CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (this "Agreement") is made this 31st day of
January, 2000, by and among NET VALUE HOLDINGS, INC., a Delaware corporation
(the "Investor"), the individuals and entities identified as Principal
Stockholders on Schedule A hereto (each, a "Principal Stockholder," and
collectively, the "Principal Stockholders") and XXXXXXXXXXXXXXXX.XXX, INC., a
Delaware corporation (the "Company").
RECITALS
A. Concurrently with the execution hereof, the Company and the Investor
have entered into that certain Series A Convertible Preferred Stock Purchase
Agreement (the "Series A Agreement"), pursuant to which the Investor will
purchase 2,858,215 shares of Series A Convertible Preferred Stock of the Company
(the "Series A Preferred Stock"). Capitalized terms used herein, but not
otherwise defined, shall have the meaning given such terms in the Series A
Agreement.
B. The Principal Stockholders are presently the legal or beneficial
owners of 5,616,467 shares of the outstanding Common Stock of the Company
(including shares issuable upon exercise of warrants). They each have at least
ten percent (10%) of the outstanding common shares of the Company.
C. To induce the Investor to make the proposed investment, the
Principal Stockholders have agreed to grant the Investor the opportunity to
participate upon the terms and conditions set forth in this Agreement, in
subsequent sales of the Common Stock by the Principal Stockholders.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, covenants and
obligations contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. SALES BY PRINCIPAL STOCKHOLDERS
1.1 Notice of Purchase Offers. Should any of the Principal
Stockholders propose to accept one or more bona fide offers (collectively, a
"Purchase Offer"), from any persons to purchase shares of the Company's Common
Stock from such Principal Stockholder (a "Purchase Offeror"), then the Principal
Stockholder or Principal Stockholders shall promptly notify the Investor in
writing of the terms and conditions of such Purchase Offer.
1.2 Right to Participate. The Investor shall have the right,
exercisable upon written notice to such selling Principal Stockholder or
Principal Stockholders within thirty (30) business days after receipt of the
notice of the Purchase Offer, to participate in the Principal Stockholder's or
Principal Stockholders' sale of Common Stock on the same terms and conditions.
To the extent the Investor exercises such right of participation, the number of
shares of Common Stock which the Principal Stockholder or Principal Stockholders
may sell pursuant to the Purchase Offer shall be correspondingly reduced. The
right of participation of the Investor shall be subject to the following terms
and conditions:
(a) The Investor may sell up to that number of shares
of Common Stock equal to the product obtained by multiplying (i) the aggregate
number of shares of Common Stock covered by the Purchase Offer, by (ii) a
fraction, the numerator of which is the number of shares of Common Stock of the
Company at the time owned by the Investor together with all shares of Common
Stock then issuable to the Investor upon the exercise of vested rights, options
or convertible securities other than the Series A Preferred Stock, and the
denominator of which is the sum of (a) the combined number of shares of Common
Stock of the Company at the time owned by all the selling Principal Stockholders
(including shares transferred to Permitted Transferees as defined below) and the
Investor, and (b) the number of shares of Common Stock then issuable to the
Investor and the Selling Principal Stockholders upon the exercise of vested
rights, options and convertible securities other than Series A Preferred Stock.
For the purposes of making such computation, the Investor shall be deemed to own
the number of shares of Common Stock into which the Series A Preferred Stock
held by the Investor is at the time convertible.
(b) The Investor may participate in the sale by
delivering to the Principal Stockholder at the time of the sale for transfer to
the Purchase Offeror one or more certificates, properly endorsed for transfer,
which represent:
(i) the number of shares of Common Stock which
the Investor elects to sell pursuant to this Section 1.2; or
(ii) the number of shares of Series A Preferred
Stock, which is at such time is convertible into the number of shares of Common
Stock that the Investor elects to sell pursuant to this Section 1.2; together
with written notice of the Investor's election to convert such shares into
shares of Common Stock. Such certificates and written notice shall be forwarded
to the Company, and the Company shall deliver to the Principal Stockholder
certificates representing that number of shares of Common Stock which the
Investor has elected to sell.
1.3 Consummation of Sale. The stock certificate or
certificates which the Investor delivers to the selling Principal Stockholder or
Principal Stockholders pursuant to Section 1.2 shall be transferred by the
selling Principal Stockholder or Principal Stockholders to the Purchase Offeror
in consummation of the sale of the Common Stock pursuant to the terms and
conditions specified in the Section 1.1 notice to the Investor, and the selling
Principal Stockholder or Principal Stockholders shall promptly thereafter remit
to the Investor that portion of the sale proceeds to which the Investor is
entitled by reason of its participation in such sale, net of a pro rata share of
all expenses incurred in connection with such sale. To the extent that any
Purchase Offeror prevents such assignment or otherwise refuses to purchase
shares from the Investor, the Principal Stockholder(s) shall not sell to such
Purchase Offeror unless and until, simultaneously with such sale, the Principal
Stockholder shall purchase such shares from the participating Investor.
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1.4 Ongoing Rights. The exercise or non-exercise of the rights
of the Investor hereunder to participate in one or more sales of Common Stock
made by a Principal Stockholder shall not adversely affect its right to
participate in subsequent Common Stock sales by a Principal Stockholder pursuant
to Section 1.1 hereof.
1.5 Permitted Exemptions. The participation rights of the
Investor shall not apply to (a) any pledge of Common Stock made by a Principal
Stockholder pursuant to a bona fide loan transaction which creates a mere
security interest, (b) any transfer of Common Stock to the Company pursuant to a
written agreement between the Company and a Principal Stockholder providing for
the right of such repurchase or to the Principal Stockholder's ancestors or
descendants or spouse or to a trustee for their benefit, (c) any bona fide gift
of Common Stock; provided, that (i) the Principal Stockholder shall inform the
Investor of such pledge, transfer or gift prior to effecting it and (ii) the
pledgee, transferee or donee (collectively, the "Permitted Transferees"), shall
furnish the Investor with a written agreement to be bound by and comply with all
provisions of this Agreement applicable to the Principal Stockholders, or (d)
any transfer between parties to this Agreement. Such transferred shares shall
remain subject to this Agreement and the Permitted Transferees shall be treated
as "Principal Stockholders" for purposes of this Agreement.
2. PROHIBITED TRANSFERS
2.1 Treatment of Prohibited Transfers. In the event a
Principal Stockholder should sell any Common Stock in contravention of the
participation rights of the Investor under this Agreement (a "Prohibited
Transfer"), the Investor, in addition to such other remedies as may be available
at law, in equity or hereunder, shall have the put option provided in Section
2.2 below, and a Principal Stockholder shall be bound by the applicable
provisions of such put option.
2.2 Put Option. In the event of a Prohibited Transfer, the
Investor shall have the right to sell to the selling Principal Stockholder(s) a
number of shares of Common Stock (either directly or through delivery of
convertible Preferred Stock) equal to the number of shares the Investor would
have been entitled to transfer to the Purchase Offeror in the Prohibited
Transfer pursuant to the terms hereof. Such sale shall be made on the following
terms and conditions:
(a) The price per share at which the shares are to be
sold to the selling Principal Stockholder or Principal Stockholders shall be
equal to the price per share paid by the purchaser to the selling Principal
Stockholder or Principal Stockholders in the Prohibited Transfer. The selling
Principal Stockholder or Principal Stockholders shall also reimburse the selling
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of such Investor's
rights under this Section 2.
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(b) Within sixty (60) days after the later of the
dates on which the Investor (i) receives notice from a Principal Stockholder of
the Prohibited Transfer, or (ii) otherwise becomes aware of the Prohibited
Transfer, the Investor shall, if exercising the put option created hereby,
deliver to the selling Principal Stockholder or Principal Stockholders the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer, together with notice of and documentation for
reimbursable expenses.
(c) The selling Principal Stockholder(s) shall, upon
receipt of the certificate or certificates for the shares to be sold by the
Investor, pursuant to Section 2.2(b), pay the aggregate purchase price therefor
and the amount of reimbursable fees and expenses, as specified in Section
2.2(a), by certified check or bank draft made payable to the order of the
Investor.
3. LEGENDED CERTIFICATES
3.1 Legend. Each certificate representing shares of the Common
Stock of the Company now or hereafter owned by a Principal Stockholder or issued
to any Permitted Transferee pursuant to Section 1.5 shall be endorsed with the
following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
BETWEEN THE STOCKHOLDERS, THE CORPORATION AND CERTAIN HOLDERS OF PREFERRED STOCK
OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
Each Principal Stockholder agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing this legend to enforce the provisions of this Agreement and
the Company agrees to promptly do so.
3.2 Legend Removal. The Section 3.1 legend shall be removed
upon termination of this Agreement in accordance with the provisions of Section
4.1.
4. MISCELLANEOUS PROVISIONS
4.1 Termination of Co-Sale Rights. The rights of the Investor
under this Agreement and the obligations of a Principal Stockholder with respect
to the Investor shall terminate at such time as the Investor shall no longer be
the owner of any shares of capital stock of the Company. Unless sooner
terminated in accordance with the preceding sentence, this Agreement shall
terminate upon the occurrence of any one of the following events:
(a) the consummation of a Qualifying
IPO (as defined in Section 5(b)(1) of the Series A Certificate);
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(b) the fourth-year anniversary of
the date of this Agreement; or
(c) the closing of a merger,
consolidation or sale of the stock or substantially all of the assets of the
Company in which the shareholders of the Company immediately prior to such
transaction do not retain a majority of voting power in the surviving entity.
4.2 Notices. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement shall be in writing and shall
be effective upon facsimile delivery, personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified as
set forth below such party's signature or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties
hereto.
4.3 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
The Investor shall be entitled to assign its rights under this Agreement to any
Related Party. As used herein, the term "Related Party" shall mean (i) any
person or entity that, directly or indirectly, through one or more
intermediaries, has voting control of, or is under common voting control with,
the Investor; or (ii) a trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, or owners, or persons or entities holding
controlling interest of which consist of the Investor and/or such other persons
or entities referred to in the immediately preceding clause (i); and (iii) the
Investor's current partners, stockholders or members, pro rata in accordance
with the current distribution provision of such entities' charter documents.
4.4 Severability. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
4.5 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Series A Preferred Stock of the Company of any class or series, then, upon the
occurrence of any subdivision, combination or stock dividend of such class or
series of stock, the specific number of shares so referenced in this Agreement
shall automatically be proportionally adjusted to reflect the effect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
4.6 Aggregation of Stock. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
4.7 Amendments. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by duly authorized representatives of the parties hereto. Any waiver by a party
of its rights hereunder shall be effective only if evidenced by a written
instrument executed by a duly authorized representative of such party. In no
event shall such waiver of any rights hereunder constitute the waiver of such
rights in any future instance unless the waiver so specifies in writing.
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4.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
regard to that body of law relating to conflict of law or choice of law.
4.9 Other Obligations of Company. The Company agrees to use
its best efforts to enforce the terms of this Agreement, to inform the Investor
of any breach hereof and to assist the Investor in the exercise of its rights
and performance of its obligations under Section 2 hereof.
4.10 Attorney Fees. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
4.11 Ownership. Each Principal Stockholder represents and
warrants that such Principal Stockholder is the sole legal and beneficial owner
of the shares of stock subject to this Agreement and that no other person has
any interest (other than a community property interest, if the law of a
community property state is applicable) in such shares.
4.12 Entire Agreement. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof. To
the extent this Agreement conflicts with any previous agreement among the
parties relative to the specific subject matter hereof, this Agreement shall
control.
4.13 Mutual Drafting. This Agreement is the result of the
joint efforts of the Company, the Investor and the Principal Stockholders and
each provision hereof has been subject to the mutual consultation, negotiation
and agreement of the parties and there shall be no construction against any
party based on any presumption of the party's involvement in the drafting
thereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Co-Sale Agreement on
the day and year indicated above.
THE COMPANY:
XXXXXXXXXXXXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxx Xxxxx
----------------------
Xxxxx Xxxxx
President
Address: 00 Xxxxxxxx
Xxxxxxx Xxxxxx, XX 00000
THE PRINCIPAL STOCKHOLDERS:
/s/ Xxxxx Xxxxx
----------------------
Xxxxx Xxxxx
Address: 00 Xxxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000-0000
/s/ Xxxxxxx Xxxxxxxxxxx
----------------------
Xxxxxxx Xxxxxxxxxxx
Address: 00 Xxxxxxxx
Xxxxxxx Xxxxxx, XX 00000
IBO$, INC.
By: /s/ Xxxxx Xxxxxx
----------------------
Name: Xxxxx Xxxxxx
Title:
Address: 0000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
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THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------
Name: Xxxxxx X. Xxxxx
Title: President
Address: Xxx Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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SCHEDULE A
PRINCIPAL STOCKHOLDERS
NAME NUMBER OF SHARES PERCENTAGE OF OWNERSHIP
Xxxxx Xxxxx 1,574,804 13.8
Xxxxxxx Xxxxxxxxxxx 2,249,720 19.7
IBO$, Inc. 1,791,943(1) 15.7(1)
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TOTAL 5,616,467 49.2
SERIES A PREFERRED STOCK
Net Value Holdings 2,858,215 25.0
---------------------
(1) Includes 500,000 shares issuable upon exercise of warrants.
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