STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement"), is made as of
August 18, 2000, by and among XxxxXx.xxx, Inc., a Delaware corporation (the
"Company"), Net Value Holdings, Inc. (the "Investor"), Xxxxxx Xxxxxxxxx and
Xxxxxxx Xxxxx Xxxxx, each owning greater than five percent (5%) of the issued
and outstanding capital stock of the Company as of the date hereof
(collectively, the "Founders") and such other parties as may from time to time
and with the consent of the Company become parties hereto (the Founders and the
other parties who become parties hereto being collectively referred to as the
"Principal Stockholders"). This Agreement shall become effective as of the
Closing (as defined therein) of that certain Preferred Stock Purchase Agreement
dated as of even date herewith (the "Purchase Agreement") by and between the
Company and the Investor.
RECITALS
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the securities of the
Company which the Principal Stockholders currently own or may hereafter acquire
(collectively, the "Securities") and to provide for certain rights and
obligations in respect thereto as hereinafter provided and the parties also wish
to agree upon the composition of the Board of Directors.
WHEREAS, the execution and delivery of this Agreement by the
Company, the Investor and the Principal Stockholders is a condition to the
closing of the issuance, sale and purchase of the Series B Preferred Stock
pursuant to the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Restrictions on Transfers.
1.1 General Prohibition on Transfers; Permitted Transfers.
(a) Except as otherwise permitted hereby, no
Principal Stockholder shall directly or indirectly sell, assign, pledge,
encumber or otherwise transfer to any person or entity (a "Transferee") any
Securities unless the Principal Stockholder has complied with all of the terms
of this Agreement. Any purported sale, assignment, pledge, encumbrance or other
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transfer in violation of any provision of this Agreement shall be void and
ineffective and shall not operate to transfer any interest or title to the
purported Transferee.
(b) The restrictions contained in this Agreement with
respect to transfers by Principal Stockholders of Securities shall not apply (i)
to repurchases of Securities of a Principal Stockholder pursuant to any stock
restriction agreement between the Principal Stockholder and the Company which
provides the Company with the right to repurchase such Securities; (ii) to any
transfer of Securities by a Principal Stockholder to any such Principal
Stockholder's spouse, parents, siblings (by blood or adoption) or lineal
descendants (by blood or adoption); (iii) to any transfer of Securities by a
Principal Stockholder to a trust, partnership, corporation, limited liability
company or other similar entity solely for the benefit of such Principal
Stockholder or such Principal Stockholder's spouse, parents, siblings or lineal
descendants; (iv) to any transfer of Securities by a Principal Stockholder, or
upon a Principal Stockholder's death to the executors, administrators,
testamentary trustees, legatees or beneficiaries of such Principal Stockholder;
provided, that in each of clauses (ii) through (iv), each transferee, donee,
heir or distributee shall, as a condition precedent to such transfer, become a
party to this Agreement by executing an Adoption Agreement substantially in the
form attached as Annex A and shall have all of the rights and obligations of a
Principal Stockholder hereunder.
1.2 Right of First Refusal.
(a) Except as otherwise permitted in Section 1.1(b)
of this Agreement, transfers of the Securities by Principal Stockholders shall
not be permitted unless the Principal Stockholder has complied with this Section
1.2. No Principal Stockholder shall transfer Securities subject to this Section
other than pursuant to a bona fide offer. Any Principal Stockholder who intends
to transfer any of such Principal Stockholder's Securities (the "Proposed
Seller") shall give written notice (the "Seller's Notice") to the Investor
stating that the Proposed Seller intends to make such a transfer, identifying
the party who made the bona fide offer (the "Proposed Transferee"), specifying
the number of Securities proposed to be transferred pursuant to the bona fide
offer (the "First Refusal Shares"), and specifying the per share purchase price
which the Proposed Transferee has offered to pay for the First Refusal Shares
(the "Sale Price").
(b) (i) Upon delivery of the Seller's Notice, the
Investor shall have the irrevocable and exclusive option to purchase, upon
delivery to the Proposed Seller within 20 days of delivery of the Seller's
Notice, all or any portion of the First Refusal Shares. The Investor shall
deliver a notice (the "Investor Notice") to the Proposed Seller and the Company
of its election to purchase such First Refusal Shares within such 20 day period,
together with payment to the Proposed Seller of the Sale Price therefor.
(c) If any First Refusal Shares are not elected to be
purchased pursuant to this Section 1.2, then, subject to Section 1.3 hereof, the
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Proposed Seller shall be free, for a period of 60 days from the date of the
Seller's Notice, to sell the remaining First Refusal Shares to the Proposed
Transferee, at a price equal to or greater than the Sale Price and upon terms no
more favorable to the Proposed Transferee than those specified in the Notice.
Any transfer of the remaining First Refusal Shares by the Proposed Seller after
the end of such 60 day period or any change in the terms of the sale as set
forth in the Notice which are more favorable to the Proposed Transferee shall
give rise anew to the rights provided in the preceding paragraphs.
(d) If the Investor elects to purchase any or all of
the First Refusal Shares mentioned in the Seller's Notice, then the Investor
shall have the right to purchase the First Refusal Shares for cash consideration
whether or not part or all of the consideration specified in the Seller's Notice
is other than cash. If part or all of the consideration to be paid for the First
Refusal Shares as stated in the Seller's Notice is other than cash, the price
stated in such Seller's Notice shall be deemed to be the sum of the cash
consideration, if any, specified in such Seller's Notice, plus the fair market
value of the non-cash consideration. The fair market value of the non-cash
consideration shall be determined by the Board of Directors of the Company, and
its judgment as to the fair market value of such non-cash consideration shall be
binding upon the Proposed Seller and the Investor.
1.3 Right of Co-Sale. In the event that all of the
First Refusal Shares are not purchased by the Investor as provided in Section
1.2 hereof, then the Proposed Seller shall deliver a notice (the "Co-Sale
Notice") to the Investor informing the Investor of the number of First Refusal
Shares it, he or she intends to sell to the Proposed Transferee pursuant to
Section 1.2(c) (the "Co-Sale Shares"). The Investor shall have the right,
exercisable upon written notice to the Proposed Seller within five days after
the giving of such notice by the Proposed Seller, to participate in the Proposed
Seller's sale of Co-Sale Shares at the Sale Price. The delivery of the notice of
election under this paragraph shall constitute an irrevocable commitment to sell
such shares contingent only upon the closing of the proposed sale on the terms
communicated in the notice. To the extent the Investor exercises such right of
participation in accordance with the terms and conditions set forth below, the
number of Securities which the Proposed Seller may sell to the Proposed
Transferee shall be correspondingly reduced. The right of participation of the
Investor shall be subject to the following terms and conditions:
(a) The Investor may elect to sell all or any part of
that number of shares of the Company held by the Investor equal to the product
obtained by multiplying (i) the aggregate number of Co-Sale Shares by (ii) a
fraction, the numerator of which is the number of shares of Common Stock of the
Company (assuming full conversion and exercise of all convertible and
exercisable securities into Common Stock) owned by the Investor at the time of
the Co-Sale Notice and the denominator of which is the combined number of shares
of Common Stock of the Company (assuming full conversion and exercise of
convertible and exercisable securities into Common Stock) owned by the Proposed
Seller and the Investor at the time of the Co-Sale Notice (the "Co-Sale Share").
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(b) The Investor shall (i) effectuate the sale by
promptly delivering to the Proposed Seller for transfer to the Proposed
Transferee one or more certificates, properly endorsed for transfer, which
represent the number of shares of Common Stock which the Investor elects to sell
and (ii) provide a written representation and warranty to the Proposed
Transferee that the shares of capital stock represented by such certificates are
free and clear of all pledges, liens and other encumbrances and that the person
transferring on behalf of the Investor has requisite power to do so.
(c) The stock certificates which the Investor
delivers to the Proposed Seller shall be transferred by the Proposed Seller to
the Proposed Transferee in consummation of the sale pursuant to the terms and
conditions specified in the Seller's Notice, and the Proposed Seller shall
instruct the Proposed Transferee to remit directly to the Investor that portion
of the Sale Price to which the Investor is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase securities
from the Investor, the Proposed Seller shall not sell to such prospective
purchaser or purchasers any Securities unless and until, simultaneously with
such sale, the Proposed Seller shall purchase such securities from the Investor
for the same consideration and on the same terms and conditions as the proposed
transfer described in the Seller's Notice.
(d) The parties acknowledge that the provisions of
this Section 1.3 may prevent a Proposed Seller from selling the amount of
securities it originally intended to sell.
1.4 Additional Transactions. The exercise or non-exercise
of the rights of the Investor hereunder to participate in one or more sales made
by a Proposed Seller shall not adversely affect its rights to participate in
subsequent sales by such Proposed Seller or other Principal Stockholders.
2. Legended Certificates
2.1 Principal Stockholders' Stock. Each certificate
representing shares of the Securities now or hereafter owned by the Investor or
the Principal Stockholders or their permitted Transferees pursuant to clauses
(ii) through (iv) of Section 1.1(b), shall be endorsed with the following
legend:
"THE SHARES REPRESENTED HEREBY MAY NOT BE VOTED,
SOLD, ASSIGNED, PLEDGED, ENCUMBERED, OR OTHERWISE TRANSFERRED
EXCEPT IN CONFORMITY WITH THE TERMS OF A STOCKHOLDERS'
AGREEMENT AMONG THE HOLDER (OR THE PREDECESSOR IN INTEREST TO
THE SHARES), THE COMPANY AND CERTAIN OTHER STOCKHOLDERS OF THE
COMPANY. THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY
OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
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The legend required under Section 2.1 hereof shall be removed
upon termination of this Agreement in accordance with the provisions of Section
4.1.
3. Prohibited Transfers
3.1 Grant. In the event that any Proposed Seller should sell
any Securities in contravention of the participation rights of the Investor
under Section 1.3 of this Agreement and in contravention of the rights under
Section 1.1(a) hereunder (a "Prohibited Transfer"), the Investor shall have the
put option provided in Section 3.2. In addition to all other rights hereunder,
upon request of the Investor, the Company shall treat as ineffective any
transfer not in compliance with the terms of this Agreement.
3.2 Put Option. In the event of a Prohibited Transfer, the
Investor shall have the option to sell to the Proposed Seller, and the Proposed
Seller shall be required to purchase from the Investor, that number of shares of
Common Stock of the Company (either directly or through delivery of Series B
Preferred Stock or Series C Preferred Stock) equal to the number of shares that
the Investor would have been entitled to sell had such Prohibited Transfer been
effected in accordance with Section 1.3 hereof, on the following terms and
conditions:
(a) The price per share at which the shares are to be
sold to the Proposed Seller shall be equal to the price per share paid to the
Proposed Seller by the third-party purchaser or purchasers of the Proposed
Seller's Securities.
(b) The Investor shall deliver to the Proposed
Seller, within 30 days after it has received notice from the Proposed Seller or
otherwise become aware of the Prohibited Transfer, the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(c) The Proposed Seller shall, upon receipt of the
certificates for the repurchased shares, pay the aggregate purchase price
therefor provided for in this Article 3, by delivery of consideration in the
same form such Proposed Seller received for the Securities sold in the
Prohibited Transfer and shall reimburse the Investor for any expenses incurred,
including legal fees and expenses.
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4. General.
4.1 Termination. This Agreement shall terminate upon the
occurrence of any of the following events:
(a) the liquidation, dissolution or indefinite
cessation of the business operations of the Company, or a merger,
recapitalization, reorganization or sale of all or substantially all of the
assets of the Company which will result in the Company's stockholders
immediately prior to such event not holding at least 50% of the voting power of
the surviving, continuing or purchasing entity immediately after such event;
(b) the execution by the Company of a general
assignment for the benefit of creditors or the appointment of a receiver or
trustee to take possession of the property and assets of the Company;
(c) the closing of a Qualifying IPO, as defined in
Article FOURTH, Section D.6(b)(i) and Section E.6(b)(1) of the Company's
Restated Certificate of Incorporation;
(d) the written agreement of the Company, the
Investor and the holders of a majority of the shares of Common Stock held by all
the Principal Stockholders hereunder.
4.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address for such party (or at such other address for a party as
shall be specified by like notice):
(i) in the case of the Company:
XxxxXx.xxx, Inc.
Five Clock Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx, President
Fax Number:
(ii) in the case of the Investor:
Net Value Holdings, Inc.
Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
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Attn: Xxxxxxx X. Xxxxx, Esquire
Fax Number: 000-000-0000
and:
Net Value Holdings, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxx
Fax Number:
(iii) in the case of a Principal Stockholder, to the address
for such Principal Stockholder listed on Schedule A hereto.
Notice given by personal delivery, courier service or mail
shall be effective upon actual receipt. Notice given by telecopier shall be
confirmed by appropriate answer back and shall be effective upon actual receipt
if received during the recipient's normal business hours, or at the beginning of
the recipient's next business day after receipt if not received during the
recipient's normal business hours. All notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail, commercial delivery
service or personal delivery. Any party may change any address to which notice
is to be given to it by giving notice as provided above of such change of
address.
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. By
their execution hereof or of an Adoption Agreement attached hereto as Annex A,
each party hereto hereby appoints the Company as its attorney-in-fact for the
sole purpose of executing Adoption Agreements with any subsequent permitted
transferees.
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, such provisions shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision had never
been contained herein.
4.5 Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. Other than with respect to amendments to Schedule A
hereto, any amendment or modification of this Agreement shall be effective only
if evidenced by a written instrument executed by the Company, the holders of at
least a majority of the shares of Common Stock (as determined on an as-converted
basis) held by the Investor hereunder and by the holders of a majority of the
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shares of Common Stock held by all the Principal Stockholders hereunder. Any
waiver hereunder shall be effective only if evidenced by a written instrument
executed by the holders of at least a majority of the shares of Common Stock
held by the Investor (as determined on an as-converted basis) or by the holders
of a majority of the shares of Common Stock held by the Principal Stockholders,
as the case may be, whose rights are being waived.
4.6 Governing Law. The construction, validity and
interpretation of this Agreement will be governed by the internal laws of the
State of Delaware without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
4.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which,
when taken together, shall constitute one and the same instrument.
4.8 Remedies. The parties hereto shall have all remedies for
breach of this Agreement available to them as provided by law or equity. Without
limiting the generality of the foregoing, the parties agree that in addition to
any other rights and remedies available at law or in equity, the parties shall
be entitled to obtain specific performance of the obligations of each party to
this Agreement and immediate injunctive relief and that, in the event any action
or proceeding is brought in equity or to enforce the same, no party will urge,
as a defense, that there is an adequate remedy at law.
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IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement on the day and year indicated above.
COMPANY:
--------
XXXXXX.XXX, INC.
By:
---------------------------------
Xxxxxx Xxxxxx
Chief Financial Officer
INVESTOR:
---------
NET VALUE HOLDINGS, INC.
By:
---------------------------------
Xxxxxx X. Xxxxx
Chief Executive Officer
PRINCIPAL STOCKHOLDERS:
-----------------------
-------------------------------------
Xxxxxx X. Xxxxxxxxx
-------------------------------------
Winston Xxxxx Xxxxx
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Schedule A
Schedule of Principal Stockholders
Xxxxxx X. Xxxxxxxxx
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Winston Xxxxx Xxxxx
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
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ANNEX A
ADOPTION AGREEMENT
This Adoption Agreement ("Adoption Agreement") is executed by
the undersigned (the "Transferee") pursuant to the terms of that certain
Stockholders' Agreement dated as of August 18, 2000 (the "Agreement") by and
among XxxxXx.xxx, Inc., Net Value Holdings, Inc. and certain Principal
Stockholders. Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Agreement. By the execution of
this Adoption Agreement, the Transferee agrees as follows:
1. Acknowledgment. Transferee acknowledges that Transferee is
acquiring certain securities of the Company (the "Securities"), subject to the
terms and conditions of the Agreement.
2. Agreement. Transferee (i) agrees that the Securities
acquired by Transferee shall be bound by and subject to the terms of the
Agreement, and (ii) hereby adopts the Agreement with the same force and effect
as if Transferee were originally a party thereto.
3. Notice. Any notice required or permitted by the Agreement
shall be given to Transferee at the address listed beside Transferee's signature
below.
EXECUTED AND DATED this __ day of _________________, 200_.
TRANSFEREE:
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Address:
--------------------------
Fax:
--------------------------
Spouse: (if applicable):
Name:
--------------------------
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Accepted and agreed to by the Company on behalf of itself and
pursuant to Section 5.3 on behalf of the other parties to the Agreement.
XxxxXx.xxx, Inc.
By:_____________________________
Xxxxxx Xxxxxx
Chief Financial Officer
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