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EXHIBIT 4.3
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT is made and entered into this 13th day of
May 1998, by and among NFRONT, INC. a Georgia corporation (the "Company"), XXXXX
X. XXXXXXX, III, a resident of the State of Georgia ("Xxxxxxx"), Xxxxx X.
Xxxxxxx, a resident of the State of Georgia ("X. Xxxxxxx"), Xxx X. Xxxxxx
("xxxxxx"), Xxxxx X. Xxxxxxxxx ("Xxxxxxxxx"), Xxxxxx Xxxxx Xxxxxx ("Xxxxxx"),
Xxxxx Xxxxx Xxxx ("Xxxx"), CNL Financial Corporation ("CNL"), and NORO-XXXXXXX
PARTNERS IV, L.P., a Georgia limited partnership ("Investor" and, together with
Xxxxxxx, X. Xxxxxxx, Greene, Verbrugge, Porter, Neel, and CNL the
"Shareholders").
BACKGROUND
A. Pursuant to a Series A Convertible Preferred Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement"), Investor has
purchased Two Hundred Fifty Five Thousand Eight Hundred Eighty Five (255,885)
shares of the Company's Preferred Stock (as hereinafter defined).
B. Pursuant to a Common Stock Purchase Agreement of even date herewith
(the "Common Stock Agreement"), Investor has purchased Thirty Five Thousand
Eight Hundred Twenty Four (35,824) shares of the Company's Common Stock from X.
Xxxxxxx.
C. The execution and delivery of this Agreement by the Company and each
of the Shareholders, each of whom owns the number of shares of Common Stock set
forth adjacent to such person's name on the signature page hereto and who,
collectively, own all of the shares of Common Stock (as hereinafter defined)
outstanding on the date hereof, is a condition precedent to the obligation of
Investor to purchase the Preferred Stock pursuant to the Stock Purchase
Agreement.
D. The parties hereto wish to state herein their mutual agreements and
obligations and to impose certain restrictions on the rights and benefits with
respect to the voting and disposition of the Shares (as hereinafter defined) now
or hereafter owned by the Shareholders, and to set forth certain agreements with
respect to the management of the Company.
AGREEMENT
For and in consideration of the foregoing, the agreements set forth
below, and other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
The following capitalized terms are used in this Agreement with
meanings thereafter ascribed:
"AFFILIATE" means any person, firm, corporation, partnership,
association, or other entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by, or is under common control with a
specified person, firm, corporation, partnership, association, or entity.
"AGREEMENT" means this Agreement, together with any addenda and
amendments made in the manner described in this Agreement.
"BUSINESS" means the business of selling Internet banking services to
community banks.
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"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday, or
Friday on which banks are open in Atlanta, Georgia.
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" means the common stock, no par value, of the Company of
which Five Million (5,000,000) shares are authorized and One Million Twenty
Three Thousand Eighteen (1,023,018) shares are issued and outstanding as of the
date hereof.
"COMMON STOCK EQUIVALENTS" means the sum of (x) the number of shares of
Common Stock outstanding, PLUS (y) the number of shares of Common Stock issuable
upon (i) conversion or exchange of all outstanding securities convertible into
or exchangeable for Common Stock, (ii) the exercise of all vested and
outstanding warrants, options, and rights to purchase Common Stock or securities
convertible into or exchangeable for Common Stock, and (iii) the conversion or
exchange of all convertible or exchangeable securities purchased upon such
exercise, all as of the date upon which the number of Common Stock Equivalents
is being determined.
"COMPANY BENEFIT PLAN" means any stock purchase or stock option plan
which the Company maintains for the benefit of its employees.
"COMPETITOR" means a person or entity that is substantially engaged in
the Business. For purposes hereof, "substantially engaged" shall mean that the
average annual revenues of such person or entity derived from the conduct of the
Business during the three most recent completed fiscal years of such person or
entity (or if such person or entity has conducted such business for less than
three completed fiscal years, then for such lesser period) is in excess of $30
million and is equal to or greater than thirty percent (30%) of the average
annual gross revenues of such person or entity over such fiscal years (or such
lesser period).
"CONFIDENTIAL INFORMATION" means information, other than Trade Secrets,
that is of value to its owner and is treated as confidential, including, but not
limited to, information concerning the customers, suppliers, products, pricing
strategies of the Company, personnel assignments and policies of the Company,
matters concerning the financial affairs and management of the Company or any
parent, subsidiary, or affiliate of the Company, future business plans,
licensing strategies, advertising campaigns, and information regarding
executives or employees of the Company.
"DISPOSITION" means any transfer of all or any part of the rights and
incidents of ownership of the Shares, including the right to vote, and the right
to possession of Shares as collateral for indebtedness, whether such transfer is
outright or conditional, inter vivos or testamentary, voluntary or involuntary,
or for or without consideration, but in any event shall exclude any transfer
pursuant to the Prior Agreements, as amended hereby.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"EXISTING SHAREHOLDERS' AGREEMENTS" means those certain Shareholders'
Agreements between the Company and each of Greene, Verbrugge, Xxxxxx, and Xxxx,
respectively, each dated March 31, 1997.
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"FAIR VALUE" means the value of one share of Common Stock determined as
set forth below, as of the business day which immediately precedes the date for
which Fair Value is determined.
(a) If the Common Stock IS NOT Publicly Traded, the Fair Value
of one share of Common Stock shall be equal to: (i) the value of the
Company, DIVIDED BY (II) the number of Common Stock Equivalents
(assuming in such case the conversion or exercise of only such
convertible securities or options or warrants that are, as of the date
of such calculation, then convertible or exercisable). The value of the
Company will initially be determined in good faith by the Board of
Directors of the Company, with the approval of the Series A Director
(his or her approval not to be unreasonably withheld). If Board of
Directors and the Series A Director shall be unable to agree as to the
value of the Company, within ten (10) business days from the first
meeting to determine the value of the Company, then the value of the
Company will be determined by appraisal as follows: the Company and the
Series A Director shall each select an appraiser experienced in the
business of evaluating or appraising the market value of stock of
privately held companies, and the two appraisers so selected shall,
within thirty (30) days of selection, appraise the fair market value of
the Company. Each of the Company and the Series A Director shall pay
the fees and expenses of their respective appraisers so chosen. If the
difference between the two appraisals is not greater than ten percent
(10%) of the higher appraisal, the average of the two appraisals shall
be deemed the value of the Company; otherwise, the two appraisers shall
select a third appraiser, who shall be experienced in a manner similar
to the initial appraisers. If the initial appraisers fail to select
such third appraiser as provided above, either the Series A Director,
or the Company, may apply, after written notice to the other, to any
judge of any court of general jurisdiction for the appointment of such
third appraiser. The third appraiser so selected shall appraise the
fair market value of the Company as of the date Fair Value is to be
determined, and shall forthwith give written notice of his
determination to the Company and the Series A Director. The value of
the Company shall then be established by averaging the three
determinations of value, and then, disregarding the value determination
which deviates most from such average, and averaging the remaining two
value determinations. The Company and the Series A Director shall each
pay one-half (1/2) the expenses and fees of the third appraiser. In
making the determination of the Fair Value pursuant to this subsection,
the Board of Directors and/or the appraisers, as the case may be, shall
assume that fair market value of the Company is equal to the amount
which would be paid in cash for the Company, as a going concern, by an
unaffiliated third party buyer, without any discount for factors such
as the absence of a trading market, the minority status of the shares,
or any other factors would might otherwise be applicable. In the event
of a Liquidation which is occasioned by a transaction such as a sale of
assets, a sale of securities by the holders thereof, or a merger or
share exchange, Fair Value shall be determined by reference to the
transaction which gives rise to the Liquidation.
(b) If the Common Stock IS Publicly Traded, "Fair Value" means
the average Daily Price (as such term is defined below) over a twenty
(20) trading day period consisting of the day as of which Fair Value is
being determined and the nineteen (19) consecutive trading days prior
to such date. For the purposes of computing Fair Value, the "Daily
Price" for each of the twenty (20) consecutive trading days shall be
determined as follows:
(i) If the Common Stock is listed on a securities
exchange, the "Daily Price" is the closing price of the Common
Stock on the securities exchange having the greatest trading
volume over the preceding thirty (30) calendar day period, OR,
if there have been
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no sales on a particular trading day, the average of the last
reported bid and asked quotations on such exchange at the
close of business for such trading day.
(ii) If the Common Stock is quoted on the NASDAQ
National Market System, the "Daily Price" is the average of the
representative bid and asked prices of the Common Stock quoted
in the NASDAQ National Market System as of 4:00 p.m., Eastern
Time.
(iii) If the Common Stock is quoted on the
over-the-counter market as reported by the National Quotation
Bureau, the "Daily Price" is the average of the highest bid and
asked prices of the Common Stock on the over-the-counter market
as reported by the National Quotation Bureau.
"MANAGEMENT SHAREHOLDERS" means Xxxxxxx and X. Xxxxxxx.
"PERMITTED DISPOSITION" means a Disposition effected:
(a) by a Shareholder to which Investor and other
Shareholders holding at least a majority of the Shares held by such
other Shareholders consent in writing;
(b) pursuant to Section 2.2 hereof, or Section 2.4
hereof;
(c) by a Shareholder to a member of such person's
immediate family, as defined in the regulations promulgated under
Section 16 of the Exchange Act, or to any trust for his or their
benefit;
(d) by a Shareholder effective at the closing of a
Transaction or a Qualifying Public Offering; and
(e) by Investor to an Affiliate of Investor.
The foregoing notwithstanding, no Disposition described in (a), (b),
(c) or (e) above shall be a Permitted Disposition unless the transferor shall
have obtained the written agreement of the proposed transferee, that such
transferee will be bound by, and the Shares proposed to be transferred will be
subject to, this Agreement. Such written agreement shall be attached as an
addendum to this Agreement and thereby incorporated as a part of this Agreement,
whereupon the proposed transferee shall have adopted this Agreement, and
thereafter shall be a party hereto, and the term "Shareholders" as used herein
shall thereafter mean and include such transferee.
"PREFERRED STOCK" means 255,885 shares of Series A Convertible
Preferred Stock issued and outstanding upon closing.
"PRIME RATE" means the "prime rate" as published in The Wall Street
Journal (Eastern Edition) under its "Money Rates" column or, if no longer
published as such, the rate of interest announced from time to time by
NationsBank, N.A., as its prime rate, base rate, or reference rate. If the Wall
Street Journal publishes more than one "prime rate" under its "Money Rates"
column or a range of rates, then the Prime Rate shall be the average of such
rates.
"PRIOR AGREEMENTS" means collectively the Existing Shareholders
Agreements and the Voting Trust Agreements.
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"PROPRIETARY INFORMATION" means Trade Secrets and Confidential
Information.
"PUBLIC OFFERING" means any offering by the Company of its securities
to the public pursuant to a registration statement filed with the Commission
under the Securities Act.
"PUBLICLY TRADED" means that the Common Stock of the Company is: (i)
listed on any securities exchange, (ii) quoted in the NASDAQ National Market
System or Bulletin Board, or (iii) quoted on the over-the-counter marker as
reported by the National Quotation Bureau.
"QUALIFYING PUBLIC OFFERING" means one or a series of firm-commitment
underwritten Public Offerings by the Company whereby the Company and/or one or
more of its Shareholders completes a sale of Common Stock such that the gross
proceeds resulting from such sale exceed Fifteen Million Dollars ($15,000,000)
before deduction of expenses and commissions, and the price per share (before
deduction of expenses and commissions) is not less than three (3) times the then
effective Series A Conversion Price (as defined in the Articles of Amendment
designating the Series A Convertible Preferred Stock).
"REGISTRATION EXPENSES" has the meaning ascribed in Section 4.5 hereof.
"REGISTRABLE SECURITIES" means all shares of Common Stock held by
Investor and issued upon conversion of the Preferred Stock purchased under the
Stock Purchase Agreement, excluding in each case securities which have been (a)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under the
Securities Act.
"RESTRICTIONS TERMINATION DATE" means the first to occur of (a) the
date on which Investor shall first hold less than (i) twenty-five percent (25%)
of the shares of Series A Convertible Preferred Stock issued on the date hereof
or (ii) twenty-five percent (25%) of the shares of Common Stock issued upon
conversion of the Series A Convertible Preferred Stock or (b) the date of
closing of the first Qualified Public Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" has the meaning ascribed in Section 4.5 hereof.
"SERIES A DIRECTOR" means the member of the Board of Directors elected
by the holders of Preferred Stock pursuant to Section 3 hereof.
"SHARES" means and includes as to each Shareholder, all shares of the
capital stock of the Company, including without limitation the Common Stock and
the Preferred Stock, now or in the future owned of record or beneficially by
such Shareholder (including without limitation, all Common Stock, Preferred
Stock, or other securities of the Company hereafter acquired pursuant to the
exercise of any option, warrant, or other right granted by the Company to such
Shareholder), and all securities of the Company that may be issued in exchange
for or in respect of such capital stock or securities (including, without
limitation, all securities issued or resulting from any stock dividend, stock
split, recapitalization, or merger effected by the Company).
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"TRADE SECRET(S)" means information if any form which derives economic
value, actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation:
(a) any useful process, machine, chemical formula, composition of matter, or
other device which: (i) is new or which the Shareholder has a reasonable basis
to believe may be new, (ii) is being used or studied by the Company and is not
described in a patent or in any literature already published and distributed
externally by the Company, and (iii) is not readily ascertainable from
inspection of a product of the Company; (b) any engineering, technical, or
product specifications including those of features used in any current product
of the Company, or to be used, or the use of which is contemplated, in a future
product of the Company; (c) any application, operating system, communication
system, or other computer software (whether in source or object code) and all
flow charts, algorithms, coding sheets, routines, subroutines, compilers,
assemblers, design concepts, test data, documentation, or manuals related
thereto, whether or not copyrighted, patented or patentable, related to or used
in the business of the company; and (d) information concerning the customers,
suppliers, products, pricing strategies of the Company, personnel assignments,
and policies of the Company, or matters concerning the financial affairs and
management of the Company or any parent, subsidiary, or affiliate of the
Company; PROVIDED HOWEVER, that Trade Secrets shall not include any information
that: (A) has been voluntarily disclosed to the public by the Company or has
become generally known to the public (except where such public disclosure has
been made by or through such Shareholder or by a third person or entity with the
knowledge of such Shareholder without authorization by the Company); (B) has
been independently developed and disclosed by parties other than such
Shareholder or the Company, without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the
Company; or (C) otherwise enters the public domain through lawful means.
"VOTING TRUST AGREEMENTS" means those certain Voting Trust Agreements
between Xxxxxxx and each of Greene, Verbrugge, Xxxxxx, and Xxxx, respectively,
each dated March 31, 1997.
SECTION 2. SHARE CONTROL
SECTION 2.1. RESTRICTIONS UPON TRANSFER OF SHARES. At all times prior
to the Restrictions Termination Date, no Shareholder shall make any Disposition
of Shares, except a Permitted Disposition as provided in this Agreement.
SECTION 2.2. RIGHT OF FIRST REFUSAL.
(a) If any Shareholder (other than Investor as to any transfer
after May 13, 1999) (the "Offering Shareholder"), desires to make a
transfer of Shares prior to the Restrictions Termination Date, which is
not a Permitted Disposition until the provisions of this Section 2.2
have been observed, shall receive a bona fide written offer from a
third party that is not a Competitor (the "Proposed Transferee") to
purchase all or part of the Shares then owned by the Offering
Shareholder that the Offering Shareholder desires to accept (an
"Offer"), the Offering Shareholder shall, as a condition precedent to
accepting the Offer, offer to the Company, and each of the other
Shareholders (such other Shareholders are hereinafter collectively
referred to as the "Other Shareholders" and individually as an "Other
Shareholder"), in the manner set forth below, the right to purchase,
individually or in the aggregate, all of the Shares that are the
subject of the Offer for the same price and the same terms as contained
in the Offer.
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(b) Within ten (10) Business Days after receipt of the Offer,
the Offering Shareholder shall notify the Company and each of the Other
Shareholders in writing of the Offer, stating in such notice (the
"Transfer Notice") the details of the Offer, including (i) the name and
address of the Proposed Transferee, (ii) the number of Shares to which
the Offer pertains (the "Offered Shares"), (iii) the price per share
offered by the Proposed Transferee for the Offered Shares (the
"Price"), and (iv) the terms and method of payment. A copy of the Offer
shall be attached to the Transfer Notice. The Transfer Notice shall
constitute an offer (the "Right of First Refusal") by the Offering
Shareholder to sell the Offered Shares to the Company and, if and to
the extent that the Company shall not accept the Right of First
Refusal, to the Other Shareholders at the Price and upon the terms and
conditions set forth in the Transfer Notice, which offer shall be
irrevocable for thirty (30) Business Days (the "Offer Period") from the
date the Transfer Notice is delivered to the Company (the "Commencement
Date"), subject to satisfaction of the conditions specified in Section
2.2(g) hereof.
(c) The Company shall have the first option to purchase all or
any portion of the Offered Shares. If the Company desires to purchase
all or any part of the Offered Shares, the Company shall communicate,
in writing, its election to purchase to the Offering Shareholder, which
communication shall state the number of Offered Shares the Company
desires to purchase and the Price and terms of payment (which shall be
identical to the terms described in the Transfer Notice), and shall be
delivered to the Offering Shareholder at the address set forth in the
Transfer Notice or if no address is set forth in the Transfer Notice,
at the address reflected in the Company's stock transfer records (with
a copy being contemporaneously delivered to each of the Other
Shareholders) within ten (10) Business Days of the Commencement Date
(such ten (10) Business Day period is hereinafter referred to as the
"Company Acceptance Period"). Such communication shall, when taken in
conjunction with the Transfer Notice, be deemed to constitute a valid,
legally binding, and enforceable agreement for the sale and purchase of
all or that portion of the Offered Shares which the Company has so
elected to purchase, subject to satisfaction to the conditions
specified in Section 2.2(g) hereof.
(d) If the Company does not exercise its option to purchase
all of the Offered Shares from the Offering Shareholder within the
Company Acceptance Period, each Other Shareholder shall have an option
to purchase all or any portion of the Offered Shares not purchased by
the Company (the "Remaining Shares"), exercisable by giving written
notice of exercise to the Offering Shareholder, each Other Shareholder,
and the Company. Such written notice shall state the number of
Remaining Shares such Other Shareholder elects to purchase, and shall
be delivered to the Offering Shareholder with a copy delivered
substantially contemporaneously to the Company and to each Other
Shareholder at the addresses reflected in the Company's stock transfer
records within the ten (10) Business Day period which commences on the
first day after the expiration of the Company Acceptance Period (such
ten (10) Business Day period is hereinafter referred to as the
"Shareholder Acceptance Period"). Such communication shall, when taken
in conjunction with the Transfer Notice, be deemed to constitute a
valid, legally binding, and enforceable agreement for the sale and
purchase of all or that portion of the Offered Shares which each such
Other Shareholder has so elected to purchase, subject to the
satisfaction of the conditions specified in Section 2.2(f) of this
Agreement, and to the terms set forth in the remainder of this
paragraph. In the event that more than one Other Shareholder exercises
the right to purchase the Remaining Shares, each Other Shareholder may
only purchase up to such Other Shareholder's pro rata share of the
Remaining Shares (based upon the ratio of the number of Common Stock
Equivalents owned by such exercising Other Shareholder to the number of
Common Stock Equivalents owned by all Other Shareholders).
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(e) If one or more Other Shareholders fails to timely exercise
such Other Shareholder's option to purchase the full pro rata share of
Offered Shares to which such Other Shareholder is entitled within the
Shareholder Acceptance Period, the Other Shareholders which did
exercise their respective options to purchase the full pro rata share
of Remaining Shares (an "Eligible Other Shareholder") shall have an
option to purchase that portion of the Remaining Shares which remain
available for purchase (the "Available Shares"), exercisable by giving
written notice of exercise to the Offering Shareholder, each Eligible
Other Shareholder, and the Company. Such written notice shall state the
number of Available Shares such Eligible Other Shareholder elects to
purchase, and shall be delivered to the Offering Shareholder with a
copy delivered substantially contemporaneously to the Company and to
each Eligible Other Shareholder at the addresses reflected in the
Company's stock transfer records within the five (5) Business Day
period which commences on the first day after the expiration of the
Shareholder Acceptance Period (such five (5) Business Day period is
hereinafter referred to as the "Overallotment Acceptance Period") Each
Eligible Other Shareholder may purchase a pro rata share of the
Available Shares (based upon the ratio of the number of Common Stock
Equivalents owned by each Eligible Other Shareholder to the number of
Common Stock Equivalents owned by all Eligible Other Shareholders).
This method of allocation shall continue to apply to options to
purchase all of the Available Shares until the first to occur of the
following: (i) all options have been exercised by one or more Eligible
Other Shareholders (which exercises shall constitute the valid, legally
binding, and enforceable agreement as provided above), (ii) the
Eligible Other Shareholders elect not to exercise their rights to
purchase any additional Available Shares, or (iii) the Overallotment
Acceptance Period expires.
(f) The closing of the purchase of any Offered Shares by the
Company, any Remaining Shares by the Other Shareholders, and any
Available Shares by the Eligible Other Shareholders (as the case may
be) shall be held at the principal office of the Company. The Company
shall designate a closing date and time, which date shall be later than
thirty (30) Business Days after the date of the Transfer Notice or such
other date as may be agreed upon by the Company (after consultation
with any Other Shareholder who has exercised such Other Shareholder's
option to purchase Remaining Shares or Available Shares) and the
Offering Shareholder (such date is hereinafter the "Share Transfer
Date"). At the closing, the Offering Shareholder shall deliver
certificates duly endorsed or accompanied by duly executed stock powers
for the Offered Shares being purchased pursuant to this Section 2.2 and
shall transfer the Offered Shares being purchased pursuant to this
Section 2.2 to the purchasers thereof, free and clear of all liens,
claims, charges, or encumbrances, against payment for the Offered
Shares in accordance with the terms of the Transfer Notice. If the
Company shall be the purchaser of any of the Offered Shares, the
Company shall have the right to set off against any payment made to the
Offering Shareholder by the Company in respect of such Offered Shares
the amount by which the Offering Shareholder is then indebted to the
Company.
(g) Notwithstanding the foregoing, if the Right of First
Refusal is not exercised with respect to all of the Offered Shares (i)
on or before the expiration of the Overallotment Acceptance Period, or
(ii) if the Company and the Other Shareholders do not purchase all of
the Offered Shares on the Share Transfer Date, then the Offering
Shareholder shall be under no obligation to sell any Offered Shares to
the Company or the Other Shareholders, and the Offered Shares may be
sold by the Offering Shareholder to the Proposed Transferee at any time
during a thirty (30) Business Day period which commences the day after
(x) the expiration of the Offer Period (if the condition in clause (i)
of this subparagraph (g) is not satisfied) or (y) the Share Transfer
Date (if the condition in clause (i) of this subparagraph (g) is
satisfied but the condition
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in clause (ii) of this subparagraph (g) is not satisfied (such thirty
(30) Business Day Period is hereinafter referred to as the "Free
Transfer Period"). Any such sale shall be only to the Proposed
Transferee at not less than the Price and upon other terms and
conditions not more favorable to the Proposed Transferee than those
specified in the Transfer Notice. No transfer of the Offered Shares or
any portion thereof shall be made to any Competitor.
(h) As a condition precedent to the sale and transfer of any
Offered Shares by the Offering Shareholder, the Offering Shareholder
shall obtain (i) the written agreement of the Proposed Transferee that
the Proposed Transferee will be bound by, and that the Offered Shares
transferred to the Proposed Transferee will be subject to, this
Agreement as provided in Section 2.1 above, except that,
notwithstanding any other provision of this Agreement, the Proposed
Transferee shall not be subject to Section 2.4 of this Agreement and
(ii) (unless waived by the Company) an opinion of counsel, satisfactory
to the Company, that such transfer of interest does not require
registration under the Securities Act, and any applicable state
securities laws. The Company shall not give effect on its books to any
transfer or purported transfer of Offered Shares held or owned by any
Offering Shareholder to the Proposed Transferee unless each and all of
the conditions hereof effecting such transfer shall have been
satisfied. If the transfer by the Offering Shareholder to the Proposed
Transferee of that portion of the Offered Shares as to which the Right
of First Refusal has not been exercised and consummated, is not made
within the Free Transfer Period, the right to transfer in accordance
with this Section 2.2 shall expire. In such event, the restrictions of
this Section 2.2 shall be reinstated as to all Shares which have not
been so transferred, and any subsequent transfer of such Shares,
whether or not to the same Proposed Transferee, must be made strictly
in compliance with the provisions of this Section 2.2.
SECTION 2.3. FAILURE TO DELIVER SHARES TO THE COMPANY. If a Shareholder
becomes obligated to sell any Shares to the Company or to the Other Shareholders
under this Agreement (the "Obligated Shareholder") and fails to deliver such
Shares in accordance with the terms of this Agreement, the Company or such Other
Shareholder may, in addition to all other remedies it may have, tender to the
Obligated Shareholder, at the address set forth in the stock transfer records of
the Company, the purchase price for such Offered Shares as is herein specified,
and (i) in the case of shares to be sold to the Company pursuant to this
Agreement, cancel such shares on its books and records whereupon all of the
Obligated Shareholder's right, title, and interest in and to such Shares shall
terminate, (ii) in the case of Shares to be sold to an Other Shareholder under
this Agreement, issue certificates representing such shares to the Other
Shareholder and register the Other Shareholder on its Company's books and
records as the record owner of the shares whereupon all of the Obligated
Shareholder's right, title, and interest in and to such shares shall terminate.
SECTION 2.4. CO-SALE RIGHTS.
(a) If at any time prior to the Restrictions Termination Date
a Shareholder proposes to effect a Disposition of any or all of the
Shares owned by such Shareholder to a third party (such transferee for
purposes of this Section 2.4 is referred to as the "Transferee") other
than a transaction described in paragraphs(a), (c) and (d) of the
definition "Permitted Disposition," and such Shareholder shall have
complied with the provisions of Section 2.2 hereof (for the purposes of
this Section 2.4, such Shares to be sold are hereinafter referred to as
the "Transfer Shares"), such Shareholder shall require the Transferee,
as a condition precedent to the consummation of the sale or disposition
of the Transfer Shares of such Shareholder to the Transferee, to offer
to acquire from Investor on the same terms as the proposed sale or
disposition from Shareholder a number of Common Stock Equivalents equal
to the product of (i) the number of Common Stock
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Equivalents owned of record by Investor MULTIPLIED BY (ii) a fraction,
the numerator of which is the number of Transfer Shares such
Shareholder proposes to sell or otherwise dispose of to the Transferee,
and the denominator of which is the total number of Common Stock
Equivalents owned beneficially and of record by such Shareholder and
Investor (for the purposes of this Section 2.4, such number of Common
Stock Equivalents is hereinafter referred to as the "Allocation
Shares").
(b) Such Shareholder shall give written notice (for the
purposes of this Section 2.4, the "Co-Sale Notice") to Investor which
shall describe fully the terms of the proposed sale or disposition, the
number of Transfer Shares to be sold or otherwise disposed of, and the
number of Allocation Shares of Investor eligible for co-sale, the name
and address of the Transferee or the Company, as applicable, and the
proposed closing date of the purchase and sale. The Co-Sale Notice
shall be signed by such Shareholder and by the Transferee or the
Company, as applicable, and shall be an irrevocable offer, open for
fifteen (15) days after receipt, to Investor to acquire, as provided
above, all Allocation Shares. Investor shall have fifteen (15) days
after receipt of the Co-Sale Notice to accept such offer as to all or a
portion of the Allocation Shares and notify the Transferee and such
Shareholder in writing of the number of Allocation Shares, if any,
Investor wishes to sell to the Transferee. Such Shareholder may not
consummate the proposed sale or disposition to the Transferee unless
(x) the sale of Allocation Shares pursuant to the co-sale right of
Investor (but only if an Investor timely accepts the offer of such
Shareholder and the Transferee) is consummated; (y) an Investor waives
the right of co-sale as to all or part of the Allocation Shares; or (z)
the irrevocable offer expires without acceptance by an Investor after
the fifteen (15) day period.
SECTION 3. GOVERNANCE PROVISIONS
SECTION 3.1. ELECTION OF DIRECTORS. At all times prior to the
Restrictions Termination Date, each Shareholder agrees to:
(a) Vote all Shares the voting of which is under the
control of such Shareholder to:
(i) maintain a Board of Directors consisting of
five (5) members;
(ii) cause one (1) person designated as the
Series A Director and nominated by the Investor to be elected
as directors of the Company;
(iii) cause two (2) persons designated in writing
by the Management Shareholders (the "Management Shareholder
Nominees") to be elected as directors of the Company; and
(iv) cause two (2) persons, each of whom either
meet the definition of "non-employee director" as defined in
Rule 16b-3 of the Securities Exchange Act of 1934 and is not
an "interested person" of the Investor as defined in Section
2(a)(19) of the Investment Company Act of 1940 OR would
otherwise be qualified to serve on the Audit Committee of the
Company if the Company were listed on the New York Stock
Exchange (the "Outside Nominees"), designated in writing by
the Management Shareholder Nominees and approved by the Series
A Director, such approval not to be unreasonably withheld or
delayed.
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(b) As of the date hereof, the Investor Nominee is Xxxxxxx X.
Xxxxxxx; the Management Shareholder Nominees are Xxxxxxx and X. Xxxxxxx
and the Outside Nominees are Xxxxxx and Xxxxxxxxx. These designations
shall remain in effect until a new designation is delivered in writing
to the Company and each party to this Agreement. A new designation
shall be effective when delivered. The Company will use reasonable
efforts to notify all Shareholders at least three (3) days prior to any
meeting (or written action in lieu of a meeting) of the Shareholders at
or by which directors are to be elected, if the director nominees will
change from the nominees designated in this Section 3.1(b).
(c) In the event that any of the Series A Director, and the
Management Shareholder Nominees, shall cease to serve as a director of
the Company for any reason, Investor, or the Management Shareholders,
as applicable, shall have the right to appoint a successor nominee. If
any Outside Nominee shall cease to serve as a director of the Company
for any reason, the Management Shareholder Nominees, with the approval
of the Series A Director, such approval not to be unreasonably withheld
or delayed, shall appoint a successor nominee who meets the eligibility
criteria set forth in Section 3.1(a)(iv) hereof. The Shareholders shall
use their best efforts to ensure that such successor nominee is duly
appointed and elected to fill such vacancy in the manner provided in
the Bylaws of the Company.
(d) Each director shall be entitled to one (1) vote on each
matter on which the Board of Directors takes action.
SECTION 3.2. RIGHT TO PURCHASE NEW SECURITIES. The Company hereby
grants to Investor the right to purchase a pro rata share of any New Securities,
as hereinafter defined, which the Company may, at any time prior to the
Restrictions Termination Date, propose to sell and issue (the "Purchase Right").
A pro rata share, for purposes of this Purchase Right, is a fraction, the
numerator of which is the number of Common Stock Equivalents then held by
Investor, and the denominator of which is the total number of Common Stock
Equivalents then outstanding.
(a) Except as set forth below, "New Securities" means any
shares of capital stock of the Company including Common Stock, whether
now or hereafter authorized, and any rights, options, or warrants to
purchase said shares of capital stock, and any securities of any type
that are, or may become, convertible into said shares of capital stock.
Notwithstanding the foregoing, "New Securities" does not include: (i)
securities offered to the public generally pursuant to a registration
statement filed pursuant to the Securities Act, or pursuant to
Regulation A under the Securities Act; (ii) securities issued pursuant
to any merger or share exchange in which the Company is the survivor or
parent, or pursuant to the purchase of substantially all of the assets
of another person; (iii) shares of Common Stock or related options
convertible into such Common Stock issued to employees, officers, and
directors of the Company pursuant to any plan or arrangement approved
by the Board of Directors, (including options outstanding on the date
hereof) as adjusted for stock splits, stock dividends, and similar
transactions; (iv) securities issued pursuant to any rights or
agreements including without limitation convertible securities,
options, and warrants, provided that the Purchase Right under this
Section 3.2 applies with respect to the initial sale of New Securities
or the grant by the Company of such rights or agreements; (v)
securities issued in connection with any stock split, stock dividend,
or recapitalization by the Company; and (vi) securities issuable to CNL
pursuant to that certain Stock Purchase and Stock Option Agreement
dated January 15, 1998 between the Company and CNL (the "CNL
Agreement").
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(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give Investor written notice of its
intention, describing the type of New Securities and the price and
terms upon which the Company proposes to issue the New Securities.
Investor shall have fifteen (15) days from the date of receipt of any
such notice to agree to purchase up to its respective pro rata portion
of shares of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company of
Investor's intentions, and stating therein the quantity of New
Securities to be purchased by Investor. Investor shall have fifteen
(15) days to complete the purchase. If Investor fails to close such
purchase within the fifteen (15) day period, Investor shall have
forfeited Investor's right to buy a pro-rata share of that particular
issuance of New Securities.
(c) In the event Investor fails to exercise the Purchase Right
as provided herein within said fifteen (15) day period, the Company
shall have ninety (90) days thereafter to sell or enter into a written
agreement (pursuant to which the sale of New Securities covered thereby
shall be completed, if at all, within sixty (60) days from the date of
said agreement) to sell the New Securities not elected to be purchased
by Investor at a price and upon such terms which are no more favorable
to the purchaser of such New Securities than specified in the Company's
notice to Investor. In the event the Company has not sold the New
Securities or entered into a written agreement to sell the New
Securities within said ninety (90) day period (or completed the sale of
the New Securities within sixty (60) days from the date of said
agreement, as provided above), the Company shall not thereafter issue
or sell any New Securities without first offering such securities in
the manner provided in this Section 3.2.
SECTION 3.3. VOTING AGREEMENT. The holders of the then outstanding
shares of Series A Convertible Preferred Stock will not withhold their approval
of any merger ("Business Combination") and shall vote as a class in favor of
such Business Combination, if (A) such Business Combination receives the
approval of the holders of a majority of the outstanding shares of Common Stock,
the holders of Series A Convertible voting with the holders of Common Stock (as
if that all Series A Convertible Preferred Stock were fully converted) and (B)
all Merger Consideration (as such term is defined below) is distributed pro-rata
(other than as may be necessary under Section 2D of the Amended and Restated
Articles of Incorporation of the Company, as amended, to pay to holders of
Series A Convertible Preferred Stock the full amount of the "Senior Liquidation
Payments" to which such holders are entitled) to all Shareholders. As used
herein "Merger Consideration" means all consideration (i) distributed to
Shareholders and (ii) paid to Shareholders of the Corporation in respect of a
Business Combination (including, without limitation, amounts paid in respect of
noncompetition covenants), required by the terms of the Business Combination to
be held in escrow, or is otherwise not immediately available for distribution to
Shareholders (including, without limitation, (x) amounts payable in conjunction
with any "earn-out" or other type of contingent consideration based in whole or
in part upon future performance, and (y) amounts payable pursuant to promissory
notes or other forms of seller financing) and all amounts paid to Shareholders
for consulting services, transition bonuses, stay-on bonuses, excluding,
however, amounts paid to Shareholders that are not in excess of reasonable
compensation for services actually performed for the surviving entity in the
Business Combination by such Shareholder.
SECTION 4. REGISTRATION RIGHTS.
SECTION 4.1. DEMAND REGISTRATION. At any time following a Public
Offering, Investor may request the Company to register under the Securities Act
not less than forty percent (40%) of all shares of Registrable Securities then
held by Investor for sale in the manner specified in such notice.
Notwithstanding anything to the contrary contained herein, no request may be
made under this
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Section 4.1 within six months after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which Investor shall have been entitled to join pursuant to Section
4.2 hereof, and in which there shall have been effectively registered all shares
of Registrable Securities as to which registration shall have been requested by
Investor and permitted by the managing underwriter. If the Company receives a
notice from Investor that imposes on the Company the registration obligations of
this Section 4.1, and if, in the reasonable opinion of the Board of Directors of
the Company the general market conditions are not appropriate at the time for an
offering, the Company may, at its option, delay the commencement of the
performance of the Company's obligation pursuant to this Section 4.1 for up to
one hundred twenty (120) days. If Investor specifies in the notice, that the
method of disposition of the Registrable Securities shall be an underwritten
public offering, Investor may designate the managing underwriter of such
offering, subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed. The Company shall be obligated to prepare and
file a registration statement with respect to Registrable Securities pursuant to
this Section 4.1 on one occasion only PROVIDED HOWEVER, that such obligation
shall be deemed satisfied only when a registration statement covering shares of
Registrable Securities, for sale in accordance with the method of disposition
specified by the requesting Investor, shall have become effective (or is in a
position to be declared effective but for Investor's election not to proceed
with the contemplated offering). The Company shall be entitled to include in any
registration statement referred to in this Section 4.1 for sale in accordance
with the method of disposition specified by Investor, shares of Common Stock to
be sold by the Company for its own account and for the accounts of other holders
of Common Stock, except as and to the extent that in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten public
offering), such inclusion would adversely affect the marketing of the
Registrable Securities to be sold. Except for registration statements on Forms
S-4 or S-8, or any successor thereto, the Company will not file with the
Commission any other registration statement with respect to its Common Stock,
whether for its own account or that of other shareholders, from the date of
receipt of a notice from Investor pursuant to this Section 4.1 until the
completion of the period of distribution of the registration contemplated
thereby (determined as provided in Section 4.3 hereof, but in no event to exceed
ninety (90) days following the effective date of the applicable registration
statement).
SECTION 4.2. PIGGYBACK REGISTRATION. At any time following a Public
Offering, if the Company at any time proposes to register any Common Stock under
the Securities Act for sale to the public, whether for its own account or for
the account of other security holders or both (except with respect to
registration statements on Forms S-4 or S-8 or another form not available for
registering the Registrable Securities for sale to the public), each such time
it will give written notice to Investor of its intention so to do. Upon the
written request of an Investor received by the Company within 10 days after the
giving of any such notice by the Company, to register such number of shares of
Registrable Securities held by Investor (or by persons taking from Investor
pursuant to a Permitted Disposition) specified in such written request, the
Company will cause the Registrable Securities as to which registration shall
have been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by Investor (in accordance
with its written request) of such Registrable Securities so registered. In the
event that any registration pursuant to this Section 4.2 shall be, in whole or
in part, an underwritten public offering of Common Stock, the number of shares
of Registrable Securities to be included in such an underwriting may be reduced
if and to the extent that the managing underwriter shall be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein. In the event such a reduction is necessary, the
reduction shall be borne first by holders of Registrable Securities who are not
Investor, and if a further reduction is necessary in the judgment of the
managing underwriter, then, Investor proposing to sell Registrable Securities in
the offering shall bear the reduction on a pro-rata basis, based on the number
of shares of Registrable Securities that Investor
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proposed to offer for sale in the Offering, or if Investor holds a majority of
the shares of Registrable Securities that Investor may elect to withdraw from
such registration all shares of Registrable Securities held by Investor as to
which registration was requested. Notwithstanding the foregoing provisions, the
Company may for any reason and without the consent of Investor withdraw any
registration statement referred to in this Section 4.2 without thereby incurring
any liability to Investor.
SECTION 4.3. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 4.1 or 4.2 hereof to use its best efforts
to effect the registration of any shares of Registrable Securities under the
Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering
pursuant to Section 4.1 or 4.2 hereof, shall be on Form S-1, Form X-0,
Xxxx X-0, any successor forms thereto, or other form of general
applicability satisfactory to the managing underwriter selected as
herein provided) with respect to such securities and use its best
efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period of distribution and comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement in
accordance with the intended method of disposition set forth in such
registration statement for such period;
(c) furnish to each Shareholder and to each underwriter such
number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale
or other disposition of the Registrable Securities covered by such
registration statement;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the
Shareholders, or, in the case of an underwritten public offering, the
managing underwriter reasonably shall request, PROVIDED HOWEVER, that
the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;
(e) use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange or
NASDAQ on which the Common Stock of the Company is then listed or
quoted;
(f) notify each selling Shareholder at any time when a
prospectus relating to Registrable Securities is required to be
delivered under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the
request of any such Shareholder, the Company will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
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(g) notify the selling Shareholders immediately, and confirm
the notice in writing, (1) when the registration statement becomes
effective, (2) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceedings for that
purpose, (3) of the receipt by the Company of any notification with
respect to the suspension of qualification of the Restricted Stock for
sale in any jurisdiction or of the initiation, or the threatening, of
any proceedings for that purpose, and (4) of the receipt of any
comments, or requests for additional information, from the Commission
or any state regulatory authority. If the Commission or any state
regulatory authority shall enter such a stop order or order suspending
qualification at any time, the Company will promptly use its best
reasonable efforts to obtain the lifting of such order; and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering a period of at
least twelve (12) months beginning after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Registrable Securities in any
other registration shall be deemed to extend until the earlier of the sale of
all Registrable Securities covered thereby or 180 days after the effective date
thereof.
In connection with each registration hereunder, each Shareholder will
furnish to the Company in writing such information with respect to it as a
shareholder as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 4.1 or 4.2
hereof covering an underwritten public offering, the Company and each
Shareholder agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of the Company's size and
investment stature.
SECTION 4.4. EXPENSES. All reasonable expenses incurred by the Company
in complying with Section 4.1 or 4.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and in
the case of Section 4.1 the reasonable fees and disbursements of one counsel for
the sellers of Restricted Stock , but excluding any Selling Expenses, are called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are called "Selling Expenses."
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(a) The Company shall pay all Registration Expenses
attributable to the shares of Restricted Stock of Shareholders included
in the Registration in connection with each registration statement
under Section 4.1 or 4.2 hereof.
(b) All Selling Expenses in connection with each registration
statement under Section 4.1 or 4.2 hereof shall be borne by Investor
and any other selling shareholder in proportion to the number of shares
sold by Investor or by such other selling shareholders.
SECTION 4.5. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 4.1 or 4.2
hereof, the Company will indemnify and hold harmless Investor, its
directors and its officers (provided Investor is a seller of
Registrable Securities thereunder), each underwriter of such
Registrable Securities thereunder, and each other person, if any, who
controls Investor, its directors and its officers or underwriter within
the meaning of the Securities Act, against any losses, claims, damages,
or liabilities, joint or several, to which Investor, its directors and
officers, such underwriter or such person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which any
shares of Registrable Securities were registered under the Securities
Act pursuant to Section 4.1, 4.2, or 4.3 hereof, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse
Investor, its directors and officers, each such underwriter and each
such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage, or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by an Investor, its directors and its officers, such
underwriter and such controlling person in writing specifically for use
in such registration statement or prospectus.
(b) In the event of a registration of any of the shares of
Registrable Securities under the Securities Act pursuant to Section 4.1
or 4.2 hereof, Investor including Shares of Registrable Securities in
such registration, severally but not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company,
each underwriter, and each person who controls any underwriter within
the meaning of the Securities Act, against all losses, claims, damages,
or liabilities, joint or several, to which the person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
under which any shares of Registrable Securities were registered under
the Securities Act pursuant to Section 4.1 or 4.2 hereof, any
preliminary prospectus, or final prospectus contained therein, or any
amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such
officer, director, underwriter, and controlling person for any legal or
other expenses
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reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action, PROVIDED,
HOWEVER, that Investor will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to Investor, as such,
respectively, furnished in writing to the Company by Investor
specifically for use in such registration statement or prospectus, and
PROVIDED, FURTHER, HOWEVER, that the respective liability of an
Investor hereunder shall be limited to the proportion of any such loss,
claim, damage, liability, or expense which is equal to the proportion
that the public offering price of the shares sold by Investor, under
such registration statement bears to the total public offering price of
all securities sold thereunder, but not in any event to exceed the
proceeds received by an Investor from the sale of shares of Registrable
Securities or covered by such registration statement. In no event will
any Shareholder be required to enter into any agreement or undertaking
in connection with any registration under this Agreement providing for
any indemnification or contribution obligation on the part of Investor
greater than Investor's obligation under this Section 4.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing
thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified
party other than under this Section 5 and shall only relieve it from
any liability which it may have to such indemnified party under this
Section 5 if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 4.6 for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, PROVIDED, HOWEVER, that, if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be
deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and
to assume such legal defenses and otherwise to participate in the
defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which
indemnification is unavailable to any indemnified party then, and in
each such case, the intended indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities, in such proportion as is
appropriate to reflect the relative fault of the intended indemnifying
party on the one hand and of the indemnified parties on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the intended
indemnifying party and of the indemnified parties shall be determined
by reference to, among other things, whether the untrue
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or alleged untrue statement of a material fact or the omission to state
a material fact relates to information supplied by the intended
indemnifying party, or by the indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or present such statement or omission. The Company and Investor
agree that it would not be just and equitable if contribution pursuant
to this Section 4.6(d) were determined by pro rata allocation or by any
other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding
paragraph, PROVIDED HOWEVER, that (i) Investor shall not be required to
contribute any amounts in excess of the limitations in Section 4.6(b)
and (ii) no person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 4.6. CHANGES IN COMMON STOCK. If, and as often as, there is any
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the registration rights granted in this Section 4
shall continue with respect to the Common Stock as so changed.
SECTION 4.7. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, at all times after ninety (90) days after any registration
statement covering a Public Offering shall have become effective (provided that
the public offering, contemplated thereby is in fact consummated), the Company
agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(c) furnish to Investor holding Registrable Securities
forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports as an
Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing Investor to sell any Registrable
Securities without registration.
SECTION 4.8. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Corporation to register securities granted the Investor under Section 4 hereof
may be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities or Preferred Stock provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, and (ii) such assignee or transferee acquires at least one-half of the
shares of Registrable Securities or Preferred Stock (appropriately adjusted for
stock split or recapitalization) then held by such Investor. Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned to any shareholder, partner, or affiliate of an Investor without
compliance with item (ii) above, provided written notice thereof is promptly
given to the Company.
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SECTION 4.9. STANDOFF AGREEMENT.
(a) Management Shareholders agree, so long as Management
Shareholders in the aggregate, hold at least five percent (5%) of the
outstanding Common Stock, in connection with the Company's initial
Public Offering, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, not to
sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of any Common Stock (other than those included
in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not
to exceed ninety (90) days from the effective date of such
registration) as may be requested by the underwriters.
(b) Investor agrees, so long as Investor holds at least five
percent (5%) of the outstanding Common Stock, in connection with the
Company's initial public offering, upon request of the Company or the
underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed ninety (90) days from the
effective date of such registration) as may be requested by the
underwriters.
SECTION 5. GENERAL PROVISIONS
SECTION 5.1. TERM. This Agreement shall terminate and be of no force
and effect, unless extended as provided herein, upon the first to occur of (a)
the passage of ten (10) years from the date of this Agreement or (b) the
effective date of a written agreement signed by all of the parties hereto
providing for the termination of this Agreement.
SECTION 5.2. PARTIAL TERMINATION UPON QUALIFIED PUBLIC OFFERING. The
restrictions in Sections 2.1, 2.2, and 2.4, and Section 3 shall terminate upon
the Restriction Termination Date.
SECTION 5.3. LEGEND. During the term of this Agreement, each
certificate representing the Shares shall bear the following legend, or a
similar legend deemed by the Company to constitute an appropriate notice of the
provisions hereof and the applicable security laws (any such certificate not
having such legend shall be surrendered upon demand by the Company and so
endorsed):
On the face of the certificate:
"TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS
PRINTED ON THE REVERSE OF THIS CERTIFICATE."
On the reverse:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN SHAREHOLDER AGREEMENT
BY AND AMONG NFRONT, INC. (ISSUER) (THE "COMPANY") AND CERTAIN
SHAREHOLDERS THEREOF, DATED MAY 13, 1998 A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE COMPANY AND MAY BE INSPECTED DURING NORMAL
BUSINESS HOURS. NO TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY
MAY BE MADE EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF
SAID AGREEMENT. BY ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER,
TRANSFEREE OR PLEDGEE HEREOF AGREES TO BE BOUND BY ALL OF THE
PROVISIONS OF SAID AGREEMENT."
"SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY
THE HOLDER FOR INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR
DISTRIBUTION, HAVE BEEN
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ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
APPLICABLE STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE OFFERED
FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE
REGISTRATION UNDER SUCH LAWS, OR IN TRANSACTIONS OTHERWISE IN
COMPLIANCE WITH OR EXEMPT FROM SUCH LAWS, AND UPON EVIDENCE
SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH OR EXEMPTION FROM SUCH
LAWS, AS TO WHICH THE COMPANY MAY RELY UPON AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY."
Each Shareholder shall promptly surrender the certificates representing
his/her Shares to the Company so that the Company may affix the foregoing
legends thereto. A copy of this Agreement shall be kept on file in the principal
office of the Company. Upon termination of all applicable restrictions set forth
herein and upon tender to the Company of the appropriate stock certificates, the
Company shall reissue to the holder of such stock certificates new stock
certificates which shall contain only the second paragraph of the restrictive
legend set forth above. The parties to this Agreement intend that the legend
conform to the applicable provisions of the Georgia Business Corporation Code.
This legend may be modified from time to time by the Board of Directors of the
Company to conform to such statutes or to this Agreement.
SECTION 5.4. WAIVER OF PRE-EMPTIVE RIGHTS; PRIOR AGREEMENTS.
(a) All Shareholders other than the Investor hereby
irrevocably waive any pre-emptive or other rights, including, without
limitation, any rights of first refusal or similar rights any of them
have or may have with respect to the issuance of the Preferred Stock
(b) Each of the Shareholders who are parties to the Prior
Agreements hereby acknowledge that the Prior Agreements remain
unaffected by the execution and delivery of the Stock Purchase
Agreement and this Agreement, except that, with respect to the Existing
Shareholders' Agreements, the provisions of Section 2 of each such
Existing Shareholders' Agreements shall be superseded only to the
extent that such transfer is a "Permitted Transfer" (as defined in the
Existing Shareholders' Agreements) by the provisions of Section 2 of
this Agreement until the earlier of the Restrictions Termination Date
or the termination of this Agreement, at which time all of the
provisions of Section 2 of each of the Existing Shareholders'
Agreements shall again be effective. In the event of any conflict
between the Prior Agreements and the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall control.
SECTION 5.5. PROPRIETARY INFORMATION.
(a) Each Shareholder acknowledges and agrees that all
Proprietary Information, and all physical embodiments thereof, are
confidential to and shall be and remain the sole and exclusive property
of the Company and that any Proprietary Information produced by the
Shareholder during the period of the Shareholder's employment by the
Company shall be considered "work for hire" as such term is defined in
17 U.S.C. Section 101, et. seq., the ownership and, if applicable, the
copyright of which shall be vested solely in the Company. Each
Shareholder agrees (i) immediately to disclose to the Company all
Proprietary Information developed in whole or part by such Shareholder
during the term of such Shareholder's employment by the Company, and
(ii) at the request and expense of the Company, to do all things and
sign all documents or instruments reasonably necessary in the opinion
of the Company to eliminate any ambiguity as to the exclusive rights of
the Company in such Proprietary Information including, without
limitation, providing to the Company such Shareholder's full
cooperation in any litigation or other proceeding to establish,
protect, or obtain such exclusive rights. Upon request by the Company,
and in any event upon termination of employment, or
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cessation of ownership of Shares, as the case may be, such Shareholder
shall promptly deliver to the Company, and shall not retain or transmit
to any other party or parties, all property belonging to the Company
including, without limitation, all Proprietary Information (and all
embodiments thereof) then in such Shareholder's custody, control, or
possession.
(b) Each Shareholder agrees that all Proprietary Information
received or developed by such Shareholder as a result of such
Shareholder's employment or association with the Company will be held
in trust and kept in the strictest confidence, that such Shareholder
will protect such Proprietary Information from disclosure, and that
such Shareholder will not use, reproduce, distribute, disclose, or
otherwise disseminate, by electronic or other means, the Proprietary
Information or any physical embodiments thereof, except in connection
with such Shareholder's employment hereunder, without the Company's
prior written consent. The obligations of confidentiality contained in
this Agreement with respect to all Proprietary Information will apply
during such Shareholder's employment by the Company, or cessation of
ownership of Shares, as the case may be, and at any and all times after
expiration or termination (for whatever reason) of such or ownership.
(c) In the event of final adjudication of a breach or
contemplated breach of the covenants and agreements set forth in
subsections (a) and (b) above, the Company shall have the right, in
addition to all other rights or remedies available to it at law or in
equity, to set off against and deduct from any monies then payable or
thereafter to become payable to the breaching Shareholder pursuant to
Section 2 hereof, the amount of any damages suffered or incurred by the
Company as a result of such breach. In addition, the Company shall be
entitled to preliminary and permanent injunctive relief against the
breaching Shareholder to prevent or enjoin an actual or threatened
breach of such covenants and agreements or the continuation thereof by
such Shareholder.
SECTION 5.6. EXTENSION OF TERM. This Agreement may be extended for
additional ten (10) year periods if all Shareholders bound by this Agreement at
the time of the extension so agree in writing.
SECTION 5.7. CONTINUATION OF EMPLOYMENT. Nothing in this Agreement
shall create an obligation on the Company to continue the employment of a
Shareholder with the Company or any Affiliate of the Company.
SECTION 5.8. SPECIFIC ENFORCEMENT. The Shareholders expressly agree
that they will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Shareholder, any other Shareholder shall, in
addition to all other remedies available with respect to such breach, be
entitled to a temporary or permanent injunction, without showing any actual
damage, and/or a decree for specific performance, in accordance with the
provisions hereof.
SECTION 5.9. NOTICES. All notices, requests, consents, and other
communications required or permitted hereunder shall be in writing and shall be
effective when delivered in person or by "confirmed" facsimile transmission or
one day after deposit with a nationally recognized overnight delivery carrier
properly addressed and deposited prior to the applicable deadline for receipt of
overnight packages, or five days after deposit in the U.S. Mail, certified or
registered mail, return receipt requested, postage prepaid, in each case
addressed as follows (or at such other address for the parties as shall be
specified by like notice):
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(a) if to the Company:
nFront, Inc.
0000 Xxxxxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
(b) if to a Shareholder other than NMP, such Shareholder's
address as reflected in the stock records of the Company or as such
Shareholder shall designate to the Company in writing.
(c) if to NMP:
Noro-Xxxxxxx Partners, IV, L.P.
0 Xxxxx Xxxxxxx Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Law Group LLC
000 Xxx Xxxx Xxx Xxxxxx
0000 Xxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx XX, Esq.
Facsimile: (000) 000-0000
SECTION 5.10. ASSIGNMENT. This Agreement shall not be assignable by any
of the parties hereto without the written consent of the other parties.
SECTION 5.11. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Georgia,
irrespective of the choice of law provisions thereof. The parties agree that any
appropriate state court located in Xxxxxx County, Georgia, or any Federal Court
located in the Northern District of Georgia-Atlanta Division, shall have
exclusive jurisdiction of any case or controversy arising under or in connection
with this Agreement and shall be a proper forum in which to adjudicate such case
or controversy. The parties consent to the jurisdiction of such courts.
SECTION 5.12. AMENDMENT. Except as otherwise provided herein, this
Agreement may be amended, supplemented, or interpreted at any time, but only by
a written instrument executed by the
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Company, the Investor, and Shareholders holding at least sixty-seven percent
(67%) of the Shares held by such Shareholders in the aggregate.
SECTION 5.13. FACSIMILE SIGNATURE; COUNTERPARTS. This Agreement may be
executed by facsimile signature and in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
SECTION 5.14. ENTIRE AGREEMENT. Subject to Section 5.4 hereof with
regard to the Prior Agreements, this Agreement, together with other documents
delivered pursuant hereto or incorporated by reference herein, contain the
entire agreement between the parties hereto concerning the transactions
contemplated herein and supersede all prior agreements or understandings between
the parties hereto relating to the subject matter hereof. No oral
representation, agreement, or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto.
SECTION 5.15. EFFECT OF OTHER LAWS AND AGREEMENTS. The rights and
obligations of the parties under this Agreement shall be subject to any
restrictions on the purchase of stock which may be imposed by the Georgia
Business Corporation Code or any agreement now or hereafter entered into between
the Company and any financial institution with respect to loans or other
financial accommodations made to the Company. Nothing contained herein shall be
deemed to limit the obligations and duties imposed upon officers and directors
in accordance with state and federal laws.
SECTION 5.16. FURTHER ASSURANCE. Each party hereto shall do and
perform, or cause to be done and performed, all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 5.17. CAPTIONS AND SECTION HEADINGS. Except as used in Section
1, captions and section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing it.
SECTION 5.18. WAIVER. Any waiver by any party hereto of any of his or
its rights hereunder shall be without prejudice of his or its future assertion
of any such rights, and any delay in exercising any rights shall not operate as
a waiver thereof.
SECTION 5.19. SEVERABILITY OF PROVISIONS. If any one or more of the
provisions of this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provision of this Agreement shall not be impaired in any way.
SECTION 5.20. SPECIFIC PERFORMANCE. In any action or proceeding to
specifically enforce the provisions of this Agreement, any person (including the
Company) against whom such action or proceeding is brought hereby waives the
claim or defense therein that the plaintiff or claimant has an adequate remedy
at law, and such person shall not urge in any such action or proceeding the
claim or defense that such remedy at law exists. The provisions of this
paragraph shall not prevent any party from seeking a remedy at law in connection
with any breach of this Agreement.
SECTION 5.21. SHAREHOLDER OBLIGATIONS. The obligations of the
Shareholders hereunder are several and not joint.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
nFront, Inc.
By: /s/ Xxxxx X. Xxxxxxx III
------------------------------------------------------
Xxxxx X. Xxxxxxx, III, President
Noro-Xxxxxxx Partners IV, L.P.
By: MKFJ IV., L.L.C., General Partner
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
------------------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx., Member 35,824 Shares (Common)
255,885 Shares (Preferred)
/s/ Xxxxx X. Xxxxxxx III
---------------------------------------------------------
Xxxxx X. Xxxxxxx, III 435,000 Shares
/s/ Xxxxx X. Xxxxxxx
---------------------------------------------------------
Xxxxx X. Xxxxxxx 435,000 Shares
/s/ Xxxxx X. Xxxxx, COO/CFO
---------------------------------------------------------
CNL Financial Corporation 23,018 Shares
/s/ Xxx X. Xxxxxx
---------------------------------------------------------
Xxx X. Xxxxxx 15,000 Shares
/s/ Xxxxx X. Xxxxxxxxx
---------------------------------------------------------
Xxxxx X. Xxxxxxxxx 15,000 Shares
/s/ Xxxxxx Xxxxx Xxxxxx
---------------------------------------------------------
Xxxxxx Xxxxx Xxxxxx 75,000 Shares
/s/ Xxxxxx Xxxxx Xxxx
---------------------------------------------------------
Xxxxxx Xxxxx Xxxx 25,000 Shares
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