CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (this "Agreement") is made this 23rd day of
November, 1999, 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 XXXXXX.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 132,941 shares of Series A Convertible Preferred Stock of the Company.
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
collectively of 855,000 shares of the outstanding Common Stock 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 made 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 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 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 all or any part of 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, and the denominator of which
is the combined number of shares of Common Stock of the Company at the time
owned by the selling Principal Stockholder (including shares transferred to
Permitted Transferees as defined below) and the Investor. 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 Stock held by the Investor is at
the time convertible.
(b) The Investor may participate in the sale by delivering to
the Principal Stockholder 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 Stock which is
at such time convertible into the number of shares of Common Stock which 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 participating 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.
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.
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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.
(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
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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); or
(b) the five-year anniversary of the date of this Agreement.
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.
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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 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.
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.
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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 PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Co-Sale Agreement on
the day and year indicated above.
THE COMPANY:
XXXXXX.XXX, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President
Address:
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
THE PRINCIPAL STOCKHOLDERS:
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxx
Address:
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
/s/ Xxxxxx Xxxx
-----------------------
Xxxxxx Xxxx
Address:
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
(Signatures continue on following page)
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/s/ Winston Xxxxx Xxxxx
---------------------------
Winston Xxxxx Xxxxx
Address:
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By:/s/ Xxxxxx X. Xxxxx
------------------------
Name: Xxxxxx X. Xxxxx
Title: President
Address:
0 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
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SCHEDULE A
INVESTOR
Name and Address Series A Shares
---------------- ---------------
Net Value Holdings, Inc. 132,941
0 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
TOTAL: 132,941
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PRINCIPAL STOCKHOLDERS
Name and Address Common Shares
---------------- -------------
Xxxxxx X. Xxxxxxxxx 285,000
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx Xxxx 285,000
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Winston Xxxxx Xxxxx 285,000
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
TOTAL: 855,000
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