EXHIBIT 10.117
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (this "Agreement") is made as of
January 6, 2000 by and among CinemaNow, Inc., a California corporation (the
"Company"), the persons and entities (each, an "Investor" and collectively, the
"Investors") listed on the Schedule of Investors attached hereto as Exhibit A,
as such Schedule of Investors may be supplemented or amended from time to time
hereafter (the "Schedule of Investors"), and the persons and entities (each, a
"Founder" and collectively, the "Founders") listed on Exhibit B attached hereto.
In consideration of the mutual covenants set forth herein, the
parties agree as follows:
1. DEFINITIONS.
1.1. "Common Stock" shall mean the Common Stock, without
par value, of the Company.
1.2. "Series A Preferred Stock" shall mean the Company's
outstanding shares of Series A Convertible Preferred Stock, without par value.
1.3. "Stock" shall mean shares of the Common Stock now owned
or subsequently acquired by a Founder.
2. RIGHT TO PARTICIPATE IN SALES BY FOUNDER.
2.1. If a Founder proposes to sell or transfer (including a
pledge or the grant of a security interest) shares of Stock in one or more
related transactions, then the Founder shall promptly give written notice (the
"Notice") to the Company and the Investors at least 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 the name and address of each prospective purchaser
or transferee. In the event that the sale or transfer is being made pursuant to
the provisions of Sections 4.1 or 4.2 hereof, the Notice shall state under which
section the sale or transfer is being made.
2.2. Each Investor shall have the right, exercisable upon
written notice to the Founder within 15 days after receipt of the Notice, to
participate in such sale of Stock on the same terms and conditions. To the
extent one or more of the Investors exercises such right of participation in
accordance with the terms and conditions set forth below, the number of shares
of Stock that the Founder may sell in the transaction shall be correspondingly
reduced.
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EXHIBIT 10.117 (CONTINUED)
2.3. Each 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 Stock covered by the Notice by (ii) a fraction the
numerator of which is the number of shares of Common Stock owned by such
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 Founder and all of the
Investors at the time of the sale or transfer. For purposes of this Agreement,
the number of shares of Common Stock owned or held by an Investor shall include
the number of shares of Common Stock issuable to the Investor upon conversion of
the shares of Series A Preferred Stock owned or held by the Investor.
2.4. Each Investor who elects to participate in the sale shall
effect its participation in the sale by promptly delivering to the Founder for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
2.4.1. the number of shares of Common Stock which such
Investor elects to sell; or
2.4.2. that number of shares of Series A
Preferred Stock which is at such time convertible into the number of shares of
Common Stock which such Investor elects to sell; provided, however, that such
Investor shall convert such Series A Preferred Stock into Common Stock, and the
Company agrees to make such conversion concurrently with the actual transfer of
such shares to the purchaser; provided further that such Common Stock shall upon
such transfer, cease to constitute Registrable Securities under the terms of the
Investors' Rights Agreement (the "Investors' Rights Agreement") dated as of the
date hereof between the parties.
2.5. The stock certificate or certificates that the Investor
delivers to the Founder pursuant to Section 2.4 shall be transferred to the
prospective purchaser upon consummation of the sale of the Stock pursuant to the
terms and conditions specified in the Notice, and the Founder shall concurrently
therewith remit to such Investor that portion of the sale proceeds to which such
Investor is entitled by reason of such Investor's participation in such sale. To
the extent that any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase shares or other securities from an
Investor exercising its rights of co-sale hereunder, the Founder shall not sell
to such prospective purchaser or purchasers any Stock unless and until,
simultaneously with such sale, the Founder shall purchase the number of such
shares or other securities from such Investor calculated in accordance with
Section 2.3.
2.6. The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more sales of Stock
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EXHIBIT 10.117 (CONTINUED)
made by the Founder shall not adversely affect their rights to participate in
subsequent sales of Stock subject to Section 2.1.
3. RIGHT OF FIRST OPPORTUNITY.
3.1. Subject to the terms and conditions specified in this
Section 3, each Founder hereby grants to each Investor a right of first
opportunity with respect to future sales of Stock by the Founder.
3.2. Each time the Founder proposes to offer any Stock, the
Founder shall first make an offering of such Stock to the Investors in
accordance with the provisions of Section 2 above concerning participation
rights and the Investors shall exercise their right of first opportunity in
accordance with the procedures set forth below:
3.2.1. By written notice to the Founder, within fifteen
(15) calendar days after receipt of the Notice, an Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of the offered Stock which equals the proportion that the number of
shares of Common Stock owned by such Investor bears to the total number of
shares of Common Stock owned by all the Investors. The Founder shall promptly,
in writing, inform each Investor which has elected to purchase all the shares
available to it (each, a "Fully-Exercising Investor") of any other Investor's
failure to so elect. During the ten-day period commencing after such information
is given, each Fully-Exercising Investor shall be entitled to obtain that
portion of the offered Stock which Investors were entitled to purchase but which
were not purchased by the Investors which is equal to the proportion of the
unpurchased Stock that the number of shares of Common Stock owned by such
Fully-Exercising Investor bears to the total number of shares of Common Stock
owned by all Fully-Exercising Investors who wish to purchase their pro rata
share of the unpurchased Stock.
3.2.2. If all the shares of Stock referred to in the
Notice are not elected to be acquired by Investors as provided in this Section
3.2, the Founder may, during the 90-day period following the expiration of the
final period provided in Section 3.2.1, offer the remaining unpurchased portion
of such Stock to any person or persons at a price not less than, and upon terms
no more favorable to the offeree than, those specified in the Notice. If the
Founder does not enter into an agreement for the sale of the Stock within such
period, or if such agreement is not consummated within ninety (90) days of the
execution thereof, the right provided by this Section 3 shall be deemed to be
revived and such Stock shall not be offered unless first re-offered to the
Investors in accordance herewith. Stock which is sold by a Founder pursuant to
this Section 3.2 (other than Stock sold to an Investor) shall remain "Stock"
hereunder and each of the purchasers of such stock
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EXHIBIT 10.117 (CONTINUED)
(other than Investors) shall be treated as a "Founder" for purposes of this
Agreement.
4. EXEMPT TRANSFERS.
4.1. Notwithstanding anything herein to the contrary, the
provisions of Sections 2 and 3 shall not apply to any transfer to a "family
member" (as defined in Rule 701(c)(3) promulgated under the Securities Act of
1933, as amended (the "Securities Act") of a Founder and, in the case of Trimark
Holdings, Inc. or Trimark Pictures, Inc., to any of their affiliates; provided
that (A) the Founder shall inform the Investors of such transfer prior to
effecting it and (B) the transferee shall furnish the Investors with a written
agreement to be bound by and comply with all provisions of this Agreement. Such
transferred Stock shall remain "Stock" hereunder, and such transferee shall be
treated as a "Founder" for purposes of this Agreement.
4.2. Notwithstanding anything herein to the contrary, the
provisions of Sections 2 and 3 shall not apply (i) to the sale of any Stock to
the Company pursuant to a right granted to the Company prior to the date of this
Agreement, (ii) to a sale or sales by a Founder where the total consideration
received by such Founder does not exceed $50,000 in any twelve-month period, or
(iii) to a sale or transfer pursuant to a tender offer, merger, reorganization
or similar transaction in which all shareholders of the Company are entitled to
participate on an equivalent basis and which is approved by the Board of
Directors.
5. PROHIBITED TRANSFERS.
5.1. In the event a Founder should sell any Stock in
contravention of the rights of the Investors under this Agreement (a "Prohibited
Transfer"), the 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 Founder shall be bound by the applicable provisions of such
option.
5.2. In the event of a Prohibited Transfer by a Founder, each
Investor shall have the right (but not the obligation) to sell to such Founder,
and such Founder shall be obligated to purchase, the type and number of shares
of Common Stock equal to the number of shares each Investor would have been
entitled to transfer to the purchaser had the Prohibited Transfer been effected
pursuant to and in compliance with the terms of this Agreement. Such sale shall
be made on the following terms and conditions:
5.2.1. The price per share at which the shares are to be
sold by the Investor to the Founder shall be equal to the price per share paid
by the purchaser to the Founder in the Prohibited Transfer. The Founder shall
also reimburse each Investor for any and all fees and expenses, including
reasonable legal fees and expenses, incurred pursuant to the exercise or the
attempted exercise of the Investor's rights under this Agreement.
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EXHIBIT 10.117 (CONTINUED)
5.2.2. Within 90 days after the later of the dates on
which the Investor (i) received notice of the Prohibited Transfer or (ii)
otherwise actually became aware of the Prohibited Transfer, the Investor shall,
if exercising the option created hereby, deliver to the Founder the certificate
or certificates representing the shares of Common Stock to be sold, each
certificate to be properly endorsed for transfer. Series A Preferred Stock shall
be converted to Common Stock before or concurrently with such transfer. Such
Common Stock shall, upon such transfer, cease to constitute Registrable
Securities under the terms of the Investors' Rights Agreement.
5.2.3. The Founder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this Section 5.2, pay to the Investors the aggregate purchase price therefor
and the amount of reimbursable fees and expense, as specified in Section 5.2.1,
in cash or by other means acceptable to the Investor.
5.2.4. Notwithstanding the foregoing, any attempt by a
Founder to transfer Stock in violation of this Agreement shall be void and the
Company agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of
two-thirds in interest of the Investors.
6. LEGEND.
6.1. Each certificate representing shares of Stock now or
hereafter owned by a Founder or issued to any person (other than an Investor) in
connection with a transfer pursuant to this Agreement (including Section 4.1
hereof) shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
ISSUEE OF THIS CERTIFICATE, THE CORPORATION AND CERTAIN
HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
6.2 The Founder agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates required to bear the legend referred to in Section 6.1 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.
7. MISCELLANEOUS.
7.1. AMENDMENT. Any provision of this Agreement may be
amended, waived, modified, discharged or terminated only with the
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EXHIBIT 10.117 (CONTINUED)
written consent of the Company, the Founders, and Investor's holding two-thirds
(2/3rds) in interest of the Series A Preferred Stock (or Common Stock issuable
upon conversion thereof); provided, however, that with the written consent of
CinemaN Investment Company Ltd., a British Virgin Islands company, any provision
of this Agreement may be amended, waived, modified, discharged or terminated
with the written consent of the Company, the Founders, and Investor's holding a
majority in interest of the Series A Preferred Stock (or Common Stock issuable
upon conversion thereof). Any amendment or waiver effected in accordance with
this Section will be binding upon the Company, the Founders, the Investors and
each Holder of any securities subject to this Agreement (including securities
into which such securities are convertible) and future Holders of all such
securities. Any Founder, Investor or Holder may waive its, his or her rights or
the Company's obligations to such person hereunder without obtaining the consent
of any other person.
7.2 ASSIGNMENT AND TRANSFER. This Agreement shall not be
assigned by the Company, by operation of law or otherwise. This Agreement or the
rights held by an Investor under this Agreement may be assigned by such Investor
only in connection with an assignment or transfer by such Investor which is made
in accordance with Sections 4.6 or 8.12 of the Purchase Agreement.
7.3 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement,
including the construction, validity and performance hereof and the obligations
arising hereunder and thereunder, and all amendments and supplements hereof and
thereof and all waivers and consents hereunder and thereunder, shall be
construed in accordance with and governed by the laws of the State of California
without giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the laws of any other jurisdiction. Any
legal action or proceeding with respect to this Agreement or any document
related hereto or thereto shall be brought in the courts of the State of
California sitting in the County of Los Angeles or of the United States of
America for the State of California sitting in the County of Los Angeles, and,
by execution and delivery and/or acceptance of this Agreement, each Party hereto
hereby accepts the exclusive jurisdiction of the aforesaid courts. In addition,
each Party hereto hereby irrevocably and unconditionally waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions, suits or proceedings arising out of or in connection with
this Agreement or any document related hereto or thereto brought in any of the
aforesaid courts, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
7.4 TERM. This Agreement shall terminate (i) upon the
Company's first sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Securities Act,
which results in aggregate gross cash proceeds
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EXHIBIT 10.117 (CONTINUED)
to the Company in excess of $15,000,000 and the public offering price of which
is not less than $3.00 per share (adjusted to reflect stock dividends, stock
splits or recapitalizations after the date of this Agreement), or (ii) upon the
sale, conveyance or other disposition of all or substantially all of the
Company's property or business or the merger into or consolidation with any
other entity (other than a wholly owned subsidiary corporation) or the effecting
of any transaction or series of related transactions in which more than 50% of
the voting power of the Company is disposed of and where in connection with such
transaction the holders of shares of Series A Preferred Stock receive
consideration for each share of Series A Preferred Stock on an as-converted
basis having a fair market value equal to (i) $2.03 in the event that such
transaction occurs during the first year after the date hereof, (ii) $2.70 in
the event that such transaction occurs during the second year after the date
hereof, and (iii) $3.38 in the event that such transaction occurs thereafter (in
each case such price to be adjusted to reflect stock dividends, stock splits or
recapitalizations after the date of this Agreement).
7.5 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and deemed given on the business day
following delivery to the recipient in person or by overnight courier service,
and addressed (i) if to an Investor or Founder, to such Investor's or Founder's
address set forth in Exhibit A or Exhibit B below, or at such other address as
such Investor or Founder shall have furnished to the Company in writing, or (ii)
if to the Company, to:
CinemaNow, Inc.
4553 Glencoe Avenue
Suite 200
Marina del Rey, California 90292
Attn: Bruce David Eisen
7.6 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.
7.7 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.
7.8 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
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EXHIBIT 10.117 (CONTINUED)
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
CinemaNow, Inc.
By:________________________
Title:_____________________
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EXHIBIT 10.117 (CONTINUED)
[Investors Signature Page]
INVESTORS:
-------------------------------------
(Print Name of Investor)
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
Address
-------------------------------
-------------------------------------
-------------------------------------
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EXHIBIT 10.117 (CONTINUED)
[Founders Signature Page]
FOUNDERS:
Trimark Holdings, Inc.
By:
----------------------------------
Title:
------------------------------
Trimark Pictures, Inc. (but only with
respect to the Common Stock to be
acquired pursuant to the Trimark
Note (as defined in the Purchase
Agreement)
By:
----------------------------------
Title:
------------------------------
-------------------------------------
Curt Marvis
-------------------------------------
Bruce Eisen
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EXHIBIT 10.117 (CONTINUED)
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Co-Sale 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,
co-sale rights (as described in the Agreement) must be granted to the Investors
by the seller. I hereby agree that those shares and my interest in them, if any,
are subject to the provisions of the Co-Sale Agreement and that I will take no
action at any time to hinder operation of, or violate, the Co-Sale Agreement.
-----------------------------------
(Signature)
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EXHIBIT 10.117 (CONTINUED)
EXHIBIT A
SCHEDULE OF INVESTORS
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EXHIBIT B
FOUNDERS
Trimark Holdings, Inc.
c/o CinemaNow, Inc.
4553 Glencoe Avenue
Marina del Rey, California 90292
Trimark Pictures, Inc.
c/o CinemaNow, Inc.
4553 Glencoe Avenue
Marina del Rey, California 90292
Curt Marvis
c/o CinemaNow, Inc.
4553 Glencoe Avenue
Marina del Rey, California 90292
Bruce Eisen
c/o CinemaNow, Inc.
4553 Glencoe Avenue
Marina del Rey, California 90292
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