EXHIBIT 10.18
CO-SALE AGREEMENT
This Agreement is made and entered into as of March 3, 2000 by and
among Sorrento Networks, Inc., a California corporation (the "Company"), those
investors in the Company listed on Exhibit A attached hereto (the "Investors")
and the stockholder of the Company listed on Exhibit B attached hereto (the
"Stockholder").
A. The Stockholder currently owns that number of shares of the
Company's Common Stock (the "Common Stock") as shown beside such Stockholder's
name on Exhibit B attached hereto.
B. Each Investor is purchasing from the Company that number of shares
of the Company's Series A Preferred Stock ("Series A Stock") shown beside such
Investor's name on Exhibit A attached hereto, pursuant to that certain Series A
Preferred Stock Purchase Agreement by and among the Company and the Investors
dated March 3, 2000 (the "Purchase Agreement").
C. To induce the Investors to purchase such shares of Series A Stock
from the Company and to enter into the Purchase Agreement, the Stockholder has
agreed to grant the Investors certain rights of co-sale with respect to the
shares of the Company's Common Stock currently owned by the Stockholder as set
forth in Exhibit B attached hereto, all on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises herein contained, and for other consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the following meanings:
1.1 "Stock" means and includes all shares of Common Stock
issued and outstanding at the relevant time plus (a) all shares of Common Stock
that may be issued upon exercise of any options, warrants and other rights of
any kind that are then exercisable, and (b) all shares of Common Stock that may
be issued upon conversion of (i) any convertible securities, including, without
limitation, Series A Stock and debt securities then outstanding that are by
their terms then convertible into or exchangeable for Common Stock or (ii) any
such convertible securities issuable upon exercise of outstanding options,
warrants or other rights that are then exercisable. For purposes of this
Agreement, a person shall be deemed to own the number of shares of Stock
issuable upon conversion, exchange or exercise of any such Securities.
1.2 "Offered Stock" means all Stock proposed to be Transferred
by the Stockholder in any proposed Transfer, or series of related Transfers,
that would result in the Stockholder transferring in the aggregate after the
date of this Agreement ten percent (10%) or more of the Stock held by it as of
the date of this Agreement.
1.3 "Transfer" and "Transferred" mean and include any sale,
assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift,
transfer by bequest, devise or
II-67
descent, or other transfer or disposition of any kind, including but not limited
to transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, except for:
(a) any bona fide pledge to a financial institution
in connection with borrowing money from such financial institution for financing
purposes if the pledgee executes a counterpart copy of this Agreement and
becomes bound thereby as if such pledgee were a Stockholder;
(b) any transfers of Stock by gift during a
Stockholder's lifetime or on a Stockholder's death by will or intestacy to such
Stockholder's "immediate family" (as defined below) or to a trust for the
benefit of Stockholder or Stockholder's immediate family, provided that each
transferee or other recipient executes a counterpart copy of this Agreement and
becomes bound thereby as a Stockholder. For purposes of this Agreement, the term
"immediate family" means Stockholder's spouse, lineal descendant or antecedent
(whether natural or adopted), brother or sister, or the spouse of any of the
foregoing;
(c) any transfer of Stock by a Stockholder made: (i)
pursuant to a statutory merger or statutory consolidation of the Company with or
into another corporation or corporations; (ii) pursuant to the winding up and
dissolution of the Company; or (iii) at, and pursuant to, the IPO; or
(d) any transfers of Stock to an Investor pursuant to
such Investor's exercise of such Investor's right of co-sale hereunder; or
(e) any transfer of Stock to the Company upon
exercise of the right of repurchase or right of first refusal set forth in any
founders' stock purchase agreement, option exercise agreement or other agreement
with the Company that was entered into by the Stockholder at the time he or she
acquired such Stock.
1.4 "IPO" means the first sale of the Company's Common Stock
to the general public pursuant to a registration statement under the Securities
Act of 1933, as amended, in which the gross proceeds to the Company (without
reduction for underwriter's discounts and commissions or expenses of the sale),
equals or exceeds $50,000,000.
1.5 "Change of Control" means any Transfer of Stock by the
Stockholder which would result in the Stockholder owning less than a majority of
the Company's then outstanding equity securities or less than a majority of the
voting or beneficial rights in the Company's then outstanding equity securities.
2. Notice of Proposed Transfer. Before the Stockholder may effect any
Transfer, or series of related Transfers, that would result in the Stockholder
Transferring in the aggregate after the date of this Agreement ten percent (10%)
or more of the Stock held by it as of the date of this Agreement, the
Stockholder (the "Selling Stockholder") must give at the same time to the
Company and the Investors a written notice signed by the Selling Stockholder
(the "Selling Stockholder's Notice") stating: (a) the Selling Stockholder's bona
fide intention to transfer such Offered Stock; (b) the number of shares of
Offered Stock proposed to be transferred to each
2
II-68
proposed purchaser or other transferee ("Proposed Transferee"); (c) the name,
address and relationship, if any, to the Selling Stockholder of each Proposed
Transferee; (d) the bona fide cash price or, in reasonable detail, other
consideration, per share for which the Selling Stockholder proposes to transfer
such Offered Stock to each Proposed Transferee (the "Offered Price") and the
proposed time of payment and other relevant terms of the proposed sale; (e)
whether the Transfer would result in a Change of Control; and (f) the other
material terms and conditions of the proposed transfer. Upon the request of the
Company or any Investor, the Stockholder will promptly furnish to the Company
and to the Investors such other information as may be reasonably requested to
establish that the offer and Proposed Transferee(s) are bona fide.
3. Right of Co-Sale.
3.1 Right of Co-Sale. Each Investor will have the right to
participate in the sale of any Offered Stock in the manner set forth herein (the
"Right of Co-Sale"). Pursuant to this Section 3, each Investor may transfer to
the Proposed Transferee(s) identified in the Selling Stockholder's Notice such
Investor's Pro Rata Share of the Offered Stock, by giving written notice to the
Selling Stockholder within ten (10) days after the date of the Selling
Stockholder's Notice; specifying the number of shares and type of Stock that
such Investor desires to transfer to each Proposed Transferee by exercising the
Right of Co-Sale. For purposes of this Section 3, an Investor's "Pro Rata Share"
will be defined as (i) in cases where the proposed Transfer would not result in
a Change of Control, a fraction, the numerator of which is the number of shares
of Stock then owned by such Investor, and the denominator of which is the number
of shares of Stock then owned by all Investors having a Right of Co-Sale
hereunder plus the number of shares of Stock held by the Selling Stockholder who
proposes the Transfer and (ii) in cases where the proposed Transfer would result
in a Change of Control, all of the shares of Stock then owned by the Investor in
priority to any shares of Stock held by any person other than Investors.
3.2 Consummation of Co-Sale. Each Investor, in exercising the
Right of Co-Sale, may effect such Investor's participation in such Transfer by
delivering to the Selling Stockholder at the closing of the transfer of Offered
Stock to such transferee (the "Closing") one or more certificates, properly
endorsed for Transfer, representing such Stock to be Transferred by such
Investor. At the Closing, such certificates or other instruments will be
transferred and delivered to the Proposed Transferee(s) set forth in the Selling
Stockholder's Notice in consummation of the transfer of the Offered Stock
pursuant to the terms and conditions specified in the Selling Stockholder's
Notice, and the Stockholder will remit, or will cause to be remitted, to
Investor at such Closing that portion of the proceeds of the Transfer to which
Investor is entitled by reason of such Investor's participation in such transfer
pursuant to the Right of Co-Sale.
3.3 Ownership of Common Stock. The Stockholder owns of record
and beneficially that number of Shares of Common Stock shown beside the
Stockholders name on Exhibit B attached hereto free and clear of all liens,
charges or other encumbrances.
4. Multiple Series, Classes or Types of Stock. If the Offered Stock
consists of more than one series or class or type of Stock, each Investor has
the right to transfer hereunder, such Investor's Pro Rata Share of each such
series, class or type of Stock; provided, however, that as to the Right of
Co-Sale, (a) if such Investor does not hold any of such series, class, or type
of
3
II-69
Stock, and the Proposed Transferee is not willing, at the Closing, to purchase
some other series, class or type of Stock from such Investor as part of such
Investor's Pro Rata Share or (b) if the Proposed Transferee is unwilling to
purchase any Stock from such Investor at the Closing (each such circumstance
being referred to herein as an "Incomplete Co-Sale"), then such Investor will
have the put right (the "Put Right") set forth in Section 5.2 hereof.
5. Refusal to Transfer; Put Right.
5.1 Refusal to Transfer. Any attempt by any Selling
Stockholder to transfer any Stock in violation of any provision of this
Agreement will be void. The Company will not (a) transfer on its books any Stock
that has been sold, gifted or otherwise transferred in violation of this
Agreement, or (b) treat as owner of such Stock, or accord the right to vote to
or pay dividends to any purchaser, donee or other transferee to whom such Stock
may have been so transferred.
5.2 Put Right. If a Selling Stockholder transfers any Stock in
contravention of an Investor's Right of Co-Sale under this Agreement (a
"Prohibited Transfer"), or if an Incomplete Co-Sale occurs and the provisions of
Section 4 hereof apply, the relevant Investor may require such Selling
Stockholder to purchase from such Investor, for cash or such other consideration
as the Selling Stockholder received in the Prohibited Transfer or Incomplete
Co-Sale, that number of shares of Stock (of the same class, series or type as
transferred in the Prohibited Transfer or Incomplete Co-Sale, if such Investor
then owns Stock of such class, series or type, and otherwise of Common Stock or
Series A Stock) having a purchase price equal to the aggregate purchase price
such Investor would have received in the closing of such Prohibited Transfer or
Incomplete Co-Sale if such Investor had exercised and been able to consummate
such Investor's Right of Co-Sale with respect thereto (the Investor's "Put
Right"). An Investor may exercise such Investor's Put Right by delivery of
written notice to the Selling Stockholder and the Company (a "Put Notice")
within thirty (30) days after such Investor becomes aware of the Prohibited
Transfer or Incomplete Co-Sale. The closing of such sale to the Selling
Stockholder under such Investor's Put Right will occur within seven (7) days
after the date of such Investor's Put Notice (or, at the option of an Investor
exercising rights under this Section 5.2 in the case of an Incomplete Co-Sale,
at the closing of the Incomplete Co-Sale).
6. Restrictive Legend and Stop-Transfer Orders.
6.1 Legend. Each Stockholder understands and agrees that the
Company will cause the legend set forth below, or a legend substantially
equivalent thereto, to be placed upon any certificate(s) or other documents or
instruments evidencing ownership of Stock by the Stockholder:
THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RIGHTS OF CO-SALE AS
SET FORTH IN A CO-SALE AGREEMENT (DATED
MARCH 3, 2000) ENTERED INTO BY THE HOLDER OF
THESE SHARES, THE COMPANY AND CERTAIN
STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY.
4
II-70
SUCH RIGHTS OF CO-SALE ARE BINDING ON
TRANSFEREES OF THESE SHARES.
6.2 Stop Transfer Instructions. The Stockholder agrees, to
ensure compliance with the restrictions referred to herein, that the Company may
issue appropriate "stop transfer" certificates or instructions and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its records.
7. Termination and Waiver.
7.1 Termination. The Investor's Right of Co-Sale will
terminate upon the earliest to occur of the following: (a) the closing of the
IPO; (b) the date on which this Agreement is terminated by a writing executed by
the Company and holders of at least 75% of the voting power of the Stock then
held by all Investors; or (c) the dissolution of the Company.
7.2 Waiver. The application of the Right of Co-Sale of an
Investor as to any proposed Transfer by a Selling Stockholder of any Stock may
be waived in advance of or after such transfer by the written agreement of the
Investors holding at least 75% of the voting power of the Stock then held by all
Investors, in which case such waiver will be binding as to all Investors. The
Company and the Investors will have the absolute right to exercise or refrain
from exercising any right or rights that each such party may have by reason of
this Agreement, including without limitation the right to purchase or
participate in the sale of Offered Stock. Neither the Company nor any Investor
will incur any liability to any other party hereto with respect to exercising or
refraining from exercising any such right or rights. Any waiver by a party of
its rights hereunder will be effective only if evidenced by a written instrument
executed by such party or its authorized representative.
8. Miscellaneous Provisions.
8.1 Notices. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement will be in writing and will
be effective and deemed given to such party under this Agreement on the earliest
of the following:
(a) the date of personal delivery;
(b) one (1) business day after transmission by
facsimile or telecopier, addressed to the other party at its facsimile number or
telecopier address specified herein (or hereafter noticed to the parties
hereto), with confirmation of transmission;
(c) one (1) business day after deposit with a return
receipt express courier for United States deliveries, or three (3) business days
after such deposit for deliveries outside of the United States; or
(d) three (3) business days after deposit in the
United States mail by registered or certified mail (return receipt requested)
for United States deliveries.
All notices not delivered personally or by facsimile will be sent with postage
and/or other charges prepaid and properly addressed to the party to be notified
at the address set forth below
5
II-71
such party's signature on this Agreement or on an Exhibit hereto, or at such
other address as such other party may designate by ten (10) days advance written
notice to the other parties hereto. All notices for delivery outside the United
States will be sent by facsimile or by express courier. Any notice given
hereunder to more than one person will be deemed to have been given, for
purposes of counting time periods hereunder, on the date effectively given to
the last party required to be given such notice. Notices to the Company will be
marked "Attention: President."
8.2 Binding on Successors and Assigns; Inclusion Within
Certain Definitions. This Agreement, and the rights and obligations of the
parties hereunder, will inure to the benefit of, and be binding upon, their
respective successors, assigns, heirs, executors, administrators and legal
representatives and, any transferee of Stock. Any transferee of a Stockholder
(including by means of those transfers which are excepted form the definition of
"Transfer" in Section 1.3 hereof) shall be required to become a party hereto and
will be considered a Stockholder for purposes of this Agreement without the need
for any consent, approval or signature of any party hereto, other than those
transferees of a Stockholder in compliance with the provisions of Section 3
hereof.
8.3 Severability. If any provision of this Agreement is held
to be invalid, illegal or unenforceable in any respect, such provision will be
enforced to the maximum extent possible and such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, and this
Agreement will be construed as if such invalid, illegal or unenforceable
provision had (to the extent not enforceable) never been contained herein.
8.4 Amendment.
(a) This Agreement may be amended only by a written
agreement executed by the Company, the Stockholder and Investors holding at
least 75% of the Stock then held by all Investors. Any amendment effected in
accordance with this Section 8.4 will be binding upon the Company, the
Investors, the Stockholder and each of their respective successors and assigns.
(b) If an Investor sells or transfers some or all of
such Investor's Stock, then any transferee of such Investor shall be subject to
all rights and obligations under this Agreement as the Investor from whom such
Stock was acquired would have if such Investor owned the Stock so transferred.
8.5 Governing Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of California,
excluding that body of law pertaining to conflict of laws.
8.6 Obligation of Company; Binding Nature of Exercise. The
Company agrees to enforce the terms of this Agreement, and to use its best
efforts to inform each Investor of any breach hereof (to the extent the Company
has knowledge thereof) and to assist each Investor in the exercise of such
Investor's rights and performance of such Investor's obligations hereunder.
6
II-72
8.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered will be deemed an
original, and all such counterparts together will constitute one and the same
agreement.
8.8 Entire Agreement. This Agreement, including all Exhibits
hereto, each of which is incorporated herein by reference, constitutes the
entire agreement of the parties with respect to the specific subject matter
hereof and supersedes in their entirety all other agreements or understandings
between or among the parties hereto with respect to such specific subject
matter.
8.9 Calculation; Binding Effect of Company Notices. All
calculations of an Investor's Pro Rata Share will be made by the Company as of
the date of the Company's notice in which such Pro Rata Share appears. The Pro
Rata Share of an Investor as shown on any notice required hereunder to be
delivered by the Company will be binding upon the parties hereto absent fraud or
error.
8.10 Headings. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. Unless otherwise stated, all references herein to
Sections and Exhibits will refer to Sections of and Exhibits to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
II-73
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement as of the date first written above.
SORRENTO NETWORKS, INC.
By: Xxx Xxxxx, Ph.D.
-------------------------------------
Title: President
----------------------------------
Address: 0000 Xxxx Xxx Xxxx
Xxx Xxxxx, XX 00000
STOCKHOLDER:
MERET COMMUNICATIONS, INC.
By:
-------------------------------------
Xxxxxxxxxxx X. Xxx,
Chief Financial Offficer
Address: 0000 Xxxx Xxx Xxxx
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-74
INVESTORS:
TELCOM-SNI INVESTORS, L.L.C.
By:
-------------------------------------
Title:
----------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
SIX RIVERS GROUP LTD.
By:
-------------------------------------
Title:
----------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
SUMMIT CAPITAL MANAGEMENT
By: Xxxxx Xxxxxx
-------------------------------------
Title: President
----------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
XXXXXX CAPITAL PARTNERS
By:
-------------------------------------
Title:
----------------------------------
Address: 00000 Xxxxxxxx Xxxxx
Xx Xxxxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-75
XXXXXXXX, XXXXXXXX & CO., L.P.
By:
--------------------------------------
Title:
-----------------------------------
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
SORRENTO HOLDINGS, L.L.C.
By: Xxxxx Xxxxxxxxxx
--------------------------------------
Title:
-----------------------------------
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
XXXXXXXX, XXXXXXXX CAPITAL CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
-----------------------------------------
Xxxx Xxxxxxxxxxxxx
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Xxxxxxx X. Xxxxxxx
Address: 0000 Xx Xxxxx Xxxxxx Xxxxx
Xx Xxxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-76
VIRGO CAP, INC.
By:
--------------------------------------
Title:
-----------------------------------
Address: 0000 Xxx Xxxxxx Xxxxx, Xxxx 0000
Xxxxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-77
BELMARKEN HOLDING B.V.
By:
--------------------------------------
Title:
-----------------------------------
Address: Xxxx. Xxxxxxxxxxxx 000
0000 XX Xxxxxxxxx
X.X. Xxx 00000
0000 XX Xxxxxxxxx
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-78
GENERAL SIGNAL HOLDINGS COMPANY
By:
--------------------------------------
Title:
-----------------------------------
Address: 000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-79
ASM INVESTMENTS, L.L.C.
By:
--------------------------------------
Title:
-----------------------------------
Address: 0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
II-80
EXHIBITS
Exhibit A: List of Investors
Exhibit B: List of Stockholders
II-81
EXHIBIT A
LIST OF INVESTORS
NAME NUMBER OF SHARES
--------------------------------------------------------------- ----------------
Telcom-SNI Investors, L.L.C. 2,697,248
Belmarken Holding BV 3,027,523
Xxxxxxxx, Xxxxxxxx & Co., L.P. 275,230
Xxxxxxxx, Xxxxxxxx Capital Corporation 357,799
Sorrento Holdings, L.L.C. 1,192,661
Summit Capital Management 91,744
Virgo Cap, Inc. 91,744
Xxxxxx Capital Partners 183,486
Six Rivers Group Ltd. 183,486
Xxxx Xxxxxxxxxxxxx 45,872
Xxxxxxx X. Xxxxxxx 18,349
General Signal Holdings Company 550,459
ASM Investments, L.L.C. 238,532
Exhibit A-1
II-82
EXHIBIT B
LIST OF STOCKHOLDERS
NAME NUMBER OF SHARES
---------------------------------------------------------------- ----------------
Meret Communications, Inc. 55,000,000
0000 Xxxx Xxx Xxxx
Xxx Xxxxx, XX 00000
Exhibit B-1
II-83
