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SHARE TENDER AGREEMENT

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SHARE TENDER AGREEMENT | Document Parties: AG.com, Inc | Photo Merger Corp., | PhotoWorks, Inc., You are currently viewing:
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AG.com, Inc | Photo Merger Corp., | PhotoWorks, Inc.,

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Title: SHARE TENDER AGREEMENT
Date: 11/29/2007
Industry: Photography     Law Firm: Baker &Hostetler LLP; Heller Ehrman LLP     Sector: Consumer Cyclical

SHARE TENDER AGREEMENT, Parties: ag.com  inc , photo merger corp.  , photoworks  inc.
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Exhibit 10.3
SHARE TENDER AGREEMENT
     This SHARE TENDER AGREEMENT (this “ Agreement ”), is dated as of November 28, 2007 (this “ Agreement ”), by and among AG.com, Inc., an Ohio corporation (“ Parent ”), Photo Merger Corp., a Washington corporation and a wholly owned subsidiary of Parent (“ Subcorp ”), PhotoWorks, Inc., a Washington corporation (“ PhotoWorks ”), and HZ Partners, FBO Edward Holl, in its capacity as shareholder of PhotoWorks (the “ Shareholder ”).
W I T N E S S E T H
     WHEREAS, as of the date hereof, the Shareholder is the beneficial owner of the number of Common Shares (as defined below) set forth opposite the name of the Shareholder on Schedule 1 hereto (including any Common Shares acquired by the Shareholder after the execution of this Agreement, collectively, the “ Owned Shares ”); and
     WHEREAS, Parent, Subcorp, and PhotoWorks are simultaneously with the execution of this Agreement entering into an Agreement and Plan of Merger, dated as of the date of this Agreement (as it may be amended from time to time in accordance with its terms, the “ Merger Agreement ”), providing for, among other things, Subcorp to commence a cash tender offer (the “ Offer ”) to purchase all of the issued and outstanding common shares, par value $0.01, of PhotoWorks (the “ Common Shares ”), followed by the subsequent merger of Subcorp with and into PhotoWorks with PhotoWorks surviving the merger, on the terms and subject to the conditions set forth in the Merger Agreement (capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Merger Agreement); and
     WHEREAS, as a condition and inducement to Parent’s and Subcorp’s willingness to enter into and perform their obligations under the Merger Agreement, Parent and Subcorp have required that the Shareholder agree, and the Shareholder has agreed, (i) to tender in the Offer (and not withdraw) all of the Shareholders’ Owned Shares, whether upon the exercise of options or warrants, conversion of convertible securities or otherwise, and any other voting securities of PhotoWorks (whether acquired prior to or after the execution of this Agreement) that are beneficially owned by the Shareholder, and (ii) that in the event that a vote of the shareholders of PhotoWorks is required in furtherance of the Merger Agreement or the transactions contemplated thereby, including the Merger, the Shareholder will vote all of the Owned Shares in favor of any such proposal, and (iii) to take the other actions described in this Agreement; and
     WHEREAS, the Shareholder desires to express its support for the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger.
     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows:

 


 
     1.  Agreement to Tender and Vote; Irrevocable Proxy .
          1.1 Agreement to Tender . (a) The Shareholder agrees that as promptly as practicable after the commencement of the Offer, and in any event no later than the 10 th Business Day following the commencement of the Offer, the Shareholder shall irrevocably tender into the Offer all of the Owned Shares owned by the Shareholder on or prior to the 10 th Business Day following the commencement of the Offer, free and clear of all Liens that would prevent Shareholder from tendering the Shareholder’s shares in accordance with this Agreement or otherwise complying with the Shareholder’s obligations under this Agreement. If the Shareholder acquires any Owned Shares after the 10 th Business Day following the commencement of the Offer (including during any subsequent offering period, if any), the Shareholder shall irrevocably tender into the Offer such Owned Shares on the date that the Shareholder shall acquire such Owned Shares.
               (b) The Shareholder agrees that once the Owned Shares are tendered into the Offer, the Shareholder shall not withdraw the tender of such Owned Shares unless the Offer shall have been terminated or shall have expired, or the Merger Agreement has been terminated, in each case in accordance with the terms of the Merger Agreement.
          1.2 Agreement to Vote . The Shareholder hereby agrees that, during the term of this Agreement, at any meeting of the shareholders of PhotoWorks, however called, or any adjournment or postponement of such meeting, the Shareholder shall be present (in person or by proxy) and vote (or cause to be voted) all of the Owned Shares (to the extent the Owned Shares are not purchased in the Offer) (a) in favor of adoption of (1) the Merger Agreement and all the transactions contemplated by the Merger Agreement, including the Merger, and (2) any other matter that is required to facilitate the consummation of the transactions contemplated by the Merger Agreement and in connection with the Merger Agreement to execute any documents which are necessary or appropriate in order to effectuate the foregoing; and (b) against (1) any Takeover Proposal, any agreement or arrangement related to such Takeover Proposal, (2) any of the following actions (other than those actions that relate to the Offer, the Merger and any other transactions contemplated by the Merger Agreement): (A) any merger, consolidation, business combination, sale of assets, or reorganization of PhotoWorks or any PhotoWorks Subsidiary, (B) any sale, lease or transfer of any significant part of the assets of PhotoWorks or any PhotoWorks Subsidiary, (C) any reorganization, recapitalization, dissolution, liquidation or winding up of PhotoWorks or any PhotoWorks Subsidiary and (D) any material change in the capitalization of PhotoWorks or any PhotoWorks Subsidiary, or the corporate structure of PhotoWorks or any PhotoWorks Subsidiary, and (3) any action or agreement (other than an adjournment of the PhotoWorks Shareholders Meeting that is recommended by the Board of Directors of PhotoWorks in accordance with the terms of the Merger Agreement) that would impair the ability of Parent and the Subcorp to complete the Offer or the Merger, the ability of PhotoWorks to consummate the Merger, or that would otherwise be inconsistent with, prevent, impede or delay the consummation of the transactions contemplated by the Merger Agreement.
          1.3 Irrevocable Proxy . The Shareholder hereby irrevocably grants to, and appoints, Parent and any designee of Parent and each of Parent’s officers, as Shareholder’s attorney, agent and proxy with full power of substitution and resubstitution, to the full extent of the Shareholder’s voting rights with respect to the Owned Shares, to vote all the Owned Shares

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or grant a consent or approval, at any meeting of the shareholders of PhotoWorks and in any action by written consent of the shareholders of PhotoWorks, until the earlier of the acceptance of Shares pursuant to the Offer or the date of termination of the Merger Agreement, on the matters described in Section 1.2, and in accordance therewith. THIS PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AND IRREVOCABLE PROXY AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM THE SHAREHOLDER MAY TRANSFER ANY SHARES. The Shareholder revokes all other proxies and power of attorneys, with respect to all of the Owned Shares that may have heretofore been appointed or granted with respect to any matters covered by Section 1.2, and no subsequent proxy (whether revocable or irrevocable) or power of attorney shall be given by the Shareholder, except as required by any letter of transmittal in connection with the Offer. The Shareholder agrees to execute any further agreement or form reasonably necessary or appropriate to confirm and effectuate the grant of the proxy contained herein. Such proxy shall automatically terminate upon the valid termination of this Agreement in accordance with Section 5.1.
     2.  Representations and Warranties . The Shareholder hereby represents and warrants to Parent and Subcorp as follows:
          2.1 Power; Due Authorization; Binding Agreement . The Shareholder has full legal capacity, power and authority to execute and deliver this Agreement, to perform the Shareholder’s obligations under this Agreement, and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by the Shareholder of this Agreement, the performance by the Shareholder of the Shareholder’s obligations hereunder and the consummation by the Shareholder of the transactions contemplated hereby have been duly and validly authorized by the Shareholder and no other actions or proceedings on the part of the Shareholder are necessary to authorize the execution and delivery by the Shareholder of this Agreement, the performance by the Shareholder of the Shareholder’s obligations hereunder or the consummation by the Shareholder of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Shareholder and constitutes a valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms.
          2.2 Ownership of Shares . On the date of this Agreement, the Owned Shares set forth opposite the Shareholder’s name on Schedule 1 are owned beneficially by the Shareholder and include all of the Owned Shares owned beneficially by the Shareholder, free and clear of any Liens that would prevent the Shareholder from tendering the Owned Shares in accordance with this Agreement or complying with the Shareholder’s other obligations under this Agreement. As of the date of this Agreement, the Shareholder does not own, beneficially or otherwise, any securities of PhotoWorks other than the Common Shares set forth on Schedule 1 , and does not have any right to acquire any securities of PhotoWorks other than pursuant to the options, warrants and/or convertible securities as set forth on Schedule 1 . As of the date of this Agreement, the Shareholder has, and as of immediately prior to the expiration of the Offer the Shareholder will have, sole voting power, sole dispositive power, sole power to issue instructions with respect to the matters set forth herein, and sole power to agree to all of the matters set forth

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in this Agreement, in each case with respect to all of the Owned Shares and is and will be entitled to dispose of the Owned Shares.
          2.3 No Conflicts . The execution and delivery of this Agreement by the Shareholder does not, and the performance of the terms of this Agreement by the Shareholder will not, (a) require the Shareholder to obtain the consent or approval of, or make any filing with or notification to, any Governmental Authority (other than, if applicable, a filing on Schedule 13D), (b) if the Shareholder is an entity, conflict with or result in a breach of any organizational documents applicable to the Shareholder, (c) require the consent or approval of any other Person pursuant to any agreement, obligation or instrument binding on Shareholder or its properties and assets, (d) except for withdrawal rights that may be required by the U.S. federal securities laws, conflict with or violate any law, rule, regulation, order, judgment, decree, writ or injunction applicable to the Shareholder or pursuant to which any of its properties or assets are bound or (e) violate any other agreement to which the Shareholder is a party, including any voting agreement, shareholders agreement, irrevocable proxy or voting trust. The Owned Shares are not, with respect to the voting or transfer of such Owned Shares, subject to any other agreement, including any voting agreement, shareholders agreement, irrevocable proxy or voting trust.
          2.4 Acknowledgment . The Shareholder understands and acknowledges that each of Parent and Subcorp is entering into the Merger

 
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