Exhibit 10.3
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made and entered into as of the 14 day of November,
1997 by and among Venturian Corp. ("Venturian"), a corporation organized and
existing under the laws of the State of Minnesota; Atio Corporation
International, Inc. ("Atio"), a corporation organized and existing under the
laws of the state of Delaware; Xxxx Xxxxxx ("Xxxxxx" and, collectively with
Venturian, and Atio, the "Shareholders"); and Venturian Software Enterprises,
Inc. (the "Corporation"), a corporation organized and existing under the laws of
the State of Minnesota that will change its name to Atio Corporation USA, Inc.
promptly following the execution and delivery of this Agreement.
PREMISES:
1. The Shareholders are the holders of all of the issued and
outstanding shares of the capital stock of the Corporation and parties to that
certain agreement (the "Joint Venture Agreement") dated October 23, 1997 among
Venturian, Atio, Atio Corporation (PTY) Ltd ("Atio (PTY)"), Xxxxxx, and the
Corporation.
2. Atio (PTY) owns a majority of the issued and outstanding shares of
the capital stock of Atio and will benefit from Atio's ownership of shares in
the Corporation.
3. The Shareholders and the Corporation desire to enter into this
Agreement concerning the transfer of shares in the Corporation and certain
matters with respect to the governance of the Corporation.
4. Promptly following the execution and delivery of this Agreement, the
Corporation and Atio (PTY) are entering into certain agreements (collectively,
the "License
Agreement") pursuant to which Atio (PTY) is licensing certain intellectual
property to the Corporation and agreeing to provide certain development services
in connection therewith.
5. The Corporation is making a pre-payment of $800,000.00 (the
"Prepayment") in consideration of development services to be provided by Atio
(PTY) under the License Agreement and such Prepayment is being applied as a
payment of amounts owing by Atio (PTY) to the Corporation as the purchase price
for the Shares to be issued to Atio under the Joint Venture Agreement.
In consideration of the foregoing premises and the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
I. GOVERNANCE
A. VOTING OF SHARES. Each Shareholder shall vote all shares of the
Corporation's capital stock now held or hereafter acquired by such Shareholder
to effectuate the provisions of this Section 1, and each Shareholder shall take
all such other action as is reasonably necessary to carry out the provisions of
this Section 1.
B. BOARD OF DIRECTORS. The Corporation shall be governed by a board of
six directors or such greater number as to which Venturian and Atio may agree.
Subject to Section 1.4 below, and except as Venturian and Atio may mutually
agree, 50% of such directors shall be designated by Venturian (the "Venturian
Directors") and 50% of such directors shall be designated by Atio (the "Atio
Directors"). Venturian shall have the power to remove any Venturian Director and
to designate any director to fill any vacancy created upon the resignation,
death or removal of any Venturian Director; and Atio shall have the power to
remove any Atio Director and to designate any director to fill any vacancy
created upon the resignation, death or removal of any Atio Director.
C. SUPERMAJORITY ACTION. The following actions by the Corporation shall
require the affirmative vote of 75% of all of the Corporation's directors:
1. The approval of each annual budget for the business and
operation of the Corporation;
2. Any expenditures, or any contracts, commitments or other
arrangements involving expenditures, which in the aggregate exceed the aggregate
amount provided for such year in a budget approved pursuant to subparagraph (a)
above;
3. The issuance by the Corporation of any shares of its capital
stock or other securities;
4. The incurrence by the Corporation of any indebtedness for
borrowed money in excess of $1,000,000 outstanding at any one time;
5. Any sale, lease, license or other transfer by the Corporation
of any patents, copyrights, trademarks, trade secrets or other intellectual
property of the Corporation, including any license or other rights held by the
Corporation with respect to the intellectual property of others ("Intellectual
Property"), other than in the ordinary course of business;
6. Any sale, lease, license or other transfer by the Corporation
of any assets other than Intellectual Property having a value equal to or
greater than 10% of the net book value of the Corporation (determined in
accordance with generally accepted accounting principles consistently applied),
other than in the ordinary course of business;
7. Any merger, exchange or transfer (within the meaning of
Minnesota Statutes ss.302A.601 et seq. or a successor statute) to which the
Corporation is a party (other than a merger pursuant to Section 1.7 below);
8. Any redemption by the Corporation of any shares of its capital
stock or other securities;
9. Any declaration or payment by the Corporation of any dividend
or other distribution;
10. Any amendment or restatement of the Corporation's articles of
incorporation or by-laws; and
11. Any transaction between the Corporation and an Affiliate (as
hereinafter defined) of Venturian or Atio. For purposes of this Agreement, a
person, corporation, partnership, limited liability company, joint venture,
trust or other entity shall be deemed to be an "Affiliate" of Venturian or Atio,
as the case may be, if such person or entity directly or indirectly controls, is
controlled by, or is under common control with Venturian or Atio, as the case
may be; and a person or entity shall be deemed to control another person or
entity if it (i) owns, beneficially or of record, or has the power to vote, more
than 5% of the issued and outstanding voting securities of such person or
entity, or (ii) has the power to elect or otherwise designate 25% or more of the
members of the board of directors or other governing body of such person or
entity, or (iii) otherwise has the power to direct the management or affairs of
such person or entity. Notwithstanding the foregoing, Xxxxxx Xxxxx and Xxxx
Xxxxxx are each hereby deemed to be an Affiliate of Atio and Xxxx Xxxxxxxxx and
Xxxx Xxxxxx are each hereby deemed to be an Affiliate of Venturian.
D. ADDITIONAL CAPITAL.
1. In the event that either Venturian or Atio (the "Principal
Shareholders") determines that the Corporation requires additional capital and
that such capital should not be raised from a third party, if the parties have
been unable to reach agreement with respect thereto through deliberations of the
Corporation's board of directors, the Principal Shareholder making such
determination (the "Calling Shareholder") shall deliver to each other
Shareholder written notice of such determination (the "Capital Call Notice"),
specifying the amount of additional capital required (the "Capital
Contribution") and the price per share at which the Capital Contribution is to
be made; provided, however, that Atio shall not have the right to be a "Calling
Shareholder" or issue a "Capital Call End Notice" unless and until all Deferred
Installments (as defined in the Joint Venture Agreement) shall have been paid in
full. The aggregate amount of the Capital Contribution shall in no event exceed
the reasonably foreseeable capital requirements of the Corporation for the 12
month period following the date that the Capital Contribution is to be made.
Within 60 days of its receipt of the Capital Call Notice (the "Capital Call
Notice Period"), the other Principal Shareholder (the "Non-Calling Shareholder")
shall by written notice delivered to each Shareholder elect or decline to make
its Proportionate Share (as hereinafter defined) of the Capital Contribution. In
the event that the Non-Calling Shareholder does not deliver to the Calling
Shareholder, within the Capital Call Notice Period, written notice electing or
declining to make its Proportionate Share of the Capital Contribution, the
Non-Calling Shareholder shall be deemed to have declined to make its
Proportionate Share of the Capital Contribution.
2. Xxxxxx shall have the right to make his Ratable Share (as
hereinafter defined) of any portion of any Capital Contribution that Venturian
makes or has the right to make pursuant to this Section 1.4 by notifying all
Shareholders of his election to do so not later than five days prior to the
expiration of the Capital Call Notice Period, and any capital to be contributed
by Venturian pursuant to this Section 1.4 may otherwise be divided between
Venturian and Xxxxxx in such proportion as they may agree. If Xxxxxx elects to
make his Ratable Share of any Capital Contribution, the portion of the Capital
Contribution to be made by Venturian shall be reduced
accordingly so that the aggregate portion of the Capital Contribution made by
Venturian and Xxxxxx is not greater than Venturian's Proportionate Share of such
Capital Contribution.
3. Within 30 days after the expiration of the Capital Call Notice
Period, (i) the Calling Shareholder shall pay to the Corporation its
Proportionate Share of the Capital Contribution, and (ii) the Non-Calling
Shareholder (and Xxxxxx, if he has so elected pursuant to paragraph (b) above)
shall pay to the Corporation its Proportionate Share of the Capital Contribution
if the Non-Calling Shareholder has elected to make its Proportionate Share of
the Capital Contribution, and (iii) if the Non-Calling Shareholder has declined
to make its Proportionate Share of the Capital Contribution, the Calling
Shareholder may pay to the Corporation such additional portion of the Capital
Contribution as the Calling Shareholder elects to pay (but the aggregate amount
paid by all Shareholders shall in no event exceed the amount of the Capital
Contribution as specified in the Capital Call Notice). All payments of the
Capital Contribution pursuant to this Section 1.4 shall be made by wire transfer
of immediately available funds in United States dollars to an account designated
by the Corporation. Immediately upon each Shareholder's payment of a portion of
the Capital Contribution pursuant to this Section 1.4, the Corporation shall
issue to such Shareholder a certificate or certificates representing that number
of Shares (as defined in Section 2.1 below) that is equal to the portion of the
Capital Contribution made by such Shareholder multiplied by the price per share
set forth in the Capital Call Notice.
4. In the event that a Capital Contribution (or a portion thereof)
is made in accordance with this Section 1.4 by one but not both Principal
Shareholders, the number of directors to be designated by Atio and Venturian,
respectively, following such Capital Contribution shall be adjusted to equal
each Principal Shareholder's Proportionate Share of the Shares outstanding
following such Capital Contribution. In such event, the Principal Shareholder
with the larger
Proportionate Share of the Shares outstanding shall have the right to designate
not less than a majority of the total number of directors, but the number of
directors designated by such Principal Shareholder shall otherwise be rounded
down to the nearest whole number and the other Principal Shareholder shall have
the right to designate the remaining directors. In the event that a Capital
Contribution (or a portion thereof) is made in accordance with this Section 1.4
by Venturian but not Atio, Atio's right to designate the chief executive officer
of the Corporation pursuant to Section 1.6 hereof shall terminate and be of no
further force or effect.
5. The "Proportionate Share" of Atio shall be the proportion that
the number of Shares held by Atio bears to the total number of Shares held by
Atio, Venturian and Xxxxxx, and the "Proportionate Share" of Venturian shall be
equal to the proportion that the number of Shares held by Venturian and Xxxxxx
bears to the total number of Shares held by Venturian, Xxxxxx and Atio. The
"Ratable Share" of Xxxxxx shall be equal to the proportion that the number of
Shares held by Xxxxxx bears to the total number of Shares held by Xxxxxx and
Venturian.
E. BUY OUT UPON DEADLOCK.
1. In the event that, at any time following the second anniversary
of the date of this Agreement, either Venturian or Atio have unsuccessfully
attempted to receive, at two or more separate meetings of the Corporation's
shareholders or its board of directors (as the case may be), the approval of the
Corporation's directors or its shareholders for the Corporation to take any
action requiring the approval of such directors or shareholders (a "Demanded
Action"), Venturian or Atio, as the case may be (the "Initiating Shareholder")
may deliver to each of the other Shareholders written notice (an "Initiating
Notice") specifying the Demanded Action and a price per share at which the
Initiating Shareholder is willing either (i) to sell all of its Shares to the
other Principal Shareholder
in accordance with this Section 1.5, or (ii) purchase all of the Shares of the
other Principal Shareholder in accordance with the provisions of this Section
1.5.
2. Not later than 120 days following its receipt of an Initiating
Notice (the "Election Period"), the Principal Shareholder that is not the
Initiating Shareholder (the "Non-Initiating Shareholder") shall deliver to each
of the other Shareholders written notice specifying whether the Non-Initiating
Shareholder (i) acquiesces in the Demanded Action, or (ii) elects to purchase
all of the Shares of the Initiating Shareholder at the purchase price set forth
in the Initiating Notice, or (iii) elects to sell all of its Shares to the
Initiating Shareholder at the purchase price set forth in the Initiating Notice.
If the Non-Initiating Shareholder elects to acquiesce in the Demanded Action,
both Principal Shareholders shall vote their shares and cause the directors
designated by them to vote to cause the Corporation to take the Demanded Action.
If the Non-Initiating Shareholder elects to purchase the Shares of the
Initiating Shareholder, the Initiating Shareholder shall sell to the
Non-Initiating Shareholder, and the Non-Initiating Shareholder shall purchase
from the Initiating Shareholder, all of the Shares of the Initiating Shareholder
at the per Share purchase price set forth in the Initiating Notice and at a
closing conducted in accordance with paragraph (d) below. If the Non-Initiating
Shareholder elects to sell its Shares to the Initiating Shareholder, the
Non-Initiating Shareholder shall sell all of its Shares to the Initiating
Shareholder, and the Initiating Shareholder shall purchase all of the Shares of
the Non-Initiating Shareholder, at the per Share purchase price set forth in the
Initiating Notice and at a closing conducted in accordance with paragraph (d)
below.
3. In the event that Venturian is selling Shares to Atio pursuant
to this Section 1.5, Xxxxxx shall sell to Atio, and Atio shall purchase from
Xxxxxx, all of Sharon's Shares on the same terms and at the same closing as Atio
is purchasing Venturian's Shares. In the event that Venturian is purchasing the
Shares of Atio pursuant to this Section 1.5, Xxxxxx shall have the option
to purchase his Ratable Share of such Shares by notifying Venturian of his
election to do so not later than 10 days prior to the expiration of the Election
Period (but in such event Venturian shall remain obligated to purchase any
Shares of Atio not purchased by Xxxxxx).
4. The closing of any purchase or sale pursuant to this Section
1.5 shall take place at the principal executive office of the Corporation on a
date not later than 30 days after the expiration of the Election Period. At such
closing, the selling Shareholder(s) shall deliver to the purchasing
Shareholder(s) the certificate or certificates representing the Shares to be
sold, and the purchasing Shareholder(s) shall pay to the selling Shareholder(s)
the purchase price therefor, by wire transfer of immediately available funds in
United States dollars to an account designated by the selling Shareholder(s).
5. Upon the purchase by one Principal Shareholder of another
Principal Shareholder's Shares pursuant to this Section 1.5, the provisions of
this Section 1 shall terminate and be of no further force or effect.
F. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall be designated by Atio.
G. MERGER.
1. Venturian may elect, at any time following the 180th day after
the date of this Agreement, to cause the Corporation to be merged with and into
Atio, with Atio as the surviving corporation, provided that the Corporation
receives an opinion of counsel reasonably satisfactory to Venturian and Atio
that such merger may be effected without the recognition of gain for United
States federal income tax purposes. In any such merger, the Shares of the
Corporation shall be exchanged for common shares of Atio (identical to the
common shares of Atio then held by Atio (PTY), if Atio has more than one series
of common shares then outstanding), at an exchange ratio
(the "Exchange Ratio") determined in accordance with Paragraph (b) below;
provided, however, that if Venturian delivers to Atio, prior to the first
anniversary of the date of this Agreement, written notice that Venturian elects
to cause a merger pursuant to this Section 1.7, the Exchange Ratio shall be
calculated as if the value of Venturian were 15% greater than the value it would
otherwise be determined to have pursuant to Paragraph (b). If Venturian elects
to merge the Corporation with Atio pursuant to this Paragraph (a), Atio and Atio
(PTY) shall take all such action as is necessary to effect such merger,
including voting the shares in Atio held by Atio (PTY) and by any entity with
whom Atio (PTY) has a Parent/Subsidiary Relationship or Sister Corporation
Relationship, to approve such merger.
2. Promptly following Venturian's delivery of written notice to
the Corporation and Atio that it elects to cause a merger pursuant to Paragraph
(a) above, Atio and Venturian shall negotiate in good faith to determine an
Exchange Ratio. If Atio and Venturian are able to agree upon an Exchange Ratio
within 30 days of Venturian's delivery of such written notice to the Corporation
and Atio, the Exchange Ratio shall be the Exchange Ratio determined by an
independent appraiser qualified to value an ongoing business and acceptable to
Atio and Venturian (an "Independent Appraiser"), according to the relative
values of the Corporation and Atio based upon what a willing buyer would pay to
a willing seller in an arm's-length transaction for the entire equity interests
of the Corporation, and what another willing buyer would pay to a willing seller
in an arm's-length transaction for the entire equity interests of Atio,
separately. If Atio and Venturian are unable to agree on such an Independent
Appraiser within 30 days of the expiration of the aforementioned 30-day period,
such independent appraiser shall be selected by arbitration pursuant to Section
10.8 below. The fees and expenses of any such appraiser shall be paid 50% by
Atio and 50% by Venturian.
3. Any merger pursuant to this Section 1.7 shall be effected as
promptly as practicable following the determination of the exchange ratio
pursuant to Paragraph (b) above, but in any event not later than 90 days
following such determination.
4. Atio shall provide to Venturian, upon its request, copies of
the certificate of incorporation and bylaws of Atio, any shareholders
agreements, voting trusts, or other documents relating in any manner to the
governance of Atio or the transfer or redemption of its securities, and such
financial statements and other information with respect to the business,
operations, assets, liabilities, financial structure and other matters of Atio
as it may reasonably request for purposes of determining whether to exercise its
rights hereunder and calculate an Exchange Ratio in accordance with the terms of
this Agreement.
H. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS. Promptly
following the execution and delivery of this Agreement, the parties shall take
all action necessary to amend the articles of incorporation and bylaws of the
Corporation to effect the provisions of this Section 1.
I. ATIO NAME. In the event that at any time neither Atio nor any of its
Affiliates holds directly or indirectly any Shares, the Corporation shall
immediately change its name to a name not including the word "Atio".
II. RESTRICTION ON TRANSFER OF SHARES
A. GENERAL RESTRICTION. No Shares (as hereinafter defined), nor any
interest therein, shall directly or indirectly be sold, assigned, conveyed,
pledged, mortgaged, hypothecated or otherwise disposed of or transferred,
voluntarily or involuntarily, or by operation of law, with or without
consideration (any such disposition shall be referred to hereinafter as a
"Transfer") except as otherwise specifically provided in this Agreement. As used
in this Agreement, "Shares" means the issued and outstanding shares of the
Corporation's capital stock of any class or series, whether such
shares have been issued on or prior to the date hereof or are subsequently
issued. Any attempt to Transfer that is not permitted under the terms of this
Agreement shall be null, void and of no effect. Recognizing that Venturian's
common stock is publicly held, no transfer of all or any portion of Venturian's
common stock shall in and of itself be deemed to be a Transfer of Shares.
Recognizing that Atio is part of an affiliated group of corporations the
ultimate parent entity of which is Atio (PTY), the shares of which are held by a
number of different shareholders, no transfer of all or any portion of the
shares of Atio (PTY) shall in and of itself be deemed to be a Transfer of
Shares.
B. ISSUANCES AND REDEMPTIONS. Nothing in this Section 2 or in Sections
3, 4 or 5 of this Agreement shall be construed to prohibit or limit in any
manner any issuance by the Corporation of any Shares of its capital stock or any
redemption by the Corporation of any Shares (other than a redemption pursuant to
the exercise of a right of first refusal under Section 3 hereof), provided that
such issuance or redemption is authorized in accordance with Sections 1.3 hereof
and provided, further, in the case of any such issuance, that the party to whom
such Shares are issued executes and delivers to the Corporation an instrument
agreeing to observe and be bound by all of the terms and provisions of this
Agreement (and whether or not such party executes and delivers to the
Corporation such instrument, any Shares issued to such party shall be subject to
the provisions of this Agreement and such party shall be bound by the
obligations of a "Shareholder" hereunder.). Any person or entity acquiring from
the Corporation shares of the Corporation's capital stock and agreeing in
writing to observe and be bound by all of the terms and provisions of this
Agreement shall be deemed to be a "Shareholder" within the meaning of this
Agreement and shall be entitled to all of the rights and benefits thereof.
C. SHARES OF XXXXXX.
1. Upon the termination of Sharon's employment with the
Corporation, whether such termination is initiated by the Corporation or Xxxxxx,
with or without cause, or upon the disability of Xxxxxx, Venturian (first) and
Atio (second) shall have the option to purchase all or any portion of the Shares
held by Xxxxxx (including, without limitation, any Shares purchased or
purchasable by Xxxxxx following the termination of his employment with the
Corporation pursuant to any options held by Xxxxxx), and the Corporation shall
have the option to redeem any of such Shares not purchased by Venturian or Atio,
on the terms set forth in this Section 2.3. Venturian shall exercise its option
pursuant to this paragraph (a), if it desires to do so, by delivering to Xxxxxx
and Atio not later than 90 days following the termination of Sharon's
employment, written notice of such exercise specifying the number of Shares to
be purchased by it. If Venturian does not so elect to purchase all of the Shares
of Xxxxxx within such 90 day period, Atio shall exercise its option pursuant to
this paragraph (a), if it desires to do so, by delivering to Xxxxxx not later
than 120 days following the termination of Sharon's employment, written notice
of such exercise specifying the number of shares to be purchased by it; and the
Corporation shall exercise its option pursuant to this paragraph (a), if it
desires to do so, by delivering to Xxxxxx not later than 150 days following the
termination of Sharon's employment, written notice of such exercise.
2. Upon the death of Xxxxxx, Venturian (first) and Atio (second)
shall have the option to purchase all or any portion of the Shares held by
Xxxxxx (including, without limitation, any Shares purchased or purchasable by
his estate following his death pursuant to any options held by him), and the
Corporation shall redeem any of such Shares that Venturian and Atio have not
elected to so purchase, on the terms set forth in this Section 2.3.
3. Upon the termination of Sharon's employment with the
Corporation, whether such termination is initiated by the Corporation or Xxxxxx,
with or without cause, or
upon the disability of Xxxxxx, if Venturian, Atio and/or the Corporation do not
elect to purchase all of the Shares of Xxxxxx pursuant to paragraph (a) and (b)
above, then Xxxxxx (or his estate) shall have the option to cause the
Corporation to purchase all (but not less than all) of the remaining Shares then
held by Xxxxxx (including, without limitation, any Shares purchased or
purchasable by Xxxxxx following the termination of his employment with the
Corporation pursuant to any options held by Xxxxxx) on the terms set forth in
this Section 2.3. Xxxxxx shall exercise his option pursuant to this paragraph
(c), if he desires to do so, by delivering to the Corporation, not later than
180 days following the termination of his employment, written notice of such
exercise.
4. Not later than 60 days following the death of Xxxxxx or the
termination of his employment with the Corporation, the Corporation shall
deliver to Xxxxxx (or his estate), Atio and Venturian written notice specifying
the price per Share for his Shares, as determined by the Corporation's Board of
Directors in good faith. If none of Venturian, Atio or Xxxxxx delivers to the
Corporation, within 30 days of its receipt of such notice, written notice
objecting to such price per Share, the price per Share to be paid by Venturian,
Atio and/or the Corporation upon the purchase or redemption of Sharon's Shares
pursuant to paragraphs (a) or (b) of this Section 2.3 (the "Option Price") shall
be the price so determined, and the price per Share to be paid by the
Corporation upon the redemption of Sharon's shares pursuant to paragraph (c) of
this Section 2.3 (the "Put Price") shall be the Option Price reduced by 35%.
5. If Xxxxxx, Atio or Venturian delivers to the Corporation,
within 30 days of his or its receipt of notice from the Corporation specifying
the price per Share as determined by the Corporation's directors, written notice
objecting thereto, the Option Price shall be determined by an Independent
Appraiser acceptable to Xxxxxx, Atio, Venturian and the Corporation based upon
what a
willing buyer would pay to a willing seller in an arm's-length transaction for
the entire equity interests of the Corporation. If Xxxxxx, Atio, Venturian and
the Corporation are unable to agree upon an Independent Appraiser within 30 days
of the delivery of the aforementioned notice of objection, the Independent
Appraiser shall be selected by arbitration pursuant to Section 10.8 below. In
the event that the Option Price has not been determined as of five days prior to
the expiration of any of the option periods set forth in Paragraphs (a) through
(c) above, such period shall be extended to the date that is five days after the
determination of the Option Price in accordance with this Paragraph (e), and all
periods ending subsequent thereto shall be extended by the same amount of time.
6. Any purchase or redemption pursuant to this Section 2.3 shall
close not later than 10 days following the determination of the Option or Put
Price pursuant to Paragraph (d) or (e) above or, if later, with 190 days
following the death of Xxxxxx or the termination of his employment, as the case
may be. Any Option Price owing shall be paid by the Corporation, Atio and/or
Venturian, as the case may be, delivering the amount owing to Xxxxxx by
certified check or wire transfer of immediately available funds to an account
designated by Xxxxxx. Any Put Price owing shall be paid by the Corporation
delivering to Xxxxxx 20% of the Put Price by certified check or wire transfer of
immediately available funds to an account designated by Xxxxxx, and the
remainder by the Corporation delivering to Xxxxxx its promissory note ("the
Note") in the amount so owing, with interest accruing on a principal balance
thereof remaining unpaid from time to time at the corresponding applicable
federal rate under Section 1274 of the Internal Revenue Code. Interest and
principal owing under the Note shall be payable in twenty equal quarterly
installments on or prior to the 15th day of the first month of each calendar
quarter following the closing of such purchase. The Corporation may at any time
and from time to time pre-pay any or all amounts owing under the Note, without
premium or penalty. All payments
under the Note shall be applied first in payment of accrued but unpaid interest
owing thereunder and thereafter in reduction of the principal balance thereof.
The Shares of Xxxxxx shall be deemed to have been transferred to Venturian
and/or Atio and/or canceled, as the case may be, automatically and immediately
upon Venturian's, Atio's and/or the Corporation's delivery of the Option or Put
Price in accordance with this Paragraph (f), and Xxxxxx (or his estate) shall
promptly return to the Corporation all certificates representing the Shares so
redeemed or transferred, duly endorsed for transfer or accompanied by assignment
separate from certificate.
D. REDEMPTIONS UPON TERMINATION OF EMPLOYMENT. Upon the termination of
an individual Shareholder's employment with the Corporation (other than Xxxxxx),
whether such termination is initiated by the Corporation or such Shareholder,
with or without cause, or upon the death or disability of such Shareholder, the
Corporation shall have the option to redeem from such Shareholder all of the
Shares of such Shareholder (including without limitation any Shares purchased by
such Shareholder following the termination of his or her employment with the
Corporation pursuant to any options held by such Shareholder), on the terms set
forth in this Section 2.4. The Corporation shall exercise such option, if it
desires to do so, by delivering to such Shareholder not later than 120 days
following the termination of such Shareholder's employment, written notice of
such election accompanied by payment of the redemption price therefor by
certified check or wire transfer of immediately available funds to an account
designated by such Shareholder. The Shares of such Shareholder shall be canceled
automatically and immediately upon the Corporation's delivery of such notice and
payment of such redemption price, and such Shareholder shall promptly return to
the Corporation all certificates representing the Shares so redeemed, duly
endorsed for transfer or accompanied by assignment separate from certificate.
The redemption price for any Shares redeemed pursuant this Section 2.4 shall be
as determined in good faith by the Corporation's board of directors.
E. ATIO AND VENTURIAN AFFILIATES. Notwithstanding any other provisions
set forth herein, the parties expressly agree that each Principal Shareholder
shall have an absolute right to Transfer any Shares owned by such Principal
Shareholder to any entity with which such Principal Shareholder has a
Parent/Subsidiary Relationship (as hereinafter defined) or a Sister Corporation
Relationship (as hereinafter defined) without regard to the provisions of this
Section 2 or Sections 3, 4 or 5 hereof, provided that such transferee agrees in
writing to be bound by the terms of this Agreement as a "Shareholder" hereunder
and as a "Principal Shareholder" under Section 6 hereof. Without limiting the
generality of the foregoing, any such transferee shall be obligated to purchase
or sell Shares pursuant to Section 1.5 hereof upon the election of its
transferor as fully as if such Shares remained the Shares of the transferor, and
no Transfer pursuant to this Section 2.5 shall relieve the transferor of any of
its obligations hereunder. Any Shares transferred pursuant to this Section 2.5
shall be deemed to be the Shares of the transferor for purposes of determining
the respective Proportionate Shares of Venturian and Atio and the Ratable Share
of Xxxxxx. For purposes of this Section 2.5, two subject entities shall be
deemed to have a Parent/Subsidiary Relationship if one of such subject entities
(i) owns, beneficially and of record, and has the power to vote, more than 50%
of the issued and outstanding voting securities of the other such subject
entity, and (ii) has the power to elect or otherwise designate more than 50% of
the members of the board of directors or other governing body of the other such
subject entity; and two subject entities shall be deemed to have a Sister
Corporation Relationship if a common entity, directly or indirectly through one
or more other entities with whom such entity has a Parent/Subsidiary
Relationship (i) owns, beneficially and of record, and has the power to vote,
more than 50% of the issued and outstanding voting securities of both such
subject entities and (ii) has the power to elect or otherwise designate more
than 50% of the members of the Board of Directors or other governing body of
both such subject entities.
III. RIGHT OF FIRST REFUSAL
A. BASIC TERMS.
1. Upon the occurrence of a Third Party Offer (as hereinafter
defined) or Involuntary Transfer (as hereinafter defined), each Shareholder
shall have a right of first refusal to purchase the Shares subject thereto and
the Corporation shall have a right of first refusal to purchase any such Shares
that the Shareholders do not elect to purchase, all in accordance with the
provisions of this Section 3. The price and terms of any such purchase shall be
(i) in the case of a Third Party Offer, the price and terms contained in the
Third Party Offer or, if the Third Party Offer involves Non-Cash Consideration
(as defined in Section 3.2 hereof), at the separate election of each Other
Shareholder (as defined in paragraph (b) below), the cash equivalent thereof as
specified in the Transfer Notice (as defined in Section 3.2 hereof), payable by
wire transfer of immediately available funds to an account designated by the
Selling Shareholder upon the closing of such transaction, or (ii) in the case of
an Involuntary Transfer, the per-share book value of the Corporation as of the
last day of the Corporation's fiscal year next preceding the date of the
Involuntary Transfer, determined in accordance with generally accepted
accounting principals consistently applied, multiplied by the number of Sale
Shares (as hereinafter defined), payable in the manner provided in Section 3.6
hereof.
2. "Third Party Offer" means the receipt by a Shareholder of a
bona fide, written offer from a third party (or another Shareholder) that would
be considered financially responsible by a reasonably prudent seller to purchase
all (but not less than all) of such Shareholder's Shares, which offer such
Shareholder intends to accept. "Involuntary Transfer" means the transfer of
title to or beneficial ownership of any Shares upon divorce, insolvency,
default, forfeiture, court order, an assignment for the benefit of creditors, or
otherwise than by a voluntary decision of the transferor, but excluding a
transfer to the estate of a Shareholder upon his or her death. The Shareholder
whose
Shares are subject to a Third Party Offer or Involuntary Transfer is hereinafter
referred to as the "Selling Shareholder", the other Shareholders are hereinafter
referred to as the "Other Shareholders", the Shares that are subject to the
Third Party Offer or Involuntary Transfer are hereinafter referred to as the
"Sale Shares", and the third party making a Third Party Offer is hereinafter
referred to as the "Third Party Offeror".
B. NOTICE OF TRIGGERING EVENTS. Upon the occurrence of a Third Party
Offer, the Selling Shareholder shall deliver a notice thereof (a "Transfer
Notice") to each of the Other Shareholders and the Corporation, including with
such Transfer Notice the name and address of the Third Party Offeror, the
maximum number of Shares the Third Party Offeror party is willing to acquire
(which shall not be less than all of the Shares of the Selling Shareholder), a
copy of such written offer containing all of the terms and conditions thereof
and, if the consideration payable under such Third Party Offer includes
securities or other property other than cash and promissory notes (non-cash
consideration), the per share cash equivalent thereof. Upon the occurrence of an
Involuntary Transfer, the Selling Shareholder or the transferee thereof shall
give notice of such transfer to each of the Other Shareholders and the
Corporation. As used in this Agreement, "Notice Date" means the date upon which
a notice required to be given pursuant to this Paragraph 3.2 is given to the
last party entitled to be so notified.
C. EXERCISE OF RIGHT OF FIRST REFUSAL. An Other Shareholder that
desires to exercise its right of first refusal pursuant to this Section 3 shall
do so by delivering to the Selling Shareholder, the Corporation and each of the
Other Shareholders, prior to the forty-fifth day following the Notice Date,
written notice of exercise specifying the number of Sale Shares to be purchased
by it and, in the case of a Third Party Offer that involves Non-Cash
Consideration, whether such Other Shareholder elects to pay with such Non-Cash
Consideration or the cash equivalent thereof as specified in the
Transfer Notice. Such notice of exercise may also state, if the Other
Shareholder so desires, that such Other Shareholder elects to exercise its
Co-sale Right pursuant to Section 4 hereof in the event that the Other
Shareholders and the Corporation, in aggregate, do not elect to purchase all of
the Sale Shares. The Corporation shall exercise its right of first refusal
pursuant to this Section 3, if it desires to do so, by delivering to the Selling
Shareholder and each of the Other Shareholders, prior to the sixtieth day
following the Notice Date, written notice of exercise specifying the number Sale
Shares to be purchased by it (but the Corporation shall have the right to
purchase only that number of Shares that the Other Shareholders have not elected
to purchase). The period commencing on the Notice Date and terminating sixty
days thereafter is hereinafter referred to as the "Option Period".
D. PURCHASE AND CLOSING. In the event the Other Shareholders and the
Corporation elect to purchase all (but not less than all) of the Sale Shares,
the Other Shareholders and the Corporation shall purchase from the Selling
Shareholder, and the Selling Shareholder shall sell to the Other Shareholders
and the Corporation, the Sale Shares at the price and on the terms determined in
accordance with Paragraph 3.1 hereof. The closing of any such purchase shall
occur at a time and place acceptable to all purchasing and selling parties or,
if such parties are not able to agree upon a time and place, at a time and place
specified by the Chief Executive Officer of the Corporation. In the event the
Other Shareholders, in the aggregate, elect to purchase more than all of the
Sale Shares, the Sale Shares shall be divided among the Other Shareholders so
electing in proportion to their relative Share holdings; provided, however, that
if the Selling Shareholder is Xxxxxx and Venturian elects to purchase all or any
portion of the Sale Shares, Venturian shall have a first right to purchase that
number of Sale Shares that it elects to purchase, and any remainder shall be
divided among the Other Shareholders and the Corporation in accordance with the
provisions of this Section 3.
E. ELECTION NOT TO PURCHASE. Unless the Other Shareholders and the
Corporation, in aggregate, elect to purchase all of the Sale Shares, the Selling
Shareholder or its transferee, as the case may be, shall not be required to sell
to the Other Shareholders or the Corporation any of the Sale Shares. In such
event, if the Triggering Event was a Third Party Offer, the Selling Shareholder
shall be entitled (subject to Sections 4 and 5 hereof), for a period of 90 days
commencing on the expiration of the Option Period, to sell all (but not less
than all) of the Sale Shares, but only (i) to the Third Party Offeror, (ii) on
the terms and subject to the conditions of the Third Party Offer, as specified
in the copy accompanying the Transfer Notice, and (iii) provided that the
transferee agrees in writing to be bound by the terms and provisions of this
Agreement (and, upon such transferee agreeing in writing to be bound by the
terms and provisions of this Agreement, such transferee shall be deemed to be a
"Shareholder" hereunder, entitled to all of the rights and benefits thereof). If
the Sale Shares are not so transferred within such 90 day period, then such
Third Party Offer shall be deemed to have expired. Such Shares shall not then be
transferred except in accordance with this Agreement.
F. PAYMENT TERMS UPON INVOLUNTARY TRANSFER. Any purchase price payable
upon the exercise of a right of first refusal pursuant to Paragraph 3.1 hereof
upon the occurrence of an Involuntary Transfer shall be payable (i) in cash at
the closing of such purchase to the extent of 20% of the purchase price, and
(ii) the remainder by the purchasing party delivering at the closing its
promissory note (the "Note") in such amount. The Note shall provide for payment
of all principal and interest owing thereunder in 60 equal monthly installments
commencing on the first day of the first month following the closing and
continuing on the first day of the each of the next 59 months, with interest
accruing on the principal balance remaining unpaid from time to time at the rate
of interest publicly announced by First Bank National Association, Minneapolis,
Minnesota, or its successor as its "reference rate" as of the date of the
closing (or, if First Bank National Association or
its successor is not then publicly announcing a "reference rate," the rate of
interest publicly announced by First Bank National Association or its successor
as being payable by its commercial customers of the highest credit quality).
Each payment under the Note shall be applied first to accrued but unpaid
interest owing thereunder and any remainder in reduction of the principal
balance thereof. If any installment of principal or interest owing under the
Note is not paid within ten days from the date due, then, at the option of the
holder of the Note, the entire unpaid principal balance thereof, plus all
accrued but unpaid interest thereon, shall become immediately due and payable in
full without notice of any kind, presentment or demand for payment, notice of
nonpayment, protest and notice of protest being waived.
IV. CO-SALE RIGHTS
A. RIGHT OF CO-SALE. If a Selling Shareholder is transferring any
Shares upon the occurrence of a Third Party Offer (whether such transfer is to
the Third Party Offeror, another Shareholder or the Corporation), each Other
Shareholder shall have the right to participate in such transfer (a "Co-Sale
Right") on the terms and subject to the conditions set forth in the Transfer
Notice (except that, if such transfer involves Non-Cash Consideration, each
Other Shareholder may elect to receive payment of the purchase price in the cash
equivalent thereof, as specified in the Transfer Notice, by wire transfer of
immediately available funds at the closing of such purchase). Each Other
Shareholder desiring to exercise its Co-Sale Right shall do so by delivering to
the Selling Shareholder, the Corporation and each of the Other Shareholders,
prior to the forty-fifth day following the Notice Date, written notice of such
election indicating the number of Shares such Other Shareholder elects to
transfer under such Co-Sale Right (the "Co-Sale Shares"), up to the maximum
number such Other Shareholder is entitled to so transfer, determined in
accordance with Paragraph 4.2. To the extent one or more Other Shareholder
exercises its right of Co-Sale in
accordance with this Section 4, the number of Sale Shares that the Selling
Shareholder may transfer in such transaction shall be correspondingly reduced.
B. NUMBER OF SHARES TRANSFERABLE. The number of Shares that each Other
Shareholder is entitled to transfer under its Co-Sale Right shall be equal to
the product obtained by multiplying (i) (A) if the transferee is the Third Party
Offeror, the maximum number of Shares such Third Party Offeror has agreed to
purchase, as indicated in the Transfer Notice, or (B) if the transferee is one
or more Other Shareholders and/or the Corporation, the total number of Sale
Shares, by (ii) a fraction the numerator of which is the number of Shares owned
by such Other Shareholder at the time of such transfer and the denominator of
which is the total number of Shares held by all Shareholders participating in
such transfer.
C. DELIVERIES. Each Other Shareholder electing to exercise its Co-Sale
Right under this Section 4 (a "Participant") shall promptly deliver to the
Selling Shareholder for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent the number of
Shares such Participant elects to transfer. Such Shares shall be transferred to
the transferee on the terms and subject to the conditions specified in the
Transfer Notice (subject to the Other Shareholders' rights to receive the cash
equivalent of any Non-Cash Consideration) and the Selling Shareholder shall
concurrently remit to such Participant that portion of the sale proceeds to
which such Participant is entitled by reason of its participation in such
transfer, less a percentage of the reasonable legal, investment banking, and
other fees and expenses of such sale equal to the percentage that the Co-Sale
Shares of such Participant bears to all Shares so transferred. To the extent
that any prospective purchaser or purchasers prohibit such assignment or
otherwise refuses to purchase Shares from a Participant exercising its Co-Sale
Right hereunder, the Selling Shareholder shall not sell to such purchaser any
Sale Shares unless, simultaneously with such sale, the Selling Shareholder
purchases the Co-Sale Shares of each Participant on the terms and subject to the
conditions specified in the Transfer Notice.
D. NO WAIVER. The exercise or non-exercise of the Co-Sale Right of the
Other Shareholders hereunder in connection with one or more sales shall not
adversely affect their rights to participate in subsequent sales in accordance
with the terms of this Agreement.
E. REMEDIES. In the event that a Selling Shareholder sells any Shares
in contravention of the Co-Sale Rights under this Section 4, each Other
Shareholder, in addition to such other remedies as may be available at law or in
equity, shall have the right to sell to the Selling Shareholder the number of
Shares such Other Shareholder was entitled to transfer pursuant to this Section
4, and the Selling Shareholder shall pay to the such Other Shareholder, in
consideration thereof, the consideration such Other Shareholder would have
received in any such sale and all reasonable legal and other fees and expenses
incurred by such Other Shareholder in connection with the enforcement of its
rights hereunder.
V. BRING ALONG RIGHTS
A. BRING ALONG RIGHT. In the event that, upon the occurrence of a Third
Party Offer, (i) the Selling Shareholder is Venturian or Atio, and (ii) the
Other Shareholders and the Corporation do not purchase the Sale Shares pursuant
to Section 3 hereof, the Selling Shareholder may require the Other Shareholders
to exercise their Co-Sale Rights in accordance with Section 4 hereof. To
exercise such election, such Selling Shareholder shall so indicate in the
Transfer Notice and, within 15 days after the expiration of the Option Period,
such Selling Shareholder shall deliver to each Other Shareholder written notice
specifying the number of Shares to be sold by such Other Shareholder (determined
in accordance with Paragraph 4.2 hereof). Promptly upon receipt of such notice,
each Other Shareholder shall deliver to the Selling Shareholder one or more
certificates, properly endorsed
for transfer, representing the number of Shares to be transferred by such Other
Shareholder and, upon the closing of such sale, the Selling Shareholder shall
remit to each Other Shareholder that portion of the sale proceeds to which such
Other Shareholder is entitled by reason of its participation in such sale (less
a percentage of the legal, investment banking and other reasonable fees and
expenses of such sale equal to the percentage that such Other Shareholder's
Co-Sale Shares bears to all Shares transferred in such sale).
VI. NONCOMPETITION.
A. Neither Principal Shareholder shall, anywhere in the world (except
outside the United States and Canada pursuant to a distribution or license
agreement with the Corporation) at any time when such Shareholder or any entity
with whom such Shareholder has a Parent/Subsidiary Relationship or a Sister
Corporation Relationship owns any Shares and for a period of five years
thereafter, directly or indirectly, whether alone, as partner with another,
shareholder in a corporation (other than as a less than 2% shareholder in a
corporation listed on a national securities exchange), lender, consultant,
financier, agent or otherwise, except through and on behalf of the Corporation:
1. engage in the marketing, sale, licensing or other distribution
of software for telephone call centers anywhere in the world; or
2. solicit or otherwise attempt to hire, or hire, as an employee,
independent contractor or otherwise, any individual who was an employee of the
Corporation at any time within the one year period preceding the solicitation or
hiring of such individual by such Principal Shareholder; or
3. induce or attempt to induce any person or entity who is an
independent contractor, other service provider, supplier or customer of the
Corporation to stop doing business or
reduce its business with the Corporation, or otherwise seek to disrupt or impair
the business relationship between the Corporation and such person or entity.
B. The Corporation shall not, anywhere in the world, at any time when a
Shareholder or any entity with whom such Shareholder has a Parent/Subsidiary
Relationship or a Sister Corporation Relationship owns any Shares and for a
period of five years thereafter, directly or indirectly, whether alone, as
partner with another, shareholder in a corporation (other than as a less than 2%
shareholder in a corporation listed on a national securities exchange), lender,
consultant, financier, agent or otherwise, solicit or otherwise attempt to hire,
as an employee, independent contractor or otherwise, any individual who was an
employee of such Shareholder or of any entity with whom such Shareholder has a
Parent/Subsidiary Relationship or a Sister Corporation Relationship, at any time
within the one year period preceding the solicitation or hiring of such
individual by the Corporation.
C. Provided, however, that in the event that that certain Technology
License, Transfer and Development Agreement of even date herewith between the
Corporation and Atio (PTY) is terminated without a transfer to the Corporation
of the AtioCALL Product Rights (as defined therein) because the Corporation
ceases to be actively engaged in the marketing of computer telephony products,
this Section 6 shall terminate and be of no further force or effect.
VII. TERMINATION.
A. PUBLIC OFFERING. Sections 1, 2, 3, 4 and 5 of this Agreement shall
terminate automatically and immediately when a registration statement filed by
the Corporation in connection with a sale by the Corporation of its common
shares is declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (provided such sale is consummated).
B. EACH SHAREHOLDER. The rights and obligations of each Shareholder
hereunder (other than those set forth in Section 6 hereof) shall terminate
automatically and immediately at such time as such Shareholder (and, in the case
of the Principal Shareholders, any parties to whom such Shareholder has properly
transferred Shares pursuant to Section 2.5 above) no longer holds of record any
Shares; provided, however, that no such termination shall relieve any
Shareholder for any breaches of this Agreement by such Shareholder occurring
prior thereto.
VIII. LEGEND ON SHARE CERTIFICATES
A. LEGEND. The Corporation shall cause to be conspicuously endorsed on
each certificate representing Shares a legend reading substantially as follows:
Any transfer of the shares represented by this certificate, or
any interest therein, is restricted by, and subject to, the provisions
of that certain Shareholders Agreement among Venturian Corp., Atio
Corporation International, Inc., Xxxx Xxxxxx, and the Corporation dated
________, 1997, a copy of which Agreement is on file with the Secretary
of the Corporation. Such agreement also concerns certain matters with
respect to the governance of the Corporation.
B. COPY TO BE ON FILE. A copy of this Agreement shall be filed with the
Secretary of Corporation. So long as this Agreement shall remain in force, a
legend reading substantially as above shall be conspicuously endorsed on each
certificate representing Shares hereafter issued by the Corporation.
IX. RIGHTS TO SPECIFIC PERFORMANCE
In view of the purposes of this Agreement, the parties hereto
acknowledge that in the event of a breach of any term or condition of this
Agreement the remedy at law would be inadequate. Accordingly, in such event, the
injured party or parties, at his, her, its or their option, shall have the right
to compel the specific performance of this Agreement in a court of competent
jurisdiction;
provided, however, that this right shall not be deemed to preclude an injured
party or parties from pursuing any other remedy that may be available at law or
in equity.
X. MISCELLANEOUS PROVISIONS
A. NOTICES. All notices, requests, and other communications from any of
the parties hereto to another shall be in writing and shall be considered to
have been duly given or served if personally delivered, or sent by first class,
certified or registered mail, return receipt requested, or recognized
international courier, postage prepaid, to the party at his, her or its address
as provided below, or to such other address as such party may hereafter
designate by written notice to the other parties:
If to the Corporation: To the address of its registered office or
principle executive offices.
If to any Shareholder: To the address of such Shareholder as
shown on such books and records of the
Corporation.
If to Atio (PTY): X.X. Xxx 0000
Xxxxxxx 0000
Xxxxxxxx xx Xxxxx Xxxxxx
Attention: Xxxx Xxxxx
Any such notice shall be deemed given when delivered
B. AMENDMENT. This Agreement may be altered or amended only by a
written amendment signed by Shareholders representing 75% or more of the issued
and outstanding Shares.
C. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the state of Minnesota.
D. PARTIES IN INTEREST. This Agreement shall be binding upon the heirs,
personal representatives, successors, and assigns of the parties hereto. The
parties hereto each covenant and agree that they, their heirs, personal
representatives, successors and assigns shall take all action and
execute any and all instruments, releases, assignments, consents and
other documents that may reasonably be required of them in order to
carry out the provisions of this Agreement.
E. CAPTIONS. The captions at the head of a Section or Paragraph of this
Agreement are designed for convenience of reference only and are not to be
resorted to for the purpose of interpreting any provisions of this Agreement.
F. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto on the subject matter hereof and supersedes any prior
agreement or understanding among them on such subject matter. Without limiting
the generality of the foregoing, the Existing Shareholders Agreement is hereby
terminated and of no further force or effect.
G. NO THIRD PARTY BENEFICIARIES. This Agreement is made solely and
specifically among and for the benefit of the parties hereto and such other
persons as become "Shareholders" in accordance with the terms of this Agreement.
No other person or entity shall have any rights, interests or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
H. ARBITRATION; LEGAL PROCEEDINGS.
1. The parties shall attempt in good faith to resolve any dispute
arising out of or relating in any manner to this Agreement or the breach,
termination or validity thereof promptly by negotiation among representatives of
the parties to the dispute, each of whom has authority to settle the
controversy. Any party may give the others written notice that a dispute exists
(a "Notice of Dispute"). The Notice of Dispute shall include a statement of such
party's position and the name and title of the representative who will represent
such party. Within ten (10) days of the delivery of the Notice of Dispute, the
parties' respective representatives shall meet at a mutually acceptable time and
place, and thereafter as long as they reasonably deem necessary, to attempt to
resolve the dispute. All
documents and other information or data on which each party relies concerning
the dispute shall be furnished or made available on reasonable terms to the
other party at or before the first meeting of the parties as provided by this
paragraph.
2. Any controversy or claim arising out of or relating to this
Agreement or the breach, termination or validity thereof, if not settled by
negotiation as provided in paragraph (a) of this Section 9.8, shall be settled
by arbitration in New York, New York, in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by three arbitrators. Any
party may initiate arbitration twenty (20) days following the delivery of a
Notice of Dispute if the dispute has not then been settled by negotiation, or
sooner if any other party fails to participate in negotiation in accordance with
paragraph (a) above. The three arbitrators shall be appointed as provided by CPR
Rule 5, Selection of Arbitrators by the parties. The arbitrators shall have no
power to add to or detract from the agreement of the parties as set forth herein
and shall not have the authority to make any ruling or award that does not
conform to the terms and conditions of this Agreement. Without limitation of the
foregoing, the arbitrators shall have no power to terminate this Agreement other
than in accordance with its terms or to award punitive damages. The arbitration
procedure shall be governed by the United States Arbitration Act, 9 U.S.C. ss.
1-16, and the award rendered by the arbitrator shall be final and binding on the
parties and may be entered in any court having jurisdiction thereof.
3. Each party shall have discovery rights as provided by the
United States Federal Rules of Civil Procedure; provided, however, that all such
discovery shall be commenced and concluded within sixty (60) days of the
initiation of arbitration.
4. It is the intent of the parties that any arbitration shall be
concluded as quickly as reasonably practicable. Unless the parties otherwise
agree, once commenced, the hearing on the
disputed matters shall be held four days a week until concluded, with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrators
shall use all reasonable efforts to issue the final award or awards within a
period of five business days after closure of the proceedings. Failure of the
arbitrators to meet the time limits of this Section 9.8(d) shall not be a basis
for challenging the award.
5. The arbitrators shall instruct the non-prevailing party or
parties to pay all costs of the proceedings, including the fees and expenses of
the arbitrators and the reasonable attorneys' fees and expenses of the
prevailing party or parties. If the arbitrators determine that there is not a
prevailing party, each party shall be instructed to bear its own costs and the
fees and expenses of the arbitrators shall be divided among the parties in
accordance with their relative share holdings as of the commencement of the
proceedings.
6. Each party hereto hereby agrees that any legal proceeding
instituted to enforce an arbitration award hereunder will be brought in the
United States Federal Court situated in New York (which shall have sole and
exclusive jurisdiction thereof), and hereby submits to personal jurisdiction
therein and irrevocably waives any objection as to venue therein and further
agrees not to plead or claim in any such court that any such pleading has been
brought in an inconvenient form. Venturian hereby designates, appoints and
empowers Xxxxxx X. Xxxxxxx, presently having offices at Xxxxxxx, Street and
Deinard, Suite 2300, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, as
Venturian's true and lawful agent for service of process to receive and accept
on its behalf service of process in any such proceeding brought in any such
courts. Atio and Atio (PTY) hereby designate, appoint and empower Xxxxxx X.
Xxxxxxx, P.C., presently having offices at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, as their true and lawful agent for service of process to receive and
accept on their behalf service of process in any such proceeding bought in any
such courts.
Xxxxxx hereby designates, appoints and empowers Xxxxxx Xxxxxxx, presently having
offices at Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, 000 Xxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000-0000, as Sharon's true and lawful agent for service of
process to receive and accept on his behalf service of process in any such
proceeding brought in any such courts. Each of the foregoing parties agree that
the failure of their process agent appointed by such person to give notice of
process to such person shall not impair or affect the validity of service upon
such agent or of any judgment based thereon, and each such person irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to such person's address for
notice under this Agreement. Nothing herein shall preclude any of the parties
hereto from servicing process in any other matter or in any other jurisdiction
in connection with enforcing an arbitration award hereunder.
I. SECURITY INTEREST.
1. In order to secure the obligation of Atio (PTY) to make full
and timely payment of the Deferred Installments (as defined in Joint Venture
Agreement) and to perform the services under the License Agreement for which it
received the Prepayment, Atio hereby grants to the Corporation a security
interest in 28,000 Shares issued to Atio pursuant to the Joint Venture
Agreement, and in all Shares issued with respect thereto by way of stock
dividend or stock split, and all other distributions thereon and proceeds
thereof (the "Default Shares"). To perfect such security interest, Atio,
contemporaneously with the execution and delivery of this Agreement, is
delivering to Venturian the certificate representing the Default Shares, to be
held by Venturian on behalf of the Corporation in accordance with the terms of
this Section 10.9.
2. Upon the occurrence of an Event of Default (as hereafter
defined) then, at the election of Venturian upon written notice to Atio and Atio
(PTY), automatically and
immediately without any further action by any party (i) the Deferred
Installments shall become immediately due and payable in full, (ii) the Default
Shares shall be deemed to have been transferred to the Corporation and canceled,
(iii) the number of directors to be designated by Atio and Venturian,
respectively, shall be adjusted in accordance with Paragraph 1.4 (d) above as if
a Capital Contribution had been made by one but not both Principal Shareholders
(with Venturian being able to designate at least one extra director), (iv)
Sections 1.3 and 1.6 of this Agreement shall be terminated and of no further
force or effect, and (v) the intellectual property subject to the License
Agreement shall be transferred to the Corporation. Atio and Atio (PTY) shall
execute such instruments and take such other action as Venturian may reasonably
request to carry out the provisions of this Section 10.9. The foregoing shall
not relieve Atio (PTY) of its obligation to pay the Deferred Installments to the
extent the amount thereof exceeds the value of the Default Shares (at the value
thereof under the Joint Venture Agreement as of the closing of the transactions
thereunder), and Venturian, in its own name or on behalf of the Corporation, may
enforce payment thereof in accordance with Section 10.8 of this Agreement and
Section 10.12 of the Joint Venture Agreement. As used in this Section 10.9,
"Event of Default" means the occurrence of either one or both of the following,
if the same continues for a period of ten days following the delivery of written
notice thereof by Venturian to Atio (PTY): (i) the failure of Atio (PTY) to make
payment of any Deferred Installment in the full amount thereof on or prior to
the date such Deferred Installment is due under the terms of the Joint Venture
Agreement (provided, however, that if such Deferred Installment is due by reason
of the acceleration thereof by the Chief Executive Officer of the Corporation
pursuant to the proviso in subsection 1.2(a)(ii) of the Joint Venture Agreement,
Atio (PTY) shall be entitled to sixty days
notice, and the opportunity to make such payment during such sixty days, prior
to such failure constituting an Event of Default hereunder), or (ii) the failure
of Atio (PTY) to repay in full all or such portion of the Prepayment as to which
Venturian has demanded repayment if (and only if) (A) Atio (PTY) has failed to
provide within the ten calendar months following the date of this Agreement all
services for which the Prepayment was made, or a dispute exists between
Venturian and Atio (PTY) as to whether such services were so provided, and (B)
Venturian has delivered to Atio (PTY) written notice of such failure and Atio
(PTY) has failed to cure the same within 30 day of its receipt of such notice,
and (C) Venturian has demanded repayment of that portion of the Prepayment for
which it believes in good faith services were not provided in accordance with
the terms of the License Agreement. Upon the occurrence of an Event of Default
under the foregoing clause (ii), any amount of the Prepayment required to be so
repaid shall constitute part of the Deferred Installments for purposes of this
Agreement and any dispute among the parties as to amounts owing by the
Corporation to Atio (PTY) under the License Agreement and the services that Atio
(PTY) is obligated to provide thereunder shall be resolved in accordance with
the terms of the License Agreement.
3. So long as no Event of Default has occurred, Atio shall possess
all of the rights of ownership of the Shares (subject to the other terms of this
Agreement), including without limitation the right to receive any dividends or
other distributions thereon and the right to vote, grant consents or take
written actions with respect thereto. Upon the full and timely payment of all of
the Deferred Installments and the timely performance of all services for which
the Prepayment was made, Venturian shall deliver to Atio the certificate
representing the Shares pledged hereunder together with the executed assignment
separate from certificate.
J. INABILITY TO MAKE DISTRIBUTIONS. If, at the time the Corporation is
required hereunder to purchase any Shares of any party or make any payments or
distributions hereunder or under any promissory notes issued pursuant hereto, it
is prohibited from doing so under Section 302A.551 of Minnesota Statutes (or
such other provision of a successor or other statute as may govern such
transaction), then notwithstanding anything in this Agreement to the contrary,
the Corporation shall not be required to purchase such Shares or make such
payment or distribution until such time as such purchase would not be so
prohibited; provided, however, that the directors and responsible officers of
the Corporation shall act in good faith in making any determinations or taking
any actions required under Section 302A.551 of Minnesota Statutes or other
provision of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and the year first above written.
VENTURIAN CORP.
By /s/ Xxxx X. Xxxxxxxxx
Its President
ATIO CORPORATION INTERNATIONAL, INC.
By /s/ Xxxxxx Xxxxx
Its Chairman
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx
VENTURIAN SOFTWARE ENTERPRISES, INC.
By /s/ Xxxx Xxxxxx
Its President
Atio Corporation (PTY) Ltd., which owns more than 50% of the issued and
outstanding voting securities of Atio Corporation International, Inc., hereby
agrees to observe and be bound by Sections 1.7 and 10.9 hereof and to observe
and be bound by Section 6 and Section 10.8 hereof as fully as if it were a
"Principal Shareholder," a "Shareholder" and "Atio" as named therein.
ATIO CORPORATION (PTY) LTD.
By /s/ Xxxx Xxxxx
Its Chief Executive
