|
--------------------------------------------------------------------------------
SHAREHOLDER AGREEMENT
Dated as of August 20, 2007
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS...................................................1
1.1 Certain Defined
Terms............................................1
ARTICLE II CORPORATE GOVERNANCE AND INFORMATION
RIGHTS...................6
2.1 Board
Representation.............................................6
2.2 Investor Shareholder Director Fees and
Expenses..................9
ARTICLE III STANDSTILL AND
TRANSFERS......................................9
3.1 Standstill
Agreement.............................................9
3.2 Transfer
Restrictions...........................................10
3.3 Right of First Refusal to Investor
Shareholders.................11
3.4 Company's Right of First
Refusal................................13
3.5 Securities Law Compliance; Reporting
Obligations................14
ARTICLE IV
MISCELLANEOUS................................................14
4.1
Termination.....................................................14
4.2
Expenses........................................................14
4.3 Assignment;
Benefits............................................15
4.4 Entire
Agreement................................................15
4.5
Severability....................................................15
4.6 Amendments and
Waivers..........................................15
4.7
Notices.........................................................15
4.8 Governing
Law...................................................16
4.9 Submission to Jurisdiction; Waiver of Jury
Trial................16
4.10
Counterparts....................................................16
4.11 Further
Assurances..............................................16
4.12 Recapitalization,
etc...........................................16
4.13 Remedies for Breach; Specific
Performance.......................16
-i-
<PAGE>
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and
entered into
this 20th day of August 2007 among (i) Gilman + Ciocia, Inc., a
Delaware
corporation (the "Company"); (ii) each of the shareholders set
forth on Schedule
I (the "Schedule of Investor Shareholders") attached hereto;
(iii) each of the
shareholders set forth on Schedule II (the "Schedule of Existing
Shareholders")
attached hereto; and (iv) each Person that subsequently becomes
a party hereto
pursuant to a Permitted Transfer.
RECITALS
WHEREAS, this Agreement is made pursuant to (i) the Stock
Purchase
Agreement, dated April 25, 2007, by and among the Company and
the purchasers
named therein (the "Investor Purchase Agreement"), which
provides for the
issuance by the Company to the Investor Shareholders of an
aggregate of
40,000,000 shares (the "Investor Shares") of the Common Stock
and (ii) the Stock
Purchase Agreement, dated by and among the Company and the
Existing Shareholders
dated August 20, 2007, (the "Placement Purchase Agreement", and,
together with
the Investor Purchase Agreement, the "Purchase Agreements"),
which provides for
the issuance by the Company to the Existing Shareholders of an
aggregate of
40,000,000 shares (together with all other shares of Common
Stock owned by the
Existing Shareholders or their Affiliates, the "Existing
Shareholder Shares").
The execution of this Agreement is a condition to the closing
under the Purchase
Agreements.
WHEREAS, the parties hereto desire to enter into certain
arrangements
relating to the Company and the Shares.
NOW, THEREFORE, in consideration of the foregoing recitals and
of the
mutual promises hereinafter set forth, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms
shall have
the following meanings:
"Affiliate" means, with respect to any Person, (i) a manager or
managing
member if such Person is a limited liability company, a trustee
if such Person
is a trust, a general partner if such Person is a limited
partnership, (ii) a
director or executive officer of such Person, (iii) a spouse,
parent, sibling or
descendant of such Person (or a spouse, parent, sibling or
descendant of any
Person identified in (i) and (ii) hereof), and (iv) any other
Person that,
directly or indirectly through one or more intermediaries,
controls, is
controlled by or is under common control with such Person.
<PAGE>
"Affiliate Transaction" means any action of either the Company
or any
Subsidiary of the Company, direct or indirect, to (i) make or
effect any payment
to any Affiliate of either the Company or a Subsidiary of the
Company, (ii)
sell, lease, transfer or otherwise dispose of any of the
Company's or any of its
Subsidiaries' respective properties or assets to any Affiliate
of either the
Company or a Subsidiary of the Company, or (iii) enter into,
make, amend, renew
or extend any transaction, contract, agreement, understanding,
loan, advance or
guarantee with any Affiliate of either the Company or a
Subsidiary of the
Company, other than employment agreements approved by the Board
in connection
with satisfying its obligations under the Investor Purchase
Agreement and
agreements relating to grants of stock options or other equity
awards approved
by the Board and permitted by Section 2.1(d)(i) hereof.
"Agreement" has the meaning assigned to such term in the
preamble.
"Agreement Termination Date" means the first date after the
Closing Date
on which the Investor Shareholders own of record less than
16,000,000 shares of
Common Stock (subject to adjustments for stock splits,
subdivisions,
combinations, stock dividends or similar reclassifications of
the Common Stock).
"beneficial owner(ship)" and "beneficially own" shall be
determined in
accordance with Rule 13d-3 under the Exchange Act; provided,
however, that a
Person shall be deemed to beneficially own any securities that
such Person or
any of such Person's Affiliates has the right to acquire
(whether such right is
exercisable immediately or only after the passage of time)
pursuant to any
agreement, arrangement or understanding (written or oral), or
upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise
(it being understood that such Person shall also be deemed to be
the beneficial
owner of the securities convertible into or exchangeable for
such securities.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, a Sunday or
other day
on which banks are required or authorized by law to be closed in
The City of New
York.
"Capital Stock" means, with respect to any Person at any time,
any and all
shares, interests, participations or other equivalents (however
designated,
whether voting or non-voting) of capital stock, partnership
interests (whether
general or limited) or equivalent ownership interests in or
issued by such
Person, and with respect to the Company includes, without
limitation, any and
all shares of Common Stock.
"Change of Control" means the occurrence of any of the following
events:
(i) any Person or group is or becomes the beneficial owner
of
Voting Securities representing more than 50% of the Total Voting
Power; or
(ii) a merger, consolidation, reorganization or similar
transaction in which the shareholders of the Company immediately
prior to
the transaction possess less than 50% of the Voting Power of the
surviving
entity (or its parent) immediately after the transaction; or
-2-
<PAGE>
(iii) during any one-year period, individuals who at the
beginning of such period constituted the Board (together with
any new
Directors whose election by the Board or whose nomination for
election by
the shareholders of the Company was approved by a vote of a
majority of
the Directors then still in office who were either Directors at
the
beginning of such period or whose election or nomination for
election was
previously so approved) cease for any reason to constitute a
majority of
the Board then in office.
"Closing" has the meaning assigned to such term in the
Purchase
Agreements.
"Closing Date" has the meaning assigned to such term in the
Investor
Purchase Agreement.
"Committee" means each of the Audit Committee and the
Compensation
Committee.
"Common Stock" means the Common Stock, par value $0.01 per
share, of the
Company and any securities issued in respect thereof, or in
substitution
therefor, in connection with any stock split, dividend or
combination, or any
reclassification, recapitalization, merger, consolidation,
exchange or other
similar reorganization.
"Company" has the meaning assigned to such term in the
preamble.
"Competitor" shall mean any Person with a division, department
or
Subsidiary principally engaged in a financial planning business,
brokerage
business, or tax services business that is competitive with the
Company.
"control" (including the terms "controlled by" and "under common
control
with"), with respect to the relationship between or among two or
more Persons,
means the possession, directly or indirectly, of the power to
direct or cause
the direction of the affairs or management of a Person, whether
through the
ownership of voting securities, as trustee or executor, by
contract or
otherwise.
"Director" means any member of the Board.
"Equity Securities" means (a) with respect to a corporation, any
and all
shares of Capital Stock and any securities of such corporation
convertible into,
or exchangeable or exercisable for, such shares of Capital
Stock, and options,
warrants or other rights to acquire such shares of Capital
Stock, (b) with
respect to a partnership, limited liability company, trust or
similar Person,
any and all units, interests or other partnership/limited
liability company
interests, and any units or interests of such partnership,
limited liability
company, trust or similar Person convertible into, or
exchangeable or
exercisable for, such units or interests, and options, warrants
or other rights
to acquire such units or interests, and (c) any other equity
ownership or
participation in a Person.
-3-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and
the rules and regulations promulgated thereunder.
"Existing Shareholder Directors" has the meaning assigned to
such term in
Section 2.1.
"Existing Shareholders" means each of the Existing Shareholders
and each
Person receiving Common Stock from an Existing Shareholder as a
result of a
Permitted Transfer.
"Existing Shareholder Shares" has the meaning assigned to such
term in the
recitals.
"Future Securities" shall have the meaning set forth in Section
3.2.
"Investor Shares" has the meaning assigned to such term in the
recitals.
"Independent Director" shall have the meaning set forth under
the NASD
Marketplace Rules.
"Investor Director" means any Director designated or nominated
for
election to the Board by the Investor Shareholders pursuant to
Section 2.1 of
this Agreement.
"Investor Shareholders" means each of the Investor Shareholders
and each
Person receiving Common Stock from an Investor Shareholder as a
result of a
Permitted Transfer.
"Permitted Transfer" means a Transfer by (a) any Investor
Shareholder to
(i) any partner of or member in the Investor Shareholders in
connection with a
distribution to such partner or member of Investor Shares or
(ii) any Affiliate
of the Investor Shareholders, or (b) any Existing Shareholder to
any Affiliate
of the Existing Shareholders, in each case (a) or (b), who
agrees to be bound by
the terms of this Agreement if, as a result of such Transfer,
such partner or
member or Affiliate would own at least 5% of the Total Voting
Power.
"Person" means any natural person, corporation, limited
liability company,
trust, joint venture, association, company, partnership,
governmental authority
or other entity.
"Placement Purchase Agreement" has the meaning assigned to such
term in
the recitals.
"Placement Shares" has the meaning assigned to such term in the
recitals.
"Purchase Agreements" has the meaning assigned to such term in
the
recitals.
"Registration Rights Agreement" means the Registration Rights
Agreement,
dated as of the date hereof, between the Company and the
Investor Shareholders.
"SEC" means the U.S. Securities and Exchange Commission or any
other
federal agency then administering the Securities Act or the
Exchange Act and
other federal securities laws.
-4-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended,
and the
rules and regulations promulgated thereunder.
"Shares" has the meaning assigned to such term in the
recitals.
"Subsidiary" means, with respect to a party, any corporation,
partnership,
trust, limited liability company or other entity in which such
party (and/or one
or more Subsidiaries of such party) holds stock or other
ownership interests
representing (a) more that 50% of the voting power of all
outstanding stock or
ownership interests of such entity, (b) the right to receive
more than 50% of
the net assets of such entity available for distribution to the
holders of
outstanding stock or ownership interests upon a liquidation or
dissolution of
such entity or (c) a general or managing partnership interest or
similar
position in such entity.
"13D Group" means any "group" (within the meaning of Section
13(d) of the
Exchange Act) formed for the purpose of acquiring, holding,
voting or disposing
of Voting Securities.
"Term" means the period commencing on the Closing Date and
ending on the
earlier to occur of (i) the Agreement Termination Date or (ii)
the date on which
this Agreement shall be terminated by the parties hereto
pursuant to Section
4.6; provided, that (a) with respect to Section 3.1 only, "Term"
shall mean the
period commencing on the date hereof and ending on the first
anniversary of the
date hereof and (b) certain obligations set forth herein shall
survive the Term
pursuant to Section 4.1 hereof.
"Total Voting Power" means the aggregate number of votes which
may be cast
in an election of Directors or other members of the governing
body of the
Company by holders of Voting Securities in respect of Voting
Securities.
"Transaction" has the meaning assigned to such term in the
recitals.
"Transfer" means, directly or indirectly, to sell, transfer,
assign,
pledge, encumber, hypothecate or similarly dispose of, either
voluntarily or
involuntarily, or to enter into any contract, option, short
sale, hedge,
derivative transaction (including a registered hedge) or other
arrangement or
understanding with respect to the sale, transfer, assignment,
pledge,
encumbrance, hypothecation, or similar disposition of any shares
of Equity
Securities beneficially owned by a Person or any interest in any
shares of
Equity Securities beneficially owned by a Person.
"Voting Securities" means, at any time, shares of any class of
Equity
Securities of the Company which are then entitled to vote in the
election of
Directors.
-5-
<PAGE>
ARTICLE II
CORPORATE GOVERNANCE AND INFORMATION RIGHTS
2.1 Board Representation. (a) At the Closing, the Company shall
appoint
two Directors designated by the Investor Shareholders for
election by the Board
and obtain resignations from two of the Directors that are not
Independent
Directors serving on the Board such that the Board shall consist
initially of
seven Directors. During the Term of this Agreement, (i) the
Investor
Shareholders, acting as a group (by majority vote based on
number of shares of
Common Stock held), shall have the right to nominate for
election to the Board
two Directors to the Board for so long as the Investor
Shareholder Group
collectively owns of record a number of shares of Common Stock
equal to at least
10% of the then outstanding Common Stock (the "Investor
Directors"), (ii) the
Existing Shareholders, acting as a group (by majority vote based
on number of
shares of Common Stock held), shall have the right to nominate
for election to
the Board two Directors to the Board for so long as the Existing
Shareholder
Group collectively owns of record a number of shares of Common
Stock equal to at
least 10% of the then outstanding Common Stock (the "Existing
Shareholder
Directors") and (iii) the Investor Directors and the Existing
Shareholder
Directors shall jointly nominate three Independent Directors. In
addition, in
the event that the Board (including at least one Investor
Director and one
Existing Shareholder Director) determines to increase the number
of directors
above seven, such additional directors shall be Independent
Directors and shall
be jointly nominated by the Investor Directors and the Existing
Shareholder
Directors. Any nomination for the replacement of (x) a Investor
Director prior
to the expiration of his or her respective term shall be made by
the remaining
Investor Director or, if no Investor Directors remain, by the
Investor
Shareholders, (y) an Existing Shareholder Director prior to the
expiration of
his or her respective term shall be made by the remaining
Existing Shareholder
Director or, if no Existing Shareholder Directors remain, by the
Existing
Shareholders or (z) an Independent Director prior to the
expiration of his or
her respective term shall be made jointly by the Investor
Directors and the
Existing Shareholder Directors; provided, however, that the
current independent
Directors shall be entitled to serve through the earlier to
occur of their
resignation or the expiration of their respective current terms
and; provided,
further that to the extent that the Board or any member thereof
reasonably
believes that it would be contrary to his, her or its fiduciary
duties to the
Company and its shareholders to nominate any Investor Director
or Existing
Shareholder Director to the Board or any Committee thereof, the
Board, or any
member thereof, may refuse to make such nomination and such
refusal shall not be
deemed a breach of this Agreement.
(b) Subject to Section 2.1(a), the Company, the Investor
Shareholders and the Existing Shareholders at all times shall
take such action
as may be reasonably required under applicable law to cause the
Investor
Shareholders' designee(s) and the Existing Shareholders'
designee(s) to be
elected to the Board. Furthermore, the Company hereby agrees,
subject to Section
2.1(a), to (i) include each of the Director designees of the
Investor
Shareholders and the Existing Shareholders (which are up for
election in
accordance with the Bylaws of the Company) on each slate of
nominees for
election to the Board proposed by the Company and/or the Board
(or any Committee
thereof), (ii) recommend the election of the Director designees
of the Investor
Shareholders and the Existing Shareholders (which are up for
election in
accordance with the Bylaws of the Company) to the shareholders
of the Company,
and (iii) without limiting the foregoing, to otherwise use
commercially
reasonable efforts to cause the Director designees of the
Investor Shareholders
and the Existing Shareholders (which are up for election in
accordance with the
Bylaws of the Company) to be elected to the Board.
-6-
<PAGE>
(c) During the Term of this Agreement, one of the two
Investor
Directors shall be appointed as a member of the Compensation
Committee of the
Board and one of the Investor Directors shall have the right to
attend all Audit
Committee meetings; provided, however, that in the event that
the Company is
listed on The Nasdaq Stock Market (or such other national
securities exchange on
which the Common Stock is then listed or quoted for trading),
then each Investor
Director shall be qualified under the rules and regulations of
the SEC and the
Nasdaq Stock Market (or such other national securities exchange
on which the
Common Stock is then listed or quoted for trading) and the
Company's guidelines
(applied on a reasonable and uniform basis consistent with past
practice) as in
effect from time to time to serve as a member of the
Compensation Committee.
(d) During the Term of this Agreement, none of the following
actions
shall take place without the consent of at least one of the
Investor Directors:
(i) the issuance, redemption or purchase of equity or debt
of
the Company (including the issuance of warrants and/or the
expansion of
the Company's current stock option plan), excluding (x)
issuances of
equity or debt securities and the incurrence of debt in
connection with
Permitted Acquisitions (defined below), (y) the incurrence of
debt in
connection with inventory, equipment or lease financing in the
ordinary
course of business in any fiscal year in an amount not to exceed
5% of the
Company's gross revenue calculated in accordance with GAAP,
consistently
applied (as set forth in financial statements filed with the
SEC) for the
prior fiscal year together with all then outstanding inventory,
equipment
or lease financings, and (z) debt incurred under lines of credit
or
revolving credit facilities or any renewals, extensions,
substitutions,
refundings, refinancings or replacements of such indebtedness in
an amount
not to exceed the greater of the amount outstanding on the date
hereof and
5% of the Company's gross revenue calculated in accordance with
GAAP,
consistently applied (as set forth in financial statements filed
with the
SEC) for the prior fiscal year.
(ii) the issu
| 
