Exhibit 10.1

 

STANDSTILL AGREEMENT

 

STANDSTILL AGREEMENT (this “Agreement”), dated as of January 10, 2006 by and
among vFinance, Inc., a Delaware corporation (the “Company”), and each of
Sterling Financial Investment Group, Inc., a Florida corporation (“Seller”),
Sterling Financial Group of Companies, Inc., a Delaware corporation (“Parent”),
and Charles Garcia (“CG”) and Alexis Korybut (“AK”).

 

WHEREAS, in connection with the closing of the Asset Purchase Agreement dated as
of January 10, 2006 (the “Asset Purchase Agreement”) by and among the Company,
vFinance Investments, Inc., a Florida corporation, Seller and Parent, Parent
will be receiving 17,500,000 shares of the Company’s common stock, par value
$.01 per share (the “Common Stock”), subject to Section 3.2 therein; and

 

WHEREAS, the Company and each of Seller, Parent and CG and AK desire to
establish in this Agreement certain conditions of such party's relationship with
Company;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Agreement, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01 Definitions.

 

(a) “ACQUISITION PROPOSAL” shall mean a bona fide, written proposal, which
proposal includes all material terms of a proposed transaction, received by the
Board of Directors of the Company from any Person or Group proposing to enter
into a transaction which, if effected, would constitute a Change of Control of
the Company.

 

(b) “AFFILIATE” shall have the meaning given it in Rule 12b-2 under the Exchange
Act.

 

(c) “ASSOCIATE” shall have the meaning given it in Rule 12b-2 under the Exchange
Act.

 

(d) “BENEFICIAL OWNER” shall have the meaning given it in Rule 13(d)(3) under
the Exchange Act; and "Beneficially Own" and "Beneficial Ownership" shall apply
to securities held by a Beneficial Owner.

 

(e) “CHANGE OF CONTROL” shall mean (1) the acquisition by a Third Party of more
than 50% of the Company's then outstanding Voting Stock, excluding however, a
purchase agreement with an underwriter or group of underwriters in a registered
public offering to the public; (2) the consummation of a merger, acquisition,
consolidation or reorganization or series of such related transactions involving
the Company, unless both (x) immediately after such transaction or

 

 

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transactions, the stockholders of the Company immediately prior to such
transaction shall Beneficially Own at least 50% of the outstanding Voting Stock
of the Company (or, if the Company shall not be the surviving company in such
merger, consolidation or reorganization, the Voting Stock of the surviving
corporation issued in such transaction in respect of Voting Stock of the Company
shall represent at least 50% of the Voting Stock of such surviving company), and
(y) the Company is not subject to an agreement that provides that individuals
who are directors of the Company immediately prior to such transaction (or
individuals designated by the Company at or before the closing of such
transaction) shall constitute less than a majority of the directors of the
Company (or such surviving company, as the case may be) after the closing of
such transaction; (3) a change or changes in the membership of the Company's
Board of Directors which represents a change of a majority or more of such
membership during any twelve month period (unless such change or changes in
membership are caused by the actions of the then-existing Board of Directors);
or (4) the consummation of a sale of all or substantially all of the Company's
assets unless immediately after such transaction, the stockholders of the
Company immediately prior to such transaction shall beneficially own at least
50% of the Voting Stock of the acquiring company.

 

(f) “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

 

(g) “GROUP” shall have the meaning provided in Section 13(d)(3) of the Exchange
Act.

 

(h) “SELLER PARTY” means Seller, Parent, CG and AK, but shall not include any
stockholders of Parent (other than CG and AK and their respective Affiliates).

 

(i) “THIRD PARTY” shall mean any Person (other than any Seller Party and his
Affiliates and Associates) or Group (other than any Group that includes any
Seller Party or its Affiliates or Associates).

 

(j) “TOTAL VOTING POWER” at any date, with respect to any Person, shall mean the
total combined Voting Power of all the Voting Stock of such Person then
outstanding and entitled to vote.

 

(k) “VOTING POWER” with respect to any Voting Stock of any Person on any date
shall mean the voting power in the general election of directors of the relevant
Person to which such Voting Stock would be entitled on such date.

 

(l) “VOTING STOCK” of any Person shall mean any securities entitled to vote
generally in the election of directors of such Person, or any direct or indirect
rights or options or warrants to acquire any such securities or any securities
(including, without limitation, the Preferred Stock) convertible or exercisable
into or exchangeable for such securities, whether or not such securities are so
convertible, exercisable or exchangeable at the time of determination.

 

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(m)   All other capitalized terms used in this Agreement but not otherwise
defined herein shall have the meaning assigned to such term in the Asset
Purchase Agreement. The provisions of Section 1.2 of the Asset Purchase
Agreement shall apply to this Agreement mutatis mutandis.

 

ARTICLE II

 

TERM

 

SECTION 2.01 Term. The term (the “Term”) of this Agreement shall commence on the
date hereof and shall continue until the earliest to occur of the following:

 

(a) the fourth (4th) anniversary of the Closing Date;

 

(b) the date on which the Seller Parties’ aggregate beneficial ownership is less
than five percent (5%) of the Company’s Voting Stock; and

 

(c) the termination of the employment and membership on the Board of Directors
of both Timothy Mahoney and Leonard Sokolow.

 

ARTICLE III

 

STANDSTILL PROVISIONS

 

SECTION 3.01 Restrictions of Certain Actions. Each Seller Party hereby agrees
that during the Term, neither it nor any Affiliate or Associate of such Seller
Party will, singly or as part of a Group, directly or indirectly:

 

(a)   acquire, offer, make a proposal or agree to acquire (whether publicly or
otherwise), in any manner, any material assets of the Company or its
subsidiaries or any equity securities of the Company or its subsidiaries (or
Beneficial Ownership thereof), except pursuant to a stock split, stock dividend,
recapitalization, reclassification or similar transaction not effected pursuant
to a violation of this Section 3.01 or options or stock acquirable upon exercise
of such options by CG under the Executive Employment Agreement;

 

(b) make or in any way propose or participate in any “solicitation” of “proxies”
to vote (as such terms are defined in Rule 14a-1 under the Exchange Act),
solicit any consent or communicate with or seek to advise or influence any
Person, other than the Company, with respect to the solicitation or voting of
any Voting Stock of the Company in opposition to any matter that has been
recommended by the Board or in favor of any matter that has not been approved by
the Board of Directors of the Company, or become a “participant” in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to Company;

 

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(c) form, be a member of, join or encourage the formation of, any Group with
respect to any Voting Stock of the Company or the acquisition of any assets of
the Company;

 

(d) deposit any Voting Stock of the Company into a voting trust or subject any
such Voting Stock to any arrangement or agreement with respect to the voting
thereof which would cause him to be in violation of any of the other provisions
of this Agreement;

 

(e) seek election to or seek to place a representative on the Board of Directors
of the Company, if such action is opposed by the then majority of the Board of
Directors of the Company, or seek the removal of any member of the Board of
Directors of the Company if such action is opposed by the then majority of the
Board of Directors of the Company (for the avoidance of doubt, nothing in this
clause (e) shall affect the rights and obligations of the parties to the Voting
and Lockup Agreement thereunder);

 

(f) call or seek to have called any meeting of the stockholders of the Company
other than participation as a director of the Company in calling, or seeking to
have called, meetings of stockholders generally;

 

(g) solicit, seek to effect, negotiate with or provide any information to any
other Person with respect to, or make any statement or proposal, whether written
or oral, or otherwise make any public announcement or proposal whatsoever with
respect to a merger or acquisition of the Company, the sale of all or a
substantial portion of the assets of the Company and its subsidiaries, the
liquidation of the Company, the recapitalization of the Company or similar
business transactions with respect to the Company or take any action which might
require the Company and at least one Seller Party to make a public announcement
with respect to any such matters; or

 

(h) instigate, encourage or assist, or enter into any discussions or
arrangements with, any Third Party to do any of the actions described in
Sections 3.01(a) through (g).

 

If any Seller Party or any of his Affiliates or Associates owns or acquires any
Voting Stock in violation of this Agreement, such Voting Stock shall immediately
be disposed of to persons who are not Affiliates or Associates thereof but only
in compliance with the provisions of this Section 3.01 and Section 4.01;
provided, however, that the Company may also pursue any other available remedy
to which it may be entitled as a result of such violation.

 

Notwithstanding the restrictions contained in this Section 3.01, a Seller Party
shall not be prevented from complying with the requirements of Sections 13(d)
and 16(a) of the Exchange Act and the rules and regulations thereunder, in each
case, as from time to time in effect, or any successor provisions or rules with
respect thereto, or any other applicable law or rule or regulation of any
governmental body.

 

SECTION 3.02 Suspension of Restrictions. The limitations provided in Section
3.01 and Section 4.01 shall immediately be suspended upon the occurrence of any
of the following events:

 

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(a) any Third Party commences a tender or exchange offer seeking to acquire
Beneficial Ownership of 50% or more of the outstanding shares of Voting Stock,
but only if (i) the Company has not within 10 days after commencement of such
offer (or such longer period as may then be permitted under applicable law for
the Company's initial recommendation with respect to such offer), publicly
recommended that such offer not be accepted, or (ii) all of the material
conditions to such offer relating to the elimination or satisfaction of the
material defensive provisions established by the Company, including any rights
plan or similar defensive provision of the Company have been satisfied or
waived;

 

(b) the Company's receipt of an Acquisition Proposal from any Third Party but
only if the Company has not, within 15 days after such receipt, rejected such
Acquisition Proposal;

 

(c) the occurrence of a Change of Control of the Company;

 

(d) the public announcement by the Company that it is "for sale";

 

(e) the execution of a definitive agreement which, if consummated, would result
in a Change of Control of the Company;

 

(f) the public announcement by or on behalf of any Person or Group (other than a
Seller Party or its Affiliates or Associates) of the commencement of a bona fide
proxy or consent solicitation subject to Section 14 of the Exchange Act (or any
successor provision) to elect or remove a majority of the directors of the
Company which is not, within 10 days after the announcement of such proxy or
consent solicitation (or such longer period as may then be permitted under
applicable law for the Company's initial recommendation with respect to such
contest if such a period is specified) publicly opposed by the Company's Board
of Directors and which would, if successful, result in a change in the
composition of a majority of the Board of Directors of the Company; or

 

(g) the adoption by the Board of Directors of the Company of a plan of
liquidation or dissolution.

 

The Company shall provide Seller with prompt written notice of the occurrence of
any of the events set forth in this Section 3.01 or of the receipt by the
Company of an Acquisition Proposal from any Third Party (such notice to be
provided within ten days after receipt thereof, but without disclosing the terms
thereof or the identity of such Third Party). Upon any (i) withdrawal or lapsing
of any such tender or exchange offer referred to in Section 3.02(a) hereof in
which such Third Party does not acquire more than 30% of the outstanding Voting
Stock of the Company, (ii) withdrawal, rejection or termination of an
Acquisition Proposal referred to in Section 3.02(b) hereof, (iii) the public
withdrawal of any "for sale" notice referred to in Section 3.02(d) hereof, (iv)
the termination of the agreement referred in Section 3.02(e) hereof without
consummation thereof, (v) the withdrawal or termination or

 

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failure of the solicitation referred to in Section 3.02(f) hereof or (vi) the
termination of the plan of liquidation referenced in Section 3.02(g) hereof, as
the case may be, the limitations provided in Sections 3.01 and 4.01 hereof
(except to the extent then suspended as a result of any other event specified in
Section 3.02 hereof) hereof shall again be applicable for so long as and only to
the extent provided therein without any extension of the term thereof.

 

ARTICLE IV

 

TRANSFER RESTRICTIONS

 

SECTION 4.01 Permitted Transfers. During the Term, each Seller Party shall not
sell, pledge, hypothecate, assign or otherwise transfer (each a "Transfer") any
Voting Stock of the Company other than the following Transfers:

 

(a) a Transfer to an Affiliate of such Seller Party;

 

(b) a Transfer by partnerships by way of distribution to a limited partner or
former limited partner of such Seller Party that is not an Affiliate of such
Seller Party;

 

(c) a private Transfer (i) to any "person" (within the meaning of Section
13(d)(3) of the Exchange Act), that is not an Affiliate or Associate of such
Seller Party, which to the knowledge of the Seller Party after inquiry
beneficially owns or, as a result of such sale or transfer, will beneficially
own less than ten percent (10%) of the Total Voting Power of the Company (a
"Permitted Transferee"), provided, that such person will not be a Permitted
Transferee and no such Transfer shall be permitted if such person has proposed a
business combination or similar transaction with, or a Change of Control of, the
Company or (ii) to an account managed by an institutional manager described in
Rule 13f-1 of the Exchange Act with respect to which the transferred Voting
Stock would constitute "Section 13(f) securities" within the meaning of Rule
13f-1(c) of the Exchange Act; and

 

(d) a sale to the public (i) pursuant to Rule 144 of the Securities Act or (ii)
pursuant to the exercise by the Seller Party of its rights under the
Registration Rights Agreement.

 

It shall be a condition to any Transfer described in Section 4.01(a), (b), (c)
or (d)(i) that such transferee agree to be bound by this Agreement and Section
5.28 of the Asset Purchase Agreement in the same manner as the transferring
Selling Party. Any Transfers permitted under Section 4.01(a), (b), (c) and
(d)(i) must also comply with the provisions of Section 5.28 of the Asset
Purchase Agreement. All Transfers in violation of this Section 4.01 shall be
null and void.

 

Nothing in this Section 4.01 shall eliminate any additional Transfer
restrictions contained in the Voting and Lockup Agreement.

 

 

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ARTICLE V

 

MISCELLANEOUS

 

The provisions of Section 12.1, 12.4, 12.5, 12.7, 12.8, 12.9, 12.10, 12.11,
12.12, 12.13, 12.14, 12.15 and 12.16 of the Asset Purchase Agreement shall apply
to this Agreement mutatis mutandis with all references in such sections to “this
Agreement” being deemed made to this Standstill Agreement and all references to
“Buyer” in such sections being deemed made to the Company.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the date first above written.

VFINANCE, INC.

 

By: /s/ Leonard J. Sokolow              

Name: Leonard J. Sokolow

Title: Chief Executive Officer

 

STERLING FINANCIAL INVESTMENT GROUP, INC.

 

 

By: /s/ Charles P. Garcia                  

Name: Charles P. Garcia

Title: Chief Executive Officer

 

STERLING FINANCIAL GROUP OF COMPANIES, INC.

 

 

 

By: /s/ Charles P. Garcia                  

Name: Charles P. Garcia

Title: Chief Executive Officer

 

/s/ Charles Garcia                             

CHARLES GARCIA

 

/s/ Alexis Korybut                            

ALEXIS KORYBUT

 

 

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