Document:

Exhibit
10.2

 

WAIVER
AND MODIFICATION NO. 3 TO

LOAN
AND SECURITY AGREEMENT

 

This
Third Modification and Modification No. 3 under Loan and Security Agreement (this “Third Modification”) is
entered into as of August 20, 2018 (the “Third Modification Effective Date”), by and between Partners for Growth
IV, L.P. (“PFG”), as lender, and each of (i) CANCER GENETICS, INC., a Delaware corporation (“Parent”),
(ii) GENTRIS, LLC, a Delaware limited liability company (“Delaware Subsidiary”), (iii) VIVOPHARM, LLC, a Delaware
limited liability company (“Vivo”), and (iv) RDDT A VIVOPHARM COMPANY PTY LTD, a company incorporated under
the laws of Australia (“Australian Borrower”, and together with Parent, Delaware Subsidiary, and Vivo, jointly
and severally, individually and collectively, “Borrower”). Capitalized terms used but not defined in this Third
Modification shall have the meanings given them in the Loan Agreement.

 

Recitals

 

WHEREAS,
PFG and Borrower entered into that certain Loan and Security Agreement dated as of March 22, 2017 (as amended and restated from
time to time, the “Loan Agreement”) and the other Loan Documents pursuant to which PFG has made available to
Borrower the principal amount of $6,000,000, all of which is outstanding on the Third Modification Effective Date.

 

WHEREAS,
Borrower has failed to comply with the terms of the Loan Agreement including (inter alia) (1) failure to comply with the Minimum
EBITDA financial covenant set forth in Section 5 of the Schedule for the reporting months ending May 31, 2018 and June 30, 2018,
(2) Borrower’s anticipated Defaults by failure to comply with the Minimum EBITDA financial covenant set forth in Section
5 of the Schedule for the reporting months ending July 31, 2018 and August 31, 2018, (3) Borrower’s failure to comply with
the Minimum Liquidity covenant set forth in Section 5 of the Schedule for the months ended and ending May 31, 2018 and June 30,
2018, (4) Borrower’s anticpated Deaults by failure to comply with the Minimum Liquidity covenant set forth in Section 5
of the Schedule for the months ended and ending July 31, 2018 and August 31, 2018, (5) Borrower’s failure to comply with
the Financing Condition set forth in Section 10(a) of the Joinder and Modification No. 2 to Loan and Security Agreement dated
June 30, 2018 (the “Financing Condition Default”) ((1) through (5), above, collectively, the “Existing
Defaults”), and (6) Borrower’s failure to comply with the terms of the Senior Debt Documents (the “Cross-Default”),
(the Cross-Default, together with the Existing Defaults, the “Specified Defaults”);

 

WHEREAS,
subject to Borower’s compliance with the terms of this Third Modification, PFG is willing to waive the Specified Defaults;

 

NOW,
THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

    	 

    	 

    

 

Agreement

 

1.
EFFECTIVENESS. The terms of this Third Modification shall become effective upon the Third Modification Effective Date,
but shall continue to be subject to Borrower’s satisfaction of the conditions set forth in Section 6 of this Third Modification.

 

2.
DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral, as described in the Loan Agreement,
in that certain Intellectual Property Security Agreement and related Collateral Agreements and Notices of even date with the Loan
Agreement (the “IPSA”) and the other Loan Documents entered into on the date of the Loan Agreement.

 

3.
CONTINUING VALIDITY. Borrower understands and agrees that in executing and delivering this Third Modification, PFG is relying
upon Borrower's representations, warranties and agreements as set forth in this Third Modification and the Loan Documents. Except
as expressly modified pursuant to this Third Modification, the terms of the Loan Documents remain unchanged and in full force
and effect. PFG’s execution and delivery of this Third Modification in no way shall obligate PFG to give any future consents
or waivers or make any future modifications to the Loan Documents as modified hereby. Nothing in this Third Modification shall
constitute a satisfaction of the Obligations or a waiver of any Default or Event of Default under the Loan Documents, except as
set forth in Section 5 in respect of the Specified Defaults (only). It is the intention of PFG and Borrower to retain as liable
parties all makers, endorsers and guarantors, if any, the Loan Documents. Unless expressly released herein, no maker, endorser,
or guarantor will be released by virtue of this Third Modification.

 

4.
ACKNOWLEDGMENT OF SPECIFIED DEFAULTS; WAIVER. Borrower acknowledges that it is currently in default under the Loan Agreement
due to the Specified Defaults. If no Default or Event of Default has occurred and is continuing under the Loan Agreement, other
than the Specified Defaults, and Borrower timely satisfies the conditions set forth in Section 6 hereof, then PFG shall be deemed
to have forever waived the Specified Defaults. PFG’s waiver of Borrower’s compliance of the Specified Defaults (other
than the Financing Condition Default) shall apply only to the foregoing specific periods. Borrower hereby acknowledges and agrees
that except as specifically provided this Third Modification, nothing in this Section 4 or elsewhere in this Third Modification
shall be deemed or otherwise construed as a waiver by PFG of any of its rights and remedies pursuant to the Existing Loan Documents,
applicable law, or otherwise. The waiver of the Specified Defaults set forth in this Third Modification shall be limited precisely
as written and, except as expressly provided in this Third Modification, shall not be deemed (a) to be a forbearance, waiver or
modification of any other term or condition of the Loan Agreement or of any other instrument or agreement referred to therein
or to prejudice any right or remedy which PFG may now have or may have in the future under or in connection with the Loan Agreement,
the other Loan Documents or any instrument or agreement referred to therein; (b) to be a consent to any future amendment or modification,
forbearance or waiver to any instrument or agreement the execution and delivery of which is consented to hereby, or to any waiver
of any of the provisions thereof; or (c) to limit or impair PFG’s right to demand strict performance of all terms and covenants
as of any date, subject to this Third Modification. The Loan Agreement, as amended, shall continue in full force and effect. This
Third Modification shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents are hereby ratified and confirmed and shall remain in full
force and effect.

 

    	 

    	 

    

 

5.
Borrowers’ Representations And Warranties. Borrower represents and
warrants to PFG that:

 

(a)
immediately upon giving effect to this Third Modification: (i) the representations and warranties contained in the Loan Documents
are true, accurate and complete in all material respects as of the date hereof (except to the extent qualified in the updated
Representations delivered to PFG on or before the Third Modification Effective Date), and (ii) no Event of Default has occurred
and is continuing, other than the Specified Defaults;

 

(b)
Borrower has the corporate power and authority to execute and deliver this Third Modification and to perform its obligations under
the Loan Documents, as modified by this Third Modification;

 

(c)
the Constitutional Documents of Borrower delivered to PFG remain true, accurate and complete and have not been amended, supplemented
or restated and are and continue to be in full force and effect;

 

(d)
this Third Modification has been duly authorized, executed and delivered by Borrower and (i) constitutes the binding obligation
of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating
to or affecting creditors’ rights; (ii) does not conflict with any law or regulation or judgment or the Constitutional Documents
of Borrower, or any agreement or document to which Borrower is a party or which is binding upon it or any of its assets; and (iii)
does not require any authorization, approval, consent (including stockholder or member consent) of any Person, or any license
or registration in any jurisdiction, for its lawful authorization, execution, performance, validity or enforceability, except
to the extent such authorization, approval, consent (including stockholder or member consent) of any Person, license or registration
is secured on or prior to the Third Modification Effective Date and provided to PFG;

 

(e)
as of the date hereof, with Knowledge that PFG is relying on Borrower’s representations and warranties herein (including
the Representations) as a basis for entering into this Third Modification at Borrower’s request, Borrower has no defenses
against its obligation to repay the Obligations and it has no claims of any kind against PFG. Borrower acknowledges that PFG has
acted in good faith and has conducted its relationship with Borrower in a commercially reasonable manner, including in connection
with this Third Modification and in connection with the Loan Documents;

 

    	 

    	 

    

 

(f)
with respect to any Loan Documents binding upon a Person not party to this Third Modification, each such Person has been apprised
of this Third Modification, has consented to Borrower’s execution and delivery of this Third Modification and, to the extent
not executed concurrently with this Third Modification (or as a condition subsequent hereto), has agreed if so requested by PFG
to promptly execute and deliver to PFG a reaffirmation of its obligations under any Loan Documents to which it is a party or is
bound;

 

(g)
the IPSA, the Collateral Agreements and Notices and their respective Schedules, taken as a whole and as last amended and delivered
to PFG, contain an accurate, complete and current listing of all Collateral that consists of Intellectual Property;

 

(h)
Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in the Representations
dated as of the Third Modification Effective Date; and

 

(i)
Except as expressly stated in this Third Modification, neither PFG nor any agent, employee or representative of PFG has made any
statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Third Modification, (ii)
Borrower has made such investigation of the facts pertaining to this Third Modification and all of the matters appertaining thereto,
as it deems necessary, and (iii) the terms of this Third Modification are contractual and not a mere recital.

 

Borrower
understands and acknowledges that PFG is entering into this Third Modification in reliance upon, and in partial consideration
for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.

 

6.
CONDITIONS. The effectiveness of this Third Modification is conditioned upon satisfaction of each of the following, with
the consequence of a failure to meet the following conditions as set forth in the proviso at the end of this Section 6:

 

(a)
Execution and Delivery. Borrower shall have duly executed and delivered to PFG a counterpart of this Third Modification;

 

(b)
Lender Expenses; PFG Waiver Fee. Borrower shall have paid, within 1 Business Day of receipt of PFG invoice, (i) all unpaid
fees and Lender Expenses incurred pursuant to or in connection with this Third Modification, and (ii) a fully earned, non-refundable
waiver fee in an amount equal to Twenty-Five Thousand Dollars ($25,000);

 

(c)
Waiver of Senior Lender. Borrower shall have provided PFG with a true and correct copy of the waiver of like Specified
Defaults under the Senior Debt Documents by the Senior Lender.

 

For
the avoidance of doubt, the failure of any of the foregoing conditions shall constitute an immediate Event of Default (i.e., without
the application of any otherwise applicable cure periods under the Loan Agreement).

 

    	 

    	 

    

 

7.
MODIFICATIONS TO LOAN AGREEMENT. The Loan Agreement is amended as of the Third Modification Effective Date as follows:

 

(a)
Definitions. Section 7 of the Loan Agreement is amended to add the following definition:

 

“Transaction
Event” means confirmation by PFG that Borrower and an unrelated third party have executed and delivered, on or prior
to August 31, 2018, a binding and enforceable agreement with respect to a merger or other business combination transaction between
Borrower and such third party, which third party shall be satisfactory to PFG in its sole and absolute discretion and which binding
and enforceable agreement shall be in form and substance (including, without limitation, as to the structure of such merger or
other business combination transaction described in or contemplated under such agreement) satisfactory to PFG in its sole and
absolute discretion.”

 

(b)
Schedule. A new Section 8(d) is added to the Schedule as follows:

 

	 	“(d)
    	Transaction
    Event. On or before August 31, 2018, provide PFG with evidence in a form and substance acceptable to PFG in
    all respects that the Transaction Event has occurred.”

 

8.
RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of the Loan
Documents as modified hereby and all security and other collateral granted to PFG thereunder, and confirms that the Indebtedness
secured thereby includes, without limitation, the Obligations. Without limiting the foregoing, (i) Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of the Intellectual Property Security Agreements (and related Collateral
Agreements and Notices) (each, an “IPSA”) entered into between PFG and Borrower and that, as of the Third Modification
Effective Date, each IPSA contains an accurate and complete listing of all Intellectual Property and Domain Rights of each Borrower
and that each such IPSA remains in full force and effect, and (ii) Borrower hereby ratifies, confirms and reaffirms, all and singular,
the Representations delivered in connection with the Joinder and Modification No. 2 to Loan and Security Agreement and that the
information disclosed therein remains true, correct, accurate and complete in all respects as of the Third Modification Effective
Date.

 

9.
Further Assurances. Borrower agrees to execute such further documents
and instruments and to take such further actions as PFG may request in its good faith business judgment to carry out the purposes
and intent of this Third Modification.

 

    	 

    	 

    

 

10.
NO CLAIMS; RELEASE. As of the Third Modification Effective Date, Borrower represents, warrants and covenants that it has
no defenses against its obligation to repay the Obligations and it has no claims of any kind against PFG. Borrower acknowledges
that PFG has acted in good faith and has conducted in a commercially reasonable manner its relationship with such Borrower in
connection with this Third Modification and in connection with the Loan Documents. Borrower voluntarily and knowingly releases
PFG, its owners, affiliates and agents from all possible, claims, counterclaims, demands, actions, causes of action, costs, expenses
and liabilities whatsoever, known or unknown, contingent or condition, whether at law or in equity, from any cause and under any
legal theory, that it may have on or before or arising out of circumstances on or prior to the Third Modification Effective Date.
Borrower waives the benefits of any law, including Section 1542 of the California Civil Code which provides in substance: “A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR.” By entering into this release,
Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition
to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to
fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected.
Accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue,
or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof,
regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not
relying upon and has not relied upon any representation or statement made by PFG with respect to the facts underlying this release
or with regard to any of such party’s rights or asserted rights. Borrower acknowledges that (i) this release may be pleaded
as a full and complete defense and/or as a cross-complaint or counterclaim in any action, suit, or other proceeding that may be
instituted, prosecuted or attempted in breach of this release, and (ii) Borrower acknowledges that the release contained herein
constitutes a material inducement to PFG to enter into this Third Modification, and that PFG would not have done so but for PFG’s
expectation that such release is valid and enforceable in all events. Borrower hereby represents and warrants to and covenants
with PFG, and PFG is relying thereon, as follows: (1) except as expressly stated in this Third Modification, neither PFG nor any
agent, employee or representative of PFG has made any statement or representation to Borrower regarding any fact relied upon by
Borrower in entering into this Third Modification; (2) Borrower has made such investigation of the facts pertaining to this Third
Modification and all of the matters appertaining thereto, as it deems necessary; (3) the terms of this Third Modification are
contractual and not a mere recital; and (4) this Third Modification has been carefully read by Borrower, the contents hereof are
known and understood by Borrower, and this Third Modification is signed freely, and without duress, by Borrower; (5) Borrower
is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein,
and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any
claims or other matters herein released. Borrower shall indemnify PFG, defend and hold it harmless from and against all claims
based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released
herein.

 

11.
ADVICE OF COUNSEL. PFG and Borrower have prepared this Third Modification and all documents, instruments, and agreements
incidental hereto with the aid and assistance of their respective counsel. Accordingly, all of them shall be deemed to have been
drafted by PFG and Borrower and shall not be construed against either PFG or Borrower.

 

    	 

    	 

    

 

12.
INTEGRATION; CONSTRUCTION; ETC. This Third Modification, the Joinder and Modification No. 2 to Loan and Security Agreement,
the Waiver and Modification No. 1 to Loan and Security Agreement (to the extent not inconsistent with a later modification), the
Loan Agreement and the other Loan Documents (each as modified by this Third Modification) and any documents executed in connection
herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede
all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence
whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Third Modification; provided, however,
that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in full force
and effect. The quotation marks around modified clauses set forth herein and any differing font styles in which such clauses are
presented herein are for ease of reading only and shall be ignored for purposes of construing and interpreting this Third Modification.
This Third Modification is subject to the General Provisions of Section 8 of the Loan Agreement. The Loan Documents are hereby
amended wherever necessary to reflect the modifications set forth in this Third Modification. The Recitals are incorporated herein
by reference.

 

13.
Governing Law; Venue. THIS THIRD MODIFICATION SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrower and PFG submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California, in connection with any proceeding or dispute arising in connection
herewith.

 

[Signature
Page Follows]

 

    	 

    	 

    

 

	PFG	 	BORROWER
	Partners
    for Growth IV, L.P.	 	CANCER
    GENETICS, INC. 
	 	 	 	 	 
	By:	/s/
    Phil Lawson	 	By:	/s/
    John A. Roberts
	Name	Phil
    Lawson, Manager	 	Name:	John
    A. Roberts 
	Title:	Partners
                                         for Growth IV, LLC, its

        General
        Partner

        
	 	Title:	Chief
Executive Officer

	 	 	 	 	 
	BORROWER:	 	BORROWER:
	 	 	 	 	 
	VIVOPHARM,
    LLC	 	GENTRIS,
    LLC 
	 	 	 	 	 
	By:	/s/
    John A. Roberts	 	By:	/s/
                                         John A. Roberts

        

	Name:	John
A. Roberts
	 	Name:	John
                                         A. Roberts

        

	Title:	Chief
    Executive Officer	 	Title:	Chief
                                         Executive Officer

        

 

	Executed
    by RDDT A VIVOPHARM COMPANY PTY LTD in accordance with Section 127 of the Corporations Act 2001	 	 
	 	 	 
	/s/
    John A. Roberts	 	/s/
    Ralf Brandt
	Signature
    of director	 	Signature
                                         of director/company secretary

                                                          

        (Please
delete as applicable)

	 	 	 
	John
    A. Roberts	 	Ralf
    Brandt
	Name
    of director (print)	 	Name
    of director/company secretary (print)Item_101_MJ_Agreement

		
			MAUI JIM, INC.
		

		
			 
		

		
			SHAREHOLDERS AGREEMENT
		

		
			 
		

		
			This Shareholders Agreement (this "Agreement") is made effective as of August 15, 2018, by and among Walter F. Hester III, individually and in his capacity as the Trustee of the Walter F. Hester III Revocable Trust dated August 24, 2017 ("Hester") and RLI Corp., a Delaware corporation ("RLI") (each, a "Holder" and collectively, the "Holders"). 
		

		
			 
		

		
			 WHEREAS, the Holders are the largest shareholders of Maui Jim, Inc., an Illinois corporation (the "Company"); 
		

		
			 
		

		
			WHEREAS, the Holders desire to provide for certain arrangements with respect to the Company's capital stock, governance and other related matters. 
		

		
			 
		

		
			NOW, THEREFORE, in consideration of the premises and mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 
		

		
			 
		

			
	
			
				 1.
			

			
	
			
			Definitions.  

		
			 
		

		
			1.1. "Affiliate" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person. 
		

		
			 
		

		
			1.2. "Class A Common  Stock"  means  voting shares  of  the  Company's  Class A Common Stock. 
		

		
			 
		

		
			1.3.  "Class B Common Stock" means shares of the Company’s Class B Common Stock. 
		

		
			 
		

		
			1.4. "Hester" means Walter F. Hester III, individually, and as trustee of the Walter F. Hester,  III 2017 Revocable Trust created under the Declaration of Trust dated August 24, 2017, of which Walter F. Hester, III is the current trustee, and his successor trustee. 
		

		
			 
		

		
			1.5. "Person" means any individual, corporation, partnership, trust, limited liability Company, association or other entity. 
		

		
			 
		

		
			1.6. "Restated Certificate" means the Company's Amended and Restated Certificate of Incorporation, as may be amended or amended and restated from time to time. 
		

		
			 
		

		
			1.7. "Sale of the Company" means the sale of the Company, including in one transaction or a series of related transactions, to a third party or parties pursuant to which such party or parties acquires or would upon completion of the such transaction or series of transactions (i) equity securities of the Company representing more than 50% of the voting power of all outstanding 

		 

		

			 

		

 

voting equity interests (whether by way of merger or consolidation or otherwise), or (ii) all or substantially all of the assets of the Company and its Subsidiaries determined on a consolidated basis. 
		

		
			 
		

		
			1.8. "Shares" means any shares of the Company's capital stock including shares of Class A Common Stock and Class B Common Stock. 
		

		
			 
		

		
			1.9. "Shareholder(s)" means the parties (individually or collectively) to this Agreement and their respective Affiliates. 
		

		
			 
		

			
	
			
				 2.
			Board of Directors.  

		
			 
		

		
			2.1.From and after the date of this Agreement until the provisions of this Section 2 cease to be effective, each Shareholder shall vote all of his or its Shares which are voting shares and any other voting securities of the Company over which such Shareholder has voting control and shall take all other necessary or desirable actions within his or its control (whether in the capacity as a Shareholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), so that: 
		

		
			 
		

		
			2.1.1. (i)   the Board shall be comprised of not less than seven (7) directors  or such other maximum number, from time to time; 
		

		
			 
		

		
			(ii) the following individuals shall be elected to the Board; 
		

		
			 
		

		
			(A)up to four (4) representatives (or if the number of directors is increased, a majority of such number) designated by Hester ("Hester Directors"); and 
		

		
			 
		

		
			(B)an additional number of representatives designated by RLI Corp., which shall be the difference in number between the total number of directors other than the Hester Directors. 
		

		
			 
		

		
			2.1.2. the composition of the board of directors of each of the Company's Subsidiaries (a "Sub Board") shall be the same as that of the Board, unless the Board determines to appoint officers of the Company or any of its Subsidiaries as the sole directors of such board; 
		

		
			 
		

		
			2.1.3. any committees of the Board or a Sub Board shall be created only upon the approval of the Hester Directors and the composition of each such committee (if any) shall be proportionately equivalent to that of the Board; 
		

		
			 
		

		
			2.1.4. a quorum for a meeting of the Board, Sub Board or committee thereof shall not exist unless at least two (2) of the Hester Directors are present in person or by proxy; 
		

		
			 
		

		
			

		 

		

			 

		

 

		

		
			2.1.5. the removal from the Board or a Sub Board (with or without cause) of any representative designated hereunder by a party shall be at such party's written request, but only upon such written request; and 
		

		
			 
		

		
			2.1.6 in the event that any representative designated hereunder ceases to serve as a member of the Board or a Sub Board during his term of office, the resulting vacancy on the Board or the Sub Board shall be filled by a representative designated by the party that nominated such director. 
		

		
			 
		

		
			2.2.If any party fails to designate a representative to fill a directorship pursuant to the terms of this Section 2, the election of an individual to such directorship shall be accomplished in accordance with the Company's bylaws and applicable law until such time as the party with the right to designate a representative for such directorship exercises such right. 
		

		
			 
		

		
			3.Transfer of Shares. Each party to this Agreement agrees that prior to any negotiation with a prospective purchaser of any Shares of such party; the engagement with an investment advisor regarding the prospect of a disposition of the party's Shares (other than an Exempt Transfer); or a transaction  that would constitute a Sale of the Company or an Approved Sale or would create a Tag-Along Right, to consult with the other party (or parties) hereto. The consultation would include discussions regarding the valuation of the Company and the Shares, the potential timing and terms of any such transaction or other matters the parties may find reasonably relevant. The obligation to consult is not a commitment to do or take any action beyond the consultation 
		

		
			 
		

		
			4. Approved Sale.  
		

		
			 
		

		
			4.1.If Hester approves a Sale of the Company and delivers written notice to RLI invoking the provisions of this Section 4 (any such sale, an "Approved Sale"), the Parties shall consent to, vote in favor of and raise no objections against the Approved Sale (or the process associated therewith). 
		

		
			 
		

		
			4.2If the Approved Sale is structured as (i) a merger or consolidation, each Shareholder shall raise no objection to and shall vote all of such Shareholder's Shares to approve such merger or consolidation, whether by written consent or at a Shareholders meeting and waive all dissenters' rights, appraisal rights and similar rights in connection with such merger or consolidation, (ii) a sale of stock, each Shareholder shall raise no objection to and shall agree to sell, and shall sell Shares and rights to acquire Shares on the terms and conditions so approved, or (iii) a sale of assets, each Shareholder shall raise no objection to and shall vote all of such Shareholder's Shares to approve such sale and any subsequent liquidation of the Company or other distribution of the proceeds therefrom, whether by written consent or at a Shareholders meeting. 
		

		
			 
		

		
			4.3.In furtherance of the foregoing, each Shareholder shall take, with respect to such Shareholder's Shares, all necessary or desirable actions reasonably requested by the Board or Hester in connection with the consummation of the Approved Sale, including, without limitation, voting to approve such transaction and the execution of such agreements and such instruments and other actions reasonably necessary to provide customary representations, warranties, indemnities and escrow arrangements relating to such Approved Sale. Notwithstanding anything 

		 

		

			 

		

 

to the contrary contained in this Section, (i) each Shareholder will only be required to make customary representations and warranties with respect to itself and its ownership of the Shares, including due power and authority, enforceability, non-contravention and title to and ownership of the Shares and (ii) no Shareholder shall be liable in respect of any indemnity obligations with respect to such Shareholder and the Company and its Subsidiaries in general pursuant to any Approved Sale in an aggregate amount not to exceed the lesser of (A) such Shareholder's pro rata portion of the total indemnification amount paid and (B) the total consideration received by such Shareholder in such Approved Sale. 
		

		
			 
		

		
			4.4.Each Shareholder shall bear its pro rata share (based upon the amount of consideration received or proposed to be received in the Approved Sale) of the costs of any Approved Sale to the extent such costs are incurred for the benefit of all Shareholders and are not otherwise paid by the Company or the acquiring party. Costs incurred by the Shareholders on their own behalf will not be considered costs of the Approved Sale. 
		

		
			 
		

		
			4.5.The obligations of the Shareholders under this Section 4 with respect to the Sale of the Company are subject to the satisfaction of the following conditions: (i) upon the consummation of the Sale of the Company, all of the holders of a particular class or series of Shares shall receive the same form and amount of consideration per share or amount of Shares, or if any holders of a particular class or series of Shares are given an option as to the form and amount of consideration to be received, all holders of such class or series will be given the same option, provided that, subject to the other provisions  of this Section 4, such holders shall only be entitled to receive the same form and amount of consideration under this Section 4 upon the same terms and conditions that are applicable to such form and amount of consideration, and provided, further the  option for management  of the Company (and its Subsidiaries) to rollover all or any portion of their equity of the Company into new equity of the acquiring or surviving company, as applicable, or such company's respective Affiliates, does not need to be made available to each Shareholder and (ii) all holders of then currently exercisable rights to acquire a particular class or series of Shares will be given an opportunity to either (A) exercise such rights prior to the consummation of the Sale of the Company and participate in such sale as holders of such Shares or (B) upon the consummation of the Sale of the Company, receive in exchange for such rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share or amount of Shares received by the holders of such type and class of Shares in connection with the Sale of the Company less the exercise price per share or amount of such rights to acquire such Shares by (2) the number of shares or aggregate amount of Shares represented by such rights. 
		

		
			 
		

		
			5.Tag-Along Right.  
		

		
			 
		

		
			5.1.In the event a Holder desires to transfer Shares of the Company  (the "Transferring Holder") in response to a bona fide offer from a third party, then the other Holder shall have the right (but not the obligation) (the "Tag-Along Right") to require, as a condition to the proposed transfer by the Transferring Holder, that such proposed bona fide third party purchaser of the Transferring Holder's Shares also purchase and/or acquire a proportionate  amount  of such other  Holder's Shares ("Tag-Along  Sale"). In the event of such proposed transfer by the Transferring Holder, the Transferring Holder shall provide written notice (the "Tag-Along Offer Notice") to 

		 

		

			 

		

 

the other Holder setting forth the name and address of the prospective transferee and the bona fide price for the Transferring Holder's Shares and other bona fide terms and conditions upon which the transfer is contemplated. If the other Holder exercises the Tag-Along Right, such Holder shall be required to transfer a proportionate amount of his or its Shares at such bona fide price (as adjusted to take into account the relative percentage of Shares being transferred and any other distribution preferences) and under the same terms and conditions as the Transferring Holder have agreed to transfer his or its Shares. 
		

		
			 
		

		
			5.2.The Tag-Along Right provided for in this Section 5 may be exercised by a Holder by delivery of a written notice to the Transferring Holder (the "Tag-Along Notice"), within ten (10) business days following receipt by such Holder of the Tag-Along Offer Notice. If a Holder does not deliver a Tag- Along Notice within such ten (10) business day period, such Holder shall be deemed to have waived the Tag-Along Right with respect to the proposed transfer by the Transferring Holder. 
		

		
			 
		

		
			5.3.The Transferring Holder may, not later than sixty (60) days following delivery to the Holder of any Tag-Along Offer Notice, conclude a transfer of the Shares covered by the Tag-Along Offer Notice on the terms and conditions described in the Tag-Along Offer Notice. If a Holder shall have delivered a Tag-Along Notice within the ten (10) business day period referred to in clause 5.2 above, the purchase of such Holder's Shares (or portion thereof) shall be made contemporaneous with the purchase of the Transferring Holder's Shares. Any proposed transfer on terms and conditions different from those described in the Tag-Along Offer Notice, as well as any proposed transfer of the Transferring Holder's Shares more than sixty (60) days following the delivery to the Holder of the Tag-Along Offer Notice, shall again be subject to the other Holder' Tag-Along Rights and shall require compliance by the Transferring Holder with the procedures described in this Section 5. 
		

		
			 
		

		
			6.Exempt Transfers.  
		

		
			 
		

		
			6.1.Exempted Transfers. Notwithstanding any other provisions to the contrary, the provisions of Sections 4 and 5 shall not apply: 
		

		
			 
		

		
			6.1.1.in the case of RLI to a transfer of Shares to its stockholders or an Affiliate;
		

		
			 
		

		
			6.1.2.to a pledge of Shares that creates a mere security interest in the pledged Shares; provided that the pledgee thereof agrees in writing in advance to be bound by and comply with all applicable provisions of this Agreement to the same extent as if it were the Holder; 
		

		
			 
		

		
			6.1.3.in the case of Hester, a transfer by him or out of a trust created by him to his spouse, a lineal descendant of his ("family members"), another trust, custodian or entity for the benefit of one or more members of his family; 
		

		
			 
		

		
			

		 

		

			 

		

 

		

		
			6.1.4.in each case the Holder shall give prior written notice to the other Holder of such transfer and the Shares shall at all times remain subject to the terms and restrictions set forth in this Agreement. 
		

		
			 
		

		
			6.1.5.Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering a Joinder Agreement (in the form of Exhibit A hereto). Upon the execution and delivery of such a Joinder Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee's signature appeared  on the signature pages of this Agreement and shall be deemed to be Holder hereunder 
		

		
			 
		

		
			7.Legends. Each certificate, instrument, or book entry representing (i) Shares and (iii) any other securities issued in respect of the securities referenced in clause (i), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall be notated with a legend substantially in the following form: 
		

		
			 
		

		
			THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN WALTER F. HESTER III, INDIVIDUALLY AND IN HIS CAPACITY AS THE TRUSTEE OF THE WALTER F. HESTER III REVOCABLE TRUST DATED AUGUST 24, 2017 AND RLI CORP. DATED AUGUST 15, 2018. 
		

		
			 
		

		
			The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of Shares in order to implement the restrictions on transfer set forth in this Section. 
		

		
			 
		

		
			8.Miscellaneous.  
		

		
			 
		

		
			8.1.Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the Company and the Holders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction. 
		

		
			 
		

		
			8.2.Remedies Cumulative. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. 
		

		
			 
		

		
			8.3.Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 
		

		
			

		 

		

			 

		

 

		

		
			 
		

		
			8.4.Governing Law. This Agreement shall be governed by the internal law of the State of Illinois.  
		

		
			 
		

		
			8.5.Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. 
		

		
			 
		

		
			8.6.Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 
		

		
			 
		

		
			8.7.Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient's next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one(l) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on Schedule A hereto or in any Joinder Agreement, or to such email address or address as subsequently modified by written notice given in accordance with this Subsection 8.7 
		

		
			 
		

		
			8.8.Consent Required to Amend, Terminate or Waive. This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by the Holders holding 2/3rds of the Shares then held by the Holders. 
		

		
			 
		

		
			8.9.Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default,  or an acquiescence  therein, or of or in any similar breach or default thereafter occurring;  nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. 
		

		
			 
		

		
			

		 

		

			 

		

 

		

		
			8.10.Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 
		

		
			 
		

		
			8.11.Entire Agreement. This Agreement constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. 
		

		
			 
		

		
			8.12.Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. 
		

		
			 
		

		
			8.13.Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of the State of Illinois located in Peoria County and to the jurisdiction of the United States District Court for the Central District of Illinois located in Peoria County for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of the State of Illinois located in Peoria County or the United States District Court for the Central District of Illinois located in Peoria County, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each party will bear its own costs in respect of any disputes arising under this Agreement. 
		

		
			 
		

		
			EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 
		

		
			 
		

		
			-  SIGNATURE PAGE FOLLOWS- 
		

		
			 
		

		
			

		 

		

			 

		

 

		

		
			   The parties have executed this Shareholders Agreement as of the date first written above. 
		

		
			 
		

			
					
						S

					
					
						 

				
	
					
						 

					
					
						HOLDERS:

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By:  /s/ Walter F. Hester, III                

				
	
					
						 

					
					
						Walter F. Hester, III

					
						 

				
	
					
						 

					
					
						By:  /s/ Walter F. Hester, III                

				
	
					
						 

					
					
						Walter F. Hester, III, as Trustee of the Walter F.   

				
	
					
						 

					
					
						Hester III Revocable Trust dated August 24, 2017

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						RLI CORP. 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By:    /s/ Jonathan E. Michael              

				
	
					
						 

					
					
						Jonathan E. Michael

				
	
					
						 

					
					
						  Its Chairman & CEO

				

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		

		 

		

			 

		

 

	
					
						

					
						 

					
					
						 

				
	
					
						Schedule A

				
	
					
						 

					
					
						 

				
	
					
						Holders

				
	
					
						 

					
					
						 

				
	
					
						RLI Corp.

					
					
						Walter F. Hester, III

				
	
					
						Jonathan E. Michael

					
					
						xxx xxx xxxx (redacted for confidentiality)

				
	
					
						9025 N Lindbergh Drive

					
					
						xxxx, xx xxxxx (redacted for confidentiality)

				
	
					
						Peoria, IL 61615

					
					
						D: xxx-xxx-xxxx (redacted for confidentiality)

				
	
					
						D: 309-692-1000

					
					
						F: xxx-xxx-xxxx (redacted for confidentiality)

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						With Copy To:

				
	
					
						 

					
					
						Michael J. Zdeb

				
	
					
						 

					
					
						Holland & Knight, LLP

				
	
					
						 

					
					
						131 S. Dearborn Street, 30th Floor

				
	
					
						 

					
					
						Chicago, IL 60603

				
	
					
						 

					
					
						D: 312-578-6608

				
	
					
						 

					
					
						F: 312-578-6666

				
	
					
						 

					
					
						michael.zdeb@hklaw.com

				
	
					
						 

					
					
						 

				

		
			 
		

		
			
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			 

		

 

		

		
			Exhibit A
		

		
			 
		

		
			JOINDER AGREEMENT
		

		
			 
		

		
			By execution and delivery of the Joinder Agreement, the undersigned hereby agrees (i) to become a “Holder” as defined in that certain Shareholders Agreement, dated as of August 15, 2018, by and among the Shareholders party thereto, and (ii) to be bound by such agreement and all amendments and amendments and restatements to such agreement hereafter.
		

		
			 
		

		
			Executed as of ________________ ______, ______
		

		
			 
		

		
			
		

			
					
						 

					
					
						 

				
	
					
						 

					
					
						HOLDER:

				
	
					
						 

					
					
						Name of the Holder: ____________________

				
	
					
						 

					
					
						Signature: ____________________________

				
	
					
						 

					
					
						Print Name (if signing as a representative of an entity):

				
	
					
						 

					
					
						___________________________________

				
	
					
						 

					
					
						Title (if signing as a representative of an entity):

				
	
					
						 

					
					
						____________________________________

				
	
					
						 

					
					
						Address:

				
	
					
						 

					
					
						____________________________________

				
	
					
						 

					
					
						____________________________________

				
	
					
						 

					
					
						Email Address: _______________________

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