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SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made as of
March 22, 1999, among AD-STAR SERVICES, INC., a New York corporation, with its
principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), those persons who are current holders of the Company's Common Stock,
no par value (the "Common Stock") who are identified on Exhibit A hereto (the
"Shareholders") and those persons (the "Investors") who are purchasing the
Company's 12% convertible subordinated unsecured notes (the "Notes").
WHEREAS, the Investors have entered into a Subscription Agreement with
the Company (the "Subscription Agreement"), pursuant to which the Investors have
agreed to purchase 10 of the Company's 12% convertible subordinated unsecured
notes, which are convertible into shares of the Common stock;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Subscription Agreement that the Company, the Investors and
each of the Shareholders shall have entered into this Agreement;
WHEREAS, each Shareholder presently owns the number of shares of the
Common Stock set forth opposite the name of such Shareholder on Exhibit A hereto
and may in the future acquire, or obtain the right to acquire, additional equity
securities of the Company (all such shares and equity securities, the "Current
Holder Shares").
In consideration of the covenants herein contained and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. TAG-ALONG RIGHTS.
1.1 PROHIBITION ON TRANSFERS. None of the Shareholders,
individually or jointly, shall sell, assign, transfer, hypothecate, pledge,
encumber or otherwise dispose of ("Transfer") any shares of Common Stock, or any
options, warrants or other rights to acquire shares of Common Stock or any
securities or other instruments convertible into shares of Common Stock, now
owned or hereafter acquired ("Covered Securities"), except as provided in this
Section 1 or in Section 2 hereof.
1.2 NOTICE OF PROPOSED TRANSFER. Any Shareholder (a "Selling
Shareholder") which enters into an agreement providing for the Transfer of any
Covered Securities in a transaction covered by this Section 1 (a "Proposed
Transfer") shall promptly provide written notice of such fact (a "Notice of
Transfer") to the Company and the Investors. The Notice of Transfer shall set
forth: (a) the name and address of the proposed transferee (the "Proposed
Transferee"), (b) the number or amount and nature of the Covered Securities
proposed to be transferred, (c) the proposed amount and form of consideration
and terms and conditions of payment offered by the Proposed Transferee (the
"Transfer Terms") and (d) that the Proposed Transferee has been informed of the
"tag-along right" provided for in this Agreement and has agreed that such
Proposed Transfer be accomplished in accordance with the terms hereof.
1.3 EXERCISE OF TAG-ALONG RIGHT. Each Investor who holds at
least ten percent (10%) of the aggregate number of Notes outstanding or Common
Stock issued upon conversion thereof
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shall have the right to offer for sale to the Proposed Transferee, as a
condition of such sale by the Selling Shareholder and pursuant to the Transfer
Terms, the same proportion of shares of Common Stock owned by the Investor
(either directly or upon the conversion of the Notes held by such Investor, such
shares of Common Stock, the "Investor Shares") as the Proposed Transfer
represents with respect to Covered Securities then owned by such Selling
Shareholder. An Investor who wishes to have any of its Investor Shares included
in a Proposed Transfer shall give written notice (a "Participation Notice") to
the Selling Shareholder within twenty (20) days of the giving of the Notice of
Transfer, stating that such Investor wishes to sell the indicated number of
Investor Shares in the Proposed Transfer on the Transfer Terms, which number of
Investor Shares shall not exceed the maximum number permitted pursuant to this
Section 1.3.
1.4 CHANGE IN TERMS. If any of the Transfer Terms shall be
changed in any way, then each Investor (whether or not such Investor gave a
Participation Notice shall have the right, for a period of twenty (20) days, to
re-examine its decision and to send to the Selling Shareholder a rescission of
its previously-given Participation Notice or a new Participation Notice.
1.5 SECURITIES INCLUDED IN TRANSFER, CONSUMMATION OF TRANSFER.
(a) All of the Covered Securities and all of the
Investor Shares to be included in a Proposed Transfer pursuant to a
Participation Notice (such Covered Securities and Investor Shares collectively,
the "Subject Securities") shall be sold on the same terms and conditions, except
that only the Selling Shareholder shall be required to provide any
representations or warranties to the Proposed Transferee regarding the Subject
Securities other than standard representations and warranties as to ownership of
the Subject Securities.
(b) All sales shall be consummated simultaneously.
SECTION 2. PERMITTED TRANSFERS. Any Shareholder may at any time, except
as prohibited by any agreement or understanding such Shareholder has with the
Company, transfer (i) all or any portion of its Covered Securities to an
Affiliate (as such term is defined in the Securities Act of 1933, as amended) of
such Shareholder; (ii) not more than two percent (2%), in the aggregate, of its
Covered Securities to any third parties who are not Affiliates (as such term is
defined in the Securities Act of 1933, as amended); or (iii) pursuant to Rule
144 of the Securities Act of 1933, as amended (such transfer, a "Permitted
Transfer"); provided, however, that, with respect to items (i) and (ii) of this
Section 2, (a) the transferee shall agree in writing to be bound by the terms
and provisions of this Agreement, (b) the transferor shall cause all parties to
this Agreement to be notified in writing of such transfer and (c) such transfer
shall constitute a complete disposition of the Covered Securities transferred,
and shall neither constitute a pledge or other encumbrance thereof nor include
any repurchase or similar right, but shall provide the transferee of the Covered
Securities with the ability to comply in full with the terms and conditions of
this Agreement.
SECTION 3. LEGEND ON COVERED SECURITIES.
The certificates for all Covered Securities to be issued to any
Shareholder or transferred pursuant to a Permitted Transfer shall prominently
bear the following restrictive endorsement (in addition to a standard securities
law legend):
"The shares represented by this Certificate or for which this
Certificate or Instrument is exercisable or into which this
Certificate or Instrument is convertible are subject to all of
the terms and conditions of a
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Shareholders' Agreement dated as of March , 1999, a copy of
which is on file at the principal office of the Company."
SECTION 4. GENERAL PROVISIONS.
4.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS. The representations, warranties, covenants and agreements contained
in this Agreement shall survive the execution of this Agreement.
4.2 NOTICES. All notices, requests, demands and other
communications which are required to be or may be given under this Agreement to
any party by any of the other parties shall be in writing and shall be deemed to
have been duly given when (a) delivered in person, (b) the day following
dispatch by a nationally recognized overnight courier service (such as Federal
Express or UPS, etc.) for next day delivery or (c) five (5) days after dispatch
by certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made. Any notice or
other communication given hereunder shall be addressed to the addressee at its
address for notices set forth as set forth above or as indicated on the
signature page hereto.
4.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
4.4 HEADINGS. All headings are inserted for convenience of
reference only and shall not affect the meaning or interpretation of any such
provisions or of this Agreement, taken as an entirety.
4.5 SEVERABILITY. If and to the extent that any court of
competent jurisdiction holds any provision (or any part thereof) of this
Agreement to be invalid or unenforceable, such holding shall in no way affect
the validity of the remainder of this Agreement.
4.6 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
rather may only be changed by a statement in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. It
is agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
4.7 EXPENSES. The Company shall pay all reasonable costs, fees
and expenses of the Purchasers in connection with the preparation of this
Agreement and any other documents or certificates executed concurrently herewith
and the closing of the transactions contemplated hereby.
4.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
4.9 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns.
4.10 INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Investors and their affiliates, and their respective partners,
officers, directors, representatives,
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employees and agents from and against all losses, claims, damages and
liabilities in connection with or arising out of any breach by the Company of
its obligations under this Agreement or the transactions contemplated hereby or
in connection with or arising out of any litigation, investigation or proceeding
relating thereto, and to reimburse upon demand each of such indemnifiable
parties currently and from time to time for any reasonable legal or other
expenses incurred in connection with investigating or defending any of the
foregoing; provided that the foregoing indemnity shall not apply to any losses,
claims, damages, liabilities or related expenses to the extent a court of
competent jurisdiction shall have determined in a final judgment that is not
subject to further appeal that the foregoing shall have resulted primarily and
directly from the willful misconduct or gross negligence of such indemnifiable
party.
4.11 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject mater thereof
and incorporates and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
4.12 FURTHER ASSURANCES. The parties agree to execute and
deliver all such further documents, agreements and instruments and take such
other and further action as may be necessary or appropriate to carry out the
purposes and intent of this Agreement.
4.13 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Subscription Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Subscription Agreement,
except as expressly provided in this Subscription Agreement. Neither this
Subscription Agreement, nor its rights and obligations hereunder can be assigned
by the Company, and any such attempted assignment will be void.
4.14 MERGER. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "the Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
THIS SPACE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first above written.
COMPANY: AD-STAR SERVICES, INC.,
a New York corporation
By: ________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
President
By: ________________________________
Name: _______________________
Title: _______________________
INVESTORS: ROLLING OAKS ENTERPRISES, LLC
a Delaware limited liability company
By: ________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director of Operations
SHAREHOLDERS:
____________________________________
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____________________________________
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Attachments
Exhibit A List of Shareholders
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LIST OF SHAREHOLDERS
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