CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT, (the "Agreement") is entered into as of
January 14, 2000, by and among NEX-I.COM INC. a New Jersey corporation (the
"Company"), with its principal office located at 7 Wall Street, Princeton, New
Jersey 08540, ALPHANET SOLUTIONS, INC., a New Jersey corporation with its
principal office located at 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927
("AlphaNet"), FALLEN ANGEL EQUITY FUND, L.P., a Delaware limited partnership,
with its principal office located at 960 Holmdel Road, Holmdel, New Jersey 07733
("Fallen Angel"), JOHN L. STEFFENS, an individual residing at 358 Wendover
Drive, Princeton, New Jersey 08540 ("Steffens," and together with AlphaNet and
Fallen Angel, the "Purchasers") and IRA A. BASEMAN, an individual residing at 5
Van Kirk Road, Princeton, New Jersey 08540 ("Baseman," together with the
Purchasers and the Company, the "Parties," and each separately, a "Party").
W I T N E S S E T H :
WHEREAS, in connection with the Securities Purchase Agreement dated
as of the date hereof, by and among the Purchasers and the Company (the
"Purchase Agreement") and the Registration Rights Agreement dated as of the date
hereof, by and between the Purchasers and the Company (the "Registration Rights
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Purchase Agreement, to issue and sell to the Purchasers (the
"Offering") 3,937,500 shares of the Company's Series A Convertible Participating
Preferred Shares (the "Preferred Shares"), convertible into shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"). The
shares of Common Stock of the Company into which the Preferred Shares are
convertible are referred to herein as the "Common Shares;"
WHEREAS, the Purchasers and the Company have agreed that in the event
that the Company proposes to offer equity securities or any other securities
which are convertible into equity securities of the Company or options therefor
("Securities") to any person (with certain exceptions set forth in Section
1.1.1(b) hereof), the Purchasers shall have the right to purchase up to each
Purchaser's pro-rata portion of such equity securities at a price and upon the
same terms and conditions as the proposed offer to such person (defined more
fully in Section 1.1.1(a)(i) herein as, the "Right of First Refusal");
WHEREAS, the Purchasers and the Company have agreed that the Right of
First Refusal shall not be applicable to the initial public offering of the
Common Stock by the Company pursuant to the filing of a Registration Statement
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "IPO"), and that the Right of First Refusal will terminate
upon an IPO or subsequent public offering in which all of the outstanding
Preferred Shares are converted into Common Shares, whereby the public offering
price is not less than $10.00 per share, adjusted for any stock splits, stock
combinations, stock dividends and other such recapitalizations, which results in
the Company receiving no less than $20 million, net of underwriting commissions
and expenses (a "Qualified IPO");
WHEREAS, Baseman holds 3,282,920 shares of Common Stock (the "Baseman
Shares");
WHEREAS, the Purchasers and the Company have agreed that as a
condition to the Closing of the transactions contemplated by the Purchase
Agreement, the Purchasers, the Company and Baseman shall agree that (i) in the
event that Baseman proposes to transfer the Baseman Shares, or any part thereof,
prior to the consummation of a Qualified IPO, the Company shall have the right
to purchase the Baseman Shares from Baseman, and (ii) in the event that the
Company fails to purchase the Baseman Shares, or any part thereof, under such
circumstances, then the Purchasers (or their permitted successors or assigns)
shall have the right to either purchase such shares, or any portion thereof not
purchased by the Company, on a pro rata basis, prior to any such sale or
transfer (defined more fully in Section 1.1.3(a) herein as, the "Baseman Shares
Right of First Refusal") or participate in the proposed transfer or sale by
Baseman as hereinafter set forth; and
WHEREAS, the Purchasers, the Company and Baseman agree that the
Baseman Shares Right of First Refusal shall not be applicable to the IPO and
that the Baseman Shares Right of First Refusal will terminate upon the
consummation of a Qualified IPO.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Parties hereby agree as follows:
ARTICLE I
1.1. Proposed Offers by the Company.
1.1.1 Right of First Refusal.
(a) In the event that, at any time or from time
to time on or before January 13, 2006, the Company proposes to offer Securities
(a "Proposed Offering"), other than in a Permitted Offering (as defined in
Section 1.1.1(b) hereof), the Company shall provide each of the Purchasers with
at least 20 days prior written notice of such offer (the "Company Sale Notice"),
setting forth the terms and conditions of the Proposed Offering.
(i) Each Purchaser (or such
Purchaser's permitted successors or assigns) shall have the right to purchase
its pro rata share of the Proposed Offering based on the ratio (the "Purchase
Ratio") of (1) the Common Shares issuable on conversion or exercise of Preferred
Shares purchased by such Purchaser on the Closing Date to (2) all of the then
issued and outstanding Common Stock of the Company plus the Common Shares then
issuable upon conversion or exercise of any preferred stock, any warrants and
any convertible debentures, options and other warrants then outstanding, before
giving effect to the Proposed Offering (the "Right of First Refusal"). In the
event that any Purchaser does not exercise such Right of First Refusal or
exercises such Right of First Refusal only in part, the Purchasers who exercise
their Right of First Refusal in full may purchase such portion of the Proposed
Offering not purchased in full by the Purchasers exercising their Right of First
Refusal, pro rata among such Purchasers, based upon the Purchase Ratio.
(ii) The Right of First Refusal shall
be exercisable by the Purchasers by written notice to the Parties not later than
10 days after the Purchasers receive the Company Sale Notice.
(b) Notwithstanding the provisions of Section
1.1.1(a) hereof, the Right of First Refusal shall not apply to (i) up to 1
million shares of Common Stock sold to Strategic Investors (as defined in
Section 1.1.1(c) hereof), (ii) any issuance by the Company of stock options or
other equity incentives pursuant to employee stock option plans and incentive
warrant plans as may hereafter be approved by the Board of Directors, including
the approval of both of the two directors elected by the holders of the
Preferred Shares, (iii) any issuance pursuant to the conversion of the Preferred
Shares, (iv) any issuance pursuant to any stock dividend in on, or upon any
subdivision or combination of shares of the Common Stock or the Preferred
Shares, (v) any issuance pursuant to a firm commitment underwritten public
offering, (vi) the IPO or (vii) any issuance in connection with an acquisition
of, or merger with, another company by the Company (collectively, "Permitted
Offerings").
(c) For the purposes of this Agreement, a
"Strategic Investor" shall mean any person or entity which has a material
business, technology or commercial relationship with the Company, in addition to
any equity financing provided by such person or entity, as determined in good
faith by the Board, including the approval of both of the two directors elected
to the Board by the holders of the Preferred Shares, provided, that if the
holders of Preferred Shares are no longer entitled to elect such directors, then
the approval of the holders of 60% of the then outstanding Preferred Shares must
be obtained to make such determination.
(d) The Right of First Refusal shall terminate
upon the consummation of a Qualified IPO.
1.2 Proposed Offers by a Purchaser.
1.2.1 Right of First Refusal and Tag Along Rights
(a) In the event that prior to the consummation
of a Qualified IPO, a Purchaser (a "Selling Purchaser") desires to sell any
Securities held by such Selling Purchaser ("Sale Shares") to any Accredited
Investor (as defined in Section 1.2.1(b) hereof), such Purchaser shall provide
each other Purchaser (the "Non-Selling Purchasers"), the Company and Baseman
with at least 20 days prior written notice of such sale (the "Purchaser Sale
Notice"), setting forth the terms and conditions thereof.
(i) Right of First Refusal. Upon
receipt of the Purchaser Sale Notice, the Company may purchase from the Selling
Purchaser any and all of the Securities offered by such Purchaser prior to any
proposed transfer, and, in the event that the Company fails to purchase all such
Securities, or any part thereof, then Baseman and each Non-Selling Purchaser (or
their permitted successors or assigns), in lieu of exercising the Purchaser Sale
Tag-Along Options (as defined in Section 1.2.1(a)(ii) hereof), shall have the
right to purchase their Pro-Rata Share of all of the Securities not purchased by
the Company (based on the percentage of the Conversion Shares owned by each
Purchaser), prior to any transfer (the "Purchaser Sale Right of First Refusal").
The Purchaser Sale Right of First Refusal shall not apply to the IPO, and will
terminate upon the consummation of a Qualified IPO. The Purchaser Sale Right of
First Refusal shall be exercisable by the Non-Selling Purchasers and Baseman by
written notice to the each of the Parties not later than 10 days after the
Non-Selling Purchasers and Baseman receive the Purchaser Sale Notice.
Notwithstanding the foregoing, collectively, Baseman and the Non-Selling
Purchasers shall exercise the Purchaser Sale Right of First Refusal with respect
to either (A) all of the Sale Shares or (B) none of the Sale Shares. In the
event that Baseman, a Non-Selling Purchaser or Non-Selling Purchasers exercise
their Purchaser Sale Right of First Refusal with respect to the Sale Shares,
Baseman, such Non-Selling Purchaser or Non-Selling Purchasers (as the case may
be) must collectively purchase 100% of the Sale Shares.
(ii) Tag-Along Rights. Each
Non-Selling Purchaser and Baseman (or their permitted successors or assigns)
shall have the option (the "Purchaser Sale Tag-Along Option"), in lieu of
exercising the Purchaser Sale Right of First Refusal, to join in the sale as to
the same percentage of Conversion Shares held by the Non-Selling Purchasers and
Baseman as the percentage of Sale Shares to be sold bears to the Conversion
Shares held by the Selling Purchaser, and on the same purchase price per share
and other terms as the Sale Shares (including the payment of expenses with
respect to such sale on a pro-rata basis). The Purchaser Sale Tag-Along Option
shall be exercisable by the Non-Selling Purchasers and Baseman by written notice
to the Selling Purchaser and the Company not later than 10 days after the
Non-Selling Purchasers and Baseman receive the Purchaser Sale Notice. In the
event that the proposed transferees of Sale Shares are unwilling to purchase the
total shares proposed to be transferred by the Non-Selling Purchasers and
Baseman pursuant to the Purchaser Sale Tag-Along Option (the "Tag-Alongs") and
the Selling Purchaser's shares, the number of shares offered to the transferees
by each of Baseman, the Selling Purchaser and the Tag-Alongs shall be reduced
pro rata so that the offer consists of pro rata portions of the Baseman Shares
and the shares offered by the Tag-Alongs. The Purchaser Sale Tag-Along Option
shall be exercisable by each of the Non-Selling Purchasers and Baseman by
written notice to each of the Parties not later than 10 days after the
Non-Selling Purchasers and Baseman receive the Purchaser Sale Notice.
(b) For the purposes of this Agreement, an
"Accredited Investor" shall mean any Person who qualifies as an accredited
investor within the meaning of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"). A "Person" shall mean any individual,
corporation, limited liability company, partnership, limited liability
partnership, joint venture, trust or unincorporated organization, joint stock
Company or other similar organization, government or political subdivision
thereof, court or any other legal entity, whether acting in an individual,
fiduciary or other capacity.
1.3 Proposed Offers by Baseman.
1.3.1 Right of First Refusal and Tag-Along Rights.
(a) In the event that at any time, or from time
to time, prior to the consummation of a Qualified IPO, Baseman proposes to sell
or otherwise transfer the Baseman Shares, or any part thereof, to any Accredited
Investor or Accredited Investors, Baseman shall provide each Purchaser and the
Company with at least 30 days prior written notice of such sale (the "Baseman
Sale Notice"), setting forth the terms and conditions thereof.
(i) Baseman Shares Right of First
Refusal. Upon receipt of the Baseman Sale Notice, the Company may purchase from
Baseman all or any part of the Baseman Shares offered by Baseman prior to any
proposed transfer, and, in the event that the Company fails to purchase the
Baseman Shares, or any part thereof, then the Purchasers (or their permitted
successors or assigns), in lieu of exercising their Baseman Sale Tag-Along
Options (as defined in Section 1.3.1(a)(ii) hereof), shall have the right to
purchase each Purchaser's Pro-Rata Share of the Baseman Shares (based on the
percentage of Conversion Shares owned by each Purchaser) not purchased by the
Company, or any part thereof, prior to any sale or transfer (the "Baseman Shares
Right of First Refusal"). The Baseman Shares Right of First Refusal shall not
apply to the IPO, and will terminate upon the consummation of a Qualified IPO.
The Baseman Shares Right of First Refusal shall be exercisable by the Purchasers
by written notice to Baseman and the Company not later than 10 days after the
Purchasers receive the Baseman Sale Notice. Notwithstanding the foregoing,
collectively, the Purchasers shall exercise the Baseman Shares Right of First
Refusal with respect to either (A) all of the Baseman Shares or (B) none of the
Baseman Shares. In the event that a Purchaser or Purchasers exercise the Baseman
Shares Right of First Refusal with respect to the Baseman Shares, such Purchaser
or Purchasers must collectively purchase 100% of the Baseman Shares.
(ii) Tag-Along Rights. Each of the
Purchasers shall have the option (the "Baseman Sale Tag-Along Option"), in lieu
of exercising the Baseman Shares Right of First Refusal, to join in the sale as
to the same percentage of Conversion Shares held by the Purchasers as the
percentage of the Baseman Shares to be sold, and on the same purchase price per
share and other terms as the Baseman Shares to be sold (including the payment of
expenses with respect to such sale on a pro-rata basis). The Baseman Sale
Tag-Along Option (i) shall be exercisable by the Purchasers by written notice to
Baseman and the Company not later than 10 days after the Purchasers receive the
Baseman Sale Notice, and (ii) shall not be applicable to the IPO, and will
terminate upon the consummation of a Qualified IPO. In the event that the
proposed transferees of the Baseman Shares are unwilling to purchase the shares
proposed to be transferred by the Purchasers (the "Tag-Along Purchasers")
pursuant to the Baseman Sale Tag-Along Option, the number of shares offered to
the transferees by each of Baseman and the Baseman Sale Tag-Along Purchasers
shall be reduced pro rata so that the offer consists of pro rata portions of the
Baseman Shares and the Securities offered by the Baseman Sale Tag-Along
Purchasers. The Baseman Sale Tag-Along Option shall be exercisable by the
Purchasers by written notice to Baseman and the Company not later than 10 days
after the Purchasers receive the Baseman Sale Notice.
(b) The Company and Baseman hereby represent and
warrant that all shares of Securities held by Baseman are free and clear of
liens and all other encumbrances and are not subject to any other agreements or
understanding (either oral or written) which oblige Baseman to sell, offer to
sell or give notice of sale to any person, except as provided herein.
ARTICLE II
2.1 Governing Law: Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey other than
the laws with respect to conflicts. The parties hereto irrevocably consent to
the jurisdiction of the United States federal courts in the State of New Jersey
and the state courts located in the County of Morris in the State of New Jersey
in any suit or proceeding based on or arising under this Agreement or the
transactions contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such courts. The Parties
each irrevocably waive the defense of an inconvenient forum to the maintenance
of such suit or proceeding in such forum. The Parties further agree that service
of process upon the each of the Parties, as applicable, mailed by the first
class mail in accordance with Section 2.6 shall be deemed in every respect
effective service of process upon such Party in any suit or proceeding arising
hereunder. Nothing herein shall affect any Party's right to serve process in any
other manner permitted by law. The Parties agree that a final judgment in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner. The
Parties irrevocably waive any right to trial by jury under applicable law.
2.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each Party and delivered
to the other Parties. In the event any signature page is delivered by facsimile
transmission, the Party using such means of delivery shall promptly cause
original executed signature pages to be delivered to the other Parties.
2.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
2.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
2.5 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the Parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parties makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived other than by an instrument in writing signed by the
party to be charged with enforcement and no provision of this Agreement may be
amended other than by an instrument in writing signed by each of the Parties.
2.6 Notices. Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by
nationally-recognized overnight courier or by facsimile machine confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company or to Ira A. Baseman:
nex-i.com inc.
7 Wall Street
Princeton, New Jersey 08540
Attention: Ira A. Baseman, President & CEO
Telephone No. (609) 497-9400
Facsimile No. (609) 497-9433
With a copy to:
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Attention: Richard J. Pinto, Esq.
Telephone No. (609) 987-6650
Facsimile No. (609) 987-6651
If to AlphaNet:
AlphaNet Solutions, Inc.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
Attention: Jack Adler, Esq., Senior VP,
Secretary & General Counsel
Telephone No. (973) 889-3813
Facsimile No. (973) 898-9694
With a copy to:
Pitney, Hardin, Kipp & Szuch LLP
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Michael W. Zelenty
Telephone No. (973) 966-8200
Facsimile No. (973) 966-1550
If to Fallen Angel:
Fallen Angel Equity Fund, L.P.
c/o Fallen Angel Capital LLC
960 Holmdel Road
Holmdel, New Jersey
Attention: Ira Cohen
Telephone No. (732) 946-2000
Facsimile No. (732) 946-0519
With a copy to:
Pitney, Hardin, Kipp & Szuch LLP
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Michael W. Zelenty
Telephone No. (973) 966-8200
Facsimile No. (973) 966-1550
If to Steffens:
John L. Steffens
358 Wendover Drive
Princeton, NJ 08540
Each party shall provide notice to the other party in accordance with this
Section 2.6 of any change in address.
2.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties and their successors and assigns. The
Parties shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other Parties except, with respect to
the Company, in accordance with the Company's Certificate of Incorporation.
Notwithstanding the foregoing, a Purchaser may, subject to and in compliance
with Section 7.2 of the Purchase Agreement, assign all or part of its rights and
obligations without the consent of the Company, and without the consent of
Baseman, so long as such transferee is an Accredited Investor and agrees in
writing to be bound by this Agreement.
2.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns (including transferees permitted in accordance with Section 2.7 and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
2.9 Further Assurances. Each Party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
2.10 Remedies. No provision of this Agreement providing for any
remedy to a Party shall limit any remedy which would otherwise be available to
such Party at law or in equity. Nothing in this Agreement shall limit any rights
a Party may have under any applicable federal or state securities laws with
respect to the purchase of securities contemplated hereby. Each Party
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to each other Party. Accordingly, the Parties acknowledge
that the remedy at law for a material breach of its respective obligations under
this Agreement will be inadequate and agree, in the event of a breach or
threatened breach by the a Party of the provisions of this Agreement, that the
remaining Parties shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
compliance, without the necessity of showing economic loss and without any bond
or other security being required.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed as of the date first above
written.
NEX-I.COM INC.
By: /s/ Ira Baseman
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Name: Ira Baseman
Title: President & CEO
/s/ Ira A. Baseman
- ------------------
IRA A. BASEMAN
/s/ John L. Steffens
- --------------------
JOHN L. STEFFENS
ALPHANET SOLUTIONS, INC.
By: /s/ Donald A. Deieso
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Name: Donald A. Deieso
Title: President and CEO
FALLEN ANGEL EQUITY
FUND, L.P.
By: /s/ Ira Cohen
- --------------------------------
Name: Ira Cohen
Title: Limited Partner