SHAREHOLDER'S AGREEMENT
This Shareholder's Agreement (this "Agreement") is made and entered into
effective as of the closing (the "Effective Date") of that certain Exchange
Agreement (the "Exchange Agreement") between VT Gaming Services, Inc., an
Arizona corporation (the "Company") and Dynasig Corporation, an Arizona
corporation ("DynaSig") and the shareholders of DynaSig including Xxxxxxx Xxx.
This Agreement is by and among the Company, Visitalk Capital Corporation and its
affiliates (jointly "VCC") and Xxxxxxx Xxx and his affiliates, (jointly "Xxx").
The Company, Xxx and VCC are jointly referred to hereinafter as the "Parties."
RECITALS
A. WHEREAS, prior to the execution of the Exchange Agreement, VCC held a
majority of the issued and outstanding capital stock of the Company.
B. WHEREAS, the Company and VCC, as the major shareholder of the Company,
are agreeing to various issuances, exchanges, warranties, waivers and other
concessions in the Exchange Agreement to induce Xxx to have his shares acquired
through the issuance of newly issued Company Common Stock.
C. WHEREAS, VTG was formed in accordance with the Second Joint Plan of
Reorganization of Xxxxxxxx.xxx, Inc. under the auspices of the Bankruptcy Court
(the "Plan") and is committed to issue under the Plan a maximum of approximately
8,900,000 of each of Series A through Series F Warrants with exercise prices
ranging from $2.00 to $4.00 (the "Plan Warrants").
D. WHEREAS, the Parties desire to maximize the value of the Company for the
benefit of all shareholders and believe that maintaining stability in control of
the Company accomplishes this objective.
E. The Parties hereby enter into this Agreement to achieve such purpose.
AGREEMENTS
Now, therefore, in consideration of the terms and conditions set forth
herein, the undersigned, by signature affixed hereto, do hereby agree to the
following:
1. RESTRICTIONS ON THE TRANSFER OF THE XXX SHARES.
Except as otherwise provided in this Agreement, Xxx will not sell, assign,
transfer, pledge, hypothecate, mortgage, encumber, convey, donate or otherwise
dispose of, voluntarily or involuntarily, by operation of law or otherwise
(collectively, a "Transfer"), all or any part of or any interest in the Common
Stock or Common Stock Equivalents, as defined in Section 5 hereinafter, of the
Company now or hereafter owned or held by Xxx (collectively, all such securities
are referred to as the "Xxx Shares"). Any Transfer of the Xxx Shares not made
in conformance with this Agreement shall be null and void, shall not be recorded
on the books of the Company and shall not be recognized by the Company. Xxx
agrees, to ensure compliance with the restrictions referred to herein, that the
Company may issue appropriate "stop transfer" certificates or instructions and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its records.
(a) Xxx xxx Transfer or permit a Transfer of any of the Xxx Shares that are
related to sales of Xxx Shares in any publicly traded market transaction that
does not require the filing of a Registration Statement under the Securities Act
of 1933.
(b) Xxx agrees that upon receipt of an offer to purchase any of the Xxx
Shares by a third party, whereby such third party (including any affiliate or
person or persons that are acting in concert with such third party) would have
effective control of the outstanding voting shares of the Company, Xxx shall not
entertain, accept or otherwise negotiate such offer unless such offer is
extended to VCC and all other Company shareholders.
(c) Xxx xxx Transfer Xxx Shares to any Xxx affiliate, family member,
trust, or controlled company or entity provided such transferee agrees to be
bound by the terms of this Agreement.
(d) Xxx xxx transfer any of the Xxx Shares to any other party assuming
he abides with Section 3 and such acquiring party agrees to abide by the
restrictions in Section 3 below.
2. VCC'S RIGHT OF FIRST REFUSAL ON NEW SECURITIES
(a) VCC shall have the right of first refusal to purchase the number of
additional New Securities (as defined below) to maintain VCC's pro rata
ownership of the Company in the event the Company may, from time to time,
propose to sell and issue and New Securities. Pro rata portion shall mean the
ratio that (x) the sum of the number of shares of the Company's Common Stock
then held by VCC (including the number of shares issuable upon conversion of any
security convertible without additional cash consideration into shares of the
Company's Common Stock held by VCC) bears to (y) the sum of the total number of
shares of Company's Common Stock then outstanding plus the number of shares of
the Company's Common Stock issuable upon conversion without additional
consideration of any of the Company's convertible securities then outstanding.
(b) Except as set forth below, "New Securities" shall mean any shares
of capital stock of the Company, whether now authorized or authorized in the
future, and rights, options or warrants to purchase any such shares, including
the Warrants but only if the exercise price of the Warrants has been reduced,
and securities of any type whatsoever that are, or may become, convertible into
or exercisable for such shares. Notwithstanding the foregoing, New Securities
shall not include: (i) Common Stock issuable upon conversion of any capital
stock outstanding as of the Effective Date; (ii) securities offered to the
public generally pursuant to a registration statement under the Securities Act
of 1933; (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets or shares or other reorganization; (iv) shares of the Company's Common
Stock or related options convertible into or exercisable for such Common Stock
issued to employees, officers and directors of, and consultants to, the Company,
pursuant to any compensatory benefit plan that has been approved by the
shareholders of the Company; (v) capital stock issued pursuant to any New
Securities or similar rights or agreements, provided that the Company shall have
complied with the right of first refusal established by this Section 2 with
respect to the initial sale or grant by the Company of such New Securities,
rights or agreements; (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company; or (vii) capital stock, options, warrants or similar rights issued in
connection with the Company obtaining a lease line, line of credit, loan or
similar financing transaction, provided the number of shares of capital stock,
options, warrants or similar rights is less than 1% of the total capital stock
of the Company then outstanding.
(c) In the event the Company proposes to undertake an issuance of New
Securities, the Company shall give VCC written notice of such intention. The
notice shall describe the type of New Securities, the price and terms upon which
the Company proposes to issue the New Securities, the identity of the proposed
purchaser including any affiliations with any other shareholder known to the
Company and the number of New Securities VCC is entitled to purchase. VCC shall
within fifteen (15) days from the date of receipt of such notice state VCC's
intent to purchase such New Securities by giving written notice to the Company
and stating therein the quantity of New Securities VCC elects to purchase.
(d) If VCC exercises its rights of first refusal hereunder, VCC shall
tender the purchase price for the New Securities or Shares which VCC elects to
purchase within 90 days of the election to purchase such securities.
(e) Notwithstanding the foregoing, the rights set forth herein shall
not prevent the Company or the Controlling Shareholder from offering New
Securities or Shares at anytime. If the Company sells any New Securities and
has not given the notice prior to sale as provided in Section 2(c), the Company
shall give notice to VCC within fifteen (15) days after the issuance of the New
Securities. Such notice shall provide the information specified in Section 2
(c). VCC shall have ninety (90) days from receipt of such notice to elect to
purchase the New Securities as specified in such notice.
(f) The rights of VCC to purchase any part of the New Securities or the
Shares may be assigned in whole or in part to any subsidiary, affiliate or
shareholder of VCC, provided such holder agrees to be bound by the terms of this
Agreement.
(g) The rights of first refusal granted under this Section 2 shall
terminate on and be of no further force or effect upon the closing of a firmly
underwritten public offering of the securities of the Company with proceeds
greater than $10,000,000.
3. VCC'S RIGHT OF FIRST REFUSAL ON THE XXX SHARES
(a) Except for Xxx Shares sold in a public market transaction, Xxx
hereby grants VCC the right of first refusal to purchase any of the Xxx Shares
at the same price that they are offered to other buyers.
(b) Transfer Notice. If at any time Xxx proposes to Transfer Shares
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to one or more persons or entities (a "Transferee"), then Xxx shall give the
Company and VCC written notice of Kim's intention to make the Transfer (the
"Transfer Notice"), which Transfer Notice shall include (i) a description of the
Xxx Shares to be Transferred ("Offered Shares"), (ii) the identity of the
prospective Transferee(s) and (iii) the consideration and the material terms and
conditions upon which the proposed Transfer is to be made. The Transfer Notice
shall certify that Xxx has received a firm offer from the prospective
Transferee(s) and in good faith believes a binding agreement for the Transfer of
the Offered Shares is obtainable on the terms set forth in the Transfer Notice.
The Transfer Notice shall also include a copy of any written proposal, term
sheet or letter of intent or other agreement relating to the proposed Transfer
(c) Company's Option. The Company shall have an option for a period of
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ninety (90) days from receipt of the Transfer Notice to elect to purchase all or
a portion of the Offered Shares at the same price and subject to the same
material terms and conditions as described in the Transfer Notice. The Company
may exercise such purchase option and, thereby, purchase itself or in
combination with its designees all or a portion of the Offered Shares by
notifying Xxx in writing before expiration of such ninety-day period as to the
number of such Offered Shares which it wishes to purchase. If the Company gives
Xxx notice that it desires to purchase all or a portion of the Offered Shares,
then payment for such Offered Shares shall be by check or wire transfer, against
delivery of the Offered Shares to be purchased at a place agreed upon between
the parties and at the time of the scheduled closing therefore, which shall be
no later than one hundred thirty-five (135) days after the Company's receipt of
the Transfer Notice, unless the Transfer Notice contemplated a later closing
with the prospective Transferee(s) or unless the value of the purchase price has
not yet been established pursuant to Section 3(f) of this Agreement, in which
case the closing shall occur no later than the later date specified in the
Transfer Notice or as provided in Section 3(f).
(d) Additional Transfer Notice. Subject to the Company's right set
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forth in Section 3(c), if at any time Xxx proposes a Transfer, then, after the
Company has declined to purchase all of the Offered Shares as set forth in
Section 3(c), Xxx shall give VCC an "Additional Transfer Notice" which shall
include all information and certifications required in a Transfer Notice and
shall additionally identify the Offered Shares which the Company has declined to
purchase (the "Remaining Shares") and briefly describe the Other Stockholders'
rights of first refusal rights with respect to the proposed Transfer
(e) VCC's Option. VCC shall have an option for a period of twenty (20)
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days from the receipt of the Additional Transfer Notice from Xxx set forth in
Section 3(d) to elect to purchase all or a portion of the Remaining Shares at
the same price and subject to the same material terms and conditions as
described in the Additional Transfer Notice. If an Existing Shareholder give
Kims notice that it desires to purchase some or all of the Remaining Shares, and
as the case may be, then payment for such Remaining Shares shall be by check or
wire transfer, against delivery of the Remaining Shares to be purchased at a
place agreed upon between the parties and at the time of the scheduled closing
therefore, which shall be no later than thirty (30) days after VCC's receipt of
the Additional Transfer Notice, unless the Additional Transfer Notice
contemplated a later closing with the prospective Transferee(s) or unless the
value of the purchase price has not yet been established pursuant to Section
3.2(f).
(f) Valuation of Property. Should the purchase price specified in
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the Transfer Notice or Additional Transfer Notice be payable in property other
than cash or evidences of indebtedness, the Company (or VCC) shall have the
right to pay the purchase price in the form of cash equal in amount to the value
of such property. If Xxx and the Company (or the Other Stockholders) cannot
agree on such cash value within five (5) days after the Company's receipt of the
Transfer Notice (or the Other Stockholders' receipt of the Additional Transfer
Notice), the valuation shall be made by an appraiser of recognized standing
selected by Xxx and the Company (or the Other Stockholders holding a majority of
the Shares held by the Other Stockholders, on an as converted basis), or, if
they cannot agree on an appraiser within ten (10) days after the Company's
receipt of the Transfer Notice (or the Other Stockholders' receipt of the
Additional Transfer Notice), each shall select an appraiser of recognized
standing and the two appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. In the event
that it is necessary to have an appraiser make a valuation, the time for the
Company or any Other Stockholder to exercise any rights under this Section 3
shall be extended by the number of days necessary to obtain such valuation. The
cost of such appraisal shall be shared equally by Xxx and the Company (or the
purchasing Other Stockholders), with the half of the cost borne by the Company
and the purchasing Other Stockholders borne pro rata by each based on the number
of shares such parties were interested in purchasing pursuant to this Section 3.
If the time for the closing of the Company's or the purchasing Other
Stockholders' purchase has expired but for the determination of the value of the
purchase price, then such closing shall be held on or prior to the fifth (5th)
business day after such valuation shall have been made pursuant to this
subsection.
(h) The rights of first refusal granted under this Section 3 shall
terminate on and be of no further force or effect upon the closing of a firmly
underwritten public offering of the securities of the Company with proceeds
greater than $10,000,000.
4. KIM'S RIGHTS IN CONNECTION WITH THE PLAN WARRANTS
(a) In the event the Company desires to lower the exercise prices of
the Plan Warrants either temporarily or permanently, Xxx must affirmatively
agree to such change.
(b) Xxx agrees to vote his shares in favor of any special treatment of
the Plan Warrants that will maintain the current exercise prices of the Plan
Warrants in the event the Board of Directors and the shareholders approve a
Reverse Split.
(c) In the event that the Plan Warrants are exercised, Xxx has right to
maintain his percentage of ownership of the Company by acquiring additional
shares at the same price that the Plan Warrants are exercised (the "Xxx
Preemptive Rights"). Xxx shall be notified of the exercise of the Plan Warrants
and shall fund the Xxx Preemptive Rights within 90 days of notice of the payment
of the net exercise price of the Plan Warrants. The Xxx Preemptive Rights shall
terminate when Kim's ownership falls below 10% of actual outstanding shares.
Xxx xxx assign the Xxx Preemptive Rights to another person or entity but such
party must agree to be subject to the VCC Right of First Refusal in Section 3.
5. ANTI-DILUTION ADJUSTMENTS.
(a) Except as provided in (c) below, in the event the Company shall
issue additional shares of its common stock ("Common Stock") or any securities
convertible into or exercisable for its Common Stock ("Common Stock
Equivalents") without consideration or for a consideration per share less than
the effective "Conversion Price" for the Series A Preferred (as determined under
the Certificate of Designation establishing the Series A Preferred) in effect on
the date of and immediately prior to such issuance, then and in such event VCC
shall be issued the number of new shares equal to the Adjusted Shares (as
defined below) minus the Old Shares (as defined below). For purposes of any
calculation hereunder, the "Adjusted Shares" shall equal (i) the Old Shares
multiplied by (ii) the quotient derived by dividing the previous Conversion
Price by the adjusted Conversion Price resulting from the subject issuance (all
as determined under the Certificate of Designation establishing the Series A
Preferred). The "Old Shares" shall equal the number of shares of Common Stock
held by VCCs as of the effective date of this Agreement, and as adjusted from
time to time hereunder.
(b) Any Additional Shares issued hereunder shall be issued to VCC for
the common shares of the Company that they still hold as of the date of any
event causing an adjustment hereunder.
(c) No adjustment for any issuance shall be made under this Section 5
if the Conversion Price of the Series A Preferred is not adjusted.
(d) The provisions of this Section 5 shall remain in effect only so
long as any Series A Preferred remains outstanding.
6. OTHER TERMS
(a) Board Representation. For so long as VCC owns more than 4% of the
outstanding shares of the Company, Xxx and his affiliates shall vote their
shares in favor of limiting the Board of Directors of the Company to no more
than five members and VCC shall have the right to elect one member to the Board.
(b) Xxx and his affiliates agree to vote their shares in favor of
changing the state of incorporation to Nevada at the request of VCC.
(c) As to Section 2, and 5, all Common Stock or Common Stock
Equivalents of the Company held by VCC, whether held at the Effective Date or
acquired thereafter, will be adjusted in accordance with the terms of this
Agreement.
(d) Xxx acknowledge that the Company shall note the restrictions set
forth in this Agreement in the stock transfer records of the Company and shall
not be obligated to transfer any Shares unless Xxx is in compliance with this
Agreement. At the request of the Company, Xxx shall surrender his existing
certificates representing the Shares for a legend noting the restrictions under
this Agreement to be noted thereon. Xxx understands that any additional
certificates issued representing any Shares subject to this Agreement shall bear
a similar legend.
6. AUTHORITY
Each party executing this Agreement represents that they have the full
authority to enter into this Agreement. Xxx is not obligated under any other
agreement with respect to the Shares or otherwise in conflict with the
Agreement. This Agreement shall be binding on all of Kim's and VCC' successors
and assigns, including affiliates. Xxx agrees to vote his shares in ways that
will affect the intent of this Agreement.
7. MISCELLANEOUS
(a) Governing Law, Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, without reference
to choice of law principles. Jurisdiction and venue for any litigation
resulting from any dispute over the provisions of this Agreement shall reside
exclusively with the federal and state courts sitting in Maricopa County,
Arizona.
(b) Severability. If any term or provision of this Agreement shall be
found by a court of competent jurisdiction to be invalid, illegal or otherwise
unenforceable, the same shall not effect the other terms or provisions hereof or
the whole of this Agreement, but such term or provision shall be deemed modified
to the extent necessary in the court's opinion to render such term or provision
enforceable, and the rights and obligations of the Xxx shall be construed and
enforced accordingly, preserving to the fullest permissible extent the intent
and agreements of the Xxx herein set forth.
(c) Complete Agreement; Amendment. This Agreement sets forth the
entire understanding between VCC and Xxx regarding restrictions on the shares
and full compensation for concessions made upon entering into the Exchange
Agreement and supercedes all prior agreements, arrangements and communications,
whether oral or written, with respect to the subject matter hereof. No other
agreements, representations, warranties or other matters, whether oral or
written, shall be deemed to bind VCC and Xxx hereto with respect to the subject
matter hereof. This Agreement may not be modified or amended except by the
mutual written agreement of VCC and Xxx.
(d) Counterparts and Delivery. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument. This instrument shall be
effective as of the Effective Date when executed by the last listed Holder.
Signature pages hereto may be delivered to the Company by facsimile, and for all
purposes shall be deemed to be an original
(e) Construction and Advise of counsel. The Parties hereto hereby
acknowledge and agree that each Party has participated in the drafting of this
Agreement and that this Agreement has been, to the extent it was felt necessary,
reviewed by the respective legal counsel for the parties hereto and that the
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party will not be applied to the interpretation of this
Agreement. No inference in favor of, or against, any Party will be drawn from
the fact that one Party has drafted any portion hereof. Each Party hereby
acknowledges that they are entitled to and have been afforded the opportunity to
consult legal counsel of their choice regarding the terms and conditions and
legal effects of this Agreement, as well as the advisability and propriety
thereof. Each Party hereby further acknowledges that having so consulted with
legal counsel of their choosing or having chosen not to consult, hereby waives
any right to such legal representation or effective representation and any right
to raise or rely upon the lack of representation or effective representation in
any future proceedings or in connection with any future claim.
(f) Injunctive Relief. Parties agree that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of
this Agreement. Accordingly, the Parties specifically agree that either of VCC,
the Company or Xxx shall be entitled to temporary and permanent injunctive
relief to enforce the provisions of this Agreement. This provision with respect
to injunctive relief shall not, however, diminish the right of the Parties to
claim and recover damages in addition to injunctive relief
In witness whereof, the undersigned have duly executed this Agreement to be
effective as of the day and year first above written.
THE COMPANY
VT Gaming Services, Inc.
By /s/ X. X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, President
VCC
Visitalk Capital Corporation
By /s/ X. X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, President
XXXXXXX X. XXX
/s/ Xxxxxxx X. Xxx
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Xxxxxxx X. Xxx
XXXX XXXXX X. XXX (SPOUSE)
/s/ Xxxx Xxxxx X.Xxx
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Xxxx Xxxxx X. Xxx
