of such entity, (b) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity or (c) a general or managing partnership interest or similar
position in such entity.
"13D Group" means any "group" (within the meaning of Section 13(d) of the
Exchange Act) formed for the purpose of acquiring, holding, voting or disposing
of Voting Securities.
"Term" means the period commencing on the Closing Date and ending on the
earlier to occur of (i) the Agreement Termination Date or (ii) the date on which
this Agreement shall be terminated by the parties hereto pursuant to Section
4.6; provided, that (a) with respect to Section 3.1 only, "Term" shall mean the
period commencing on the date hereof and ending on the first anniversary of the
date hereof and (b) certain obligations set forth herein shall survive the Term
pursuant to Section 4.1 hereof.
"Total Voting Power" means the aggregate number of votes which may be cast
in an election of Directors or other members of the governing body of the
Company by holders of Voting Securities in respect of Voting Securities.
"Transaction" has the meaning assigned to such term in the recitals.
"Transfer" means, directly or indirectly, to sell, transfer, assign,
pledge, encumber, hypothecate or similarly dispose of, either voluntarily or
involuntarily, or to enter into any contract, option, short sale, hedge,
derivative transaction (including a registered hedge) or other arrangement or
understanding with respect to the sale, transfer, assignment, pledge,
encumbrance, hypothecation, or similar disposition of any shares of Equity
Securities beneficially owned by a Person or any interest in any shares of
Equity Securities beneficially owned by a Person.
"Voting Securities" means, at any time, shares of any class of Equity
Securities of the Company which are then entitled to vote in the election of
Directors.
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ARTICLE II
CORPORATE GOVERNANCE AND INFORMATION RIGHTS
2.1 Board Representation. (a) At the Closing, the Company shall appoint
two Directors designated by the Investor Shareholders for election by the Board
and obtain resignations from two of the Directors that are not Independent
Directors serving on the Board such that the Board shall consist initially of
seven Directors. During the Term of this Agreement, (i) the Investor
Shareholders, acting as a group (by majority vote based on number of shares of
Common Stock held), shall have the right to nominate for election to the Board
two Directors to the Board for so long as the Investor Shareholder Group
collectively owns of record a number of shares of Common Stock equal to at least
10% of the then outstanding Common Stock (the "Investor Directors"), (ii) the
Existing Shareholders, acting as a group (by majority vote based on number of
shares of Common Stock held), shall have the right to nominate for election to
the Board two Directors to the Board for so long as the Existing Shareholder
Group collectively owns of record a number of shares of Common Stock equal to at
least 10% of the then outstanding Common Stock (the "Existing Shareholder
Directors") and (iii) the Investor Directors and the Existing Shareholder
Directors shall jointly nominate three Independent Directors. In addition, in
the event that the Board (including at least one Investor Director and one
Existing Shareholder Director) determines to increase the number of directors
above seven, such additional directors shall be Independent Directors and shall
be jointly nominated by the Investor Directors and the Existing Shareholder
Directors. Any nomination for the replacement of (x) a Investor Director prior
to the expiration of his or her respective term shall be made by the remaining
Investor Director or, if no Investor Directors remain, by the Investor
Shareholders, (y) an Existing Shareholder Director prior to the expiration of
his or her respective term shall be made by the remaining Existing Shareholder
Director or, if no Existing Shareholder Directors remain, by the Existing
Shareholders or (z) an Independent Director prior to the expiration of his or
her respective term shall be made jointly by the Investor Directors and the
Existing Shareholder Directors; provided, however, that the current independent
Directors shall be entitled to serve through the earlier to occur of their
resignation or the expiration of their respective current terms and; provided,
further that to the extent that the Board or any member thereof reasonably
believes that it would be contrary to his, her or its fiduciary duties to the
Company and its shareholders to nominate any Investor Director or Existing
Shareholder Director to the Board or any Committee thereof, the Board, or any
member thereof, may refuse to make such nomination and such refusal shall not be
deemed a breach of this Agreement.
(b) Subject to Section 2.1(a), the Company, the Investor Shareholders and
the Existing Shareholders at all times shall take such action as may be
reasonably required under applicable law to cause the Investor Shareholders'
designee(s) and the Existing Shareholders' designee(s) to be elected to the
Board. Furthermore, the Company hereby agrees, subject to Section 2.1(a), to (i)
include each of the Director designees of the Investor Shareholders and the
Existing Shareholders (which are up for election in accordance with the Bylaws
of the Company) on each slate of nominees for election to the Board proposed by
the Company and/or the Board (or any Committee thereof), (ii) recommend the
election of the Director designees of the Investor Shareholders and the Existing
Shareholders (which are up for election in accordance with the Bylaws of the
Company) to the shareholders of the Company, and (iii) without limiting the
foregoing, to otherwise use commercially reasonable efforts to cause the
Director designees of the Investor Shareholders and the Existing Shareholders
(which are up for election in accordance with the Bylaws of the Company) to be
elected to the Board.
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(c) During the Term of this Agreement, one of the two Investor
Directors shall be appointed as a member of the Compensation Committee of the
Board and one of the Investor Directors shall have the right to attend all Audit
Committee meetings; provided, however, that in the event that the Company is
listed on The Nasdaq Stock Market (or such other national securities exchange on
which the Common Stock is then listed or quoted for trading), then each Investor
Director shall be qualified under the rules and regulations of the SEC and the
Nasdaq Stock Market (or such other national securities exchange on which the
Common Stock is then listed or quoted for trading) and the Company's guidelines
(applied on a reasonable and uniform basis consistent with past practice) as in
effect from time to time to serve as a member of the Compensation Committee.
(d) During the Term of this Agreement, none of the following actions
shall take place without the consent of at least one of the Investor Directors:
(i) the issuance, redemption or purchase of equity or debt of
the Company (including the issuance of warrants and/or the expansion of
the Company's current stock option plan), excluding (x) issuances of
equity or debt securities and the incurrence of debt in connection with
Permitted Acquisitions (defined below), (y) the incurrence of debt in
connection with inventory, equipment or lease financing in the ordinary
course of business in any fiscal year in an amount not to exceed 5% of the
Company's gross revenue calculated in accordance with GAAP, consistently
applied (as set forth in financial statements filed with the SEC) for the
prior fiscal year together with all then outstanding inventory, equipment
or lease financings, and (z) debt incurred under lines of credit or
revolving credit facilities or any renewals, extensions, substitutions,
refundings, refinancings or replacements of such indebtedness in an amount
not to exceed the greater of the amount outstanding on the date hereof and
5% of the Company's gross revenue calculated in accordance with GAAP,
consistently applied (as set forth in financial statements filed with the
SEC) for the prior fiscal year.
(ii) the issuance of any omnibus stock plan which would permit
the issuance to employees, officers or directors of the Company of options
for Company stock; provided however, that such consent shall not be
required for the approval of an omnibus stock plan of up to 18% of the
number of shares of Common Stock outstanding on the Closing Date (after
giving effect to the issuance of Common Stock pursuant to the Purchase
Agreements), so long as such plan provides that (i) no more than 20% of
the shares of Common Stock available for grant under such plan shall be
granted in any one calendar year, (ii) no more than 3.5% of the shares of
Common Stock available for grant under such plan shall be granted to any
one individual in any one calendar year, and (iii) no more than 50% of the
shares of Common Stock granted under such plan in any given year shall be
granted to the officers and directors of the Company or any of their
respective Affiliates (excluding officers and directors of the Company who
derive at least 50% of their cash compensation from the Company as sales
commission). (As of the date hereof, the persons set forth on Schedule III
derive at least 50% of their cash compensation from the Company as sales
commission); or
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(iii) the creation of any new class of securities; or
(iv) any Affiliate Transaction, other than Affiliate
Transactions entered into prior to the date hereof and set forth on the
Disclosure Schedules to the Investor Purchase Agreement on the terms in
effect on the date hereof (including the repayment of debt in accordance
with its terms in effect on the date hereof or accrued compensation as of
the date hereof owed to Affiliates); or
(v) changes to the certificate of incorporation or bylaws of
the Company or the formation of new committees; or
(vi) the entering into a merger, reorganization or sale of the
Company or any of it Subsidiaries or the disposal of any significant
portion of their respective assets, or the acquiring of any significant
business or assets from another Person (whether by merger, asset or stock
purchase or otherwise), other than mergers, acquisitions or other business
combinations involving the acquisition of a business offering the same or
complimentary services or products to those offered by the Company,
provided that the aggregate purchase price for all such businesses in any
12-month period does not exceed 5% of the Company's gross revenue
(calculated in accordance with GAAP, consistently applied, (as set forth
in financial statements filed with the SEC) for the prior fiscal year
("Permitted Acquisitions"); or
(vii) material changes to the business lines of the Company as
in effect on the date hereof.
(e) During the Term of this Agreement, (i) the Investor Shareholders
agree to vote all shares of Common Stock then owned by such Investor Shareholder
so as to elect to the Board the Investor Directors, the Existing Shareholder
Directors and the Independent Directors during the Term of this Agreement
pursuant to Section 2.1(a) hereof and (ii) each Existing Shareholder agrees to
vote all shares of Common Stock then owned by such Existing Shareholder so as to
elect to the Board the Existing Shareholder Directors, the Investor Directors
and the Independent Directors during the Term of this Agreement pursuant to
Section 2.1(a) hereof. In the event that the Board, acting in good faith in the
exercise of its fiduciary duty, determines not to recommend to the Company's
stockholders to elect as a director a designee of the Investor Shareholders or a
designee of the Existing Shareholders, if the Investor Shareholders or the
Existing Shareholders determine to solicit proxies from the Company's
stockholders to vote for such nominee, the Company shall reimburse the Investor
Shareholders Group or the Existing Shareholder Group, as the case may be, for
their reasonable cost incurred in connection with the solicitation of such
proxies.
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(f) If one or more Investor Directors serve as members of the Board
at a time when the Investor Shareholders no longer have the right to designate a
Director, promptly following a written request by a majority of the Board, the
Investor Shareholders shall immediately cause the Investor Director(s) to
resign, as so requested.
(g) If one or more Existing Shareholder Directors serve as members
of the Board at a time when the Existing Shareholders no longer have the right
to designate a Director, promptly following a written request by a majority of
the Board, the Existing Shareholders shall immediately cause the Existing
Shareholder Director(s) to resign, as so requested.
2.2 Investor Shareholder Director Fees and Expenses. The Company shall pay
each Investor Director customary fees in accordance with the Company's director
compensation policy as paid to other non-employee Directors, as in effect from
time to time. The Company shall also reimburse each Investor Director for its
reasonable out-of-pocket expenses incurred for the purpose of attending meetings
of the Board or the Compensation Committee or the Audit Committee thereof
(including as a designated attendee thereof pursuant hereto) in accordance with
the Company's current reimbursement policy.
ARTICLE III
STANDSTILL AND TRANSFERS
3.1 Standstill Agreement.
(a) For a period of twelve (12) months from the date hereof, except
as provided in this Section 3.1, the Investor Shareholders will not directly or
indirectly, nor will they authorize or direct any of their officers, employees,
agents and other representatives to, in each case, unless specifically requested
to do so in writing in advance by a resolution of the Board or a Committee:
(i) offer, seek or propose to acquire, ownership of any assets
or businesses of the Company or any of its Subsidiaries having a fair
market value in excess of 5% of the fair market value of all of the
Company's and its Subsidiaries' assets, or any rights or options to
acquire any such ownership (including from a third party);
(ii) acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, beneficial ownership of, or participate in an
acquisition of, any securities of the Company or any of its Subsidiaries,
or any options, warrants or other rights (including, without limitation,
any convertible or exchangeable securities) to acquire any such securities
(except pursuant to a stock dividend, stock split, reclassification,
recapitalization or other similar event by the Company;
(iii) make, or in any way participate in, any "solicitation"
of "proxies" (as such terms are used in the proxy rules of the SEC) with
respect to the voting of any securities of the Company or any of its
Subsidiaries, except as contemplated by Section 2.2(e) hereof;
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(iv) deposit any securities of the Company or any of its
Subsidiaries in a voting trust or subject any securities of the Company to
any arrangement or agreement with respect to the voting of such securities
or enter into any other agreement having similar effect;
(v) form, join, or in any way become a member of a 13D Group
with any other Person (other than its Affiliates or other Investor
Shareholders) with respect to any voting securities of the Company or any
of its Subsidiaries;
(vi) seek to propose or propose, whether alone or in concert
with others, any tender offer, exchange offer, merger, business
combination, restructuring, liquidation, dissolution, recapitalization or
similar transaction involving the Company or any of its Subsidiaries;
(vii) nominate any person as a Director of the Company who is
not nominated by the then incumbent Directors or seek the removal of any
person as a Director of the Company, or propose any matter to be voted
upon by the shareholders of the Company or seek to call a meeting of the
shareholders of the Company; provided that the Investor Shareholders may
designate or nominate Directors and seek the removal of such Directors, in
accordance with Section 2.1; or
(viii) take any action with respect to or publicly announce or
disclose any intention, plan or arrangement inconsistent with the
foregoing.
(b) Nothing contained in Section 3.1 shall be deemed in any way to
prohibit or limit (i) the activities of the Investor Directors discharging
their fiduciary duties as Directors or (ii) any transactions in the
ordinary course of business and on arm's length terms between the Company
and its Subsidiaries, on the one hand, and Investor Shareholders and their
Affiliates, on the other hand, which transactions, in the case of the
Company, shall have been approved by a majority of the Directors who are
not Investor Directors.
(c) If any Person shall commence and not withdraw a bona fide
unsolicited tender offer or exchange offer that if successful would result
in a Change of Control (an "Offer"), the Standstill Period shall
immediately terminate unless within ten (10) Business Days of the
announcement of such Offer, the independent directors shall have publicly
recommended that the Offer not be accepted.
3.2 Transfer Restrictions.
(a) During the Term of this Agreement, (i) each of the Investor
Shareholders and the Existing Shareholders shall not Transfer any of the
Investor Shares or the Existing Shareholder Shares, as the case may be, to a
Competitor (ii) the Investor Shareholders shall use their commercially
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reasonable efforts to cause the members of the Investor Shareholder Group to not
Transfer any of the Investor Shares to a Competitor, and (iii) the Existing
Shareholders shall use their commercially reasonable efforts to cause the
Existing Shareholder Group to not Transfer any of the Existing Shareholder
Shares to a Competitor.
(b) None of the Investor Shareholders or the Existing Shareholders
shall effect any Transfer in violation of any applicable law or if such Transfer
would affect the availability of the exemption from the registration
requirements under the Securities Act relied upon by the Company in connection
with the issuance of the Investor Shares or the Existing Shareholder Shares
pursuant to the Purchase Agreements.
(c) Promptly following any Transfer or upon the reasonable request
of the Company or any Director, the Investor Shareholders and the Existing
Shareholders shall promptly notify the Company of the number of Investor Shares
or Existing Shareholder Shares which such Person own of record or has the right
to vote.
3.3 Right of First Refusal to Investor Shareholders. During the Term of
this Agreement, the Company hereby grants to each member of the Investor
Shareholder Group the right of first refusal to purchase a pro rata share of
Future Securities (as defined in this Section 3.3) which the Company may, from
time to time, propose to sell and issue. A member of the Investor Shareholder
Group's pro rata share, for purposes of this right of first refusal, is the
ratio of the number of shares of Common Stock owned by such Person immediately
prior to the issuance of Future Securities to the total number of shares of
Common Stock outstanding immediately prior to the issuance of Future Securities.
This right of first refusal shall be subject to the following provisions:
(a) "Future Securities" shall mean any issuance of Capital Stock in
a financing transaction (other than an underwritten public offering), a purpose
of which is raising capital, at a price which is less than ninety percent (90%)
of the 10-day average closing price of Common Stock as reported by the Bloomberg
Professional Service (x) established on the date on which Notice (as defined
below) is delivered to members of the Investor Shareholder Group, if the
issuance is to be sold at a price which has been established prior to the date
of such Notice, or (y) on the day immediately prior to the closing date of such
transaction if the price has not been established prior to Notice.
Notwithstanding anything to the contrary, the term "Future Securities" does not
include:
(i) shares of Common Stock issued or issuable to officers,
directors and employees of, or consultants to, the Company pursuant to
stock grants, option plans, purchase plans or other employee stock
incentive programs or arrangements approved by the Board and, if required,
an Investor Director pursuant to Section 2.1(d) hereof and the
shareholders of the Company;
(ii) shares of Common Stock issued upon the exercise or
conversion of options or convertible securities of the Company outstanding
as of the date of this Agreement, as set forth on Schedule 3.3(a) hereto;
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(iii) shares of Capital Stock issued or issuable to banks,
equipment lessors or other financial institutions pursuant to a commercial
leasing or secured debt financing transaction in the ordinary course of
business approved by the Board and, if required, an Investor Director
pursuant to Section 2.1(d) hereof; and
(iv) shares of Capital Stock of the Company which are issued
or issuable pursuant to and in connection with a strategic transaction or
an acquisition or other business combination approved by a the Board and,
if required, an Investor Director pursuant to Section 2.1(d) hereof.
(b) In the event the Company proposes to undertake an issuance of
Future Securities, it shall give each member of the Investor Shareholder Group
written notice of its intention, describing in detail the type of Future
Securities, identities of purchasers, if known, and their price and the terms
upon which the Company proposes to issue the same ("Notice"). Each member of the
Investor Shareholder Group shall have the right to request such additional
information about the Company and the proposed issuance of Future Securities as
it reasonably determines is necessary to make an informal investment decision,
subject to the execution of a confidentiality agreement in form satisfactory to
the Company, if requested by the Company. Each member of the Investor
Shareholder Group shall have ten (10) days after all of such additional
information is received to agree to purchase such member's pro rata share of
such Future Securities for the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the quantity of
Future Securities to be purchased and may condition its purchase upon the
Company otherwise completing the remaining portion of the proposed issuance of
Future Securities.
(c) In the event any member of the Investor Shareholder Group fails
to exercise fully the right of first refusal within said ten (10) day period and
after the expiration of the additional ten (10) day period for the exercise of
the over-allotment provisions of this Section 3.3, the Company shall have ninety
(90) days thereafter to sell or enter into an agreement (pursuant to which the
sale of Future Securities covered thereby shall be closed, if at all, within
ninety (90) days from the date of said agreement) to sell the Future Securities
respecting which the member of the Investor Shareholder Group's right of first
refusal option set forth in this Section 3.3 was not exercised, at a price and
upon terms no more favorable to the purchasers thereof than specified in the
Company's notice to members of the Investor Shareholder Group pursuant to
Section 3.3(b). In the event the Company has not sold within such ninety (90)
day period, the Company shall not thereafter issue or sell any Future
Securities, without first again offering such securities to the members of the
Investor Shareholder Group in the manner provided in Section 3.3(b) above.
(d) The right of first refusal granted under this Section 3.3 shall
expire upon, and shall not be applicable to the closing of a firm underwritten
public offering of Common Stock with gross proceeds to the Company in excess of
$10 million.
(e) The right of first refusal set forth in this Section 3.3 may not
be assigned or transferred, except to a Permitted Transferee.
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3.4 Company's Right of First Refusal.
(a) If any member of the Investor Shareholder Group or the Existing
Shareholder Group proposes to Transfer any Common Stock to any Person, other
than a Permitted Transfer or a Transfer pursuant to a Registration Statement (as
such term is defined in the Registration Rights Agreement) or any other "open
market" sale made through a broker, then such Person shall first give written
notice to the Company (such written notice being referred to as the "Transfer
Notice") that (i) sets forth the number of shares of Common Stock proposed to be
sold (the "Offered Shares"), (ii) sets forth the name and address of the
proposed purchaser (the "Proposed Purchaser")), (iii) sets forth the price and
other terms of the proposed sale, and (iv) includes a copy of the bona fide
written offer received by such Person from the Proposed Purchaser.
(b) The Transfer Notice shall constitute an offer (the "Offer") by
such Investor Shareholder(s) or Existing Shareholder(s) to sell the Offered
Shares to the Company or its designee (the "Option Holder"). If the proposed
sale is for other than cash, then the price per share shall be deemed to be the
fair market value per share, as reasonably determined by the Board, of the
consideration offered by the Proposed Purchaser.
(c) The Option Holder shall have ten (10) Business days from the
date they receive the Offer in which to agree to purchase all of the Offered
Shares by so notifying the selling Investor Shareholder(s) or Existing
Shareholder(s), as the case may be, in writing. Such notice and election shall
be irrevocable. In accordance with the provisions of Section 3.4, if, pursuant
to its written notice the Option Holder does not elect to purchase all of the
Offered Shares, then the offering shareholder may immediately consummate the
sale of the Offered Shares to the Proposed Purchaser on terms no less favorable
to the Investor Shareholders or Existing Shareholders, as the case may be, than
as set forth in the Transfer Notice.
(d) If the Offer is accepted with respect to all the Offered Shares
in accordance with Section 3.4, the closing of the purchase and sale of the
Offered Shares shall be held at the principal office of the Company on the date
and at the time set forth in the written notice given by the Option Holder to
the selling Investor Shareholder(s) or Existing Shareholder(s), but in no event
later than ten (10) days after such notice, if the Option Holder elects to
purchase the Offered Shares. The Option Holder shall deliver to the selling
Investor Shareholder(s) or Existing Shareholder(s) at the closing the full
purchase price payable for the Offered Shares by means of a cashier's check,
certified check, or wire transfer and documents containing such acknowledgments,
representations, and agreements that counsel for the Company may reasonably
require in order for the transfer to comply with applicable federal and state
securities laws. The selling Investor Shareholder(s) or Existing Shareholder(s)
shall deliver to the purchasers certificates representing the Offered Shares, if
any, duly endorsed in blank for transfer or with duly executed blank stock
powers attached, together with such other documents as may be necessary or
appropriate, in the reasonable opinion of counsel for the purchasers, to
effectuate the transfer to the Option Holder.
(e) If the Offer is not accepted by the Option Holder within ten
(10) Business Days of the date that the Transfer Notice is delivered to the
Company pursuant to Section 3.4(b), the selling Investor Shareholder(s) or
Existing Shareholder(s) shall be free to sell all, but not less than all, of the
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Offered Shares, provided, however, that (i) such sale by the selling Investor
Shareholder(s) or Existing Shareholder(s) must be made to the Proposed Purchaser
on terms of the proposed disposition that are no less favorable to the Investor
Shareholder(s) or Existing Shareholder(s), as the case may be, described in the
Transfer Notice, (ii) such sale must be consummated within thirty (30) days
after the date that the Transfer Notice is delivered to the Company pursuant to
Section 3.4(b), and (iii) such sale shall comply with all applicable federal and
state securities laws. If the Offered Shares are not so sold to the Proposed
Purchaser prior to the expiration of such thirty (30) day period on terms no
more favorable to the selling Investor Shareholder(s) or Existing
Shareholder(s), the Offered Shares shall again be subject to the provisions of
this Agreement as though the Offer had not previously been made.
(f) The right of first refusal granted under this Section 3.4 shall
expire upon, and shall not be applicable to the closing of a firm underwritten
public offering of Common Stock with gross proceeds to the Company in excess of
$10 million.
(g) The right of first refusal set forth in this Section 3.4 may not
be assigned or transferred.
3.5 Securities Law Compliance; Reporting Obligations. Each Investor
Shareholder and Existing Shareholder covenants to comply with (a) all applicable
restrictions on transfer set forth in the Exchange Act, the Securities Act, and
all rules promulgated thereunder, including but not limited to Rule 144
promulgated under the Securities Act, and (b) the applicable reporting
obligations under Section 13 of the Exchange Act and the rules promulgated
thereunder. In addition, each Investor Shareholder and Existing Shareholder
covenants that it will deliver to the Company a copy of all beneficial ownership
reports that are required to be filed pursuant to Section 13 of the Exchange Act
and the rules promulgated thereunder in accordance with the notice provisions
herein, within three (3) Business days of the date of the filing of such report
with the SEC.
ARTICLE IV
MISCELLANEOUS
4.1 Termination.
(a) This Agreement shall terminate, except for this Article IV which
shall survive such termination, upon the earlier to occur of the Agreement
Termination Date or upon the written consent of the parties hereto in such
manner required for amendments hereto as provided in Section 4.6.
(b) The termination of this Agreement will not relieve any party for
any liability arising from a breach of representation, warranty, covenant or
other agreement occurring prior to such termination.
4.2 Expenses. Except as otherwise provided in the Investor Purchase
Agreement, all expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
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4.3 Assignment; Benefits. Unless expressly permitted pursuant to this
Agreement, neither the Investor Shareholders nor the Existing Shareholders may
assign their rights hereunder without the consent of the Company and, in the
event of a proposed assignment by an Existing Shareholder, an Investor Director.
4.4 Entire Agreement. This Agreement (including any schedules or exhibits
hereto), together with the Investor Purchase Agreement and the Registration
Rights Agreement constitutes the full and entire understanding and agreement
among the parties with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, that may have related to the subject matter hereof in
any way.
4.5 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby;
provided that the essential terms and conditions of this Agreement for the
parties remain valid, binding and enforceable; provided, further, that the
economic and legal substance of the transactions contemplated by this Agreement
is not affected in any manner materially adverse to any party. In event of any
such determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the parties hereby to the same extent
waive any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
4.6 Amendments and Waivers. This Agreement may not be amended, modified or
supplemented without the written consent of the Company the Investor
Shareholders, and the Existing Shareholders and waivers or consents to
departures from the provisions hereof may be given in writing by the party
granting such waiver, consent or departure.
4.7 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and duly given when delivered by
hand or mailed by express, registered or certified mail, or any courier
guaranteeing overnight delivery (a) if to an Investor Shareholder, at the most
current address given by the Investor Shareholder in accordance with the
provisions of this Section 4.7, which address initially is the address set forth
in the Investor Purchase Agreement with respect to the Investor Shareholder,
with a copy to ▇▇▇▇ ▇▇▇▇▇▇▇, P.C., 1350 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.; and (b) if to the
Company or the Existing Shareholders, to the attention of its General Counsel,
initially at the Company's address set forth in the Investor Purchase Agreement,
and thereafter at such other address of which notice is given in accordance with
the provisions of this Section 4.7, with a copy to Blank Rome LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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4.8 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of laws rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
4.9 Submission to Jurisdiction; Waiver of Jury Trial. No proceeding
related to this Agreement or the transactions contemplated hereby may be
commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company, the
Existing Shareholders and the Investor Shareholders hereby irrevocably and
unconditionally consent to the jurisdiction of such courts and personal service
with respect thereto, waive any objection to the laying of venue of any such
litigation in such courts and agree not to plead or claim that such litigation
brought in any courts has been brought in an inconvenient forum. Each of the
Company, the Existing Shareholders and the Investor Shareholders hereby waive
all right to trial by jury in any proceeding (whether based upon contract, tort
or otherwise) in any way arising out of or relating to this Agreement. Each of
the Company, the Existing Shareholders and the Investor Shareholders agree that
a final judgment in any such proceeding brought in any such court shall be
conclusive and binding upon the Company and may be enforced in any other courts
in the jurisdiction of which the Company are or may be subject, by suit upon
such judgment.
4.10 Counterparts. This Agreement and any amendments, modifications or
supplements hereto may be executed in any number of counterparts, each of which
when so executed shall be deemed an original, and all of which together shall
constitute one and the same agreement.
4.11 Further Assurances. Each party hereto shall do and perform or cause
to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the
provisions of this Agreement and the consummation of the transactions
contemplated hereby.
4.12 Recapitalization, etc. In the event that any capital stock or other
securities are issued in respect of, in exchange for, or in substitution of, any
shares of Common Stock by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
shareholders or combination of the shares of Common Stock or any other change in
capital structure of the Company, appropriate adjustments shall be made with
respect to the relevant provisions of this Agreement so as to fairly and
equitably preserve, as far as practicable, the original rights and obligations
of the parties hereto under this Agreement.
4.13 Remedies for Breach; Specific Performance. In the event of a breach
by any party to this Agreement of its obligations under this Agreement, the
party injured by such breach, in addition to being entitled to exercise all
rights granted by law, including recovery of damages and costs (including
reasonable attorneys' fees), shall be entitled to specific performance of its
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rights under this Agreement, it being agreed that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived. It is further
agreed that injunctive relief shall be available to the Investor Shareholders
and the Existing Shareholders for breach of Section 2.1(e) above, it being
agreed that the remedy at law, including monetary damages, for breach of any
such provision will be inadequate compensation for any loss and that any defense
in any action for injunctive relief that a remedy at law would be adequate is
waived.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Shareholder
Agreement as of the date first set forth above.
▇▇▇▇▇▇ + CIOCIA, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
WYNNEFIELD SMALL CAP VALUE
OFFSHORE FUND, LTD.
By: Wynnefield Capital Management, Inc.,
its Investment Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.
By: Wynnefield Capital Management, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Co-Managing Member
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.I
By: Wynnefield Capital Management, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Co-Managing Member
WEBFINANCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title:
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EXISTING SHAREHOLDERS:
Prime Partners, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Prime Partners II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Member and
Manager
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SCHEDULE I
SCHEDULE OF INVESTOR SHAREHOLDERS
Wynnefield Small Cap Value Offshore Fund, Ltd.
Wynnefield Partners Small Cap Value, L.P.
Wynnefield Partners Small Cap Value, L.P. I
WebFinancial Corporation
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SCHEDULE II
SCHEDULE OF EXISTING SHAREHOLDERS
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
PRIME PARTNERS, INC.
PRIME PARTNERS II, LLC
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SCHEDULE III
SCHEDULE OF OFFICERS AND DIRECTORS WHO DERIVE AT LEAST 50% OF
THEIR CASH COMPENSATION AS SALES COMMISSION AS OF THE DATE
HEREOF
▇▇▇▇▇ ▇▇▇▇▇▇
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