1
109016282.1
[Name of Corporation], Inc.
STOCKHOLDERS’ AGREEMENT
Stockholders’ Agreement (this “Agreement”), dated effective as ___, 201_, by and among [Insert Name of Corporation], Inc., a ____ [Insert State of Incorporation] corporation (the “Company”), the purchasers of Series A Preferred, par value $___ per share (the “Series A Preferred Stock”) listed on Schedule 1 hereto (each, an “Investor” and collectively, the “Investors”), _____ (the “Founder”), and the other stockholders of the Company listed in Schedule 2 hereto (the “Existing Holders”, and, collectively with the Investors and the Founder, the “Stockholders”). [1]
RECITALS:
WHEREAS, the Company proposes to sell shares of its Series A Preferred Stock to the Investor pursuant to the terms of the Securities Purchase Agreement of even date herewith between the Company and the Investor (the “Securities Purchase Agreement”), and it is a condition to the closing of such sale that this Agreement be executed and delivered by the parties hereto;
WHEREAS, the Founder owns ___% of, and the Existing Holders collectively own __% of the issued and outstanding capital stock of the Company as of the date hereof (without giving effect to the sale and issuance of any Series A Preferred Stock pursuant to the Securities Purchase Agreement [or the exercise of Warrants (as defined below) granted contemporaneously therewith][2]; and
WHEREAS, the parties hereto wish to promote and protect their mutual interests of their investment in the Company be restricting the transfer of the capital stock of the Company by imposing certain rights and obligations upon the parties with respect to the Stock (as defined below);
NOW, THEREFORE, in consideration of the mutual premises and covenants contained in this Agreement and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1.Definitions.
As used herein the following capitalized terms shall have the meanings set forth below, and all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement:
“Affiliate”means, with respect to any Person, (i) a Person that directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned Person, and (ii) an “associate” as that term is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement.For purposes of this definition, the term “control” (including the term “controlling,” “controlled by” and “under common control,” or correlative terms) means the possession, direct or indirect, of the power to direct the management and policies of a Person, whether as an officer or director, through the ownership of voting securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in the preamble of this Agreement and shall include any duly approved amendments and modifications.
“Appraisal” shall mean, whenever a determination of fair market value of the Company by appraisal is called for pursuant to the terms hereof, the written appraisal that is prepared by a Qualified Appraiser selected by the Board of Directors in accordance with the terms of this Agreement.
“Articles [Certificate] of Incorporation” shall mean the Company’s Articles [Certificate] of Incorporation, as amended and restated from time to time.
“Available Shares” shall have the meaning set forth in Section 2.3(b)(iii) of this Agreement.
“Board of Directors” shall mean the board of directors of the Company.
“Business Day” shall mean any day, other than a Saturday, Sunday, a federal holiday, and days on which banks in the State of ______are closed for business.
“Bylaws” shall mean the Company’s Bylaws, as amended and restated from time to time.
“Change of Control”[“Liquidation Event”][3] shall mean any of the following: [(a) any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or involuntary,] (a)[(b)] a consolidation, merger, or other business combination by, or a sale of equity securities of, or a recapitalization or refinancing of, the Company which results in the holders of the issued and outstanding voting capital stock of the Company entitled to vote generally in an election of Directors immediately prior to such transactions own or control less than a majority of the voting power of the continuing or surviving entity (regardless of whether the Company is the continuing or surviving entity) immediately following such transaction (after giving effect to the exercise or conversion of any derivative or convertible securities issued, directly or indirectly, in connection with such transaction), (b)[(c)] the sale, lease, exchange, transfer, exclusive license or other disposition (including, without limitation, by merger, consolidation, or otherwise) of all or substantially all of the assets or intellectual property of the Corporation to a Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or (c)[(d)] a transaction pursuant to which any Persons acting together or which would constitute a “group” for purposes of Section 13(d)(3) or 14(d)(2) of the Exchange Act, together with any Affiliates thereof (other than the Stockholders as of the date of this Agreement and their respective Affiliates), beneficially own (as defined in Rule 13d-3 promulgated under the Exchange Act) or control, directly or indirectly, in excess of 50% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors of the Company.
“Common Stock” shall mean the Company’s common stock, par value $____ per share, and shall also include any class or series of common stock that the Company may be authorized to issue from time to time and any stock into which such Common Stock may hereafter be changed or for which such Common Stock may be exchanged after giving effect to the terms of such change or exchange (by way of reorganization, recapitalization, merger, consolidation or otherwise) and also shall include any Common Stock of the Company hereafter authorized and any capital stock of the Company of any other class hereafter authorized which is not preferred as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company or which has ordinary voting power for the election of directors of the Company.
“Common Stock Directors” shall have the meaning set forth in Section 6.1(a)(v) of this Agreement.
“Company” shall have the meaning set forth in the preamble of this Agreement and shall include its successors and assigns.
“Company Offer Price” shall have the meaning set forth in Section 4.2 of this Agreement.
“Company Option Period” shall have the meaning set forth in Section 2.3(a)(i) of this Agreement.
“Company Purchase Offer Notice” shall have the meaning set forth in Section 4.2 of this Agreement.
“Company Purchase Option” shall have the meaning set forth in Section 2.3(a)(i) of this Agreement
“Company Purchase Price” shall have the meaning set forth in Section 2.3(a) of this Agreement.
“Controlling Shareholders” shall have the meaning set forth in Section 3.1 of this Agreement.
“Conversion Price” shall have the meaning ascribed to such term in the Company’s Articles [Certificate] of Incorporation.
“Conversion Shares” means shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock.
“Drag Along Right” shall have the meaning set forth in Section 3.1 of this Agreement.
“Entity” shall mean any general partnership, limited partnership, corporation, joint venture, trust, limited liability company, limited liability partnership, business trust, cooperative or association.
“Equivalent Price Per Share” means, (i) in the case of a share of Common Stock, the same price per share as the share of Common Stock proposed to be sold, and (ii) in the case of a share of Preferred Stock, a price per share equal to the price per share of Common Stock is proposed to be sold multiplied by the number of shares of Common Stock into which each such share of Preferred Stock is then convertible.
“Existing Holders” shall have the meaning set forth in the Preamble to this Agreement.
“Fair Market Value” shall have the meaning set forth in Section 3.2 of this Agreement.
“Founder” shall have the meaning set forth in the Preamble to this Agreement.
“Founder Director” shall have the meaning set forth in Section 6.1(a)(iv) of this Agreement
“Founders Notice” shall have the meaning set forth in Section 2.3(b)(iii) of this Agreement.
“Founder Option Period”shall have the meaning set forth in Section 2.3(c) of this Agreement.
“Founder Purchase Option” shall have the meaning set forth in Section 2.3(c) of this Agreement.
“Independent Director” shall have the meaning set forth in Section 6.1(a)(iii) of this Agreement.
“Investor(s)” shall have the meaning set forth in the Preamble to this Agreement.
“Investor Director[s]”shall have the meaning set forth in Section 6.1(a)(i) of this Agreement.
“New Securities” shall have the meaning set forth in Section [5.3][5.4] of this Agreement.
“New Securities Offer Notice” shall have the meaning set forth in Section 5.2(a) of this Agreement.
“New Securities Offer Period” shall have the meaning set forth in Section 5.2(a) of this Agreement.
“New Securities Offer Price” shall have the meaning set forth in Section 5.2(a) of this Agreement.
“Offered Shares” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Offered Share Price” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Options” shall mean options, warrants, and other rights to acquire or purchase Common Stock or any security directly or indirectly convertible into or exchangeable or exercisable for, Common Stock, including, without limitation, any convertible indebtedness obligations.
“Option Period(s)” shall mean any of the Company Option Period, the Right Holder Option Period, the Over-Allotment Option Period, or the Founder option Period.
“Over-Allotment Option” shall have the meaning set forth in Section 2.3(b)(ii) of this Agreement.
“Over-Allotment Option Period” shall have the meaning set forth in Section 2.3(b)(ii) of this Agreement.
“Participating Right Holder” shall have the meaning set forth in Section 2.5(a) of this Agreement.
“Permitted Transfers” shall have the meaning set forth in Section 2.9 of this Agreement.
“Person” shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.
“Preemptive Rights Notice” shall have the meaning set forth in Section [5.2(a)][5.3(b)] of this Agreement.
“Preferred Stock” shall mean any class of preferred stock of the Company that may have issued or be authorized to issue from time to time, including the Company’s Series A Preferred Stock.
“Proportionate Percentage” shall mean with respect to each Stockholder a fraction, the numerator of which shall be the total number of shares of Common Stock then owned by such Stockholder and the number of Conversion Shares into which Shares of Series A Preferred Stock then owned by such Stockholder may then be converted, and the denominator of which shall be the total number of shares of Common Stock and Conversion Shares then owned by all Stockholders of the Company.
“Proposed New Securities Purchaser” shall have the meaning set forth in Section 5.2(a) of this Agreement.
“Proposed Purchaser” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Purchase Offer” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Qualified Appraiser” shall mean any investment bank or similar financial institution or a reputable regional or national accounting firm approved by the Board and the Investor which has not been an Affiliate as to any Stockholder within the three year period prior to the date of its appointment hereunder, which shall have had not less than three years’ experience in appraising, valuing, owning or managing companies in a similar line of business to the Company. If the Board and the Investor cannot agree on such a selection, each shall select such a firm or institution and the two firms or institutions so selected shall appoint a Qualified Appraiser meeting the terms of this definition.
“Qualified IPO” shall mean a firm commitment underwritten initial public offering (“IPO”) of Common Stock by, and for the account of, the Company pursuant to an effective registration statement filed under the Securities Act which (a) the aggregate gross proceeds (before deducting for underwriting discount, commission or expense) received by the Company equals or exceeds $_____, and (b) the per price per share of Common Stock equals or exceeds ___% of the Conversion Price in effect for the Series A Preferred Stock immediately prior to the closing of the sale of the Common Stock by the Company pursuant to the IPO.
“Remaining Shares” shall have the meaning set forth in Section 2.3(a)(ii) of this Agreement.
“Required Sellers” shall have the meaning set forth in Section 3.1 of this Agreement.
“Required Percentage” shall mean with respect to each Existing Holder [and Founder] the number of shares of Stock that such Existing Holder [or Founder] owns divided by the total number of shares of Stock held by all Existing Holder [and Founder].
“Right Holder” shall mean any Investor, its Affiliates, or any Person who has acquired shares of Stock from the Investor or its Affiliates in accordance with the terms of this Agreement. [Any Investor owning beneficially or of record of not less than _____ shares of Series A Preferred Stock or _____ Conversion Shares (each as adjusted for any stock split, stock dividend, subdivision, combination, or reclassification of shares or similar event).]
“Right Holder Notice” shall have the meaning set forth in Section 2.3(a)(ii) of this Agreement.
“Right Holders Option Period” shall have the meaning set forth in Section 2.3(b)(i) of this Agreement.
“Right Holders Purchase Option” shall have the meaning set forth in Section 2.3(b)(i) of this Agreement.
“Sale of Control” shall have the meaning set forth in Section 3.1 of this Agreement.
“Sales Notice” shall have the meaning set forth in Section 4.2 of this Agreement.
“Second Right Holder Notice” shall have the meaning set forth in Section 2.3(b)(ii) of this Agreement.
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Securities Purchase Agreement” shall have the meaning set forth in the recitals to this Agreement.
“Selling Stockholder” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Series A Preferred Stock”shall have the meaning set forth in the Preamble to this Agreement.
“Stock” shall mean all (i) shares of Common Stock or Preferred Stock held by Stockholders from time to time, (ii) shares of Common Stock or Preferred Stock subsequently held by transferees of the Stockholders who acquire such shares in one or more transfers, and (iii) securities of the Company or any of its Subsidiaries issued in exchange for, upon conversion of, upon reclassification of, or as a distribution in respect of any of the foregoing, including the Conversion Shares. For purposes of this Agreement, (A) “Stock” shall include Common Stock purchasable or otherwise subject to acquisition upon conversion, exercise, or exchange of outstanding Options, and (B) when calculating the percentage of Stock held by any holder, such calculation shall give effect to any stock splits, stock dividends, distributions, subdivisions, combinations or other recapitalization events involving the Stock.
“Stockholder(s)” shall have the meaning set forth in the Preamble to this Agreement, and shall include other individuals or Entities becoming party to this Agreement, as provided for herein..
“Subsidiaries” or “Subsidiary” means all corporations, limited liability companies, limited partnerships, and other entities in which the entity in question owns or controls 50% or more of the outstanding equity or voting securities or interests either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity or voting securities or interests are owned directly or indirectly by such entity in question.
“Transfer” shall be construed broadly and shall include to mean, in the context of a transfer of Stock, any sale, assignment, participation, gift, bequest, distribution, exchange, pledge, hypothecation, placement of a lien thereon or a grant of a security interest therein or other encumbrances thereon, judicial attachment, contribution to a trust or other Entity, or other transfer or disposition (voluntarily or involuntarily, by operation of law or otherwise, and whether as security or otherwise) by a Stockholder of all or a portion of its Stock or any right or interest therein. For purposes of this definition, a “Transfer” shall include (a) the sale, assignment, participation, gift, bequest, distribution, exchange, pledge, hypothecation, placement of a lien thereon or a grant of a security interest therein or other encumbrances thereon, judicial attachment, contribution to a trust or other Entity, or other transfer or disposition (voluntarily or involuntarily, by operation of law or otherwise, and whether as security or otherwise) of a controlling equity interest in any Person which owns of record any of the Stock, or (b) the merger or consolidation of a Stockholder or of any other Person referred to in clause (a) hereof with another Person.
“Transfer Notice” shall have the meaning set forth in Section 2.2(a) of this Agreement.
[“Warrants” shall have the meaning ascribed to it in the Securities Purchase Agreement.]