Document:

exv10w2

 

Exhibit 10.2

INVESTMENT MANAGEMENT TRUST AGREEMENT

     This Agreement is made as of ___, 2005 by and between Community Bankers Acquisition
Corp. (the “Company”) and Continental Stock Transfer & Trust Company (the “Trustee”).

     WHEREAS,
the Company’s Registration Statement on Form S-1,
No. 333-124240 (the
“Registration Statement”), for its initial public offering of securities (the “IPO”) has been
declared effective as of the date hereof by the Securities and Exchange Commission (the “Effective
Date”); and

     WHEREAS,
I-Bankers Securities Incorporated (“I-Bankers”), Newbridge
Securities Corp. and Legend Merchant Group, Inc. (the
“Representatives”) are acting as the representatives of the underwriters in the IPO; and

     WHEREAS, as described in the Registration Statement, and in accordance with the
Company’s Certificate of Incorporation, $54,900,000 of the gross
proceeds of the IPO ($63,135,000 if the underwriters’
over-allotment option is exercised in full) will be delivered to the
Trustee to be deposited and held in a trust account for the benefit
of the Company and the holders of the Company’s common stock,
par value $.01 per share, issued in the IPO and in the event the Units are registered in Colorado, pursuant to Section 11-51-302(6) of the
Colorado Revised Statutes (the amount to be
delivered to the Trustee will be referred to herein as the
“Property”; the stockholders for whose benefit the Trustee
shall hold the Property will be referred to as the “Public
Stockholders,” and the Public Stockholders and the Company will
be referred to together as the “Beneficiaries”); and

     WHEREAS,
a portion of the Property consists of $900,000 (or $1,035,000 if the
underwriters’ over-allotment option is exercised in full)
attributable to the underwriters’ discount which the
representatives of the underwriters, have agreed to deposit in the Trust Account (defined below); and

     WHEREAS, the Company and the Trustee desire to enter into this Agreement to set forth the
terms and conditions pursuant to which the Trustee shall hold the Property;

     IT IS AGREED:

1. Agreements and Covenants of Trustee. The Trustee hereby agrees and covenants to:

     (a) Hold the Property in trust for the
 Beneficiaries in accordance with the terms of this
Agreement, including the terms of Section 11-51-302(6) of the
Colorado Revised Statutes in a segregated
trust account (“Trust Account”) established by the Trustee at a branch of JPMorgan Chase NY Bank
selected by the Trustee;

     (b) Manage, supervise and administer the Trust Account subject to the terms and conditions set
forth herein;

     (c) In
a timely manner, upon the written instruction of the Company, to invest and reinvest the
Property in any “Government Security” or other high-quality, short-term interest-bearing investments meeting conditions of the
Investment Company Act of 1940; as used herein, “Government Security” shall have the meaning set
forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended, including any Treasury Bill
issued by the United States, having a maturity of one hundred and
eighty days or less;

 

 

     (d) Collect and receive, when due, all principal and income arising from the Property, which
shall become part of the “Property,” as such term is used herein;

     (e) Notify the Company of all communications received by it with respect to any Property
requiring action by the Company;

     (f) Supply any necessary information or documents as may be requested by the Company in
connection with the Company’s preparation of the tax returns for the Trust Account;

     (g) Participate in any plan or proceeding for protecting or enforcing any right or interest
arising from the Property if, as and when instructed by the Company
in writing to do so;

     (h) Render
to the Company and to I-Bankers on behalf of the Representatives, and to such other person as the Company
may instruct, monthly written statements of the activities of and amounts in the Trust Account
reflecting all receipts and disbursements of the Trust Account;

     (i) If there is any income or other tax obligation relating to the income from the Property
in the Trust Account or otherwise, in each case as determined by the Company, then, from time to
time, at the written instruction of the Company, the Trustee shall promptly to the extent there is
not sufficient cash in the Trust Account to pay such tax obligation, liquidate such assets held in
the Trust Account as shall be designated by the Company in writing, and pay such amounts by the
issuance of a check directly to the taxing authorities designated by the Company, out of the
Property in the Trust Account, for the amount indicated by the Company as owing to each such
taxing authority; and

     (j) Commence
liquidation of the Trust Account only upon receipt of and only in accordance
with the terms of a letter (the “Termination Letter”), in a form substantially similar to that
attached hereto as either Exhibit A or Exhibit B, signed on behalf of the Company by its President
or Chairman of the Board and Secretary, and complete the liquidation of the Trust Account and
distribute the Property in the Trust Account only as directed in the Termination Letter and the
other documents referred to therein.

2. Agreements and Covenants of the Company. The Company hereby agrees and covenants to:

     (a) Give all instructions to the Trustee hereunder in writing, signed by the Company’s
President or Chairman of the Board. In addition, except with respect
to its duties under Section 1(i) above, the Trustee shall be entitled to rely on, and shall be protected in relying on, any
verbal or telephonic advice or instruction which it in good faith believes to be given by any one
of the persons authorized above to give written instructions, provided that the Company shall
promptly confirm such instructions in writing;

     (b) Hold the Trustee harmless and indemnify the Trustee from and against, any and all
expenses, including reasonable counsel fees and disbursements, or loss suffered by the Trustee in
connection with any action, suit or other proceeding brought against the Trustee involving any
claim, or in connection with any claim or demand which in any way arises out of or relates to this
Agreement, the services of the Trustee hereunder, or the Property or any income earned from
investment of the Property, except for expenses and losses resulting from the Trustee’s gross
negligence or willful misconduct. Promptly after the receipt by the Trustee of notice of demand or
claim or the commencement of any action, suit or proceeding, pursuant to which the Trustee intends
to seek indemnification under this paragraph, it shall notify the Company in writing of such claim
(hereinafter referred to as the “Indemnified Claim”). The Trustee shall have the right to conduct
and manage the defense against such Indemnified Claim, provided,

Page 2 of 11

 

that the Trustee shall obtain the consent of the Company with respect to the selection of
counsel, which consent shall not be unreasonably withheld. The Company may participate in such
action with its own counsel; and

     (c) Pay the Trustee an initial acceptance fee of $1,000 and an annual fee of $3,000 (it being
expressly understood that the Property shall not be used to pay such fee). The Company shall pay
the Trustee the initial acceptance fee and first year’s fee at the consummation of the IPO and
thereafter on the anniversary of the Effective Date. The Trustee shall refund to the Company the
fee (on a pro rata basis) with respect to any period after the liquidation of the Trust Fund. The
Company shall not be responsible for any other fees or charges of the
Trustee except as may be provided in Section 2(b) hereof (it being expressly understood
that the Property shall not be used to make any payments to the
Trustee under such Section).

3. Limitations of Liability. The Trustee shall have no responsibility or liability to:

     (a) Take
any action with respect to the Property, other than as directed in
Section 1 hereof
and the Trustee shall have no liability to any party except for liability arising out of its own
gross negligence or willful misconduct;

     (b) Institute any proceeding for the collection of any principal and income arising from, or
institute, appear in or defend any proceeding of any kind with respect to, any of the Property
unless and until it shall have received written instructions from the Company given as provided herein to
do so and the Company shall have advanced or guaranteed to it funds sufficient to pay any expenses
incident thereto;

     (c) Change
the investment of any Property, other than in compliance with Section 1(c);

     (d) Refund any depreciation in principal of any Property;

     (e) Assume
that the authority of any person designated by the Company to give
instructions
hereunder shall not be continuing unless provided otherwise in such designation, or unless the
Company shall have delivered a written revocation of such authority to the Trustee;

     (f) The other parties hereto or to anyone else for any action taken or omitted by it, or any
action suffered by it to be taken or omitted, in good faith and in the exercise of its own best
judgment, except for its gross negligence or willful misconduct. The Trustee may rely conclusively
and shall be protected in acting upon any order, judgment,
instruction, notice, demand, certificate, opinion or advice of
counsel (including counsel chosen by the Trustee), statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of its provisions,
but also as to the truth and acceptability of any information therein contained) which is believed
by the Trustee, in

Page 3 of 11

 

good faith, to be genuine and to be signed or presented by the proper person or persons. The
Trustee shall not be bound by any notice or demand, or any waiver, modification, termination or
rescission of this agreement or any of the terms hereof, unless evidenced by a written instrument
delivered to the Trustee signed by the proper party or parties and, if the duties or rights of the
Trustee are affected, unless it shall give its prior written consent thereto;

     (g) Verify the correctness of the information set forth in the Registration Statement or to
confirm or assure that any acquisition made by the Company or any other action taken by it is as
contemplated by the Registration Statement; and

     (h) As and to the extent requested from time to time by the Company, prepare, execute and
file such tax reports, income or other tax returns and pay any taxes with respect to income and
activities relating to the Trust Account, regardless of whether such tax is payable by the Trust
Account or the Company (including but not limited to income tax obligations), it being expressly
understood that as set forth in Section l(i), if there is any income or other tax obligation
relating to the Trust Account or the Property in the Trust Account, as determined from time to
time by the Company and regardless of whether such tax is payable by the Company or the Trust, at
the written instruction of the Company, the Trustee shall issue a check directly to the taxing
authorities designated by the Company, out of the Property in the Trust Account, for the amount
indicated by the Company as owing to each such taxing authority.

4. Termination. This Agreement shall terminate as follows:

     (a) If the Trustee gives written notice to the Company that it desires to resign under this
Agreement, the Company shall use its reasonable efforts to locate a successor trustee. At such time
that the Company notifies the Trustee that a successor trustee has been appointed by the Company
and has agreed to become subject to the terms of this Agreement, the Trustee shall transfer the
management of the Trust Account to the successor trustee, including but not limited to the transfer
of copies of the reports and statements relating to the Trust Account, whereupon this Agreement
shall terminate; provided, however, that, in the event that the Company does not locate a successor
trustee within ninety days of receipt of the resignation notice from the Trustee, the Trustee may
submit an application to have the Property deposited with the United States District Court for the
Southern District of New York and upon such deposit, the Trustee shall be immune from any liability
whatsoever;

     (b) At such time that the Trustee has completed the liquidation of the Trust Account in
accordance with the provisions of Section 1(j) hereof, and distributed the Property in accordance
with the provisions of the Termination Letter, this Agreement shall terminate except with respect
to Section 2(b).

5. Miscellaneous.

     (a) The Company and the Trustee each acknowledge that the Trustee will follow the security
procedures set forth below with respect to funds transferred from the Trust Account. Upon receipt
of written instructions, the Trustee will confirm such instructions with an Authorized Individual
at an Authorized Telephone Number listed on the attached Exhibit C. The Company and the Trustee
will each restrict access to confidential information relating to such security procedures to
authorized persons. Each

Page 4 of 11

 

party must notify the other party immediately if it has reason to believe unauthorized persons
may have obtained access to such information, or of any change in its authorized personnel. In
executing funds transfers, the Trustee will rely upon account numbers or other identifying numbers
of a beneficiary, beneficiary’s bank or intermediary bank, rather than names. The Trustee shall not
be liable for any loss, liability or expense resulting from any error in an account number or other
identifying number, provided it has accurately transmitted the numbers provided.

     (b) This Agreement shall be governed by and construed and enforced in accordance with the laws
of the State of New York, without giving effect to conflict of laws. It may be executed in several
counterparts, each one of which shall constitute an original, and together shall constitute but one
instrument.

     (c) This Agreement contains the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof. The parties hereto may change, waive, amend or modify any provision contained herein that may be
defective or inconsistent with any other provision contained herein only upon the written consent
of each of the parties hereto; provided that such action shall not materially adversely affect the
interests of the Public Stockholders. Any other change, waiver,
amendment or modification to this Agreement shall be subject to approval by a majority of the Public
Stockholders. As to any claim, cross-claim or counterclaim in any way relating to this
Agreement, each party waives the right to trial by jury.

     (d) The parties hereto consent to the jurisdiction and venue of any state or federal court
located in the City of New York for purposes of resolving any disputes hereunder.

     (e) Any notice, consent or request to be given in connection with any of the terms or
provisions of this Agreement shall be in writing and shall be sent by express mail or similar
private courier service, by certified mail (return receipt requested), by hand delivery or by
facsimile transmission:

if to the Trustee, to:

Continental Stock Transfer & Trust Company

17 Battery Place

8th Floor

New York, New York 10004

Attn: Mr. Frank Di Paolo, CFO

Fax: (212) 616-7620

if to the Company, to:

Community Bankers Acquisition Corp.

717 King Street

Alexandria, Virginia 22314

Attn: Mr. Gary A. Simanson, President

Fax: (703) 757-8202

with a copy to:

Dilworth Paxson LLP

1818 N Street, N.W., Suite 400

Washington, DC 20036

Attn: Kathleen L. Cerveny, Esq.

Fax: (202)452-0930

Page 5 of 11

 

in either
case with a copy on behalf of the Representatives to:

I-Bankers Securities Incorporated

1560 East Southlake Boulevard

Suite 232

Southlake, Texas 76092

Attn: Shelley Gluck, Chief Financial Officer

Fax: (817) 416-2264

Greenberg Traurig, LLP

600 Three Galleria Tower

13155 Noel Road
Dallas, TX 75240
Attn:Phillip Kushner, Esq.

Fax: (972) 419-1251

     (f) This Agreement may not be assigned by the Trustee without the prior consent of the
Company.

     (g) Each of the Trustee and the Company hereby represents that it has the full right and power
and has been duly authorized to enter into this Agreement and to perform its respective obligations
as contemplated hereunder. The Trustee acknowledges and agrees that it shall not make any claims or
proceed against the Trust Account, including by way of set-off, and shall not be entitled to any
funds in the Trust Account under any circumstance.

 
     (h) The Trustee hereby consents to the inclusion of Continental Stock Transfer & Trust
Company in the Registration Statement and other materials relating to the IPO.

[Signature page follows]

Page 6 of 11

 

     IN WITNESS WHEREOF, the parties have duly executed this Investment Management Trust Agreement
as of the date first written above.

	 	 	 	 	 
	 	 	CONTINENTAL STOCK TRANSFER
	 	 	& TRUST COMPANY, as Trustee
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:
	 	
	

	 	 	 	 
	

	 	Title:
	 	
	

	 	 	 	 
	 
	 	 	 	 
	 	 	COMMUNITY BANKERS ACQUISITION
	 	 	CORP.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:
	 	Gary A. Simanson
	

	 	 	 	 
	

	 	Title:
	 	President
	

	 	 	 	 

Page 7 of 11

 

EXHIBIT A

[LETTERHEAD OF COMPANY]

[INSERT DATE]

Continental Stock Transfer & Trust Company

17 Battery Place

8th Floor

New York, New York 10004

	Attn:

	 	Frank Di Paolo, CFO	 	 
	Re:

	 	Trust Account No. [___]	 	 
	

	 	Termination Letter	 	 

Gentlemen:

     Pursuant
to Section 1(i) of the Investment Management Trust Agreement between Community
Bankers Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company (the
“Trustee”), dated as of ___, 2005 (the “Trust Agreement”), this is to advise you that the
Company has entered into an agreement (“Business Agreement”) with ___(the
“Target Business”) to consummate a business combination
with Target Business (a “Business
Combination”) on or about [INSERT DATE]. The Company
shall notify you at least 48 hours in advance
of the actual date of the consummation of the Business Combination (the “Consummation Date”).

     In accordance with the terms of the Trust Agreement, we hereby authorize you to commence
liquidation of the Trust Account to the effect that, on the Consummation Date, all of funds held in
the Trust Account will be immediately available for transfer to the account or accounts that the
Company shall direct in writing on the Consummation Date.

     On the Consummation Date (i) counsel for
 the Company shall deliver to you written notification
that (a) the Business Combination has been consummated and (b) the provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado Revised Statutes
have been met and (ii) the Company shall
deliver to you written instructions with respect to the transfer of the funds held in the Trust
Account (the “Instruction Letter”). You are hereby directed and authorized to transfer the funds
held in the Trust Account immediately upon your receipt of the
counsel’s letter and the Instruction
Letter. In the event that certain deposits
held in the Trust Account may not be liquidated by the Consummation Date without penalty, you will
notify the Company of the same and the Company shall direct you as to whether such funds should
remain in the Trust Account and distributed after the Consummation Date to the Company. Upon the
distribution of all the funds in the Trust Account pursuant to the terms hereof, the Trust
Agreement shall be terminated.

     In the event that the Business Combination is not consummated on the Consummation Date
described in the notice thereof and we have not notified you on or before the original Consummation
Date of a new Consummation Date, then the funds

 

 

held in the Trust Account shall be reinvested as provided in the Trust Agreement on the
business day immediately following the Consummation Date as set forth in the notice.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	COMMUNITY BANKERS ACQUISITION
	 	 	CORP.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	Gary A. Simanson, President

 

 

EXHIBIT B

[LETTERHEAD OF COMPANY]

[INSERT DATE]

Continental Stock Transfer & Trust Company

17 Battery Place

8th Floor

New York, New York 10004

Attn: Frank Di Paolo, CFO

Re: Trust Account No. [___] Termination Letter

Gentlemen:

     Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Community
Bankers Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company (the
“Trustee”), dated as of ___, 2005 (the “Trust Agreement”), this is to advise you that the
Board of Directors of the Company has voted to dissolve and liquidate
the Company due to the Company’s inability to effect a Business Combination within the time frame specified in
the Company’s prospectus relating to its IPO. Attached hereto
is a copy of the minutes of the meeting of the Board of Directors of the Company relating thereto,
certified by the Secretary of the Company as true and correct and in full force and effect.

     In accordance with the terms of the Trust
 Agreement, we hereby authorize you to commence liquidation of the Trust Account. You will notify the Company and
 JPMorgan Chase NY Bank (the “Designated Paying Agent”) in writing as to when all of the funds in the Trust
Account will be available for immediate transfer (the “Transfer Date”). The Designated Paying Agent
shall thereafter notify you as to the account or accounts of the Designated Paying Agent that the
funds in the Trust Account should be transferred to on the Transfer Date so that the Designated
Paying Agent may commence distribution of such funds in accordance with the Company’s instructions.
You shall have no obligation to oversee the Designated Paying Agent’s distribution of the funds.
Upon the payment to the Designated Paying Agent of all the funds in the Trust Account, the Trust
Agreement shall terminate in accordance with the terms thereof.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	COMMUNITY BANKERS ACQUISITION
	 	 	CORP.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	Gary A. Simanson, President

 

 

EXHIBIT C

AUTHORIZED INDIVIDUAL(S)
AND TELEPHONE NUMBERS

AUTHORIZED FOR TELEPHONE CALL BACK

	 	 	 	 	 
	COMPANY:

	 	Community Bankers Acquisition Corp.
	 	 
	

	 	717 King Street	 	 
	

	 	Alexandria, Virginia 22314	 	 
	

	 	Attn:Gary A. Simanson, President	 	 
	

	 	Telephone:(703)759-2502	 	 
	 
	 	 	 	 
	TRUSTEE:

	 	Continental Stock Transfer & Trust Company
	 	 
	

	 	17 Battery Place	 	 
	

	 	8th Floor	 	 
	

	 	New York, New York 10004	 	 
	

	 	Attn: Frank Di Paolo, CFO	 	 
	

	 	Telephone:(212)845-3270exv10w7

 

Exhibit 10.7

____________, 2005

I-Bankers Securities, Inc.

Legend Merchant Group, Inc.

Newbridge Securities Corp.

c/o I-Bankers Securities, Inc.

1560 East Southlake Boulevard, Suite 232

Southlake, TX 76092

     Re:           Community Bankers Acquisition Corp.

 

Gentlemen:

     This letter will confirm the agreement of Gary A. Simanson and David Zalman, on the one hand
(the “Stockholders”), and I-Bankers Securities, Inc. (“I-Bankers”), Newbridge Securities Corp. and
Legend Merchant Group, Inc., (collectively, the “Representatives”), on the other hand, with respect
to the purchase of certain warrants to purchase common stock (“Warrants”) of Community Bankers
Acquisition Corp. (the “Company”) included in the units (comprised of one share of common stock and
one warrant to purchase common stock) being sold in the Company’s initial public offering (“IPO”)
upon the terms and conditions set forth herein. The shares of Common Stock and Warrants will not
be separately tradable until 90 days after the effective date of the Company’s IPO, unless
I-Bankers, on behalf of the Representatives, informs the Company of their decision to allow earlier
separate trading.

     1.      Each of the Stockholders, the Representatives and their respective designees will enter
into an agreement or plan (a “10b5-1 Plan”) in accordance with the terms of this agreement and with
the guidelines specified in Rule 10b5-1 (“Rule 10b5-1”) promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), with a broker-dealer registered under Section 15 of
the Exchange Act who shall be mutually acceptable to the Stockholders and the Representatives and
which shall agree to effect all such purchases pursuant to the 10b5-1 Plans on a commission-free
basis.

     2.      The 10b5-1 Plans entered into pursuant hereto shall, among other things:

     (a) provide for the purchase pursuant to the 10b5-1 Plans of up to a maximum of 1,000,000
Warrants (the “Stockholders’ Maximum Warrant Purchase”) in the aggregate by the Stockholders and
their designees;

     (b) provide for the purchase pursuant to the 10b5-1 Plans of up to a maximum of 500,000
Warrants (the “Representatives’ Maximum Warrant Purchase”) in the aggregate by the Representatives
and their designees;

 

 

     (c) provide that all purchases of Warrants pursuant to the 10b5-1 Plans shall be made only in
the public market, at market prices not to exceed $1.20 per Warrant, and shall occur only during
the 20-trading day period (the “Trading Window”) commencing on the later of (i) the date separate
trading of the Warrants has commenced or (ii) 60 calendar days after the end of the IPO “restricted
period” as defined in Regulation M (“Regulation M”) promulgated under the Exchange Act;

     (d) provide instructions to the Broker to make, keep, and produce promptly upon request a
daily time-sequenced schedule of all Warrant purchases made pursuant to the 10b5-1 Plans;

     (e) provide irrevocable instructions to the Broker to fill the order of each party to each
such 10b5-1 Plan in such amounts and at such times as the Broker may determine, in its sole
discretion, during the Trading Window; provided, however, that the Broker shall sequence the
fulfillment of such orders such that the initial 50,000 Warrants shall be purchased for the account
of the Stockholders and their designees, the next 50,000 Warrants shall be purchased for the
account of the Representatives and their designees and thereafter, alternating the fulfillment of
the Stockholders’ and Representatives’ respective orders in 50,000 Warrant increments during the
Trading Window until the Representatives’ Maximum Warrant Purchase is fulfilled, and, thereafter,
all additional purchases shall be for the account of the Stockholders and their designees until the
Stockholders’ Maximum Warrant Purchase is fulfilled;

     (f) contain a representation and warranty by each party that such party is not aware of any
material nonpublic information concerning the Company or any securities of the Company and is
entering into the Rule 10b5-1 Plan in good faith and not as part of a plan or scheme to evade the
prohibitions of Rule 10b-5 promulgated under the Exchange Act; and

     (g) provide that each party, while the Rule 10b5-1 Plan is in effect, shall comply with the
prohibition set forth in Rule 10b5-1(c)(1)(i)(C) against entering into or altering a corresponding
or hedging transaction or position with respect to the Company’s securities and that such party
shall not, directly or indirectly, communicate any material nonpublic information relating to the
Company or the Company’s securities to any officer, director or employee of the Representatives or
the Broker.

     3.      None of the Stockholders, the Representatives or their respective designees have, and shall
not attempt to exercise, any influence over how, when or whether to effect purchases of Warrants by
the Broker or any person.

     4.      Each of the parties hereto agrees that the Warrants acquired pursuant to this agreement and
the Rule 10b5-1 Plans shall not be sold or transferred until the earlier of the consummation by the
Company of a merger, capital stock exchange, asset acquisition or other similar business
combination; provided, however, nothing contained herein shall preclude a sale or transfer (i) by
gift to the immediate family of a member of any Stockholder or to a trust, the beneficiary of which
is any Stockholder or a person in the immediate family of such Stockholder, (ii) by virtue of the
laws of descent and distribution upon death of any Stockholder, (iii) pursuant to a qualified
domestic relations order, or (iv) pursuant to a transfer of record ownership whereby there is no
change in

2

 

beneficial ownership; provided further, however, that such permissive transfers may be
implemented only upon the respective transferee’s written agreement to be bound by the terms and
conditions of this paragraph. Each party hereto acknowledges that the certificates for such
Warrants shall contain a legend indicating such restriction on transferability. It is further
understood and acknowledged by each party hereto that all Warrants purchased pursuant to this
Agreement and the Rule 10b5-1 Plans shall be non-callable by the Company for so long as such
Warrants are held by the purchaser thereof or its permitted transferee.

     5.      Each of the parties hereto hereby covenants and agrees that such party and its respective
designees shall comply with, and shall take all actions reasonably necessary to cause compliance by
the Broker with, the following conditions:

(i)      The Company and I-Bankers shall provide to the Division of Market Regulation of
the Securities and Exchange Commission (the “Division”) promptly upon request, a daily
time-sequenced schedule of all Warrant purchases made pursuant to the 10b5-1 Plans, on a
transaction-by-transaction basis, including: (i) size, broker, time of execution, price of
purchase; and (ii) the exchange, quotation system, or other facility through which the
Warrant purchase occurred;

(ii)      Upon the request of the Division, the Company and I-Bankers shall transmit the
information as specified in paragraph 5(i) to the Division at its headquarters in
Washington, D.C. within 30 days of its request; and

(iii)      Representatives of the Company, the Stockholders, the Representatives and the
respective designees of the Stockholders and the Representatives shall be made available
(in person at the offices of the Division in Washington, D.C. or by telephone) to respond
to inquiries by the Division regarding their purchase(s).

     6.      This agreement shall for all purposes be deemed to be made under and shall be construed in
accordance with the laws of the State of Delaware. This agreement contains the entire agreement
and understanding of the parties hereto with respect to the subject matter hereof. This agreement
or any provision hereof may only be changed, amended or modified by a writing signed by each of the
parties hereto and shall be binding upon each of the parties hereto and their respective heirs,
successors and assigns.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	
 	 
	 	Gary A. Simanson 	 
	 	 	  	 	 
	 
	 	 	 
	 	
 	 
	 	David Zalman	 
	 	  	 	 

3

 

	 	 	 	 	 

AGREED:

I-Bankers Securities, Inc.

 

By: _______________________________________

          Shelly Gluck, Chief Financial Officer

Legend Merchant Group, Inc.

By: _______________________________________

          John Shaw, President

Newbridge Securities Corp.

By: _______________________________________

          James Hosch, Investment Banking

4

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