Exhibit 3
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (this "Agreement") is made and entered into
as of August 17, 2006, by and among Celebrate Express, Inc. (the "Company"), on
the one hand, and ▇▇▇▇▇▇▇ Capital Management, LLC, ▇▇▇▇▇▇▇ Capital Opportunity
Fund, L.P., ▇▇▇▇▇▇▇ Capital Partners, LLC, ▇▇▇▇▇▇▇ Capital Offshore Opportunity
Fund, Ltd., ▇▇▇▇▇▇▇ Capital Offshore Partners, LLC, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD,
CFA, Thesis Capital Management, LLC, Thesis Capital, LP, Thesis Capital Master
Fund Limited and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA (collectively, the "Shareholder Group"),
on the other hand.
RECITALS
WHEREAS, the Shareholder Group beneficially owns in the aggregate
1,495,396 shares of common stock of the Company, constituting approximately
19.2% of such shares outstanding, and has initiated a proxy solicitation (the
"Proxy Solicitation") to elect three individuals to the Company's Board of
Directors (the "Board") at the 2006 annual meeting of shareholders of the
Company; and
WHEREAS, the Company has engaged ▇▇▇▇▇ and Company, LLC ("Cowen") to
assist the Board in exploring strategic alternatives for the Company; and
WHEREAS, the Board has determined that it is in the best interests of
the shareholders of the Company to provide representation on the Board to the
Shareholder Group; and
WHEREAS, the Company and the Shareholder Group desire, in connection
with the termination of the Proxy Solicitation, to make certain representations,
warranties, covenants and agreements with one another pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Article I.
BASIC AGREEMENTS
Section 1.1. Termination of the Proxy Solicitation.
Based on the representations, warranties, covenants and agreements of
the Company contained in this Agreement, the Shareholder Group hereby (i)
immediately and irrevocably withdraws its nomination of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and immediately and irrevocably withdraws
and terminates the Proxy Solicitation, (ii) irrevocably withdraws its demand for
a shareholder list and other materials pursuant to Section 23B.16.020 of the
Washington Business Corporation Act or otherwise; (iii)
agrees not to, directly or indirectly, initiate, propose, make, encourage or
induce any person, or in any way participate in any solicitation with respect to
any shareholder proposals for the 2006 Annual Meeting whether made pursuant the
rules and regulations promulgated under the Securities Exchange Act of 1934 or
otherwise, and (iv) agrees not to make any public objection to the election of
the Slate at the 2006 Annual Meeting, any public statement inconsistent with the
provisions of this Agreement, or otherwise take or cause or induce others to
take any action inconsistent with any of the foregoing.
Section 1.2. Board Actions.
The Company represents and warrants to the Shareholder Group that the
Board has taken the following actions, and covenants and agrees as follows:
(a) The Board has adopted a resolution increasing the authorized number of
directors of the Company to eight directors, effective at or prior to the
execution and delivery of this Agreement, and reducing the authorized number of
directors of the Company to seven directors, effective upon the conclusion of
the 2006 Annual Meeting. The Board agrees not to rescind or amend such
resolution prior to the 2006 Annual Meeting.
(b) The Board has elected ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
as directors to fill the two vacancies on the Board, which election is effective
as of the execution and delivery of this Agreement and at which time the
following will be the eight members of the Board: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
Section 1.3. 2006 Annual Meeting. At the 2006 Annual Meeting (or any other
meeting of shareholders held in lieu thereof, including any adjournments,
postponements, reschedulings or continuations thereof, the "2006 Annual
Meeting"), the Company shall nominate four persons for election to the Board,
and such slate shall consist of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Slate"). ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇
shall be nominated as Class II and I directors, with terms to end in 2008 and
2009, respectively. The Company shall prepare and distribute proxy materials
(the "Company Proxy Materials") (as well as any other solicitation or
recommendation made by the Company) that shall recommend, support and solicit
the election of the Slate to the Board and such material shall otherwise be
prepared in accordance with and to give effect to the terms of this Agreement.
If the Slate is elected at the 2006 Annual Meeting, the following will be
(absent death, removal or resignation) the seven directors of the Company
immediately following the 2006 Annual Meeting: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
Section 1.4. Strategic Alternatives Process. The Company represents and
warrants to the Shareholder Group that it has previously provided to the
Shareholder Group a true and correct copy of the engagement letter between Cowen
and the Company (including as the same may be amended, the "Engagement Letter"),
and that the Engagement Letter is, as of the date of this Agreement, in full
force and effect. The Company covenants and agrees that ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇.
▇▇▇▇▇▇▇, in their capacities as directors of the Company, shall have the right
to have direct access to Cowen, as it performs its engagement pursuant to the
Engagement Letter.
Such access shall be at such times as ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇▇, on the
one hand, and Cowen, on the other hand, shall deem reasonable and mutually
convenient. ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ agree to report to ▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer of the Company, on any conversation either of them holds
with Cowen with respect to ▇▇▇▇▇'▇ engagement pursuant to the Engagement Letter,
except for conversations for which ▇▇. ▇▇▇▇▇ or a quorum of the Board is present
and except for ministerial or insignificant conversations.
Section 1.5. Voting Agreement. Each member of the Shareholder Group agrees
to vote all shares of common stock of the Company as to which it has voting
rights as of the record date for the 2006 Annual Meeting in favor or the Slate.
Article II.
MISCELLANEOUS PROVISIONS
Section 2.1. Representations and Warranties. Each of the parties hereto
represents and warrants to the other party that:
(i) such party has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby;
(ii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all required action on the part
of such party and no other proceedings on the part of such party
are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby;
(iii) this Agreement has been duly and validly executed and delivered
by such party and constitutes the valid and binding obligation
of such party enforceable against such party in accordance with
their respective terms; and
(iv) this Agreement will not result in a violation of any terms or
provisions of any agreement to which such person is a party or
by which such party may otherwise be bound, or of any law, rule,
license, regulation, judgment, order or decree governing or
affecting such party.
Section 2.2. General.
(a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto.
(b) This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersedes all prior and
contemplated arrangements and understandings with respect thereto.
(c) This Agreement may be signed in counterparts, each of which shall
constitute an original and all of which together shall constitute one and the
same Agreement.
(d) All notices and other communications required or permitted hereunder
shall be effective upon receipt and shall be in writing and may be delivered in
person, by telecopy, electronic mail, express delivery service or U.S. mail, in
which event it may be mailed by first-class, certified or registered, postage
prepaid, addressed to the party to be notified at the respective addresses set
forth below, or at such other addresses which may hereinafter be designated in
writing:
If to the Company:
Celebrate Express, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇. ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Shareholder Group:
▇▇▇▇▇▇▇ Capital Management, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(e) This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made and performed therein, without giving effect
to the principles of conflicts of law thereof.
(f) Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid, but if any provision of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not render invalid or unenforceable any
other provision of this Agreement.
(g) It is hereby agreed and acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person, therefore, shall be
entitled to injunctive relief, including specific performance, to enforce such
obligations, without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written above.
CELEBRATE EXPRESS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
▇▇▇▇▇▇▇ CAPITAL MANAGEMENT, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Title: Authorized Signatory
▇▇▇▇▇▇▇ CAPITAL OPPORTUNITY FUND, LP
By: ▇▇▇▇▇▇▇ Capital Partners, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Title: Managing Member
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▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Title: Managing Member
▇▇▇▇▇▇▇ CAPITAL OFFSHORE OPPORTUNITY FUND,
LTD.
By: ▇▇▇▇▇▇▇ Capital Offshore Partners, LLC,
Its Investment Adviser
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Title: Managing Member
▇▇▇▇▇▇▇ CAPITAL OFFSHORE PARTNERS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
Title: Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, MD, CFA
[SIGNATURE PAGE TO SETTLEMENT AGREEMENT]
THESIS CAPITAL MANAGEMENT, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
Title: Manager
THESIS CAPITAL, LP
By: Thesis Capital Advisors, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
Title: Manager
THESIS CAPITAL MASTER FUND LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
Title: Director
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFA
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