Document:

EX-4.2

 

Exhibit 4.2

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF CERTIFICATE OF INCORPORATION

FEDERATED DEPARTMENT STORES, INC.

          The corporation organized and existing under and by virtue of the General Corporation Law of
the State of Delaware does hereby certify:

FIRST: That at a meeting of the Board of Directors of Federated Department
Stores, Inc., resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered “Seventh” so that, as amended, said Article
shall be and read as follows:

     SEVENTH. Section 1. NUMBER, ELECTION, AND TERMS OF DIRECTORS.
Subject to the rights, if any, of the holders of any series of Preferred Stock
to elect additional Directors under circumstances specified in a Preferred
Stock Designation, the number of the Directors of the Company will not be less
than three nor more than 16 and will be fixed from time to time in the manner
described in the by-laws of the Company. At the annual meeting of stockholders
to be held in 2006, the successors of the Directors whose terms expire at that
meeting shall be elected for a term expiring at the next following annual
meeting of stockholders, at the annual meeting of stockholders to be held in
2007, the successors of the Directors whose terms expire at that meeting shall
be elected for a term expiring at the next following annual meeting of
stockholders, and at the annual meeting of stockholders to be held in 2008 and
at each annual meeting of stockholders thereafter, each of the Directors shall
be elected for a term expiring at the next following annual meeting of
stockholders. In each case, Directors shall be elected by plurality vote of
all votes cast at such meeting and shall hold office until his or her successor
has been elected and qualified. Subject to the rights, if any, of the holders
of any series of Preferred Stock to elect additional Directors under
circumstances specified in a Preferred Stock Designation, Directors may be
elected by the stockholders only at an annual meeting of stockholders.
Election of Directors of the Company need not be by written ballot unless
requested by the Chairman or by the holders of a majority of the Voting Stock
present in person or represented by proxy at a meeting of the stockholders at
which Directors are to be elected.

     Section 2. NOMINATION OF DIRECTOR CANDIDATES. Advance notice of
stockholder nominations for the election of Directors must be given in the
manner provided in the by-laws of the Company.

 

 

     Section 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to
the rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal, or other cause will be filled solely by
the affirmative vote of a majority of the remaining Directors then in office,
even though less than a quorum of the Board, or by a sole remaining Director.
Any Director elected in accordance with the preceding sentence will hold office
for the remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such Director’s
successor has been elected and qualified. No decrease in the number of
Directors constituting the Board may shorten the term of any incumbent
Director.

     Section 4. REMOVAL. Subject to the rights, if any, of the
holders of any series of Preferred Stock to elect additional Directors under
circumstances specified in a Preferred Stock Designation, any Director may be
removed from office by the stockholders only in the manner provided in this
Section 4. At any annual meeting or special meeting of the stockholders, the
notice of which states that the removal of a Director or Directors is among the
purposes of the meeting, the affirmative vote of the holders of at least 80% of
the Voting Stock, voting together as a single class, may remove such Director
or Directors. If, at the time of any such meeting, the Board is classified as
provided in Section 141(d) of the DGCL (or in any successor provision thereto),
such removal may be effected only for cause.

     Section 5. AMENDMENT, REPEAL, ETC. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the Voting Stock, voting together as a
single class, is required to amend or repeal, or adopt any provision
inconsistent with, Sections 2 through 5 of this Article Seventh.

SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and held upon
notice in accordance with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statute were
voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.

FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this
13th day of July, 2005.

	 	 	 	 	 
	 	FEDERATED DEPARTMENT STORES, INC.

 	 
	 	/s/  Dennis J. Broderick
 	 
	 	Dennis J. Broderick 	 
	 	Senior Vice President, General Counsel and Secretary<PAGE>

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                                                                    EXHIBIT 10.1

            SHAREHOLDER AGREEMENT dated as of August 29, 2005, (this
"Agreement"), among SMISC, LLC, a Delaware limited liability company ("Parent"),
and the individuals and other parties listed on Schedule A attached hereto
(each, a "Shareholder" and, collectively, the "Shareholders").

            WHEREAS, Parent, Motorsports Authentics, Inc., a Delaware
corporation and a indirect wholly owned Subsidiary of Parent ("Sub"), and Action
Performance Companies, Inc., an Arizona corporation ("Company"), propose to
enter into an Agreement and Plan of Merger dated as of the date hereof (as the
same may be amended or supplemented, the "Merger Agreement") providing for the
merger of Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in the Merger Agreement;

            WHEREAS, each Shareholder owns the number of shares of common stock,
par value $.01 per share, of the Company (the "Company Common Stock") set forth
opposite his, her or its name on Schedule A attached hereto (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by such Shareholder after the date hereof and during the term
of this Agreement (including through the exercise of any stock options, warrants
or similar instruments), being collectively referred to herein as the "Subject
Shares" of such Shareholder);

            WHEREAS, the Board of Directors of the Company has unanimously
approved the terms of this Agreement; and

            WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Shareholder enter into this Agreement.

            NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the mutual
promises and the representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, agree as follows:

            1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each
Shareholder hereby, severally and not jointly, represents and warrants to Parent
as of the date hereof in respect of himself, herself or itself as follows:

                  (a) AUTHORITY, EXECUTION AND DELIVERY; ENFORCEABILITY. The
      Shareholder has all requisite power and authority to enter into this
      Agreement and to consummate the transactions contemplated hereby. This
      Agreement has been duly authorized, executed and delivered by the
      Shareholder and, assuming this Agreement constitutes the legal, valid and
      binding obligation of Parent, constitutes the legal, valid and binding
      obligation of the Shareholder, enforceable against the Shareholder in
      accordance with its terms. Except for the expiration or termination of the
      waiting periods under the HSR Act and informational filings with the SEC,
      the execution and delivery by the Shareholder of this Agreement do not,
      and the consummation of the transactions contemplated hereby and
      compliance with the terms hereof will not, conflict with, or result in any
      violation of, or

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      default (with or without notice or lapse of time or both) under, or give
      rise to a right of termination, cancellation or acceleration of any
      obligation or to loss of a material benefit under, or result in the
      creation of any Lien upon any of the Subject Shares of the Shareholder
      under, (i) any trust agreement, loan or credit agreement, bond, note,
      mortgage, indenture, lease or other contract, agreement, obligation,
      commitment, arrangement, understanding or instrument, (collectively,
      "Contracts") to which the Shareholder is a party or by which any of the
      Subject Shares of the Shareholder is bound or (ii) subject to the filings
      and other matters referred to in the next sentence, any provision of any
      judgment, order or decree (collectively, "Judgment") or any statute, law,
      ordinance, rule or regulation (collectively, "Applicable Law") applicable
      to the Subject Shares of the Shareholder. No consent, approval, order or
      authorization (collectively, "Consent") of, action by or in respect of, or
      registration, declaration or filing with, any Governmental Entity is
      required to be obtained or made by or with respect to the Shareholder in
      connection with the execution, delivery and performance by the Shareholder
      of this Agreement or the consummation by the Shareholder of the
      transactions contemplated hereby, other than (i) compliance with and
      filings under the HSR Act, if applicable to the Shareholder's receipt in
      the Merger of the Merger Consideration, (ii) such reports under Sections
      13(d) and 16 of the Exchange Act as may be required in connection with
      this Agreement and the transactions contemplated hereby and (iii) where
      the failure to obtain such Consent or action, or to make such
      registration, declaration or filing, could not reasonably be expected to
      prevent, materially impede or delay the performance by the Shareholder of
      its obligations under this Agreement. If the Shareholder is a natural
      person and is married, and the Shareholder's Subject Shares constitute
      community property or otherwise need spousal or other approval for this
      Agreement to be legal, valid and binding, this Agreement has been duly
      authorized, executed and delivered by, and constitutes a valid and binding
      agreement of, the Shareholder's spouse, enforceable against such spouse in
      accordance with its terms. No trust of which such Shareholder is a trustee
      requires the consent of any beneficiary to the execution and delivery of
      this Agreement or to the consummation of the transactions contemplated
      hereby.

                  (b) THE SUBJECT SHARES. The Shareholder is the record and
      beneficial owner of, or is trustee of a trust that is the record holder
      of, and whose beneficiaries are the beneficial owners of, and has good and
      marketable title to, the Subject Shares set forth opposite his, her or its
      name on Schedule A attached hereto, free and clear of any Liens. The
      Shareholder does not own, of record or beneficially, any shares of capital
      stock of the Company other than the Subject Shares set forth opposite his,
      her or its name on Schedule A attached hereto. The Shareholder has the
      sole right to vote such Subject Shares (except to the extent that such
      Subject Shares are issuable upon the exercise of options or Warrants that
      have not been exercised by such Shareholder), and, except as contemplated
      by this Agreement, none of such Subject Shares is subject to any voting
      trust or other agreement, arrangement or restriction with respect to the
      voting of such Subject Shares.

            2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to each Shareholder that Parent (i) is duly formed,
validly existing and in good standing

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under the laws of the State of Delaware, and (ii) has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized. The
execution and delivery by Parent of this Agreement and consummation by Parent of
the transactions contemplated hereby have been duly authorized by all necessary
limited liability company action on the part of Parent. Parent has duly executed
and delivered this Agreement, and, assuming this Agreement constitutes the
legal, valid and binding obligation of each of the other parties hereto, this
Agreement constitutes a valid and binding obligation of Parent enforceable
against Parent in accordance with its terms. The execution and delivery by
Parent of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, (i) the
Certificate of Formation or Limited Liability Company Agreement of Parent, (ii)
any Contract to which Parent is a party or by which any properties or assets of
Parent are bound in any way that would prevent the consummation by Parent of the
transactions contemplated by this Agreement or (iii) subject to the filings and
other matters referred to in the next sentence, any provision of any Judgment or
Applicable Law applicable to Parent or the properties or assets of Parent, in
any way that would prevent the consummation by Parent of the transactions
contemplated by this Agreement. No Consent of, action by or in respect of, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to Parent in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. There is no suit, action, investigation or
proceeding pending or, to the knowledge of Parent, threatened against or
affecting Parent or any of its Affiliates before or by any Governmental
Authority that could reasonably be expected to materially impair the ability of
Parent to perform its obligations hereunder or to consummate the transactions
contemplated hereby on a timely basis.

            3. COVENANTS OF EACH SHAREHOLDER. Each Shareholder, acting as a
shareholder of the Company and not as an officer or director of the Company,
severally and not jointly, agrees as follows:

                  (a) Without in any way limiting each Shareholder's right to
      vote its Subject Shares in its sole discretion with respect to any other
      matters, at any meeting of shareholders of the Company called to vote upon
      the Merger and the Merger Agreement or at any adjournment thereof or in
      any other circumstances upon which a vote, consent or other approval
      (including by written consent) with respect to the Merger and the Merger
      Agreement is sought, the Shareholder shall, including by executing a
      written consent if requested by Parent, vote (or cause to be voted) the
      Subject Shares in favor of the Merger, the adoption by the Company of the
      Merger Agreement and the approval of the terms thereof and each of the
      other transactions contemplated by the Merger Agreement.

                  (b) Notwithstanding the foregoing paragraph (a), each
      Shareholder may decline to vote, or cause to be voted, the Subject Shares
      in favor of the Merger, if (i) without the prior written consent of such
      Shareholder, the Merger Agreement shall be amended to (A) reduce the price
      per share to be paid for the Subject Shares to less than

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      $13.00 per share, net to the seller in cash, (B) change the form of
      consideration payable in the Merger Agreement, or (C) amend or modify any
      term or condition of the Merger Agreement in a manner adverse to the
      shareholders of the Company; or (ii) any Governmental Entity shall have
      issued a final, nonappealable order, decree or ruling or taken any other
      action permanently restraining, enjoining, or otherwise prohibiting such
      Shareholder from tendering Shares.

                  (c) At any meeting of shareholders of the Company or at any
      adjournment thereof or in any other circumstances upon which the
      Shareholder's vote, consent or other approval is sought, the Shareholder
      shall vote (or cause to be voted) the Subject Shares against (i) any
      merger agreement or merger (other than the Merger Agreement and the
      Merger), consolidation, combination, sale of substantial assets,
      reorganization, recapitalization, dissolution, liquidation or winding up
      of or by the Company or any other Takeover Proposal or (ii) any amendment
      of the Company's First Amended and Restated Articles of Incorporation or
      Bylaws or other proposal or transaction involving the Company, in each
      case which proposal, transaction or amendment would in any manner impede,
      frustrate, prevent or nullify, or result in a breach of any covenant,
      representation or warranty or any other obligation of the Company under or
      with respect to, the Merger, the Merger Agreement or any of the other
      transactions contemplated by the Merger Agreement or change in any manner
      the voting rights of the Company Common Stock. The Shareholder shall not
      commit or agree to take any action inconsistent with the foregoing.

                  (d) The Shareholder shall not (i) sell, transfer, pledge,
      assign or otherwise dispose of (including by gift) (collectively,
      "Transfer"), consent to any Transfer of, or enter into any Contract,
      option or other arrangement (including any profit sharing arrangement)
      with respect to the Transfer of, any Subject Shares (or any interest
      therein) to any person other than pursuant to the terms of the Merger or
      (ii) enter into any voting arrangement, whether by proxy, voting agreement
      or otherwise, with respect to any Subject Shares other than pursuant to
      this Agreement and shall not commit or agree to take any of the foregoing
      actions. The Shareholder shall not, nor shall such Shareholder permit any
      entity under such Shareholder's control to, deposit any Subject Shares in
      a voting trust.

                  (e) The Shareholder shall not, nor shall it authorize or
      permit any employees or Affiliates of, or any investment banker, financial
      advisor, attorney, accountant or other advisor, agent or representative
      of, the Shareholder (collectively, the "Shareholder Representatives") to,
      directly or indirectly through any person or entity, (i) solicit, initiate
      or encourage, or knowingly take any other action designed to, or which
      would reasonably be expected to, facilitate, any inquiries or the making
      of any proposal that constitutes or would reasonably be expected to lead
      to a Takeover Proposal or (ii) enter into, continue or otherwise
      participate in any discussions or negotiations regarding, or furnish to
      any person any non-public information with respect to, any Takeover
      Proposal. Without limiting the foregoing, it is agreed that any violation
      of the restrictions set forth in the preceding sentence by any Shareholder
      Representative of such Shareholder, whether or not such person is
      purporting to act on behalf of such

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      Shareholder, shall be a breach of this Section 3(e) by such Shareholder.
      The Shareholder shall promptly advise Parent orally and in writing of any
      Takeover Proposal or inquiry made to the Shareholder with respect to any
      Takeover Proposal.

                  (f) Until the earlier of (i) the consummation of the Merger
      and (ii) termination of the Merger Agreement pursuant to its terms, the
      Shareholder shall use all reasonable efforts to take, or cause to be
      taken, all actions, and to do, or cause to be done, and to assist and
      cooperate with the other parties in doing, all things necessary, proper or
      advisable to consummate and make effective, in the most expeditious manner
      practicable, the Merger and the other transactions contemplated by the
      Merger Agreement. The Shareholder shall not issue any press release or
      make any other public statement with respect to this Agreement, the Merger
      Agreement, the Merger or any other transaction contemplated by this
      Agreement or the Merger Agreement without the prior written consent of
      Parent, except as may be required by Applicable Law.

                  (g) The Shareholder, and any beneficiary of a revocable trust
      for which such Shareholder serves as trustee, shall not take any action to
      revoke or terminate such trust or take any other action which would
      restrict, limit or frustrate in any way the transactions contemplated by
      this Agreement. Each such beneficiary hereby acknowledges and agrees to be
      bound by the terms of this Agreement applicable to it.

                  (h) The Shareholder hereby consents to and approves the
      actions taken by the Board of Directors of the Company in approving the
      Merger Agreement and this Agreement, the Merger and the other transactions
      contemplated by the Merger Agreement.

            4. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF ATTORNEY-IN-FACT.

                  (a) Each Shareholder hereby irrevocably grants to, and
      appoints, Parent and Lesa Kennedy and Marcus Smith, in their respective
      capacities as officers of Parent, and any individual who shall hereafter
      succeed to any such office of Parent, and each of them individually, and
      any individual designated in writing by any of them, as such Shareholder's
      proxy and attorney-in-fact (with full power of substitution), during and
      for the Proxy Term (hereinafter defined), for and in the name, place and
      stead of such Shareholder, to vote such Shareholder's Subject Shares, or
      grant a consent or approval in respect of such Subject Shares, (i) in
      favor of adoption of the Merger Agreement and approval of the Merger and
      any other transactions contemplated by the Merger Agreement, (ii) against
      any Takeover Proposal and (iii) against any amendment of the Company's
      First Amended and Restated Articles of Incorporation or Bylaws, or other
      proposal or transaction (including any consent solicitation to remove or
      elect any directors of the Company) involving the Company, which amendment
      or other proposal or transaction would in any manner impede, frustrate,
      prevent or nullify, or result in a breach of any covenant, representation
      or warranty or any other obligation or agreement of the Company under or
      with respect to, the Merger, the Merger Agreement or any of the other
      transactions contemplated by the Merger Agreement or change in any manner
      the voting rights of the Company Common Stock. The Shareholder understands
      and

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      acknowledges that Parent is entering into the Merger Agreement in reliance
      upon the Shareholder's execution and delivery of this Agreement.

                  (b) Such Shareholder represents that any proxies heretofore
      given in respect of such Shareholder's Subject Shares are not irrevocable,
      and that all such proxies are hereby or heretofore have been revoked.

                  (c) Such Shareholder hereby affirms that the irrevocable proxy
      set forth in this Section 4 is given in connection with the execution of
      the Merger Agreement, and that such irrevocable proxy is given to secure
      the performance of the duties of the Shareholder under this Agreement.
      Such Shareholder hereby further affirms that the irrevocable proxy is
      coupled with an interest and may under no circumstances be revoked. Such
      Shareholder hereby ratifies and confirms all that such irrevocable proxy
      may lawfully do or cause to be done by virtue hereof. Such irrevocable
      proxy is executed and intended to be irrevocable in accordance with the
      provisions of Section 10-722 of the Arizona Code. The irrevocable proxy
      granted hereunder shall automatically terminate upon the termination of
      this Agreement in accordance with Section 7.

                  (d) For purposes of this Agreement, "Proxy Term" means the
      period from the execution of this Agreement until the termination of this
      Agreement in accordance with the terms of Section 7 hereof.

            5. FURTHER ASSURANCES. Each Shareholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.

            6. ADDITIONAL MATTERS. (a) Each Shareholder agrees that this
Agreement and the obligations hereunder shall attach to such Shareholder's
Subject Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Subject Shares shall pass, whether by operation of
law or otherwise, including such Shareholder's heirs, guardians, administrators
or successors, and that each certificate representing such Subject Shares will
be inscribed with a legend to such effect. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Company Common Stock, or the
acquisition of additional shares of Company Common Stock or other voting
securities of the Company by any Shareholder, the number of Subject Shares
listed in Schedule A beside the name of such Shareholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Company Common Stock or other voting securities of the
Company issued to or acquired by such Shareholder. Notwithstanding any provision
in this Agreement to the contrary, nothing herein shall require or be deemed to
require the exercise of, or give any person other than the Shareholder the power
to exercise, any option to purchase Company Common Stock or any Warrants held at
any time by such Shareholder, it being understood that the foregoing shall in no
way limit the provisions of Section 3 herein.

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                  (b) Each Shareholder agrees that such Shareholder will tender
      to the Company, within 10 business days after the date hereof (or, in the
      event Subject Shares are acquired subsequent to the date hereof within 10
      business days after the date of such acquisition), any and all
      certificates representing such Shareholder's Subject Shares in order that
      the Company may inscribe upon such certificates the legend in accordance
      with Section 5.12 of the Merger Agreement.

                  (c) No person executing this Agreement who is or becomes
      during the term hereof a director or officer of the Company makes (or
      shall be deemed to have made) any agreement or understanding herein in his
      or her capacity as such a director or officer of the Company. Each
      Shareholder signs solely in his, her or its capacity as the record holder
      and beneficial owner of, or the trustee of a trust whose beneficiaries are
      the beneficial owners of, such Shareholder's Subject Shares and nothing
      herein shall limit or affect any actions taken by any Shareholder or any
      employee or Affiliate of any Shareholder in his or her capacity as an
      officer or director of Company to the extent specifically permitted by the
      Merger Agreement.

                  (d) The parties hereto agree that the legend referenced above
      shall be removed and the restrictions set forth in the legend above shall
      be of no further force and effect, in each case, upon termination of this
      Agreement in accordance with Section 7 hereof.

            7. TERMINATION. This Agreement shall terminate, and the provisions
hereof shall be of no further force or effect, upon the earliest to occur of (i)
the Effective Time or (ii) the termination of the Merger Agreement. Nothing in
this Section 7 shall relieve or otherwise limit the liability of any party for
breach of this Agreement.

            8. GENERAL PROVISIONS.

                  (a) AMENDMENTS. This Agreement may not be amended except by an
      instrument in writing signed by each of the parties hereto.

                  (b) NOTICE. All notices and other communications hereunder
      shall be in writing and shall be deemed given if delivered personally or
      sent by overnight courier (providing proof of delivery) to Parent in
      accordance with Section 8.02 of the Merger Agreement and to the
      Shareholders at their respective addresses set forth on Schedule A
      attached hereto (or at such other address for a party as shall be
      specified by like notice).

                  (c) INTERPRETATION. When a reference is made in this Agreement
      to a Section, such reference shall be to a Section of this Agreement
      unless otherwise indicated. The headings contained in this Agreement are
      for reference purposes only and shall not affect in any way the meaning or
      interpretation of this Agreement. Wherever the words "include", "includes"
      or "including" are used in this Agreement, they shall be deemed to be
      followed by the words "without limitation".

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                  (d) COUNTERPARTS. This Agreement may be executed in one or
      more counterparts (including by facsimile), all of which shall be
      considered one and the same agreement. This Agreement shall become
      effective against Parent when one or more counterparts have been signed by
      Parent and delivered to each Shareholder. This Agreement shall become
      effective against any Shareholder when one or more counterparts have been
      executed by such Shareholder and delivered to Parent. Each party need not
      sign the same counterpart.

                  (e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
      Agreement (including the documents and instruments referred to herein) (i)
      constitutes the entire agreement and supersedes all prior agreements and
      understandings, both written and oral, among the parties with respect to
      the subject matter hereof and (ii) is not intended to confer upon any
      person other than the parties hereto any legal or equitable rights or
      remedies.

                  (f) GOVERNING LAW; CAPITALIZED TERMS. THIS AGREEMENT SHALL BE
      GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
      ARIZONA, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
      APPLICABLE PRINCIPLES OF CONFLICTS OF LAW THEREOF. CAPITALIZED TERMS USED
      BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER
      AGREEMENT.

                  (g) VOIDABILITY. If prior to the execution hereof, the Board
      of Directors of the Company shall not have duly and validly authorized and
      approved by all necessary corporate action, this Agreement, the Merger
      Agreement and the transactions contemplated hereby and thereby, so that by
      the execution and delivery hereof Parent or Sub would become, or could
      reasonably be expected to become an "interested shareholder" with whom the
      Company would be prevented for any period pursuant to Sections 10-2741 et
      seq. of the Arizona Code from engaging in any "business combination" (as
      such terms are defined in Section ARS 10-2701 of the Arizona Code), then
      this Agreement shall be void and unenforceable until such time as such
      authorization and approval shall have been duly and validly obtained.

            9. SPECIFIC ENFORCEMENT. The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in any state court in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
of any state court located in the State of Delaware in the event any dispute
arises out of this Agreement or the transactions contemplated by this Agreement,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and

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(iii) agrees that it will not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any court other than a Federal
court located in the State of Delaware or a state court located in the State of
Delaware.

            10. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, by operation of law or
otherwise, by any Shareholder, on the one hand, without the prior written
consent of Parent nor by Parent, on the other hand, without the prior written
consent of the Shareholders, and any assignment without such consent shall be
null and void, except that Parent may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to any direct or indirect
wholly owned Subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

            11. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by Applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

            12. NO OWNERSHIP INTEREST. Nothing contained in this Agreement shall
be deemed to vest in Parent any direct or indirect ownership or incidence of
ownership of or with respect to the Subject Shares. All rights, ownership and
economic benefits of and related to the Subject Shares shall remain vested in
and belong to the Shareholders, and Parent shall have no authority to manage,
direct, superintend, restrict, regulate, govern or administer any of the
policies or operations of the Company or exercise any power or authority to
direct the Shareholders in the voting of any of the Subject Shares, except as
otherwise provided herein.

            13. SERVICE OF PROCESS. Each party irrevocably consents to service
of process in the manner provided for the giving of notices pursuant to this
Agreement. Nothing in this Agreement will affect the right of a party to serve
process in another manner permitted by law.

            14. FIDUCIARY DUTIES. Notwithstanding anything to the contrary in
this Agreement, in the case of any Shareholder who is a director of the Company,
the agreements of such Shareholder contained in this Agreement shall not govern,
limit or restrict such Shareholder's ability to exercise his or her fiduciary
duties as a director to the shareholders of the Company under applicable law in
his or her capacity as a director of Company.

                                       9
<PAGE>

                                                                  EXECUTION COPY

            IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and each Shareholder has signed this
Agreement, all as of the date first written above.

                                     SMISC, LLC

                                     /s/ Marcus G. Smith
                                     _____________________________________
                                     By: Marcus G. Smith
                                     Title: Vice President

                                     SHAREHOLDER

                                      /s/ Fred Wagenhals
                                     -------------------------------------
                                     By: Fred Wagenhals

                    [Signature Page to Shareholder Agreement]

                                       10
<PAGE>

                                                                  EXECUTION COPY

                                   SCHEDULE A

<TABLE>
<CAPTION>
       NAME                                  SHARES
       ----                                  ------
<S>               <C>
Fred Wagenhals    Fred Wagenhals has sole voting and disposition power over
                  906,800 shares of the Company and 284,195 options of the
                  company. In addition, Mr. Wagenhals has the right to vote up
                  to 906,800 shares owned by Lisa Wagenhals (to the extent still
                  owned by Lisa Wagenhals) and stock issued upon the exercise of
                  up to 284,195 options of the company (to the extent still
                  owned by Ms. Wagenhals).
</TABLE>

                                       11

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