EXHIBIT 10.4
COMMAND SYSTEMS, INC.
CO-SALE AGREEMENT
AUGUST 26, 1997
COMMAND SYSTEMS, INC.
CO-SALE AGREEMENT
This Co-Sale Agreement (the "Agreement") is made as of this 26th day of
August, 1997, by and among Command Systems, Inc., a Delaware corporation (the
"Company"), Phoenix Home Life Mutual Insurance Company (hereto as "Stockholder")
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (hereto as the "Founder").
RECITALS
WHEREAS, the Stockholder is exchanging certain notes evidencing indebtedness
of the Company's direct and indirect subsidiaries to the Stockholder (the
"Notes") for an aggregate of one hundred (100) shares (the "Shares") of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock") subject to the terms and conditions set forth in
that certain Securities Exchange Agreement between the Company and the
stockholder dated as of the date hereof;
WHEREAS, the Stockholder was induced by the Company to exchange the Notes
for the Shares in part on the Company's and the Founder's agreement to enter
into this Agreement;
WHEREAS, the parties desire to enter into this Agreement in order to grant
rights of co-sale to each party.
NOW THEREFORE, in consideration of the mutual covenants set forth herein, the
parties agree hereto as follows:
1. DEFINITIONS.
a) "Co-Sale Stock" shall mean shares of the Company's Common Stock or
Preferred Stock now owned or subsequently acquired by the Founder. The
Founder is currently the owner of 8,550,000 of the Company's Common
Stock.
b) "Common Stock" shall mean the Company's Common Stock, $.01 par value per
share and shares of Common Stock issued or issuable upon conversion of
the Company's outstanding Preferred Stock.
2. SALES BY THE FOUNDER.
a) If the Founder proposes to sell or transfer any shares of Co-Sale Stock
then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to the Stockholder 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 Co-Sale
CO-SALE AGREEMENT
Stock to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid, and the name, address and relationship, if any,
to the Founder of each prospective purchaser or transferee. In the event
that the sale or transfer is being made pursuant to the provisions of
Sections 3(a), the Notice shall state under which section the sale or
transfer is being made. Upon the request of the Company or the
Stockholder, the Founder will promptly furnish to the Company and the
Stockholder such other information as may be reasonably requested to
establish that the offer and proposed transferee are bona fide.
b) The Stockholder shall have the right, exercisable upon written notice to
the Founder within fifteen (15) days after the Notice, to participate in
such sale of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock the Stockholder wishes
to sell under its right to participate. To the extent the Stockholder
exercises such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Co-Sale Stock that the
Founder may sell in the transaction shall be correspondingly reduced.
c) The Stockholder may sell all or any part of that number of shares equal to
the product obtained by multiplying (i) the aggregate number of shares of
Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of
which is the number of shares of Common Stock owned by the Stockholder 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 the Stockholder
at the time of the sale or transfer.
d) If the Stockholder elects to participate in the sale pursuant to this
Section 2, the Stockholder 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:
i) the type and number of shares of Common Stock which the Stockholder
elects to sell; or
ii) that number of shares of Series A Preferred Stock which is at such time
convertible into the number of shares of Common Stock which the
Stockholder elects to sell; provided, however, that if the prospective
purchaser objects to the delivery of Series A Preferred Stock in lieu
of Common Stock, the Stockholder shall convert such Series A Preferred
Stock into Common Stock and deliver Common Stock as provided in Section
2(d)(i) above. The Company agrees to make any such conversion
concurrent with the actual transfer to such shares to the purchaser.
e) The stock certificate or certificates that the Stockholder delivers to the
Founder pursuant to Section 2(d) shall be transferred to the prospective
purchaser in
CO-SALE AGREEMENT
consummation of the sale of the Common Stock pursuant to the terms and
conditions specified in the Notice, and the Founder shall concurrently
therewith remit to the Stockholder that portion of the sale proceeds to
which the Stockholder 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 shares or other
securities from the Stockholder exercising its rights of co-sale
hereunder, the Founder shall not sell to such prospective purchaser or
purchasers any Co-Sale Stock unless and until, simultaneously with such
sale, the Founder shall purchase such shares or other securities from the
Stockholder on the same terms and conditions specified in the Notice.
f) The exercise or non-exercise of the rights of the Stockholder hereunder to
participate in one or more sales of Co-Sale Stock made by the Founder
shall not adversely affect the Stockholder's rights to participate in
subsequent sales of Co-Sale Stock subject to Section 2(a).
g) If the Stockholder elects not to participate in the sale of the
Co-Sale Stock subject to the Notice, the Founder may, not later than sixty
(60) days following delivery to the Company of the Notice, enter into an
agreement providing for the closing of the transfer of the Co-Sale Stock
covered by the Notice within thirty (30) days of such agreement on terms
and conditions not more materially favorable to the transferor than those
described in the Notice. Any proposed transfer on terms and conditions
materially more favorable than those described in the Notice, as well as
any subsequent proposed transfer of any of the Co-Sale Stock by the
Founder, shall again be subject to the co-sale rights of the Stockholder
and shall require compliance by the Founder with the procedures described
in this Section 2.
3. EXEMPT TRANSFERS.
a) Notwithstanding the foregoing, the co-sale rights of the Stockholder shall
not apply to (i) any transfer or transfers by the Founder which in the
aggregate, over the term of this Agreement, amount to no more than fifteen
percent (15%) of the Co-Sale Stock held by the Founder as of the date
hereof, (ii) any pledge of Co-Sale Stock made pursuant to a bona fide loan
transaction with a financial institution that creates a mere security
interest to the extent permitted under the Amended and Restated Guaranty
Agreement, (iii) any transfer to the ancestors, descendants or spouse or
to trusts for the benefit of such persons or the Founder, or (iv) any bona
fide gift; provided that in the event of any transfer made pursuant to one
of the exemptions provided by clauses 3(a)(ii), (iii) and (iv), (A) the
Founder shall inform the Stockholder of such pledge, transfer or gift
prior to effecting it and (B) the pledgee, transferee or donee shall
furnish the Stockholder with a written agreement to be bound by and comply
with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer by
subject to the co-sale rights of the Stockholder), such transferred Co-
Sale Stock shall remain "Co-Sale Stock"
CO-SALE AGREEMENT
hereunder, and such pledgee, transferee or donee shall be treated as the
"Founder" for purposes of this Agreement.
b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act").
4. PROHIBITED TRANSFERS.
a) In the event that the Founder should sell any Co-Sale Stock in
contravention of the co-sale rights of the Stockholder under this
Agreement (a "Prohibited Transfer"), and the Stockholder and the Company
are unable to void such transfer pursuant to Section 4(b)(iv) hereof, the
Stockholder (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.
b) In the event of a Prohibited Transfer, the Stockholder shall have the
right to sell to the Founder the type and number of shares of Common Stock
equal to the number of shares the Stockholder would have been entitled to
transfer to the purchaser under Section 2(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 Founder
shall be equal to the price per share paid by the purchaser to the
Founder in such Prohibited Transfer. The Founder shall also reimburse
the Stockholder for any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted
exercise of the Stockholder's rights under Section 2.
ii) Within ninety (90) days after the date on which the Stockholder
received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, the Stockholder shall, if exercising the
option created hereby, deliver to the Founder the certificate or
certificates representing shares to be sold, each certificate to be
properly endorsed for transfer.
iii) The Founder shall, upon receipt of the certificate or certificates for
the shares to be sold by the Stockholder, pursuant to this Section
4(b), pay the aggregate purchase price therefore and the amount of
reimbursable fees and expenses, as specified in Section 4(b)(i), in
cash or by other means acceptable to the Stockholder.
CO-SALE AGREEMENT
iv) Notwithstanding the foregoing, any attempt by the Founder to transfer
Co-Sale Stock in a Prohibited Transfer 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 Stockholder's prior
written consent.
5. LEGEND.
a) Each certificate representing shares of Co-Sale Stock now or hereafter
owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof 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 CO-SALE AGREEMENT BY AND BETWEEN ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND THE
COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE COMPANY."
b) The Founder 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 Section 5(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.
6. MISCELLANEOUS.
a) Conditions to Exercise of Rights. Exercise of the Stockholder's rights
under this Agreement shall be subject to and conditioned upon, and the
Founder and the Company shall use their best efforts to assist Phoenix in
compliance with applicable laws.
b) Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within
Delaware.
c) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written
consent of (i) as to any obligation of the Company, only by the Company
and the Stockholder, (ii) as to any obligation of the Stockholder, only
by the Stockholder, the Founder and the Company and (iii) as to any
obligation of the Founder, only by the Founder and the Stockholder. Any
amendment or waiver effected in accordance with clauses (i), (ii), and
(iii) of this Section 6(c) shall be binding upon the Stockholder, its
successors
CO-SALE AGREEMENT
and assignees, the Company and the Founder.
d) Assignment of Rights. This Agreement constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any
previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. 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.
e) Term. This Agreement shall terminate upon the earlier of (i) ten years after
the date hereof and (ii) closing of a firm commitment underwritten public
offering of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended or upon any merger,
consolidation or other acquisition of the Company.
f) Ownership. The Founder represents and warrants that he is the sole legal and
beneficial owner of those shares of Co-Sale Stock he currently holds subject
to the Agreement and that no other person has any interest (other than a
community property interest) in such shares.
g) Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party
to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the party to be notified at the address 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.
h) 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.
i) Attorneys' 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
CO-SALE AGREEMENT
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.
j) 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
CO-SALE AGREEMENT
The foregoing Co-Sale Agreement is hereby executed as of the date first above
written.
COMMAND SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President
ADDRESS:
THE FOUNDER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ADDRESS:
THE STOCKHOLDER:
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
ADDRESS: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CO-SALE AGREEMENT