Stockholders Agreement Series a Template 1

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STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT (this "Agreement"), is made as of the __ day of ______, 2010, by and among _______, Inc., a company organized under the laws of the State of Delaware (the "Company"), ________________ (each, a "Founder" and together the "Founders"), the persons and entities holding Common Stock of the Company identified in Schedule 1 attached hereto (the "Common Holders"), and the persons and entities identified in Schedule 2 hereto (each a "Preferred Holder" and collectively the "Preferred Holders", and together with the Common Holders, the "Shareholders"). W I T N E S S E T H : WHEREAS, the Preferred Holders are the holders of all of the issued and outstanding shares of Series A Preferred Stock, par value $0.0001 each, of the Company (the "Preferred Stock"), and the Common Holders are the holders of all of the issued and outstanding shares of Common Stock, par value $0.0001 each, of the Company (the "Common Stock"); and WHEREAS, the Company, the Preferred Holders and the Common Holders desire to set forth certain matters regarding the ownership of the Securities (as defined below). NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows: 1. Sales by Shareholders . 1.1 General . Prior to the closing of a firm commitment underwritten public offering, covering the offer and sale of Common Stock to the public in a major international stock market (an "IPO"), each Shareholder shall not sell, assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber (each of the foregoing being referred to as a "disposition") all or any shares of capital stock of the Company, of any class or series, now owned or hereafter acquired by it (such shares are hereinafter 1

Transcript of Stockholders Agreement Series a Template 1

Page 1: Stockholders Agreement Series a Template 1

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this "Agreement"), is made as of the __ day of ______, 2010, by and among _______, Inc., a company organized under the laws of the State of Delaware (the "Company"), ________________ (each, a "Founder" and together the "Founders"), the persons and entities holding Common Stock of the Company identified in Schedule 1 attached hereto (the "Common Holders"), and the persons and entities identified in Schedule 2 hereto (each a "Preferred Holder" and collectively the "Preferred Holders", and together with the Common Holders, the "Shareholders").

W I T N E S S E T H :

WHEREAS, the Preferred Holders are the holders of all of the issued and outstanding shares of Series A Preferred Stock, par value $0.0001 each, of the Company (the "Preferred Stock"), and the Common Holders are the holders of all of the issued and outstanding shares of Common Stock, par value $0.0001 each, of the Company (the "Common Stock"); and

WHEREAS, the Company, the Preferred Holders and the Common Holders desire to set forth certain matters regarding the ownership of the Securities (as defined below).

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:

1. Sales by Shareholders.

1.1 General. Prior to the closing of a firm commitment underwritten public offering, covering the offer and sale of Common Stock to the public in a major international stock market (an "IPO"), each Shareholder shall not sell, assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber (each of the foregoing being referred to as a "disposition") all or any shares of capital stock of the Company, of any class or series, now owned or hereafter acquired by it (such shares are hereinafter collectively referred to as the "Securities") except in accordance with this Section 1.

1.2 Right of First Refusal. Prior to the closing of an IPO, any disposition of shares in the Company shall be subject to the following:

(a) Any Shareholder (the "Offeror") proposing to dispose of all or any of its Securities, pursuant to the terms of a bona fide offer received from any person or entity, except to a Permitted Transferee (as defined below) (the "Third Party") shall first request the Company, by written notice (which shall contain all the information necessary to enable the Company to do so), to offer such Securities (the "Offered Shares"), on the material terms of the proposed transfer, to each Preferred Holder (the "Offerees"). The Company shall comply with such request by sending the Offerees a written notice (the "Offer"), as soon as possible, but in any event within up to five (5) days from the Offeror's foregoing notice, stating therein the identity of the Offeror and of the proposed transferee(s) and the material proposed terms of sale of the Offered Shares. Any Offeree may accept such offer in respect of all or any of the Offered Shares by giving the Company notice to that effect to be

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received by the Company as soon as practicable after receipt of the Offer, and in all events within fourteen (14) days after being served with the Offer.

(b) If the acceptances, in the aggregate, are in respect of all of, or more than, the Offered Shares, then the accepting Offerees shall acquire the Offered Shares, on the terms aforementioned, in proportion to their respective holdings, provided, that no Offeree shall be entitled to acquire under the provisions of this Section 2(b) more than the number of Offered Shares initially accepted by such Offeree, and upon the allocation to it of the full number of shares so accepted, it shall be disregarded in any subsequent computations and allocations hereunder. Any shares remaining after the computation of such respective entitlements shall be re-allocated among the accepting Offerees (other than those to be disregarded as aforesaid), in the same manner, until one hundred percent (100%) of the Offered Shares have been allocated as aforesaid.

(c) If the acceptances, in the aggregate, are in respect of less than the number of Offered Shares, then the Offeror, at the expiration of the aforementioned 14-day period, shall be entitled, subject to Section 1.3 below, to transfer all of the Offered Shares to the Third Party, provided, however, that in no event shall the Offeror transfer any of the Offered Shares to any transferee other than such accepting Offerees or such proposed Third Party or transfer the same on terms more favorable to the buyer(s) than those stated in the Offer, and, provided, further, that any of the Offered Shares not transferred within ninety (90) days after the expiration of such 14-day period shall again be subject to the provisions of this Section 1.2.

(d) For the purposes of any Offer under this Section 1.2, the respective holdings of any number of accepting Offerees shall mean the respective proportions of the aggregate number of Common Stock (including, for purposes of such determination, Common Stock issuable upon conversion of the then outstanding Preferred Stock ("As Converted Basis")) held by such accepting Offerees as determined prior to such Offer.

1.3 Co-Sale. Unless the right of first refusal set forth in Section 1.2 above is exercised in full, each Preferred Holder shall have the right to participate in a Founder's (or any transferee thereof) sale of Securities, other than with respect to the sale of Securities under Section 1.4(a) below, in accordance with this Section 1.3, pursuant to the specified terms and conditions of the Offer. Each Preferred Holder shall be entitled, upon written notice to the Founder (the "Participation Notice") within fourteen (14) days after receipt of the Offer, to sell to the Third Party up to such number of the Shares in the Company owned by the Preferred Holders (the "Equity Shares") determined by multiplying the total number of Offered Shares by a fraction the numerator of which is the number of Common Stock owned by the Preferred Holders offering to sell their shares in accordance with the Participation Notice on an as converted into Common Stock basis and the denominator of which is the total number of Common Stock owned by such participating Preferred Holders and the selling Founder on an as converted basis. The Participation Notice shall indicate, subject to the terms of this Section 1.3, the number of Equity Shares that each Preferred Holder intends to transfer to the Third Party. To the extent that a Preferred Holder exercises such right in accordance with the terms and conditions set forth below, the number of Securities that the Founder may sell pursuant to such Offer shall be correspondingly reduced. At the closing of the sale of Securities to the Third Party, the Founder shall transfer his shares to the Third Party only if the Third Party concurrently therewith purchases, on the same terms and conditions specified in the Offer, all of the Shares as to which a Participation

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Notice has been delivered and the shares offered for sale by the Preferred Holders entitled to sell under this Section 1.3; provided, however, that if the Third Party objects to the delivery of Preferred Stock in lieu of Common Stock, such participating Preferred Holders shall convert such Preferred Stock into Common Stock (at the then applicable conversion ratio) and deliver such Common Stock to the Third Party. The Company shall make any such conversion concurrent with the actual transfer of such shares to the Third Party and contingent on such transfer and shall otherwise do all such things and sign all such documents and instruments as shall be reasonably required in order to complete the Transfer in accordance with the terms and conditions specified in the Transfer Notice. The restrictions set forth in this Section 1.3 shall terminate immediately prior to the closing of the IPO.

1.4 Prohibited and Permitted Transfers.

(a) Until the earlier to occur of: (i) July 24, 2011, and (ii) the consummation of an IPO (the “No Sale Period”), no Founder shall dispose of all or any of his Securities or any rights thereto, now owned or hereafter acquired unless such disposition is made in connection with a sale of all or substantially all of the shares of the Company or pursuant to Section 2 below or unless such disposition is made to a Permitted Transferee. Following the expiration of the No Sale Period and until the consummation of an IPO, each Founder shall be entitled to dispose of up to ten percent (10%) of his Securities per year and up to forty percent (40%) of his Securities in the Aggregate, except for dispositions made to a Permitted Transferee, dispositions made in connection with the sale of all or substantially all of the capital stock of the Company.

(b) Notwithstanding anything in this Agreement to the contrary, a Shareholder may dispose of Securities to a Permitted Transferee, provided, that, prior to the closing of an IPO, no Shareholder may dispose its Securities to a person or entity which the Board of Directors of the Company (the "Board") reasonably determines is a competitor of the Company to which the transfer is prohibited (other than as part of the sale of all or substantially all of the shares of the Company to an acquirer of the Company), provided that the Board must notify the selling shareholder of its determination within seven (7) days from receipt of notice of transfer from the transferring shareholder. No disposition under this Section 1.4 or otherwise shall be made to any transferee, unless such transferee agrees in writing to be bound by all agreements binding upon the transferring shareholder immediately prior to such transfer. No subsequent disposition of any of such Securities may be made except in conformity with the provisions of this Agreement. As used herein, "Permitted Transferee" means, with respect to a Shareholder: (i) any member of such Shareholder's immediate family (defined as a Shareholder's spouse, parents, children and siblings, whether by blood, marriage or adoption); (ii) any custodian or trustee of any trust; (iii) any partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Shareholder or any of his immediate family member (as defined in Sub-section (i) above); (iv) the Company; (v) any Affiliate of such Shareholder; (vi) with respect to the Preferred Holder, its partners and to affiliated partnerships managed by the same management company or managing general partner or by an Affiliate of such management company or managing general partner; (vii) with respect to the Founders, the Investor (as defined in that certain Share Purchase Agreement by and among the Company, the Founders and the Investor (as defined therein) of even date hereof, for any transfer of securities pursuant to Section 3.23 of such Share Purchase Agreement, and (viii) with respect to the Preferred Holder, any fund (or shareholder or partner of any such fund), or any

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beneficiary of any trust or any account or arrangement managed by such shareholder or by the general partner or managing entity of such shareholder, or by an Affiliate thereof. "Affiliate" means, with respect to any person or entity, any other person or entity, directly or indirectly, through one or more intermediary persons, controlling, controlled by or under common control with such person or entity.

2. Bring-Along. Notwithstanding any specific voting rights set forth in the Company's Certificate of Incorporation, as shall be in force from time to time, and notwithstanding the provisions of Section 1 above, in the event that prior to the IPO, the holders of sixty percent (60%) of the issued and outstanding shares of capital stock of the Company (for the avoidance of doubt, excluding any options under the Company's Employees Stock Options Plan) including the holders of a majority of the issued and outstanding Preferred Stock of the Company, on an as converted basis (which for the purpose hereof shall include any future preferred stock issued by the Company), accept an offer to sell all of their shares to a third party (and such sale is conditioned upon the sale of all remaining shares of capital stock of the Company to such third party) (the "Proposing Shareholders"), then all other Shareholders shall be required to sell their shares of capital stock in such transaction; provided, however, that (i) the consideration for all of the Company's stock be allocated among the Shareholders in accordance with the order of preference set forth in the relevant provisions of the Company's Certificate of Incorporation, and (ii) subject to the foregoing Sub-section (i), all the Shareholders shall receive the same terms and conditions upon such sale.

If the Proposing Shareholders approve a sale as set forth in this Section 2, then each other Shareholder shall (i) vote for and consent to such transaction, to the extent such vote or consent is required, and (ii) execute and deliver all documents reasonably required to carry out such transaction and participate in such transaction. Not in limitation thereof, each other party or future party hereto (as applicable) waives any dissenters' rights, appraisal rights or similar rights in connection with such transaction.

3. Affirmative Covenants. The parties agree that, in the event that at any time the number of authorized Common Stock of the Company shall be insufficient to permit the conversion of all Preferred Stock into Common Stock in accordance with the conversion provisions of the Company's Certificate of Incorporation, the Shareholders shall vote in favor of such increase of the Company's authorized capital stock as shall be necessary to permit such conversion. Furthermore, the Shareholders agree to vote their shares and do all such other acts as are necessary to give full force and effect to this Agreement.

4. Board of Directors.

4.1 At each meeting of the Shareholders of the Company (including class meetings) at which members of the Board are to be elected, or whenever members of the Board are to be elected by written consent, the parties hereto agree to vote and/or act with respect to their Securities so as to:

(a) elect two (2) members of the Board designated by the Founders holding the majority of the capital stock then held by the Founders (on an as converted basis); and

(b) elect two (2) members of the Board designated by the holders of a majority of the Preferred Stock, who shall initially be ________________________; and

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(c) elect two (2) members of the Board, who shall be industry experts (the “Industry Expert Directors”), designated by holders of a majority of the Common Stock and the holders of a majority of the Preferred Stock and approved by the holders of a majority of the Preferred Stock and the majority of the Common Stock.

For the purposes of this Section 4, each of the designating parties as set forth in the above subsections (a), (b) and (c), may be referred to herein as a "Designating Party."

4.2 In the event of the resignation, death, removal or disqualification of a director selected by a Designating Party, such Designating Party, and only such Designating Party, may nominate a new director, and, after written notice of the nomination has been given by such Designating Party to the other parties, each party shall vote its shares of capital stock of the Company to elect such nominee to the Board. Section 4.1(a1) above shall apply, mutatis mutandis, to any nomination pursuant to a resignation, death, removal or disqualification of a director nominated in accordance with Section 4.1(a) above.

4.3 A Designating Party (only) may demand the removal of its designated director (the "Terminated Director") at any time and from time to time, with or without cause (subject to the Bylaws of the Company as in effect from time to time and any requirements of law), in its sole discretion, and after written notice to each of the parties hereto of the new nominee to replace such director, each party shall promptly vote its shares of capital stock of the Company in favor of the removal of the Terminated Director and to elect the nominee to the Board to replace the Terminated Director. For the avoidance of doubt, each Industry Expert Directors may be removed upon the request of any of the holders of a majority of the Common Stock and the holders of a majority of the Preferred Stock. Section 4.1(a1) above shall apply, mutatis mutandis, to any removal of a director designated in accordance with Section 4.1(a) above and nomination of any replacing director.

4.4. The Company shall promptly reimburse all directors for reasonable out-of-pocket expenses incurred for: (i) attending meetings of the Board of Directors or committees of the Board of Directors; and (ii) performing their respective duties as directors of the Company, all pursuant to the Company’s policy with respect to such matters, as shall be determined by the Company’s Board of Directors. The Company shall always maintain a director indemnity insurance policy for acts and omissions of each of the Company's directors and shall provide each director with an indemnification agreement.

5. Legend.

Each certificate representing shares held by Shareholder or issued to any transferee in connection with a disposition of such shares shall be endorsed with a legend substantially in the following form:

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OR OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT BY AND AMONG THE STOCKHOLDER, THE COMPANY AND CERTAIN OTHER HOLDERS OF STOCK OF THE COMPANY, AS MAY BE AMENDED FROM TIME TO TIME. FURTHER, SUCH SHARES ARE ALSO SUBJECT TO A VOTING AGREEMENT WHICH IS INCLUDED IN SAID STOCKHOLDERS AGREEMENT. BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO

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AGREE TO AND SHALL BECOME BOUND BY ALL THE TERMS AND CONDITIONS OF SUCH STOCKHOLDERS AGREEMENT. COPIES OF SUCH STOCKHOLDERS AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

6. Miscellaneous

6.1 Further Assurances. Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.

6.2 Governing Law; Jurisdiction. This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the courts in the district of ____________ for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the courts in the district of ______________, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney's fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the courts in the district of ___________.

6.3 Successors and Assigns; Assignment. Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred without the prior consent in writing of each party to this Agreement, with the exception of assignments and transfers from a Shareholder to a transferee of shares of such Shareholder, it being acknowledged and agreed that any such assignment or transfer shall be subject to and conditioned upon any such assignee's delivery to the Company of a counterpart signature page hereto pursuant to which such assignee shall confirm its agreement to be subject to and bound by all of the provisions set forth in this Agreement that were applicable to the assignor of such assignee. The Company may freely assign its rights and obligations hereunder by operation of law or to the acquirer of the Company.

6.4 Entire Agreement; Amendment and Waiver. This Agreement and the Schedules hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof and any other written or oral agreement relating to the subject matters hereof existing between the parties are expressly canceled. Any term of this Agreement may be amended or terminated and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the Company, the parties hereto who

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are the holders of at least a majority the outstanding Common Stock held by all parties hereto, assuming the conversion of the Preferred Stock into Common Stock and the parties hereto who are the holders of at least a majority the outstanding Preferred Stock, or Common Stock issued upon conversion thereof, held by the parties hereto. Any amendment or waiver effected in accordance with this Section 6.4 shall be binding upon the Company, the Shareholders, and each of their respective successors and assigns.

6.5 Notices, etc. All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be telecopied or mailed by registered or certified mail, postage prepaid, or prepaid air courier, or otherwise delivered by hand or by messenger, addressed to such party's address as set forth below:

if to the Common Holders: At its respective address set forth in Schedule 1

if to the Preferred Holders: At its respective address set forth in Schedule 2

if to the Company:

or such other address with respect to a party as such party shall notify each other party in writing as above provided. Any notice sent in accordance with this Section 6.5 shall be effective (i) if mailed, five (5) business days after mailing, (ii) if by air courier, two (2) business days after delivery to the courier service, (iii) if sent by messenger, upon delivery, and (iv) if sent via facsimile or email, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic confirmation of receipt.

6.6 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

6.7 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

6.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.

6.9 Aggregation of Stock. All Preferred Stock (or Common Stock issuable upon conversion thereof) held or acquired by persons or entities who are Permitted Transferees of each other shall be aggregated together for the purpose of determining the availability of any

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rights under this Agreement and the exercise of any such rights may be allocated among such Permitted Transferees in such manner as such persons or entities may determine in their discretion.

6.10 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

6.11 Additional Parties. Notwithstanding anything to the contrary contained herein, concurrently with the issuing any additional shares the Company after the date hereof, any purchaser of such shares shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and thereafter shall be deemed a "Shareholder" for all purposes hereunder. No action or consent by the other Shareholders shall be required for such joinder to this Agreement by such additional Shareholder, so long as such additional Shareholder has agreed in writing to be bound by all of the obligations as a Shareholder hereunder.

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IN WITNESS WHEREOF the parties have signed this Agreement as of the date first hereinabove set forth.

________________, INC.

By: _____________________________________

Name: ____________________________________

Title: ____________________________________

_________________________ L.P.

By: ____________________________________

Signature: _________________________

________________________________

____________________________

UDI TRUGMAN

[SIGNTURE PAGE TO STOCKHOLDERS AGREEMENT]

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SCHEDULE 1

THE COMMON HOLDERS:

Name Address

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SCHEDULE 2

THE PREFERRED HOLDERS:

Name Address

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