MTM TECHNOLOGIES, INC.
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
-----------------------
This AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (this "Agreement"), dated
as of December 21, 2004, is among (a) MTM TECHNOLOGIES, INC., a New York
corporation (the "Company"), (b) the shareholders of the Company listed on
signature pages hereto under the heading "Principal Shareholders" (each a
"Principal Shareholder" and, collectively, the "Principal Shareholders"), (c)
PEQUOT PRIVATE EQUITY FUND III, L.P. and PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS
III, L.P. (each a "Pequot Shareholder" and, collectively, the "Pequot
Shareholders"), (d) CONSTELLATION VENTURE CAPITAL II, L.P., CONSTELLATION
VENTURE CAPITAL OFFSHORE II, L.P., THE BSC EMPLOYEE FUND VI, L.P. and CVC II
PARTNERS, LLC (each a "Constellation Shareholder" and collectively, the
"Constellation Shareholders" and together with the Pequot Shareholders, the
"Investor Shareholders") and (e) each other Person who becomes a party to this
Agreement, subject to the conditions set forth herein, by executing an
Instrument of Accession ("Instrument of Accession") in the form of Schedule I
hereto.
WHEREAS, pursuant to that certain Purchase Agreement, dated January 29,
2004 (the "Initial Series A Purchase Agreement"), between the Company and the
Pequot Shareholders, the Pequot Shareholders purchased an aggregate amount of
3,255,814 of the Company's Series A-1 convertible preferred stock, par value
$0.001 per share (the "Series A-1 Preferred Stock") and detachable warrants to
purchase up to 500,000 shares of Common Stock and purchased an aggregate amount
of 2,000,000 shares of the Company's Series A-2 convertible preferred stock, par
value $0.001 per share (the "Series A-2 Preferred Stock") and detachable
warrants to purchase up to 400,000 shares of Common Stock; and
WHEREAS, pursuant to that certain Series A-3 Convertible Preferred Stock
Assignment Agreement, dated as of December 7, 2004 (the "Assignment Agreement"),
between the Pequot Shareholders and the Constellation Shareholders, the Pequot
Shareholders assigned to the Constellation Shareholders all of their rights and
obligations under the Initial Series A Purchase Agreement to purchase from the
Company 1,923,077 shares of the Company's Series A-3 convertible preferred
stock, par value $0.001 per share (the "Series A-3 Preferred Stock" and,
together with the Series A-1 Preferred Stock and Series A-2 Preferred Stock, the
"Old Series A Preferred Stock") at a purchase price of $3.25 per share and
detachable warrants to purchase up to 384,616 shares of Common Stock at an
exercise price of $4.0625 per share (the "Series A-3 Warrants"), and solely with
respect to the Series A-3 Preferred Stock and the Series A-3 Warrants, any and
all rights granted to the Pequot Shareholders under the Initial Series A
Purchase Agreement as if the Constellation Shareholders were treated as the
"Purchasers" under the Initial Series A Purchase Agreement with respect to the
Series A-3 Preferred Stock and the Series A-3 Warrants; and
WHEREAS, pursuant to a Purchase Agreement, dated December 10, 2004 (as the
same may be amended or supplemented, the "Purchase Agreement"), among the
Company and the Investor Shareholders, the Company has issued and sold to the
Investor Shareholders (i) convertible secured subordinated promissory notes in
the aggregate principal amount of $10,000,000 (each, a "Series A-4 First Tranche
Note" and, collectively, the "Series A-4 First Tranche Notes") which, subject to
Shareholder Approval, are convertible in accordance with their terms into shares
of Series A-4 convertible preferred stock, par value $0.001 per share, of the
Company (the "Series A-4 Preferred Stock") and (ii) detachable warrants, subject
to Shareholder Approval, to purchase 615,385 shares of Common Stock (each, a
"Warrant" and, collectively, the "Warrants"), and has provided for the issuance
and possible sale by the Company to the Investor Shareholders of (iii)
convertible secured subordinated promissory notes in the aggregate principal
amount of up to $15,000,000 (each, a "Series A-4 Second Tranche Note" and,
collectively, the "Series A-4 Second Tranche Notes" and, together with the
Series A-4 First Tranche Notes, the "Series A-4 Notes") which are convertible in
accordance with their terms into shares of Series A-4 Preferred Stock, (iv)
detachable warrants to purchase up to 923,077 shares of Common Stock (each, an
"Additional Warrant" and, collectively, the "Additional Warrants" and together
with the Warrants, the "Series A-4 Warrants") and (v) convertible secured
subordinated promissory notes in the aggregate principal amount of up to
$15,000,000 (each, a "Series A-5 Note" and, collectively, the "Series A-5 Notes"
and together with the Series A-4 Notes, the "Notes") which are convertible in
accordance with their terms into shares of Series A-5 Convertible Preferred
Stock, $0.001 par value per share (the "Series A-5 Preferred Stock" and,
together with the Series A-4 Preferred Stock, the "New Series A Preferred
Stock"); and
WHEREAS, on December 10, 2004 simultaneously with, and as a condition to,
the closing of the transactions contemplated by the Purchase Agreement, the
Company, the Investor Shareholders and the Principal Shareholders amended and
restated the Shareholders' Agreement dated as of May 21, 2004 of the Company to
set forth certain restrictions and obligations of the Company and the
Shareholders; and
WHEREAS, the Company and the Shareholders desire to further amend the
Amended and Restated Shareholders' Agreement of the Company dated as of December
10, 2004, in connection with the resignation of Xxxxxx Xxxxxx from the Board of
Directors of the Company which will be effective on March 31, 2005;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and the Purchase Agreement, and intending to be
legally bound, the parties hereto agree that the Amended and Restated
Shareholders' Agreement is hereby amended and restated in its entirety as
follows:
SECTION 1. DEFINITIONS.
For all purposes of this Agreement, including the preamble, except as
otherwise defined herein, the following terms shall have the meanings set forth
below:
Agreement. Agreement shall have the meaning ascribed to it in the
preliminary paragraph.
Additional Warrants. Additional Warrants shall have the meaning
ascribed to it in the recitals.
2
Assignment Agreement. Assignment Agreement shall have the meaning
ascribed to it in the recitals.
Board of Directors. Board of Directors shall mean the board of
directors of the Company.
Certificate of Incorporation. Certificate of Incorporation shall mean
the Amended and Restated Certificate of Incorporation of the Company as
hereafter amended and restated.
Common Stock. Common Stock shall mean (a) the Company's Common Stock,
$.001 par value per share (the "Common Stock") and (b) any shares of any other
class of capital stock of the Company hereafter issued which are (i) not
preferred as to dividends or assets over any class of stock of the Company or
(ii) issued to the holders of shares of Common Stock upon any reclassification
thereof.
Company. Company shall have the meaning ascribed to it in the
preliminary paragraph.
Constellation Designees. Constellation Designees shall have the
meaning ascribed to it in Section 3.1(iii).
Constellation Majority in Interest. Constellation Majority in Interest
shall mean the Constellation Shareholders holding at least a majority of the
shares of Common Stock issued or issuable, directly or indirectly, upon the
conversion or exercise of the Constellation Securities.
Constellation Notes. Constellation Notes shall mean all of the Notes
issued or to be issued to the Constellation Shareholders pursuant to the
Purchase Agreement.
Constellation Securities. Constellation Securities shall mean (a) the
Constellation Notes, (b) the Constellation Shares, (c) the Constellation
Warrants, (d) all other interests in the Company owned from time to time by any
Constellation Shareholder, (e) all shares of the Company's capital stock issued
or issuable upon conversion or exercise of any security described in (a), (b),
(c) or (d) and (f) all shares of the Company's capital stock issued with respect
to any such securities by way of stock dividend or stock split or in connection
with any merger, consolidation, recapitalization or other reorganization
affecting the Company's capital stock. Constellation Securities will continue to
be Constellation Securities in the hands of any holder including, without
limitation, a Principal Shareholder and each transferee thereof will succeed to
the rights and obligations of a holder of Constellation Securities hereunder;
provided that shares of Constellation Securities will cease to be Constellation
Securities following a transfer (i) to the Company or (ii) pursuant to a Public
Sale.
Constellation Shares. Constellation Shares shall mean all shares of
Series A Preferred Stock issued to the Constellation Shareholders or issuable to
the Constellation Shareholders on conversion of the Constellation Notes and all
shares of Common Stock issued or issuable on conversion of the Series A
Preferred Stock owned by such Constellation Shareholders.
Constellation Shareholders. Constellation Shareholders shall mean (i)
each of Constellation Venture Capital II, L.P., Constellation Venture Capital
Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC (ii)
3
any other Person to whom the rights to acquire any Notes or Series A Preferred
Stock have been assigned by Constellation Venture Capital II, L.P.,
Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P.
or CVC II Partners, LLC for so long as such Persons hold Constellation
Securities and any other Person to whom Constellation Securities are transferred
for so long as such Person holds any Constellation Securities; provided,
however, that any such transferee shall be a Constellation Shareholder only in
connection with the Constellation Securities held by such Person.
Constellation Warrants. Constellation Warrants shall mean the warrants
of the Company for the purchase of shares of Common Stock issued to the
Constellation Shareholders pursuant to the Purchase Agreement and any warrants
issued upon transfer, exchange or replacement thereof.
Employment Agreement. Employment Agreement shall mean that certain
employment agreement entered into by the Company and Xxxxxx Xxxxxxx on May 21,
2004.
Initial Series A Purchase Agreement. Initial Series A Purchase
Agreement shall have the meaning ascribed to it in the recitals.
Instrument of Accession. Instrument of Accession shall have the
meaning ascribed to it in the preliminary paragraph.
Investor Designees. Investor Designees shall have the meaning ascribed
to it in Section 3.1(iii).
Investor Securities. Investor Securities shall mean the Pequot
Securities and the Constellation Securities, collectively.
Investor Shares. Investor Shares shall mean the Pequot Shares and the
Constellation Shares, collectively.
Investor Shareholders. Investor Shareholders shall have the meaning
ascribed to it in the preliminary paragraph.
New Series A Preferred Stock. New Series A Preferred Stock shall have
the meaning ascribed to it in the recitals.
Notes. Notes shall have the meaning ascribed to it in the recitals.
Offered Securities. Offered Securities means the Securities that are
the subject of a proposed Transfer.
Old Series A Preferred Stock. Old Series A Preferred Stock shall have
the meaning ascribed to it in the recitals.
Other Securities. Other Securities shall mean (a) all of the shares of
the Company's capital stock owned by any of the Principal Shareholders other
than the Investor Securities and, (b) all shares of the Company's capital stock
issued or issuable upon conversion of such shares and (c) all shares of the
4
Company's capital stock issued with respect to such shares by way of stock
dividend or stock split or in connection with any merger, consolidation,
recapitalization or other reorganization affecting the Company's capital stock.
Other Securities will continue to be Other Securities in the hands of any holder
and each transferee thereof will succeed to the rights and obligations of a
holder of Other Securities hereunder; provided that shares of Other Securities
will cease to be Other Securities following a transfer (i) to the Company, (ii)
to any Investor Shareholders or (iii) pursuant to a Public Sale.
Pequot Designees. Pequot Designees shall have the meaning ascribed to
it in Section 3.1(ii).
Pequot Majority in Interest. Pequot Majority in Interest shall mean
the Pequot Shareholders holding at least a majority of the shares of Common
Stock issued or issuable, directly or indirectly, upon the conversion or
exercise of the Pequot Securities.
Pequot Notes. Pequot Notes shall mean all of the Notes issued or to be
issued to the Pequot Shareholders pursuant to the Purchase Agreement.
Pequot Securities. Pequot Securities shall mean (a) the Pequot Notes,
(b) the Pequot Shares, (c) the Pequot Warrants, (d) all other interests in the
Company owned from time to time by any Pequot Shareholder, (e) all shares of the
Company's capital stock issued or issuable upon conversion or exercise of any
security described in (a), (b), (c) or (d) and (f) all shares of the Company's
capital stock issued with respect to any such securities by way of stock
dividend or stock split or in connection with any merger, consolidation,
recapitalization or other reorganization affecting the Company's capital stock.
Pequot Securities will continue to be Pequot Securities in the hands of any
holder including, without limitation, a Principal Shareholder and each
transferee thereof will succeed to the rights and obligations of a holder of
Pequot Securities hereunder; provided that shares of Pequot Securities will
cease to be Pequot Securities following a transfer (i) to the Company or (ii)
pursuant to a Public Sale.
Pequot Shares. Pequot Shares shall mean all shares of Series A
Preferred Stock issued to the Pequot Shareholders or issuable to the Pequot
Shareholders on conversion of the Pequot Notes and all shares of Common Stock
issued or issuable on conversion of the Series A Preferred Stock owned by such
Pequot Shareholders.
Pequot Shareholders. Pequot Shareholders shall mean (i) Pequot Private
Equity Fund III, L.P., (ii) Pequot Offshore Private Equity Partners III, L.P.
and (iii) any other Person to whom the rights to acquire any Notes or Series A
Preferred Stock have been assigned by either, or both, of Pequot Private Equity
Fund III, L.P. or Pequot Offshore Private Equity Partners III, L.P., in each
case, for so long as such Persons hold Pequot Securities and any other Person to
whom Pequot Securities are transferred for so long as such Person holds any
Pequot Securities; provided, however, that any such transferee shall be a Pequot
Shareholder only in connection with the Pequot Securities held by such Person.
Pequot Warrants. Pequot Warrants shall mean the warrants of the
Company for the purchase of shares of Common Stock issued to the Pequot
Shareholders pursuant to the Initial Series A Purchase Agreement and the
5
Purchase Agreement and any warrants issued upon transfer, exchange or
replacement thereof, respectively.
Person. Person shall mean an individual, partnership, corporation,
limited liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
Principal Shareholders. Principal Shareholders shall have the meaning
ascribed to it in the preliminary paragraph.
Principal Shareholder Majority in Interest. Principal Shareholder
Majority in Interest shall mean, subject to Section 2 and Section 3 of this
Agreement, those Principal Shareholders who are then subject to the rights and
obligations set forth in Section 2 and Section 3 of this Agreement applicable to
such Principal Shareholders and who hold at least a majority of the shares of
Common Stock held by all such Principal Shareholders.
Public Offering. Public Offering shall mean a public offering pursuant
to an effective registration statement under the Securities Act covering the
offer and sale of shares of Common Stock.
Public Sale. Public Sale shall mean any sale of Common Stock to the
public pursuant to a Public Offering or to the public through a broker or
market-maker pursuant to the provisions of Rule 144 (or any successor rule)
adopted under the Securities Act.
Purchase Agreement. Purchase Agreement shall have the meaning ascribed
to it in the recitals.
Securities. Securities shall mean the Investor Securities and the
Other Securities.
Securities Act. Securities Act shall mean the Securities Act of 1933,
as amended.
Series A Preferred Stock. Series A Preferred Stock shall mean
collectively, the Old Series A Preferred Stock and the New Series A Preferred
Stock.
Series A-1 Preferred Stock. Series A-1 Preferred Stock shall have the
meaning ascribed to it in the recitals.
Series A-2 Preferred Stock. Series A-2 Preferred Stock shall have the
meaning ascribed to it in the recitals.
Series A-3 Preferred Stock. Series A-3 Preferred Stock shall have the
meaning ascribed to it in the recitals.
Series A-4 Preferred Stock. Series A-4 Preferred Stock shall have the
meaning ascribed to it in the recitals.
Series A-5 Preferred Stock. Series A-5 Preferred Stock shall have the
meaning ascribed to it in the recitals.
6
Series A-4 First Tranche Notes. Series A-4 First Tranche Notes shall
have the meaning ascribed to it in the recitals.
Series A-4 Second Tranche Notes. Series A-4 Second Tranche Notes shall
have the meaning ascribed to it in the recitals.
Series A-4 Notes. Series A-4 Notes shall have the meaning ascribed to
it in the recitals.
Series A-5 Notes. Series A-5 Notes shall have the meaning ascribed to
it in the recitals.
Series A-3 Warrants. Series A-3 Warrants shall have the meaning
ascribed to it in the recitals.
Series A-4 Warrants. Series A-4 Warrants shall have the meaning
ascribed to it in the recitals.
Shareholder(s). Shareholder shall mean each party hereto other than
the Company and Shareholders shall mean, collectively, the parties hereto other
than the Company.
Shareholder Approval. Shareholder Approval shall mean the approval by
the shareholders of the Company of the Certificate of Incorporation, the
authorization and issuance of (or the conversion of the Notes into) the New
Series A Preferred Stock, the exercise of the Series A-4 Warrants and the
issuance of any Common Stock issuable upon conversion or exercise of the
foregoing.
Transfer(s) or Transferred. Transfer(s) or Transferred shall mean and
include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, transfer by request, devise or descent, or other transfer or
disposition of any kind, including, but not limited to, transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, of any of the Securities.
Transferring Shareholder. Transferring Shareholder shall have the
meaning ascribed to it in Section 2.4.
Transfer Notice. Transfer Notice shall have the meaning ascribed to it
in Section 2.4.
Warrants. Warrants shall have the meaning ascribed to it in the
recitals.
SECTION 2. TRANSFERS OF SECURITIES.
2.1. General. (a) No Transfer of any Securities made in violation of this
Agreement shall be effective, and no such Transfer shall be recorded on the
stock record books of the Company. All such Transfers shall be conducted in
accordance with all applicable federal and state securities laws.
7
(b) Any Transfer by a Shareholder of Securities to a Person who is not a
party to this Agreement shall be made only pursuant to the terms of this
Agreement and on the condition that such Person shall become a party to this
Agreement, agreeing in writing to be bound by all of its terms.
(c) Any Shareholder making a Transfer shall promptly notify the Company,
and the Company shall promptly notify the other Shareholders, if any, of the
name of each transferee and the date of such Transfer.
2.2. Restrictions on Transfer - All Shareholders. Each Shareholder agrees
that such Shareholder shall not Transfer any Securities owned by such
Shareholder prior to May 21, 2005. On or after May 21, 2005, each Shareholder
may Transfer any Securities owned by such Shareholder in accordance with and
subject to the terms and provisions of this Agreement.
2.3. Restrictions on Transfer - Principal Shareholders. In addition to the
restrictions set forth in Section 2.2, each Principal Shareholder agrees that
during the term of his employment by the Company such Principal Shareholder
shall not Transfer Securities owned by such Principal Shareholder as follows:
(a) from and after May 21, 2005 to, but not including, May 21, 2006, each
Principal Shareholder shall not Transfer more than 25%, in the aggregate, of the
Securities owned by such Principal Shareholder as of the date of this Agreement;
(b) in addition to any Securities that such Principal Shareholder was
permitted to Transfer pursuant to Section 2.3(a) that such Principal Shareholder
did not Transfer prior to May 21, 2006, from and after May 21, 2006 to, but not
including, May 21, 2007, each Principal Shareholder shall not Transfer more than
35%, in the aggregate, of the Securities owned by such Principal Shareholder;
and
(c) subject to Section 2.4 and Section 2.5, on or after May 21, 2007, the
Principal Shareholders may Transfer Securities owned by such Principal
Shareholder without regard to the restrictions set forth in this Section 2.3.
2.4. Right of First Refusal. (a) During the term of each Principal
Shareholder's employment by the Company and for a period of two years following
the termination of such Principal Shareholder's employment with the Company, for
any reason or without reason, each Principal Shareholder (the "Transferring
Shareholder") shall give the Company and the Investor Shareholders holding Old
Series A Preferred Stock notice of the terms of any proposed bona fide sale of
Offered Securities, including (i) the number of shares that are proposed to be
Transferred, (ii) the anticipated date of the proposed Transfer, (iii) the name
and address of each Person to whom the Transfer is proposed to be made and (iv)
the material terms of the proposed Transfer, including the cash and/or other
consideration to be received in respect of such Transfer, at least twenty (20)
days prior to any proposed Transfer (a "Transfer Notice"); provided, however,
that in connection with a Transfer pursuant to a Public Sale, the Transferring
Shareholder shall deliver the Transfer Notice to the Company and each Investor
Shareholder holding Old Series A Preferred Stock at least three (3) business
days, or any other time period as may be mutually agreed upon by the parties
hereto, prior to any such proposed Transfer. Any such Transfer Notice shall be
8
deemed an irrevocable bona fide third party offer to sell such shares to the
Investor Shareholders holding Old Series A Preferred Stock on such terms as set
forth in such Transfer Notice and shall be deemed a representation by the
Transferring Shareholder that the Transfer is a bone fide transaction.
(b) The Investor Shareholders holding Old Series A Preferred Stock shall
have a period of (i) in connection with a Transfer pursuant to a Public Sale,
five (5) business days and (ii) in connection with any other Transfer, ten (10)
business days, from the receipt of the Transfer Notice from the Transferring
Shareholder within which to elect to purchase their respective pro rata shares
of the Offered Securities at the same price and subject to the same material
terms and conditions as described in the Transfer Notice. Each Investor
Shareholder holding Old Series A Preferred Stock may exercise such purchase
option, and thereby purchase all or any portion of its pro rata share of the
Offered Securities, by notifying the Transferring Shareholder in writing, before
the expiration of such five (5) or ten (10) business day period, as the case may
be, as to the number of such shares that it wishes to purchase. For the purpose
of the preceding sentence, each Investor Shareholder's pro rata share shall be a
fraction of the Offered Securities, the numerator of which shall be the number
of shares of Common Stock (including shares of Common Stock issuable upon
conversion of Old Series A Preferred Stock) owned by such Investor Shareholder
on the date of the Transfer Notice and the denominator of which shall be the
total number of shares of Common Stock (including shares of Common Stock
issuable upon conversion of Old Series A Preferred Stock) held by all Investor
Shareholders holding Old Series A Preferred Stock on the date of the Transfer
Notice. Each Investor Shareholder holding Old Series A Preferred Stock shall
have a right of reallotment such that, if any other Investor Shareholder holding
Old Series A Preferred Stock fails to exercise the right to purchase its full
pro rata share of the Offered Securities, the other participating Investor
Shareholders holding Old Series A Preferred Stock may exercise an additional
right to purchase, on a pro rata basis, the Offered Securities not previously
purchased. If an Investor Shareholder holding Old Series A Preferred Stock gives
the Transferring Shareholder notice that it desires to purchase its pro rata
share of the Offered Securities and, as the case may be, its allotment, then
payment for the Offered Securities shall be in cash, by check or wire transfer
or in such other consideration as set forth in the Transfer Notice, against
delivery of the Offered Securities to be purchased at a place agreed upon
between the parties and at the time of the scheduled closing therefor.
(c) If all the Offered Securities are not so purchased, and subject to the
right of co-sale set forth in Section 2.5 herein below, the Transferring
Shareholder shall be free for a period of sixty (60) days after expiration of
the time periods referred to above to consummate the proposed transaction upon
terms not less favorable to the Transferring Shareholder than those set forth in
the Transfer Notice with respect to any Offered Securities not sold to any
Investor Shareholder pursuant to this Section 2.4. Promptly upon the
consummation of any such transaction, the Transferring Shareholder shall confirm
in writing to the Company and the Investor Shareholders holding Old Series A
Preferred Stock the terms of the transaction as so consummated, including the
number of shares involved, the consideration received, and the name of the party
to whom the Transfer was made. After the expiration of said sixty (60) day sale
period, subject to the time period set forth in Section 2.4(a), if such
Transferring Shareholder again wishes to Transfer any shares of Securities, such
Transferring Shareholder shall again offer the shares in accordance with the
provisions of this Section 2.4.
9
(d) Should the purchase price specified in the Transfer Notice be payable
in property other than cash or evidences of indebtedness, the Investor
Shareholders shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If the Transferring Shareholder
and the Investor Shareholders holding Old Series A Preferred Stock cannot agree
on such cash value within five (5) or ten (10) business days, as the case may
be, after the receipt of the Transfer Notice, the valuation shall be made by an
appraiser of recognized standing selected by such Investor Shareholders and the
Transferring Shareholder. The cost of such appraisal shall be shared equally by
the Investor Shareholders holding Old Series A Preferred Stock and the
Transferring Shareholder (with the half of the cost borne by such Investor
Shareholders borne pro rata by each based on the number of shares each such
Investor Shareholder holding Old Series A Preferred Stock was interested in
purchasing pursuant to this Section).
2.5. Co-Sale Rights. Except in connection with a Transfer pursuant to a
Public Sale, during the term of each Principal Shareholder's employment by the
Company and for a period of two years following the termination of such
Principal Shareholder's employment with the Company, for any reason or without
reason, at least ten (10) days prior to any proposed Transfer by a Principal
Shareholder, such Principal Shareholder shall give a Transfer Notice to the
Investor Shareholders (which Transfer Notice may be the same Transfer Notice as
that described in Section 2.4 above). Upon receipt of a Transfer Notice, if the
Investor Shareholders have not exercised to the full extent their rights of
first refusal pursuant to Section 2.4 hereof, such Investor Shareholders may
elect to participate in the proposed Transfer by delivering written notice to
the Transferring Shareholder within ten (10) business days of the date of
receipt of such Transfer Notice. Each Investor Shareholder shall have the right
to sell to the proposed transferee(s) as a condition to such Transfer by the
Transferring Shareholder(s), at the same price per share of Securities and on
the same terms and conditions as are specified in the Transfer Notice, the
lesser of (x) two shares (on an as converted basis including shares of Common
Stock issuable upon conversion of Series A Preferred Stock) for every one share
owned by the Principal Shareholders or (y) that number of Securities equal to
the Offered Securities (on an as converted basis including shares of Common
Stock issuable upon conversion of Series A Preferred Stock) owned by such
Investor Shareholder, multiplied by a fraction, the numerator of which is the
Investor Securities owned by such Investor Shareholder and the denominator of
which is the number of Securities (on an as converted basis including shares of
Common Stock issuable upon conversion of Series A Preferred Stock). The
Transferring Shareholder will be entitled to sell in the proposed Transfer the
balance of the Offered Securities proposed to be so sold. If the Investor
Shareholders elect to participate in such Transfer, the Transferring Shareholder
shall use his, her or its best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Investor Shareholders in
any proposed Transfer and shall not Transfer any shares of the capital stock of
the Company to such prospective transferee(s) unless such prospective
transferee(s) allow(s) the participation of the Investor Shareholders on the
terms specified in the Transfer Notice. Subject to the foregoing, the
Transferring Shareholder(s) may, within sixty (60) days after the expiration of
the ten (10) business day period referred to above, Transfer the Offered
Securities (reduced by the number of shares of Securities with respect to which
the Investor Shareholders have elected to participate, if any) to the
transferee(s) identified in the Transfer Notice at a price and on the terms no
more favorable to the Transferring Shareholder(s) than specified in the Transfer
Notice; provided, that, prior to any Transfer such transferee(s) shall first
execute and deliver to the Company a written agreement to be bound by all of the
provisions of this Agreement applicable to the transferor(s). However, if such
10
Transfer is not consummated within such sixty (60) day period, the Transferring
Shareholder(s) shall not Transfer any shares of the Offered Securities as have
not been purchased within such period without again complying with all of the
provisions of Sections 2.4 and 2.5 hereof. Any attempt by a Transferring
Shareholder to Transfer shares of Securities in violation of Section 2.4 or 2.5
hereof shall be void and the Company agrees that it will not effect such a
Transfer nor will it treat any alleged transferee as the holder of such shares
of Securities without the consent of the Investor Shareholders.
2.6. Termination of Right of First Refusal and Co-Sale Rights.
Notwithstanding anything contained in this Section 2 to the contrary, the rights
granted to an Investor Shareholder pursuant to Section 2.4 and 2.5 shall
terminate on the earlier of (x) the date that such Investor Shareholder owns
less than 10% of its respective Investor Shares and (y) the date that the
Principal Shareholders own less than 10% of the number of shares of Common Stock
owned by such Principal Shareholders on the date hereof.
SECTION 3. BOARD OF DIRECTORS.
3.1. Boards of Directors; Voting Agreements. (a) From and after the date
hereof to, but not including, December 10, 2009, and subject to paragraphs
(b),(c) and (d) below, in any and all elections of directors of the Company
(whether at a meeting or by written consent in lieu of a meeting), each
Shareholder shall vote, or cause to be voted, or cause such Shareholder's
designees as directors to vote, all Securities owned by such Shareholder or over
which such Shareholder has voting control so as to nominate and elect such
directors of the Company as follows:
(i) The Chief Executive Officer of the Company;
(ii) Two directors designated by Pequot Private Equity Fund III, L.P.
(the "Pequot Designees"), for so long as the Pequot Shareholders own at
least 25% of the Pequot Shares, who shall initially be Xxxxxx X. Xxxx and
Xxxxxxx Xxxxxxxxx; provided, however, that if the Pequot Shareholders own
less than 25% of the Pequot Shares, then the Pequot Shareholders will only
be entitled to designate one director; and each director designated by the
Pequot Designees shall be entitled to serve as director for the remainder
of such director's elected term;
(iii) One director designated by the Constellation Shareholders (the
"Constellation Designees" and together with the Pequot Designees, the
"Investor Designees"), who shall initially be Xxxxxxxx Xxxxxxxx;
(iv) Three "independent directors" (as such term is used in the
applicable regulations promulgated by Nasdaq or any other national stock
exchange on which the Company's Common Stock is listed on the date hereof)
who shall be selected by the Company's nominating and corporate governance
committee;
(v) Two "independent directors" (as such term is used in clause (iv)
above) selected by the Chief Executive Officer of the Company and
reasonably acceptable to the Company's nominating and corporate governance
committee;
11
(vi) Subject to Section 3.1(b), Xxxxxx Xxxxxxx.
(b) Notwithstanding anything contained in Section 3.1(a) to the contrary,
the Investor Shareholders shall only be obligated under Section 3.1(a)(vi) with
respect to Xx. Xxxxxxx (i) for so long as he (x) has not been terminated by the
Company pursuant to Section 4(a) or (y) has not terminated his employment with
the Company other than pursuant to Section 4(b), in each case of his Employment
Agreement and (ii) from and after the date hereof to, but not including, May 21,
2007.
(c) Notwithstanding anything contained in Section 3.1(a) to the contrary,
the Principal Shareholders shall not be obligated pursuant to (x) Section
3.1(a)(ii) and (iii), if (i) the Pequot Shareholders own less than 10% of the
shares of Series A-1 Preferred Stock, Series A-2 Preferred Stock and Series A-3
Preferred Stock issued to such Pequot Shareholders and all shares of Common
Stock issued or issuable on conversion of the Series A-1 Preferred Stock, Series
A-2 Preferred Stock and Series A-3 Preferred Stock owned by such Pequot
Shareholders, (ii) the Constellation Shareholders own less than 10% of the
shares of Series A-3 Preferred Stock issued to such Constellation Shareholders
and all shares of Common Stock issued or issuable on conversion of the Series
A-3 Preferred Stock owned by such Constellation Shareholders, and (iii) any
other shareholders that are introduced to the Company by the Pequot Shareholders
own less than 10% of the shares acquired by such shareholders from the Company
in a transaction not including a public offering or (y) Section 3.1(a)(vi), if
the Principal Shareholders own less than 10% of the number of shares of Common
Stock owned by such Principal Shareholders on the date hereof.
(d) If any vacancy shall occur in the Board of Directors as a result of
death, disability, resignation or any other termination of a director, the
replacement for such vacating director shall be designated by the Person or
Persons who, pursuant to Section 3.1(a), originally designated such vacating
director; provided, however, that the foregoing shall not apply with respect to
the vacancy occurring as a result of the resignation of Xxxxxx Xxxxxx. Each
Person entitled to designate a director or a replacement for a director pursuant
to Section 3.1(a) shall also be entitled to designate the removal of such
director with or without cause.
(e) The Investor Shareholders hereby agree that (i) one of the five
directors designated pursuant to Sections 3.1(a)(iv) and (v) above shall be the
"financial expert" required on the audit committee of the Company by the
Xxxxxxxx-Xxxxx Act of 2002, as amended and (ii) the greatest extent permitted by
applicable law and the rules and regulations of the Nasdaq, the directors
designated by the Investor Shareholders pursuant to Section 3.1(a)(ii) shall
qualify as "independent directors" (as such term is used in Section 3.1(a)(iv).
(f) To the greatest extent permitted by applicable law and the rules and
regulations of the Nasdaq, at least one of the directors designated by the
Pequot Shareholders pursuant to Section 3.1(a)(ii) above shall be a member of
any committee formed by the Board of Directors including, without limitation,
the compensation committee, audit committee, the nominating and the corporate
governance committee.
(g) In addition to the Investor Designees, each of Pequot and Constellation
shall be entitled to have one representative attend each meeting of the Board
and any committee meetings as a non-voting observer, whether such meeting is
12
conducted in person or by teleconference; provided, that each such non-voting
observer, at the request of the Company, shall execute a confidentiality
agreement with the Company prior to his first attendance of any such meeting.
(h) The Company shall not enter into any contract, agreement or other
instrument with (i) any of its affiliates, (ii) any holder of Securities or
(iii) any employee or director of the Company, on terms more favorable than the
Company would obtain on an arms-length basis with a third party without first
obtaining the written consent of a majority of members of the Board who do not
have an interest (direct or indirect) in such contract, agreement or other
instrument.
(i) The Company shall have no less than three (3) members on each of its
audit committee and compensation committee. The nominating committee and the
corporate governance committee shall have no less than four (4) members; one of
which shall have been designated by the Pequot Shareholders and one of which
shall have been designated by the Constellation Shareholders.
3.2. Certain Voting Preferences. So long as at least 30% of the shares of
Series A-3 Preferred Stock remain outstanding (as adjusted for any stock splits,
stock dividends, combinations, recapitalizations involving equity of the
Company, reclassifications or other similar events involving a change with
respect to the Series A-3 Preferred Stock), without the approval of the Investor
Shareholders holding a majority of the then outstanding shares of Series A-3
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately from any other class of the Company's capital
stock, but together as a single group, the Company will not:
(a) except with respect to the amendment of the Certificate of
Incorporation contemplated by the Purchase Agreement, amend the Certificate of
Incorporation or the Company's bylaws to adversely affect the voting powers,
preferences or other rights of the Series A-3 Preferred Stock;
(b) except with respect to the amendment of the Certificate of
Incorporation contemplated by the Purchase Agreement and the issuance of New
Series A Preferred Stock pursuant to the Purchase Agreement, issue any other
class or series of capital stock of the Company ranking as to dividend rights,
redemption rights, liquidation preference and other rights on parity or senior
to the Series A-3 Preferred Stock; and
(c) amend this Section 3.2.
3.3. PROXY. EACH SHAREHOLDER HEREBY GRANTS TO THE COMPANY AN IRREVOCABLE
PROXY, COUPLED WITH AN INTEREST, TO VOTE ALL OF THE VOTING SECURITIES OWNED BY
SUCH SHAREHOLDER OR OVER WHICH SUCH SHAREHOLDER HAS VOTING CONTROL TO THE EXTENT
NECESSARY TO CARRY OUT THE PROVISIONS OF THIS SECTION 3, BUT ONLY IN THE EVENT
OF AND TO THE EXTENT NECESSARY TO REMEDY ANY BREACH BY SUCH SHAREHOLDER OF HIS,
HER OR ITS OBLIGATIONS UNDER THE VOTING AGREEMENT CONTAINED HEREIN.
13
3.4. Action by Shareholders; Voting Agreement. Each Shareholder further
agrees that such Shareholder will not vote any Securities owned by such
Shareholder or over which such Shareholder has voting control, or take any
action by written consent, or take any other action as a shareholder of the
Company, to circumvent the voting arrangements required by this Section 3. Each
Shareholder hereby agrees to vote or cause to be voted or cause such
Shareholder's designees as directors to vote all Securities owned by such
Shareholder or over which such Shareholder has voting control so as to comply
with this Section 3. The provisions set forth herein constitute a voting
agreement under Section 620 of the New York Business Corporation Law, as
amended, and, in connection therewith, the Shareholders expressly consent to the
enforcement of this Section 3 by specific performance.
SECTION 4. MISCELLANEOUS.
4.1. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
4.2. Entire Agreement; No Third Party Beneficiaries. Each party hereby
acknowledges that no other party or any other person or entity has made any
promises, warranties, understandings or representations whatsoever, express or
implied, not contained in this Agreement and acknowledges that it has not
executed this Agreement in reliance upon any such promises, representations,
understandings or warranties not contained herein and that this Agreement
supersedes all prior agreements and understandings between the parties with
respect hereto. There are no promises, covenants or undertakings other than
those expressly set forth or provided for in this Agreement. This Agreement is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
4.3. Successors and Assigns. This Agreement will bind and inure to the
benefit of and be enforceable by the Company and the Shareholders and their
respective heirs, successors and assigns.
4.4. Counterparts; Facsimile Signatures. This Agreement may be executed in
separate counterparts each of which will be an original and all of which taken
together will constitute one and the same agreement. Any signature page
delivered by a fax machine shall be binding to the same extent as an original
signature page, with regard to any agreement subject to the terms hereof or any
amendment thereto.
4.5. Remedies. The Shareholders will be entitled to enforce their rights
under this Agreement specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any Shareholder may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent any
14
violation of the provisions of this Agreement. In the event of any dispute
involving the terms of this Agreement, the prevailing party shall be entitled to
collect reasonable fees and expenses incurred by the prevailing party in
connection with such dispute from the other parties to such dispute.
4.6. Notices. All notices and other communications required or permitted
hereunder shall be in writing. Notices shall be delivered personally, against
written receipt therefor, via recognized overnight courier (such as Federal
Express, DHL or Airborne Express) or via certified or registered mail. Notices
may be delivered via facsimile or e-mail, provided that by no later than two
days thereafter such notice is confirmed in writing and sent via one of the
methods described in the previous sentence. Notices to the Company or an
Investor Shareholder shall be sent to such address as set forth on Schedule II
hereto or at such other address as the Company or such Investor Shareholder
shall have furnished in writing to the other parties hereto. Notices to a
Principal Shareholder shall be sent to such address as set forth on the books
and records of the Company, or at such other address or facsimile number as such
Principal Shareholder shall have furnished in writing to the other parties
hereto. All notices shall be effective upon receipt.
4.7. Amendment and Waiver. No modification, amendment or waiver of any
provision of this Agreement will be effective against the Company or the
Shareholders unless such modification, amendment or waiver is approved in
writing by the Company, a Pequot Majority in Interest, a Constellation Majority
in Interest and a Principal Shareholder Majority in Interest. Any modification,
amendment or waiver signed by the Company, a Pequot Majority in Interest, a
Constellation Majority in Interest and a Principal Shareholder Majority in
Interest shall bind all of the parties hereto. No delay or omission to exercise
any right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such nonbreaching or nondefaulting party nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Notwithstanding anything
contained in this Section 4.7 to the contrary, if any amendment to this
Agreement adversely affects the rights of an Investor Shareholder differently
than it affects the rights of any other Investor Shareholder, the consent of
such adversely affected Investor Shareholder shall be required prior to any such
amendment.
4.8. Termination. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated in a writing approved by the Company, a Pequot
Majority in Interest and a Constellation Majority in Interest. This Agreement
will terminate automatically upon the earliest to occur of (a) the completion of
any voluntary or involuntary liquidation or dissolution of the Company, (b) the
sale of all or substantially all of the Company's assets or of a majority of the
outstanding equity of the Company (determined on a fully diluted basis) to any
Person that is not a party to this Agreement (whether pursuant to a merger,
consolidation or otherwise), or (c) on the date that the Investor Shareholders
are no longer entitled to designate any directors pursuant to Section 3.1(a)(ii)
or (iii).
4.9. GOVERNING LAW. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
15
4.10. Future Shareholders' Rights; Transfers; Legend. The Company shall not
issue (except in a Public Offering) any Common Stock or securities convertible
into or exercisable for Common Stock unless the Person receiving such Common
Stock executes an Instrument of Accession. No Shareholder shall Transfer any
Securities other than to the Company or pursuant to a Public Sale unless the
Person receiving Transfer of such Securities executes an Instrument of
Accession. Certificates representing the Securities shall be endorsed with the
following legend:
THE SECURITIES REPRESENTED HEREBY MAY BE SUBJECT TO THE TERMS AND
CONDITIONS OF A VOTING AGREEMENT WHICH MAY PLACE CERTAIN RESTRICTIONS
ON THE VOTING OF AND THE TRANSFER OF THE SECURITIES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SECURITIES SHALL BE
DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF
SUCH AGREEMENT. A COPY OF SUCH AGREEMENT WILL BE FURNISHED TO THE
RECORD HOLDER OF THIS SECURITY WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
[Signature pages follow.]
16
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Shareholders' Agreement on the day and year first above written.
MTM TECHNOLOGIES, INC.
By:/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
PEQUOT PRIVATE EQUITY FUND III, L.P.
By: Pequot Capital Management, Inc.,
Its Investment Manager
By:/s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
PEQUOT OFFSHORE PRIVATE EQUITY
PARTNERS III, L.P.
By: Pequot Capital Management, Inc.,
Its Investment Manager
By:/s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
CONSTELLATION VENTURE CAPITAL II, L.P.
By: Constellation Ventures Management
II, LLC
Its General Partner
By:/s/ Xxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
Signature Page to Shareholders' Agreement
CONSTELLATION VENTURE CAPITAL
OFFSHORE II, L.P.
By: Constellation Ventures Management
II, LLC
Its General Partner
By:/s/ Xxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
THE BSC EMPLOYEE FUND VI, L.P.
By: Constellation Ventures Management
II, LLC
Its General Partner
By:/s/ Xxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
CVC II PARTNERS, LLC
By: The Bear Xxxxxxx Companies Inc.
Its Managing Member
By:/s/ Xxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
Signature Page to Shareholders' Agreement
PRINCIPAL SHAREHOLDERS:
----------------------
By:/s/ Xxxxxx Xxxxxxx
---------------------------------
Xxxxxx Xxxxxxx
By:/s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx Xxxxxx
Signature Page to Shareholders' Agreement
Schedule I
----------
Form of Instrument of Accession
Instrument of Accession
-----------------------
Reference is made to that certain Amended and Restated Shareholders'
Agreement dated as of December 10, 2004, a copy of which is attached hereto (as
amended and in effect from time to time, the "Shareholders Agreement"), among
MTM Technologies, Inc. (the "Company"), and the Shareholders (as defined
therein).
The undersigned, ____________________________, in order to become the owner
or holder of [identify Securities being Transferred] (the "Securities") of the
Company hereby agrees that by his execution hereof the undersigned is a
Shareholder party to the Shareholders Agreement subject to all of the
restrictions and conditions applicable to Shareholders set forth in such
Shareholders' Agreement, and all of the Securities purchased by the undersigned
in connection herewith (and any and all debt and equity of the Company issued in
respect thereof) are subject to all the restrictions and conditions applicable
to such Securities as set forth in the Shareholders Agreement. This Instrument
of Accession shall take effect and shall become a part of said Shareholders
Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of New
York.
Signature:
----------------------------------
Address:
----------------------------------
----------------------------------
Date:
----------------------------------
Accepted:
MTM TECHNOLOGIES, INC.
By:
---------------------------
Name:
Title:
Date:
Signature Page to Shareholders' Agreement
Schedule II
-----------
Names and Addresses of the Company and the Investor Shareholders
If to the Company:
-----------------
MTM Technologies, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
If to the Investor Shareholders:
-------------------------------
1. Pequot Private Equity Fund III, L.P.
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
2. Pequot Offshore Private Equity Partners III, L.P.
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
3. Constellation Venture Capital II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
4. Constellation Venture Capital Offshore II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
5. The BSC Employee Fund VI, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
6. CVC Partners II, LLC
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
