The parties hereby agree as follows:
For purposes of this Agreement, the following terms have the respective meanings:
"Affiliate" of a person means any other person controlling, controlled by or under common control with such person, whether by ownership of voting securities,
by contract or otherwise.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday or Sunday or any day on which commercial banks in the State of Colorado are not open for business.
"Common Stock" means Company's common stock, no par value.
"Fair Market Value" means the fair market value of a share of Common Stock as determined in good faith by the Board.
"Founding Shareholders" “Dusty” L.W. Brogdon
"Independent Third Party" means any person who does not own in excess of 10% of the Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 10% owner of Common Stock and who is not the spouse, ancestor or descendant (by birth or adoption)
of any such 10% owner of Common Stock.
"Permitted Transferee" is defined in Section 2(b).
"Sale of the Company" means the acquisition of beneficial ownership of a majority or more of the outstanding voting securities of the Company by any person or "group" (as that term is used in Regulation 13D under the Securities Exchange Act of 1934) other than Shareholders as of the date hereof and their respective Affiliates or a sale of all of substantially all of the Company's assets.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders Shares" means
(i) all shares of Common Stock held or deemed to be held by the Shareholders and
(ii) all shares of Common Stock or other securities issued or issuable directly or indirectly with respect to the securities referred to in clause
(i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization of the Company.
2 Restrictions on Transfer; Right of First Refusal
2.1 Prohibition on Transfers.
No Common Stock may be sold, transferred, pledged or otherwise disposed of (including by gift) otherwise than in accordance with this Section 2. No Common Stock may be transferred in accordance with this Section 2 without the prior written consent of the Company, which consent will not be unreasonably withheld, conditioned or delayed, provided that, prior to any proposed transfer (other than to a Permitted Transferee), each Shareholder must comply with the provisions of Section 2(c) below.
2.2 Certain Permitted Transfers. Section 2(a) shall not apply to transfers of Common Stock by a Shareholder
(i) pursuant to Section 4,
(ii) within such Shareholder's family group (including by will or pursuant to applicable laws of descent and distribution),
(iii) to an entity wholly owned by such Shareholder (other than a trust properly considered as part of such Shareholder's family group), or
(iv) to any third person permitted by this Section 2, provided that, in connection with any transfer pursuant to clauses (ii), (iii) and (iv) of this Section 2(b), each transferee (a "Permitted Transferee") agrees in writing to be bound by the provisions of this Agreement. Any shares of Common Stock transferred to a Permitted Transferee shall continue to be Common Stock for purposes of this Agreement. A Shareholder's "family group" means such Shareholder's spouse and lineal descendants (whether natural or adopted) and any trust formed and maintained solely for the benefit of such Shareholder, such Shareholder's spouse and/or such Shareholder's lineal descendants.
2.3 The Company Right. At any time that any Shareholder (a "Seller") proposes to sell to a third party (the "Proposed Transferee") any Common Stock of the Company (the "Offered Securities"), Seller shall first offer to sell the Offered Securities to the Company at the same price and on the same terms in a writing delivered to the Company (the "the Company Offer"), which the Company Offer shall remain open and irrevocable for a period of ten (10) Business Days after delivery (the "the Company Offer Period").
2.4 Shareholder Right. In the event that the Company declines the Offer, the Seller shall then offer to sell the Offered Securities to the Founding Shareholders of the Company, on a pro rata basis, at the same price and on the same terms in a writing delivered to the Shareholders (the "Shareholder Offer"), which Shareholder Offer shall remain open and irrevocable for a period of ten (10) Business Days after delivery (the "Shareholder Offer Period").
2.5 Notice of the Company Acceptance. Notice of the Company's election to accept, in whole or in part, an the Company Offer shall be made by a writing signed by an officer of the Company specifying the portion of the Offered Securities that the Company elects to purchase, delivered to the Seller prior to the expiration of the Company Offer Period (the "Company Acceptance Notice").
2.6 Notice of Founding Shareholder Acceptance. Notice of any Founding Shareholder's election to accept, in whole or in part, a Shareholder Offer shall be made by a writing signed by the Founding Shareholder specifying the portion of the Offered Securities that the Founding Shareholder elects to purchase, delivered to the Seller, the Company, and the other Shareholders, prior to the expiration of the Shareholder Offer Period (a "Shareholder Acceptance Notice").
2.7 Remaining Offered Securities. Any offered securities not included within the Company Acceptance Notice or a Shareholder Acceptance Notice within the Company Offer Period or the Shareholder Offer Period (as appropriate) may thereafter be sold by the Seller to any third person who is not a direct or indirect competitor of the Company or an officer, director, employee or equity holder of a direct or indirect competitor of the Company.
3 Additional Restrictions on Transfer
3.1 Common Stock Legend. The certificates representing Common Stock shall bear substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY UNITED STATES SECURITIES OR BLUE SKY LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED OR DISPOSED OF (A "TRANSFER") EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER, THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT PURSUANT TO REGULATIONS PROMULGATED THEREUNDER AND UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE GENERAL SHAREHOLDERS AGREEMENT WHICH RESTRICTS THE RIGHT TO SELL, TRANSFER OR ENCUMBER THE SHARES REPRESENTED BY THIS CERTIFICATE. NOTICE OF THE SAID AGREEMENT IS HEREBY GIVEN. A COPY OF THE SAID AGREEMENT MAY BE OBTAINED BY SENDING A WRITTEN REQUEST TO THE BOARD OF DIRECTORS OF THE CORPORATION.
3.2 Opinion of Counsel.
No holder of Common Stock may sell, transfer or dispose of any such stock (other than pursuant to an effective registration statement under the Act) without first delivering to the Company upon its request an opinion of counsel reasonably acceptable in form and substance to the Company that registration under the Act is not required in connection with such transfer.
4 Sale of the Company
If the Board approves the Sale of the Company to an Independent Third Party, whether by merger, consolidation, sale of all or substantially all of its assets, sale of all of the outstanding Common Stock or otherwise (an "Approved Sale"), the Shareholders shall consent to and raise no objections against such Approved Sale (including raising an objection by exercising any appraisal, dissenters' or similar) and shall take all necessary and desirable actions in their capacities as shareholders to facilitate the consummation of such Approved Sale. If the Approved Sale is structured as a sale of stock, the Shareholders shall agree to sell all of their shares of Common Stock and rights to acquire shares of Common Stock on the terms and conditions approved by the holders of a majority of the Common Stock then outstanding. The obligations of the Shareholders with respect to any Approved Sale are subject to the condition that, upon the consummation of such Approved Sale, all of the holders of Common Stock will receive the same form and amount of consideration per share of Common Stock, or, if any holders are given an option as to the form and amount of consideration to be received, all holders will be given the same option.
5 Sale of Common Stock
If any Shareholder (in one transaction or a series of related transactions) reaches agreement to sell in excess of 10% of its shares of Common Stock of the Company to one or more parties acting in concert to purchase shares of Common Stock (other than to a party who is a Permitted Transferee under Section 2 or if any Sale of the Company takes place under Section 4), the other Shareholder(s) may require that such third party or parties, as a condition to the acquisition of the shares of Common Stock of the selling Shareholder, purchase a pro rata portion of the shares of Common Stock of the non-selling Shareholder(s) on terms identical to those agreed upon with the selling Shareholder.
6 Corporate Governance Provisions
6.1 Each Shareholder agrees to vote all Shareholder Shares over which such Shareholder has voting control and to take all other necessary or desirable actions within its control (whether as a shareholder, director or officer of the Company or otherwise, and including, without limitation, attendance at meetings in Person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special board and Shareholder meetings), so that:
6.1.1 The Company shall have a Board of Directors consisting of no more than seven members; and
6.1.2 the following persons, with such changes as may be determined from time to time by the Founding Shareholders, shall be members of the Board of Directors: “Dusty” L.W. Brogdon.
6.2 Inconsistent Provisions. To the extent that any provision of the Company's Articles of Incorporation or Bylaws is inconsistent with the provisions of this Section 6, the Shareholders agree to take all actions necessary to effect such amendments to the Articles of Incorporation or Bylaws as may be necessary and appropriate to give full effect to the provisions of this Section.
7 Assignment of Rights; Representations on Sale
The Company may assign to one or more third parties its right to repurchase shares of Common Stock pursuant to Section 2, subject only to compliance with applicable securities laws, provided that the provisions of Section 5 shall apply to any such purchase by a third party, and such third party agrees to be bound by the terms of this Agreement. The purchasers of Common Stock pursuant to Sections 2, 4 and 5 shall be entitled to receive customary representations and warranties from the seller regarding the seller's good title to, and freedom from liens, encumbrances and restrictions on the sale of, such Common Stock.
8 Participation Rights
If the Company proposes to issue any shares of capital stock or other securities convertible into or exercisable for capital stock (other than (a) the issuance of securities as consideration in acquisitions or other business combinations, strategic relation transactions, or the issuance of securities in connection with leases, bank financings, credit agreements or similar instruments with equipment lessors, commercial lenders, banks, or similar financial institutions if approved by the Board, or (b) compensatory issuances to directors, consultants or employees, provided that, in clause (a) herein, no such issuances, in the aggregate, shall exceed 10% of the Company's outstanding capital stock and that, in clause (b) herein, no such issuances, in the aggregate, shall exceed 12.5% of the Company's outstanding capital stock), the Company shall first make an offering of such shares of capital stock or other securities convertible into or exercisable for capital stock to the Shareholders of record of capital stock at the date of such proposed issuance on such terms as the Company shall determine, and each such Shareholder shall have right to purchase such shares or other securities without regard to such Shareholder's percentage interest in the capital stock of the Company, on a first-come, first-served basis (the "Rights Offering"). In the event that the Rights Offering is not fully subscribed, then each Shareholder who has not purchased such shares or other securities in the Rights Offering shall have the right of first refusal to purchase that portion of such securities sufficient to enable such Shareholder to maintain its percentage interest in the capital stock of the Company on a fully diluted basis (calculated prior to the issuance of such shares or other securities in the Rights Offering and prior giving effect to the conversion of all securities convertible into capital stock of the Company, if any, then issued and outstanding) immediately prior to such issuance. In the event that the Rights Offering is not fully subscribed, the Company shall give each Shareholder at least ten (10) Business Days' prior written notice of any such proposed issuance subject to such right of first refusal, which notice shall set forth in reasonable detail the proposed terms and conditions such proposed issuance and shall offer each Shareholder the opportunity to purchase such securities at the same price, on the same terms, and at the same time as the securities proposed to be issued by the Company. Each Shareholder may exercise its participation right in such proposed issuance by delivery of an irrevocable written notice to the Company not more than five (5) Business Days after delivery of the Company's notice, or, if later, five (5) Business Days after such Shareholder's receipt of definitive documentation for such proposed issuance.
9 Transfers in Violation of Agreement
Any transfer or attempted transfer of any Shareholder Shares in violation of this Agreement shall be void ab initio, and the Company shall not be obligated to record such transfer on its books or treat any purported transferee of such Shareholder Shares as the owner of such shares for any purpose.
10 Amendment and Waiver
Except as otherwise provided herein, no amendment or waiver of any provision of this Agreement shall be effective against the Company or the Shareholders unless such amendment or waiver is approved in writing by the Company or the holders of at least a majority of the then-outstanding shares of Common Stock, as the case may be. The failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of such provision and shall not affect the right of such party thereafter to enforce each provision of this Agreement in accordance with its terms.
If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
12 Entire Agreement
Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
13 Successors and Transferees
This Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and transferees and by the Shareholders and their Permitted Transferees, in each case so long as such persons hold Common Stock.
This Agreement may be executed in separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement.
The Company and each of the Shareholders shall be entitled to enforce its rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company and each of the Shareholders may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. In the event of any legal proceedings seeking to enforce any rights or obligations under this Agreement, the prevailing party shall be entitled to recover its attorney’s fees and costs in connection with such proceeding from the non-prevailing party.
Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or sent by telecopy (confirmed in writing) or sent by reputable overnight courier service for next-day delivery (charges prepaid) to the Company at its address set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Common Stock subject to this Agreement at such address as indicated by the Company's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder when delivered personally, on the date of transmission if sent by confirmed facsimile transmission (or on the next Business Day if transmission is not made on a business day) or on the next Business Day after deposit with a reputable overnight courier service.
17 Governing Law
This Agreement shall be governed by the internal laws of the State of Colorado, without regard to principles of conflicts of law.
18 Descriptive Headings
The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
19 Termination; Survival
This Agreement shall terminate and be of no further force and effect upon consummation of the Company's initial public offering of Common Stock under the Act or upon the written agreement of all Shareholders who are party to this Agreement.