GOVERNANCE AGREEMENTAgreement and Plan of Merger |
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LECG CORP | GHEP III, LLC | Great Hill Equity Partners III, LP | GREAT HILL INVESTORS, LLC | LECG Corporation | Parent, Red Sox Acquisition Corporation | Red Sox Acquisition LLC | Smart Business Holdings, Inc. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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This GOVERNANCE AGREEMENT (this " Agreement ") is made and entered into as of • , 2009, by and among LECG Corporation, a Delaware corporation (" Parent "), and the other parties set forth on the signature pages hereto (each, a " Holder " and collectively, the " Holders "). A. Parent, Red Sox Acquisition Corporation, a Delaware corporation and a direct wholly owned subsidiary of Parent (" Merger Sub I "), Red Sox Acquisition LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Parent (" Merger Sub II ", and with Merger Sub I, the " Merger Subs "), Smart Business Holdings, Inc., a Delaware corporation (the " Company "), and Great Hill Equity Partners III, L.P., a Delaware limited partnership, have entered into an Agreement and Plan of Merger dated as of August 17, 2009 (the " Merger Agreement "), which provides for, among other things, (i) the merger of Merger Sub I with and into the Company, with the Company as the surviving corporation (the " First Step Merger "), and (ii) the merger of the Company, as successor to the First Step Merger, with and into Merger Sub II, with Merger Sub II as the surviving entity (together with the First Step Merger, the " Merger "). B. Parent and the Holders have entered into a Stock Purchase Agreement dated as of the date hereof (the " Stock Purchase Agreement "), which provides for, among other things, the issuance by Parent of shares of Series A Convertible Redeemable Preferred Stock of Parent to the Holders (the " Investment "). C. Parent and the Holders desire to establish in this Agreement certain terms and conditions concerning the corporate governance of Parent and the acquisition and disposition of securities of Parent by the Holders. D. The execution and delivery of this Agreement is concurrent with the Merger and the Investment and is a material inducement to the willingness of Parent, the Company and the Holders to consummate the transactions contemplated by the Merger Agreement and the Stock Purchase Agreement. In consideration of the foregoing and the respective covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) " Affiliate ," when used with reference to any Person, means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such first Person. (b) " beneficial ownership " has the meaning given to such term in Rule 13d-3 under the Exchange Act (and phrases such as " beneficially own " have correlative meanings). (c) " Board of Directors " means the Board of Directors of Parent. (d) " Business Day " means any day on which banks are not required or authorized to be closed in San Francisco, California. (e) " Change in Control of Parent " means any transaction or series of related transactions following the Effective Time involving: (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Parent, pursuant to which the stockholders of Parent immediately prior to such transaction hold equity interests representing less than 50% of the voting power of the equity interests of the surviving or resulting entity issued and outstanding immediately following such transaction, or (ii) the acquisition by any person or 13D Group, directly or indirectly, of shares of Voting Stock (including by way of a tender offer or an exchange offer, or a share issuance by Parent) representing in excess of 50% of the voting power of the then outstanding shares of Voting Stock of Parent. (f) " Director " means a member of the Board of Directors. (g) " Effective Time " means the time of the consummation of the Merger. (h) " Exchange Act " means the Securities Exchange Act of 1934, as amended. (i) " Initial Holders " means the Persons that are the Holders under this Agreement on the date hereof. (j) " Parent Common Stock " means the Common Stock, par value $0.001 per share of Parent. (k) " Parent CEO " means the Chief Executive Officer of Parent. (l) " Parent Preferred Stock " means any series of Preferred Stock of Parent. (m) " Parent Stock Plan " means Parent's 2000 Incentive Plan, as amended, Parent's Employee Stock Purchase Plan and Parent's 2003 Stock Option Plan. (n) " Person " means any individual, firm, corporation, partnership, company, limited liability company, division, trust, joint venture, association, governmental authority or other entity or organization. (o) " Securities Act " means the Securities Act of 1933, as amended. (p) " Solicitation " has the meaning ascribed to it in Exchange Act Regulation 14A, as amended. (q) " Standstill Period " means the period beginning on the date hereof and terminating on the second anniversary of the date hereof. (r) " Transfer " means any transaction by which a Person directly or indirectly sells, transfers or otherwise disposes of a security or any interest therein. (s) " Voting Stock " means outstanding securities of Parent having the right to vote generally in any election of Directors. (t) " 13D Group " means any group of Persons formed for the purpose of acquiring, holding, voting or disposing of Voting Stock which would be required under Section 13(d) of the Exchange Act, and the rules and regulations thereunder (as in effect, and based on legal interpretations thereof existing, on the date hereof), to file a statement on Schedule 13D with the Securities and Exchange Commission as a "person" within the meaning of Section 13(d)(3) of the Exchange Act if such group beneficially owned Voting Stock representing more than 5% of any class of Voting Stock then outstanding. 2 2.1 Composition of the Board of Directors at the Effective Time. At the Effective Time, the Board of Directors shall be comprised of seven Directors, consisting of (i) Garrett F. Bouton and three persons that are designated by the Board of Directors prior to the mailing of the Proxy Statement that qualify as an "Independent Director" under Nasdaq Rule 5605(a)(2) and that meet the criteria for audit committee independence set forth in Rule 10A-3(b)(1) promulgated under the Exchange Act (collectively, the " Parent Designated Directors "); (ii) two Directors designated by Holders beneficially owning a majority of the capital stock of the Company as of immediately prior to the Effective Time, which will be Christopher S. Gaffney and James P. Dougherty (collectively, the " Company Designated Directors "); and (iii) the Parent CEO, which will initially be Steve Samek. 2.2 Composition of the Board of Directors following the Effective Time . (a) In connection with the first meeting of the Parent Stockholders following the Effective Time at which Directors are elected (whether an annual meeting or a special meeting in lieu of an annual meeting) (such meeting, the " 2010 Election Meeting "), (i) Parent shall cause each of the individuals set forth in Section 2.1 (the " Designated Directors ") to be nominated for re-election at such meeting and (ii) Parent shall use its commercially reasonable efforts to solicit, from the Parent Stockholders eligible to vote for the election of Directors at such meeting, proxies in favor of each of the Designated Directors that stands for re-election at such meeting. (b) At the 2010 Election Meeting, each Holder shall vote, or cause to be voted, all shares of Voting Stock beneficially owned by such Holder in favor of the re-election of each of the Designated Directors; provided, however , that if, for any reason, any Parent Designated Director does not stand for re-election at such meeting, then, in lieu of voting for such Director, the Holders may vote for another candidate so long as such candidate meets the criteria for audit committee independence set forth in Rule 10A-3(b)(1) promulgated under the Exchange Act (such candidate, an " Independent Replacement Director "). For the avoidance of doubt, in the event that any Parent Designated Director does not stand for re-election at the 2010 Election Meeting, each Holder shall vote for each of the other Parent Designated Directors that stand for re-election at the 2010 Election Meeting. (c) Notwithstanding anything in this Agreement to the contrary, Sections 2.2(a) and (b) above shall terminate and be of no further force and effect as of December 31, 2010. 2.3 Limitation on Removal of Directors. Prior to the earlier to occur of the first anniversary of the 2010 Election Meeting and June 30, 2011 (the " Section 2.3 Expiration Date "), each Holder agrees (a) to vote, or cause to be voted, at each meeting of the Parent Stockholders at which any proposal to remove any of the Designated Directors is to be voted on, all shares of Voting Stock beneficially owned by such Holder against any proposals to remove any of the Designated Directors; (b) not to exercise such Holder's right, if any, to call a special meeting of stockholders if any of the proposals to be voted on at such special meeting is to remove any of the Designated Directors; and (c) in the event that any Holder calls a special meeting of stockholders between the 2010 Election Meeting and the Section 2.3 Expiration Date for the purpose of removing an Independent Replacement Director, that any individual nominated by such Holder to fill the resulting vacancy shall meet the criteria for audit committee independence set forth in Rule 10A-3(b)(1) promulgated under the Exchange Act. 3 2.4 Additional Limitations. Until the Section 2.3 Expiration Date, no Holder shall, directly or indirectly, grant any proxies with respect to any Voting Stock or deposit any Voting Stock in any voting trusts, in each case, unless appropriate provision is made or caused to be made by such Holder in any such proxies or voting trusts to ensure that such Voting Stock will be voted on each proposal to elect or remove any Designated Directors and will be voted in the same manner as such Holder is then required to vote such Voting Stock pursuant to Article 2. For the avoidance of doubt, the taking of any action that is not prohibited by this Section 2.4 shall not relieve any Holder of its obligations under Article 2. 2.5 Certificate of Incorporation and By-laws. Parent and the Holders shall take or cause to be taken all lawful action necessary to ensure at all times that Parent's certificate of incorporation and by-laws are not at any time inconsistent with the provisions of this Agreement. 2.6 Management Directors. Each Holder hereby commits that the Company Designated Directors, at any time when any such proposals are brought before a meeting of the Board of Directors, will vote in favor of any proposals approved by a majority of the other members of the Board of Directors regarding the appointment or removal of any individuals as "Management Directors" of Parent; it being understood that (i) the number of "Management Directors" shall be determined by the Board of Directors in consultation with the Chief Executive Officer of the Company (but shall not be less than two in any event), (ii) candidates for the position of "Management Director" of Parent shall be employees of Parent or one of its subsidiaries and shall be nominated from time to time by the Chief Executive Officer of the Company in his sole discretion, after consultation with the leading experts of the Company, and approved by the Board of Directors, (iii) "Management Directors" may be removed with or without cause by a majority vote of the Board of Directors, (iv) "Management Directors" of Parent shall not be members of the Board of Directors, and (v) subject to the limitations established from time to time by the Board of Directors, the "Management Directors" of Parent will be invited to and allowed to participate in meetings of the Board of Directors in a non-voting capacity. 3.1 Purchases of Equity Securities. During the Standstill Period, no Holder shall, nor shall it cause or permit any of its Affiliates (other than Parent and any subsidiaries of Parent) to, directly or indirectly, purchase or otherwise acquire any shares of Voting Stock from any Person unless: (a) a majority of the Directors, not including the Company Designated Directors, shall have previously approved such acquisition; (b) such purchase or acquisition is a result of a dividend that is declared by the Board of Directors and that is payable in Voting Stock; (c) such purchase or acquisition is pursuant to the right of participation set forth in Section 4; (d) such acquisition is pursuant to the indemnification provisions set forth in Article 7 of the Merger Agreement; (e) such purchase or acquisition occurs (i) after December 31, 2010 and (ii) is effected through a tender offer made to all holders of Voting Stock in accordance with all applicable securities laws; or (f) such purchase or acquisition is the result of the conversion of any shares of Parent Preferred Stock. 3.2 Transfer of Voting Stock. During the Standstill Period, no Holder shall cause or permit to be effected any Transfer of any Voting Stock to any of its Affiliates (other than Parent and any 4 subsidiary of Parent) unless such Affiliate transferee shall have, prior to such Transfer, executed and delivered to Parent a binding counterpart of this Agreement agreeing to be bound as a Holder hereunder. Any purported Transfer in violation of this Section shall be void for all purposes. 4.1 Grant. Subject to the terms and conditions specified in this Article 4, Parent hereby grants, to each Holder that then holds any shares of Parent Preferred Stock and that is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act, the preemptive right to purchase a portion of any New Securities (as defined below). 4.2 New Securities; Limitation on Grant. " New Securities " means (i) any shares of Parent Common Stock, any shares of Parent Preferred Stock or other equity security of Parent (collectively, " Parent Capital Stock "), (ii) any securities convertible into or exercisable or exchangeable for Parent Capital Stock, and (iii) any options, rights, warrants or other securities issued by Parent carrying the right to acquire shares of Parent Capital Stock; provided, however, that the term "New Securities" does not include: (a) shares of Parent's Common Stock, and/or options, rights or warrants therefor, issued or issuable for compensatory purposes to employees, officers, directors, contractors, vendors, advisors or consultants of Parent or any of its subsidiaries pursuant to the Parent Stock Plan or any other incentive agreements or plans approved by the Board of Directors; (b) any securities issuable upon conversion of or with respect to any then previously-issued or outstanding securities of Parent; (c) shares of Parent Common Stock or Parent Preferred Stock issued in connection with any stock split or stock dividend or recapitalization of Parent in which all holders of Parent Preferred Stock are affected proportionally; (d) securities issued or issuable pursuant to the bona fide acquisition of another corporation or entity by Parent by consolidation, merger, purchase of all or substantially all of the assets, or other bona fide reorganization in which Parent acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty percent (50%) |
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