EXHIBIT 4.3
RIGHT OF FIRST REFUSAL
AND
CO-SALE AGREEMENT
This Right of First Refusal and Co-Sale Agreement ("Agreement") dated
January 30, 1996 is by and among Xxxxxx Xxxx and Xxxx Xxxxxx (including any
permitted transferee of Xxxxxx Xxxx or Xxxx Xxxxxx, the "Founders"), Xxxx,
Xxxxxx & Associates, Inc., a California corporation (the "Company"), and the
undersigned holders of Series A Preferred Stock and Common Stock Warrants (the
"Investors").
WHEREAS, the Company and the Investors are parties to that certain
Series A Preferred Stock and Warrant Purchase Agreement of even date herewith
("Series A Agreement") pursuant to which the Investors are purchasing shares of
the Company's Series A Preferred Stock and Warrants exercisable for shares of
the Company's Common Stock. Capitalized terms not defined herein have the
meaning set forth in the Series A Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. Definitions.
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(a) "Stock" shall mean shares of the Company's capital stock now
owned or subsequently acquired by the Founders or Investors.
(b) "Preferred Stock" shall mean the Company's outstanding Series A
Preferred Stock.
(c) "Common Stock" shall mean (i) the Company's Common Stock, (ii)
shares of Common Stock issued or issuable upon conversion of the Company's
outstanding Series A Preferred Stock, (iii) shares of Common Stock issuable upon
exercise of outstanding options to the extent such options are then exercisable
and/or the stock issuable thereupon that would not be subject to repurchase by
the Company, and (iv) shares of Common Stock issuable upon conversion or
exercise of any outstanding convertible or exercisable securities, including,
but not limited to, the Series A Preferred Stock and Warrants.
(d) "Permitted Transfers" shall have the meaning provided in Section
5 hereof.
(e) "Fair Market Value" of a share of Common Stock on any relevant
date, prior to the initial public offering of the Common Stock, shall be
determined by the Company's Board of Directors (the "Board") after taking into
account such factors as it shall deem appropriate.
2. Right of First Refusal
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(a) Grant. The Company, Founders and Investors are each hereby
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granted a right of first refusal (the "First Refusal Right") exercisable in
connection with any proposed transfer of Stock by the Founders or Investors.
(b) Definition. For purposes of this Section 2 only, a "transfer"
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shall be deemed to occur upon any sale, assignment, pledge, encumbrance or other
disposition of Stock; provided, however, that such term transfer shall not
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include (i) any transfer to Founder's spouse made pursuant to Founder's will or
the laws of intestate succession following Founder's death, (ii) any transfer to
Founder's spouse upon the occurrence of the dissolution of Founder's marriage or
legal separation of Founder and Founder's spouse or (iii) any Permitted
Transfer.
(c) Notice of Intended Disposition. In the event any Founder or
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Investor desires to accept a bona fide third-party offer for the transfer of any
or all of his or her shares of Stock (the Stock subject to such offer to be
hereinafter referred to as the "Target Shares"), the transferring Founder or
Investor shall promptly (i) deliver to the Company, non-transferring Founder(s)
and Investor(s) (collectively, the "Rights Holders") written notice (the
"Disposition Notice") of the terms of the offer, including the purchase price,
and the identity of the third-party offeror, and (ii) provide satisfactory proof
that the disposition of the Target Shares to such third-party offeror would not
be in contravention of applicable federal and state securities laws or the lock-
up agreement (the "Lock-Up Agreement") between the Company, Founders and
Investors set forth in the Investors' Rights Agreement entered into by the
parties.
(d) Company's Exercise of the First Refusal Right. Prior to the
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exercise of any rights under this Section 2 by the other Rights Holders, the
Company shall, for a period of twenty-five (25) days following receipt of the
Disposition Notice, have the right to repurchase any or all of the Target Shares
subject to the Disposition Notice upon the same terms as those specified therein
or upon such other terms (not materially different from those specified in the
Disposition Notice) to which the transferring Founder or Investor consents.
Such right shall be exercisable by delivery of written notice (the "First
Exercise Notice") to the transferring Founder or Investor prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Company shall effect
the repurchase of such shares, including payment of the purchase price, not more
than five (5) business days after delivery of the First Exercise Notice, and at
such time the certificates representing the Target Shares shall be delivered to
the Company.
(e) Founders' and Investors' Exercise of the First Refusal Right. If
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the transferring Founder or Investor shall have not received a First Exercise
Notice for all of the Target Shares from the Company within twenty-five (25)
days of the Disposition Notice, then the transferring Founder or Investor shall
provide notice thereof to the other Rights Holders (the "Second Rights Notice")
specifying the number of shares not purchased pursuant to the First Exercise
Notice. The other Rights Holders shall, for a period of twenty-five (25) days
following receipt of the Second Rights Notice, have the right to repurchase any
or all of the Target Shares subject to the Second Rights Notice, in proportion
to their respective percentage ownership of
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Common Stock (excluding for the purposes of such calculation 800,000 shares of
Common Stock subject to pledge to the Company pursuant to the Pledge Agreements
entered into by the Company, the Founders and the Investors to the extent
800,000 shares continue to be subject to said Pledge Agreement), upon the same
terms as those specified in the Disposition Notice or upon such other terms (not
materially different from those specified in the Disposition Notice) to which
the transferring Founder or Investor consents. Such right shall be exercisable
by delivery of written notice (the "Second Exercise Notice") to the transferring
Founder or Investor prior to the expiration of the twenty-five (25)-day exercise
period. If, in the aggregate, First Refusal Rights are thereby exercised with
respect to all the Target Shares (including Target Shares, if any, subject to
the First Exercise Notice), then the Rights Holders shall effect the repurchase
of such shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Second Exercise Notice, and at such time the
certificates representing the Target Shares shall be delivered to the Rights
Holders.
(f) Purchase of Remaining Portion. If any non-transferring Founder or
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Investor fails to elect to fully exercise his/her/its First Refusal Right set
forth in subsection 2(e), then such non-exercising Rights Holder shall promptly
give notice ("Notice of Non-Participation") of such failure to the other Rights
Holders (such other Rights Holders who delivered a Second Exercise Notice, the
"Participants"). Such Notice of Non-Participation may be made by telephone if
confirmed in writing within two (2) days and shall specify the number of Target
Shares with respect to which such Rights Holder did not deliver a Second
Exercise Notice. Each Participant shall, for a period of ten (10) days
following receipt of such Notice of Non-Participation, have the right to
repurchase any or all of the Target Shares subject to the Notice of Non-
Participation, in proportion to their respective percentage ownership of Common
Stock (excluding for the purposes of such calculation 800,000 shares of Common
Stock subject to pledge to the Company to the extent 800,000 shares continue to
be subject to said Pledge Agreement), upon the same terms as those specified in
the Disposition Notice or upon such other terms (not materially different from
those specified in the Disposition Notice) to which the transferring Founder or
Investor consents. Such right shall be exercisable by delivery of written
notice (the "Third Exercise Notice") to the transferring Founder or Investor
prior to the expiration of the ten (10)-day exercise period. If, in the
aggregate, First Refusal Rights are thereby exercised with respect to all the
Target Shares (including Target Shares subject to the First Exercise Notice, if
any, and the Second Exercise Notice), then the Rights Holders shall effect the
repurchase of such shares, including payment of the purchase price, not more
than five (5) business days after delivery of the Third Exercise Notice, and at
such time the certificates representing the Target Shares shall be delivered to
the Rights Holders.
(g) Non-Exercise of the First Refusal Right. In the event any First
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Exercise Notice, Second Exercise Notice or Third Exercise Notice is not timely
given to the transferring Founder or Investor, the transferring Founder or
Investor shall have a period of thirty (30) days thereafter in which to sell or
otherwise dispose of the Target Shares subject to compliance with the Co-Sale
Rights granted in Section 4 below to the third-party offeror identified in the
Disposition Notice upon terms (including the purchase price) no more favorable
to such third-party offeror than those specified in the Disposition Notice;
provided, however, that any such sale or disposition must not be effected in
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contravention of applicable federal and state securities laws or the Lock-Up
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Agreement. The third-party offeror shall acquire the Target Shares free and
clear of the First Refusal Right, but the acquired shares shall remain subject
to the provisions of the Lock-Up Agreement. In the event Founder or Investor
does not effect such sale or disposition of the Target Shares within the
specified thirty (30)-day period, the First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Founder or
Investor until such right lapses.
(h) Partial Exercise of the First Refusal Right. If the Rights
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Holders, in the aggregate, timely exercise their First Refusal Rights with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, the transferring Founder or Investor shall have the option,
exercisable by written notice to the Rights Holders (within five (5) days of the
earlier of (i) the expiration of the applicable period for delivery of the
Second Exercise Notice if no Second Exercise Notice is delivered within such
period or (ii) receipt of the Third Exercise Notice), to effect the sale of the
Target Shares pursuant to either of the following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of subsection 2(g), as if the Rights Holders
did not exercise the First Refusal Right; or
(ii) sale to the Rights Holders of the portion of the Target
Shares which the Rights Holders have elected to purchase, such sale to be
effected in substantial conformity with the provisions of subsections 2(d),
2(e) and 2(f). The First Refusal Right shall continue to be applicable to any
subsequent disposition of the remaining Target Shares until such right lapses.
Failure of Founder or Investor to deliver timely notification to the
Rights Holders shall be deemed to be an election by Founder or Investor to sell
the Target Shares pursuant to alternative (i) above.
(i) Non-Cash Payment. Should the purchase price specified in the
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Disposition Notice be payable in property other than cash or evidences of
indebtedness, the Rights Holders shall have the right to pay the purchase price
in the form of cash equal in amount to the Fair Market Value of such property.
If the transferring Founder or Investor on the one hand, and the Rights Holders
on the other hand cannot agree on such Fair Market Value within ten (10) days
after the Rights Holders' receipt of the Disposition Notice, the valuation shall
be made by an appraiser of recognized standing selected by the transferring
Founder or Investor on the one hand, and by the Rights Holders on the other
hand, or, if they cannot agree on an appraiser within twenty (20) days after the
Rights Holders' receipt of the Disposition Notice, the transferring Founder or
Investor on the one hand, and the Rights Holders on the other hand, shall each
select an appraiser of recognized standing and the two (2) appraisers shall
designate a third (3rd) appraiser of recognized standing, whose appraisal shall
be determinative of such value. The cost of such appraisal shall be shared
equally by the transferring Founder or Investor on the one hand, and the Rights
Holders on the other hand.
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(j) Recapitalization/Reorganization. Any new, substituted or
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additional securities or other property which is by reason of any
Recapitalization distributed with respect to the Stock shall be immediately
subject to the First Refusal Right, but only to the extent the Stock is at the
time covered by such right. In the event of a Reorganization, the First Refusal
Right shall remain in full force and effect and shall apply to the new capital
stock or other property received in exchange for the Stock in consummation of
the Reorganization, but only to the extent the Stock is at the time covered by
such right.
"Recapitalization" shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Company's outstanding Stock without the Company's receipt of
consideration. "Reorganization" shall mean any merger or consolidation other
than one described in Section 8(d).
3. Purchase Right of Spouse's Interest on Death or Divorce of
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Founder.
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(a) Transfer to Voting Trust. Immediately following the Closing,
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and, in the case of Stock hereafter acquired upon acquisition, each Founder will
transfer all shares of his or her Stock (whether now owned or hereafter
acquired) to the Voting Trust and such Stock will remain subject to the
obligations set forth in this Agreement.
(b) Notice of Divorce or Death. Founder, Founder's spouse or the
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executor of Founder's estate, as applicable, shall promptly provide the Rights
Holders with written notice (the "Dissolution Notice") of (i) the entry of any
judicial decree or order resolving the property rights of Founder and Founder's
spouse in connection with their marital dissolution or legal separation, (ii)
the execution of any contract or agreement relating to the distribution or
division of such property rights, or (iii) the determination of any transfer,
conveyance or other distribution of Founder's property upon Founder's death.
The Dissolution Notice shall be accompanied, as applicable, by (A) a copy of the
actual decree or order of dissolution or contract or agreement between Founder
and Founder's spouse that provides for the award to the spouse of one or more
shares of Stock in settlement of any community property or other marital
property rights such spouse may have in such shares, or (B) the operative
document(s) providing for a determination of Founder's property upon Founder's
death.
(c) Spouse's Election upon Death or Divorce. At the time the
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Dissolution Notice is delivered in accordance with Section 3(b), Founder's
spouse may elect to subject to the Voting Trust the Stock that would otherwise
be transferred or conveyed to Founder's spouse or other beneficiary by will, the
laws of intestate succession, settlement, operation of any community property or
marital property rights, or otherwise. In addition, and to the extent that, at
any time the Stock subject to the Dissolution Notice ("Option Stock") is
transferred out of the Voting Trust, or if such Voting Trust is terminated at
any time, then such event shall be deemed to be a "transfer" under Section 2 and
the Option Stock shall be subject to the First Refusal Right set forth in
Section 2 hereof; provided, however, that for purposes of the application of
such Section 2 the following shall apply: (i) with respect to the Option Stock
only, the purchase price under the First Refusal Right shall be the Fair Market
Value of the Option Stock, (ii) Founder's spouse, other beneficiary or the
executor of Founder's estate, as the case may be, shall be deemed to be the
transferring
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Founder thereunder, (iii) the Dissolution Notice under this Section 3 shall be
treated as the Disposition Notice under Section 2, (iv) the term "Rights
Holders" shall exclude the Founder who has died or who has divorced or legally
separated from his spouse. With respect to any exercise of the First Refusal
Right for Option Stock, if Founder's spouse, other beneficiary or the executor
of Founder's estate, as the case may be, does not agree with the Fair Market
Value specified for the shares of Option Stock, then the spouse shall promptly
notify the Rights Holders in writing of such disagreement and the fair market
value of such shares of Option Stock shall thereupon be determined by an
appraiser of recognized standing selected by the Rights Holders on the one hand,
and by the spouse, other beneficiary or the executor of Founder's estate, as the
case may be, on the other hand. If they cannot agree on an appraiser within
twenty (20) days after the date of the Dissolution Notice, the Rights Holders on
the one hand, and the spouse on the other hand, shall each select an appraiser
of recognized standing, and the two (2) appraisers shall designate a third
(3rd) appraiser of recognized standing and the average of the three appraisals
shall be determinative of such value. The cost of the appraisal shall be shared
equally by the Rights Holders on the one hand, and the spouse on the other hand.
The closing shall then be held on the fifth (5th) business day following the
completion of such appraisal; provided, however, that if the appraised value is
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more than twenty-five percent (25%) greater than the Fair Market Value specified
for the shares of Option Stock in the Dissolution Agreement, the Rights Holders
shall have the right, exercisable prior to the expiration of such five (5)
business-day period, to rescind the exercise of the First Refusal Right and
thereby revoke their election to purchase the shares of Option Stock. In the
event the Rights Holders so revoke their election, the Rights Holders shall bear
the entire cost of the appraisal. If the appraisal value is more than twenty-
five percent (25%) less than the appraisal of the appraiser selected by the
spouse, the spouse shall have the right, exercisable prior to the expiration of
such five (5) business-day period, in which case the Option Stock shall remain
in the Voting Trust Agreement and will be subject to the First Refusal Rights if
it is thereafter removed from such Voting Trust Agreement.
4. Co-Sale Rights.
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(a) Following compliance with or waiver of right under the First
Refusal Right granted in Section 2 below, if either Founder, or any Investor,
proposes to sell or transfer any shares of Stock in one or more related
transactions that will result in the transfer of Stock by such Founder or
Investor, then such Founder or Investor shall promptly give written notice (the
"Notice") to the Company and Founders and Investors at least twenty (20) days
prior to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without limitation,
the number of shares of Stock to be sold or transferred, the nature of such sale
or transfer, the consideration to be paid and other material terms, and the name
and address of each prospective purchaser or transferee.
(b) Each Founder and each Investor shall have the right (the "Co-Sale
Right"), exercisable upon written notice to such Founder or Investor within
thirty (30) days after receipt of the Notice, to participate to the extent
provided below in such sale of Stock on the same terms and conditions. To the
extent one or more of the Founders or Investors exercises such right of
participation in accordance with the terms and conditions set forth below, the
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number of shares of Stock that the initiating Founder or Investor may sell in
the transaction shall be correspondingly reduced.
(c) In connection with any such proposed sale of Stock (i) each
Investor may sell all or any part of that number of shares of Stock equal to the
product obtained by multiplying (x) one-half of the aggregate number of shares
of Stock covered by the Notice by (y) a fraction the numerator of which is the
number of shares of Common Stock owned by the Investor at the time of the sale
or transfer and the denominator of which is the total number of shares of Common
Stock owned by the Investors at the time of the sale or transfer and (ii) each
Founder may sell all or any part of that number of shares of Stock equal to the
product obtained by multiplying (x) one-half of the aggregate number of shares
of Stock covered by the Notice by (y) a fraction the numerator of which is the
number of shares of Common Stock owned by the Founder at the time of the sale or
transfer and the denominator of which is the total number of shares of Common
Stock owned by the Founders at the time of the sale or transfer.
(d) If any Investor or Founder fails to elect to fully participate in
such sale pursuant to this Section 4, then such Founder or Investor shall
promptly give notice of such failure to the other Investors and Founders (those
who did so elect the "Participants"). Such notice may be made by telephone if
confirmed in writing within two (2) days. The Participants shall have five (5)
days from the date such notice was given to agree to sell their pro rata share
of the unsold portion. For purposes of this paragraph, pro rata share shall mean
(i) each Investor Participant may sell all or any part of that number of shares
of such portion equal to the product obtained by multiplying (x) one-half of the
aggregate number of shares of such portion by (y) a fraction the numerator of
which is the number of shares of Common Stock owned by the Investor Participant
at the time of the sale or transfer and the denominator of which is the total
number of shares of Common Stock owned by the Investor Participants at the time
of the sale or transfer and (ii) each Founder Participant may sell all or any
part of that number of shares of such portion equal to the product obtained by
multiplying (x) one-half of the aggregate number of shares of such portion by
(y) a fraction the numerator of which is the number of shares of Common Stock
owned by the Founder Participant at the time of the sale or transfer and the
denominator of which is the total number of shares of Common Stock owned by the
Founder Participants at the time of the sale or transfer.
(e) Each Participant shall effect its participation in the sale by
promptly delivering to the initiating Founder or Investor for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent:
(i) the type and number of shares of Common Stock which such
Participant elects to sell; or
(ii) that number of shares of Series A Preferred Stock or Warrants
to purchase Common Stock which is at such time convertible into or exercisable
for, into the number of shares of Common Stock which such Participant elects to
sell; provided, however, that if the prospective purchaser objects to the
delivery of Series A Preferred Stock or Warrants to purchase Common Stock, in
lieu of Common Stock, such Participant shall convert such
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Preferred Stock or Warrants into Common Stock and deliver Common Stock as
provided in subsection 4(e)(i) above. The Company agrees to make any such
conversion or exercise concurrent with the actual transfer of such shares to the
purchaser.
(f) The stock certificate or certificates that the Participant
delivers to the initiating Founder or Investor pursuant to subsection 4(e) shall
be transferred to the prospective purchaser in consummation of the sale of the
Stock pursuant to the terms and conditions specified in the Notice, and the
initiating Founder or Investor shall concurrently therewith remit to such
Participant that portion of the sale proceeds to which such Participant is
entitled by reason of its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibit such assignment or otherwise
refuses to purchase shares or other securities from a Participant exercising its
Co-Sale Right hereunder, the initiating Founder or Investor shall not sell to
such prospective purchaser or purchasers any Stock unless and until,
simultaneously with such sale, the initiating Founder or Investor shall purchase
such shares or other securities from such Participant for the same consideration
and on the same terms and conditions as the proposed transfer described in the
Notice.
(g) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Stock made by the Founders or
Investors shall not adversely affect their rights to participate in subsequent
sales of Stock subject to this Section 4.
(h) If none of the Founders or Investors elect to participate in the
sale of the Stock subject to the Notice, the initiating Founder or Investor may,
not later than sixty (60) days following delivery to the Company and each of the
Founders and Investors of the Notice, conclude a transfer of not less than all
of the Stock covered by the Notice on terms and conditions not more favorable to
the transferor than those described in the Notice. Any proposed transfer on
terms and conditions more favorable than those described in the Notice, as well
as any subsequent proposed transfer of any of the Stock by the initiating
Founder or Investor, shall again be subject to the Co-Sale Right of the Founders
and Investors and shall require compliance by the initiating Founder and
Investor with the procedures described in this Section 4.
5. Permitted Transfers.
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(a) Notwithstanding the foregoing provisions, the Right of First
Refusal and the Co-Sale Right of the Investors or the Founders shall not apply
to (i) any pledge of up to 2,000,000 shares of Stock to the Company under the
terms of the Pledge Agreement, or any subsequent transfer of shares of such
Stock to the Company or the Founders made pursuant to the terms of the Pledge
Agreement (provided, however, that any such Stock subsequently transferred to
the Founders shall thereafter be subject to the terms of this Agreement), (ii)
any gratuitous transfer of up to 50,000 shares of Stock by each Founder to the
ancestors, descendants or spouse or to trusts for the benefit of such persons or
Founder (either of the foregoing, a "Permitted Transfer"), or (iii) any
distribution by a partnership to its partners or by and between the partnerships
that compose the Sprout Group; provided that with respect to transfers pursuant
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to subsection 5(a)(ii), the transferring Founder shall inform the Investors of
such pledge, transfer or gift prior to effecting it and the pledgee, transferee
or donee shall furnish the Investors with a
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written agreement to be bound by and comply with all provisions of this
Agreement. Such transferred Stock shall remain "Stock" hereunder, and such
pledgee, transferee or donee shall be treated as a "Founder" for purposes of
this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Stock (i) pursuant to an IPO as defined in Section
8(d) hereof, or (ii) to the Company.
6. Prohibited Transfers.
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(a) In the event a Founder should sell any Stock in contravention of
the Co-Sale Right under this Agreement (a "Prohibited Transfer"), the Founders
and Investors, in addition to such other remedies as may be available at law, in
equity or hereunder, shall have the put option provided below, and the
transferring Founder or Investor shall be bound by the applicable provisions of
such option.
(b) In the event of a Prohibited Transfer, each non-transferring
Founder or Investor shall have the right to sell to the transferring Founder or
Investor the type and number of shares of Stock equal to the number of shares
each Founder or Investor would have been entitled to transfer to the purchaser
under subsection 4(c) hereof had the Prohibited Transfer been effected pursuant
to and in compliance with the terms hereof. Such sale shall be made on the
following terms and conditions:
(i) The price per share at which the shares are to be sold to the
transferring Founder or Investor shall be equal to the price per share paid by
the purchaser to the transferring Founder or Investor in the Prohibited
Transfer. The transferring Founder or Investor shall also reimburse each non-
transferring Founder or Investor for any and all fees and expense, including
legal fees and expenses, incurred pursuant to the exercise or the attempted
exercise of the Co-Sale Right under Section 4.
(ii) Within ninety (90) days after the later of the dates on which
the non-transferring Founder or Investor (A) received notice of the Prohibited
Transfer or (B) otherwise become aware of the Prohibited Transfer, each non-
transferring Founder or Investor shall, if exercising the option created hereby,
deliver to the transferring Founder or Investor the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) The transferring Founder or Investor shall, upon receipt of
the certificate or certificates for the shares to be sold by a non-transferring
Founder or Investor, pursuant to this subsection 6(b), pay the aggregate
purchase price therefor and the amount of reimbursable fees and expenses, as
specified in subsection 6(b)(i), in cash or by other means acceptable to the
Investor.
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(iv) Notwithstanding the foregoing, any attempt by a transferring
Founder or Investor to transfer Stock in violation of Section 2 and Section 4
hereof shall be void and the Company agrees it will not effect such a transfer.
7. Legend.
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(a) Each certificate representing shares of Stock now or hereafter
owned by the Investors or the Founders shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE COMPANY
AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE COMPANY."
(b) Each Founder and Investor agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in subsection 7(a) above to enforce
the provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
8. Miscellaneous.
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(a) Governing Law. This Agreement shall be governed by and construed
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under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
(b) Amendment. Any provision may be amended and the observance thereof
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may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to the Investors, by persons holding more
than fifty percent (50%) in interest of the Common Stock held by the Investors
and their assignees, and (iii) as to each Founder, such Founder. Any amendment
or waiver effected in accordance with clauses (i), (ii) and (iii) of this
paragraph shall be binding upon each Investor, its successors and assigns, the
Company and the Founder in question.
(c) Assignment of Rights. This Agreement and the rights and
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obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
The rights of the Investors hereunder are only assignable (i) by each of such
Investors to any other Investor or (ii) to an assignee or transferee
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who acquires all of the Series A Preferred Stock purchased by a Investor or at
least 700,000 shares of Series A Preferred Stock.
(d) Term. This Agreement shall terminate upon the earlier of (i) the
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closing of a firm commitment underwritten public offering ("IPO") pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $12.50 (as adjusted for stock splits, reverse stock splits and
the like effected after the date of this Agreement) and an aggregate offering
price of not less than $10,000,000, and (ii) the closing of the Company's sale
of all or substantially all of its assets or the acquisition of the Company by
another entity by means of merger or consolidation resulting in the exchange of
the outstanding shares of the Company's capital stock for securities or
consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary (other than any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding company structure).
(e) Ownership. Each Founder represents and warrants that he or she is
---------
the sole legal and beneficial Founder of the shares of stock subject to this
Agreement and that no other person has any interest (other than a community
property interest) in such shares.
(f) Notices. Except as otherwise expressly provided, all notices
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required or permitted hereunder shall be in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or five (5)
days after deposit in the United States mail, by registered or certified mail,
postage prepaid and properly addressed to the party to be notified as set forth
on the signature page hereof or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties hereto.
(g) 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.
(h) 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.
(i) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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(ii) Stock Split. All references to numbers of shares in this
-----------
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
(i) Aggregation of Stock. All shares of Common Stock 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.
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IN WITNESS WHEREOF, the parties have executed this Right of First Refusal
and Co-Sale Agreement as of the date first above written.
XXXX, XXXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, President
Address: 0000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
/s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
/s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
DLJ CAPITAL CORPORATION
By /s/ Xxxx X. Xxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxx
Attorney in Fact
SPROUT GROWTH II, L.P.
By /s/ Xxxx X. Xxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxx
Attorney in Fact
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SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation,
General Partner
By /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxx
Attorney in Fact
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CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the Company held of record by either or both of us,
including my community interest in such shares, if any, a First Refusal Right
and Co-Sale Right (as described in the Agreement) must be granted to the
Investors by the transfer. I hereby agree that those shares and my interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of, or violate, the Agreement.
/s/ Xxxxxxxx Xxxxxx
-----------------------------------------
(Signature)
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CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the Company held of record by either or both of us,
including my community interest in such shares, if any, a First Refusal Right
and Co-Sale Right (as described in the Agreement) must be granted to the
Investors by the transfer. I hereby agree that those shares and my interest in
them, if any, are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of, or violate, the Agreement.
/s/ Xxxxxx Xxxx
-----------------------------------------
(Signature)
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