MASTER MODIFICATION AGREEMENT
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This MASTER MODIFICATION AGREEMENT ("Modification Agreement") is
effective as of January 12, 2001, by and between xXxxxxxxxxx.xxx, Inc., a Nevada
corporation ("eAutoclaims") and Thomson Kernaghan & Co., Ltd., a corporation
organized under the laws of Ontario, Canada ("Agent"). Agent is entering into
this Modification Agreement for itself and as agent for the purchasers
("Purchasers") of Series A Convertible Preferred Stock issued by eAutoclaims
("Preferred Stock"). eAutoclaims, Agent and Purchasers are herein collectively
called the "Parties".
RECITALS
WHEREAS, eAutoclaims and Agent entered into that certain Securities
Purchase Agreement dated as of June 27, 2000 (the "Purchase Agreement"); and
WHEREAS, eAutoclaims and Agent entered into that certain Security
Agreement dated as of August 25, 2000 (the "Security Agreement"); and
WHEREAS, in accordance with the terms set forth in the Purchase
Agreement, eAutoclaims has issued shares of its Preferred Stock and Purchasers'
Warrants ("Purchaser Warrants") to each Purchaser upon each funding under the
Purchase Agreement; and
WHEREAS, as further required under the Purchase Agreement, eAutoclaims
and Agent entered into a Registration Rights Agreement dated as of August 25,
2000 pursuant to which eAutoclaims is obligated to register shares of its $.001
par value common stock underlying the Preferred Stock, the Purchaser Warrants,
and the hereinafter described Agent's Warrants ("Registration Agreement"); and
WHEREAS, in consideration for services performed by the Agent under the
Purchase Agreement, eAutoclaims issued Agent's Warrants to the Agent ("Agent
Warrants"); and
WHEREAS, eAutoclaims intends to file a registration statement with the
Securities and Exchange Commission to register Units comprised of shares of its
common stock and redeemable common stock purchase warrants ("Units"); and
WHEREAS, the Parties desire to amend certain terms of the Purchase
Agreement, the Security Agreement, the Registration Agreement, the Purchaser
Warrants, and the Agent Warrants (such agreements are collectively referred to
as the "Preferred Stock Agreements"); and
WHEREAS, the Parties desire to set forth their agreements with respect
to the modification of certain provisions included in the Preferred Stock
Agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:
1. Lock-Up of Shares, Shareholder Action, and Conditional Notice of
Conversion. The Agent will use its best efforts to cause each Purchaser to
execute the Lock-Up Letter, Shareholder Consent and Conditional Notice of
Conversion in the form attached hereto as Exhibit "A" and will deliver the
original executed copy of each such document to eAutoclaims as soon as possible,
but no later than five business days prior to the effective date of the
registration statement contemplated in such letter. Pursuant to the Lock-up
Letter, each Purchaser will agree to certain restrictions on the sale of
eAutoclaims securities and xxxxx Xxxxx & Company a right of first refusal to act
as the broker for any shares to be sold during the periods specified therein.
Pursuant to the Shareholder Consent, each Purchaser will consent to the
amendment of the Certificate of Designations, Rights, Preferences and
Limitations of Series A Convertible Preferred Stock (the "Certificate of
Designations") and the Registration Agreement as described below.
2. Amendment of Certificate of Designations, Rights, Preferences and
Limitations. Within five business days after the effective date of the
registration statement and so long as the Agent has delivered executed
Shareholder Letters to eAutoclaims representing approval of the actions
described therein by a majority of the outstanding shares of Preferred Stock,
eAutoclaims will amend the Certificate of Designations, Rights, Preferences and
Limitations of Series A Convertible Preferred Stock constituting a part of its
Articles of Incorporation (the "Certificate of Designations"). Such amendment
will delete Section 5(b) of the Certificate of Designations in the entirety and
replace it with the following:
(a) Conversion Rate. Each share of Series A Preferred
Stock may be converted into 6,667 shares of fully
paid and non-assessable shares of Common Stock of the
Company.
3. Amendment of Registration Agreement. If the registration statement
is declared effective on or before April 30, 2001, the Registration Agreement
will be automatically amended on such effective date by deleting Section 2.1
thereof in the entirety and replacing it with the following:
Section 2.1 Mandatory Registration. As soon as
reasonably practicable after the date of
this Agreement, the Company shall prepare
and file with the Commission a registration
statement and shall use its best efforts to
have such registration statement declared
effective by the Commission as soon
thereafter as reasonably possible.
4. Amendment of Agent's Warrants. If the registration statement is
declared effective on or before April 30, 2001, the Agent Warrants will be
automatically amended on such effective date to provide for an Exercise Price
(as defined in the Agent's Warrants) equal to the lower of the existing exercise
prices of the Purchaser's Warrants and Agent's Warrants or the exercise price of
the warrants included in the Units.
5. Registration of Shares Underlying Preferred Shares. In addition to
the Units, the registration statement will include a sufficient number of shares
of common stock to fully register all shares of common stock issuable upon
conversion of Preferred Shares and exercise of the Purchaser's Warrants and
Agent's Warrants, assuming that the Certificate of Designations is amended as
provided in Section 2, above.
6. Conforming Amendments. Upon amendment of the Preferred Stock
Agreements according to the preceding provisions of this Agreement, any other
provision of any Preferred Stock Agreement that conflicts with the terms of this
Modification Agreement shall be deemed to be modified or amended to be
consistent with the terms hereof. All other provisions of the Preferred Stock
Agreements shall remain in full force and effect and are unmodified hereby.
7. Agent's Exclusive Right to Future Equity Line Financing Agreements.
eAutoclaims agrees that the Agent shall have the exclusive right as the
financing source for any future equity line of credit or similar arrangements
based upon current agreed upon terms as summarized on Exhibit "B."
8. Sale of Shares. The Agent and the Purchasers shall have the right to
have up to $2,000,000 of eAutoclaims common stock owned by the Purchasers and
Agent sold as part of the Form SB-2 registration statement. Agent shall have the
right to designate each selling shareholder and the number of shares to be sold
by each selling shareholder. The purchase price per shall be the same as the
price set by the underwriters for the sale of shares of eAutoclaims, less
underwriters' discounts and commissions.
IN WITNESS WHEREOF, the parties below have executed this Modification
Agreement, effective as of the date first set forth above.
eAUTOCLAIMS, INC.
By:
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Xxxx Xxxxxx, President
THOMSON KERNAGHAN & CO., INC.,
individually and as Agent
By:
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Xxxxx Xxxxxx
Senior Vice President
LOCK-UP LETTER
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To the Board of Directors of xXxxxXxxxxx.xxx, Inc.
0000 Xxx. 00 X., Xxxxx 000
Xxxx Xxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx, President
Gentlemen:
By virtue of the execution of this letter agreement (the "Agreement")
the undersigned individual and/or entity (the "Shareholder"), as record and
beneficial owner of shares of Common Stock, Preferred Stock and/or Warrants (the
"Securities") of xXxxxXxxxxx.xxx, Inc., a Nevada corporation (the "Company")
hereby represents and warrants to the Company as follows:
a) The undersigned has full power and authority to enter into this
Agreement and to restrict the transferability and salability of
the Securities;
The Shareholder hereby agrees with the Company as follows:
Effective as of the close of business on Friday, January 12, 2001, the
undersigned Shareholder will not sell any securities of the Company pursuant to
Rule 144 or otherwise, for a period of one (1) year after the closing date of
the anticipated secondary offering of the Company (the "Offering") to be
underwritten by Xxxxx & Company other than as set forth below, or as otherwise
agreed to in writing by the Company and Xxxxx & Company ("Xxxxx").
- From and after January 12, 2001 to the date that is 30 days
after the closing date of the Offering, the undersigned
Shareholder will not sell any Securities, whether pursuant to
Rule 144 or otherwise. Such period is the First Period.
- From the last day of the First Period until the end of the
sixth month after the closing of the Offering, the undersigned
Shareholder may sell, without the consent of Xxxxx or the
Company, a number of shares equal to 5% of the average daily
trading volume for the month immediately preceding the month
of sale. Such period is the Second Period. The undersigned
Shareholder hereby grants Xxxxx the right of first refusal to
purchase any Securities that the Shareholder desires to sell
during the Second Period.
- From the last day of the Second Period until the end of the
twelfth month after the closing of the Offering, the
undersigned Shareholder may sell, without the consent of Xxxxx
or the Company, a number of shares equal to 10% of the average
daily trading volume for the month immediately preceding the
month of sale. Such period is the Third Period. The
undersigned Shareholder hereby grants Xxxxx the right of first
refusal to purchase any Securities that the Shareholder
desires to sell during the Third Period.
Example: Assume that 2,000,000 shares were traded in the month
prior to a sale during the Second Period and that there were 20 trading days in
such month. That equals an average of 100,000 shares traded per day. Therefore,
T.K. would be entitled to trade 5,000 shares per trading day in the following
month, or a total of 100,000 shares (10,000 per day or 200,000 per month in the
Third Period). Xxxxx will have the right of first refusal to affect either day
trades or block trades for these shares. Xxxxx would be required to give the
Shareholders notice within the first three (3) business days of the subsequent
month of its intent to handle the trades or pass on the trades and the trade
shall be executed within the first ___ business day of the subsequent month.
Nothing in this Agreement shall, or shall be deemed to, restrict the
right of the Shareholder to sell all or any portion of the Securities to any
other individual, firm or entity in a private transaction exempt from the
registration provisions of the Act and pursuant to the terms of a duly executed
investment letter. By virtue of the execution of this Agreement, the Shareholder
acknowledges his agreement and understanding that any purchaser of the
Securities in a private transaction must execute and deliver to the Shareholder
and the Company, an investment letter wherein such purchaser agrees to hold the
Securities for at least one (1) year commencing on the date of such sale and
without the benefit of any "tacking" for any period of time during which the
Securities were held by the Shareholder.
This Lock-Up Letter is conditioned upon the Company proceeding with its
proposed public offering. If the Form SB-2 is not filed by February 15, 2001 or
the Form SB-2 is not declared effective by April 30, 2001, which includes up to
$2,000,000 of the Agent's and Purchasers' shares being sold as part of the
offering, then this Lock-Up Letter shall be null and void.
Very truly yours,
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Signature
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Print Name
xXXXXXXXXXX.XXX, INC.
SPECIAL CORPORATE ACTIONS BY WRITTEN CONSENT OF THE
HOLDERS OF SERIES A CONVERTIBLE PREFERRED STOCK INCLUDING
CERTIFICATION, NOTICE, WAIVER AND POWER OF ATTORNEY
1. Consents:
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The undersigned holder of Series A Convertible Preferred Stock (the
"Series A Stock") of xXxxxxxxxxx.xxx, Inc. (the "Corporation"), acting pursuant
to Section 78.320, Nevada Revised Statutes, hereby waives all formal
requirements, including the necessity of holding a formal or informal meeting,
and any requirements that notice of such meeting be given, and hereby consents
to the adoption and approval of the following actions pursuant to Section 8 of
the Certificate of Designations, Rights, Preferences and Limitations of the
Series A Stock (the "Certificate of Designations"):
WHEREAS, the undersigned Shareholder deems it to be in the best
interests of the Corporation and the holders of Series A Stock to amend certain
provisions of the Certification of Designations pertaining to the conversion
rights thereof, but only if certain actions, as described below, have been taken
by the Corporation; and
WHEREAS, the undersigned Shareholder also deems it to be in the best
interests of the Corporation and the holders of Series A Stock to amend certain
provisions of the Registration Rights Agreement between the Shareholder and the
Corporation, but only if certain actions, as described below have been taken by
the Corporation.
I.
NOW, THEREFORE, BE IT RESOLVED, that, the Certificate of Designations
be amended by deleting Section 5(b) thereof in the entirety and replacing it
with the following:
(a) Conversion Rate. Each share of Series A Preferred Stock may be
converted into 6,667 shares of fully paid and non-assessable
shares of Common Stock of the Company.
II.
NOW, THEREFORE, BE IT FURTHER RESOLVED, that, the Registration Rights
Agreement be amended by deleting Section 2.1 thereof in the entirety and
replacing it with the following:
Section 2.1 Mandatory Registration. As soon as reasonably
practicable after the date of this Agreement, the
Company shall prepare and file with the Commission a
registration statement and shall use its best efforts
to have such registration statement declared
effective by the Commission as soon thereafter as
reasonably possible.
III.
FURTHER RESOLVED, that the Officers of the Corporation be, and hereby
are, authorized and directed in the Corporation's name and on its behalf to do
and perform all things and acts, and to execute and deliver or file all
instruments, certificates and documents, that such Officers shall determine to
be necessary, appropriate or desirable to carry out the foregoing resolutions,
any such determination to be conclusively evidenced by the doing or performing
of any such act or thing or the execution and delivery of any such instruments,
certificate or document.
IV.
FURTHER RESOLVED, that so long as the Company files a Form SB-2 before
its proposed secondary offering on or before February 15, 2001 and provided that
the subject registration statement is declared effective by the SEC on or before
April 30, 2001, then the undersigned shareholder agrees to waive any penalty
provisions for failure to register the shares of the Company's common stock
underlying the Series A Preferred Stock, Purchaser's Warrants or Agent's
Warrants as required in the Registration Rights Agreement or any other documents
or agreements between the Company and the undersigned.
2. Power of Attorney
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By execution hereof, the undersigned hereby irrevocably makes,
designates, constitutes and appoints Xxxxxx Xxxxxxxxx & Co., Ltd. acting through
any authorized officer, as his true and lawful agent and attorney in fact with
the same power and authority as if the undersigned had personally acted with
respect to the matter described in Item IV. The undersigned hereby gives to said
agent and attorney in fact full power and authority to extend the date set forth
in said Item to such later date as it, in its sole and absolute discretion,
deems appropriate and to execute and deliver such forms, signature pages,
agreements and other documents as may be required to accomplish such extension.
The undersigned hereby authorizes said agent and attorney in fact to take any
further action that the agent or attorney in fact shall consider necessary or
convenient in connection with any of the foregoing, hereby giving said agent and
attorney in fact full power and authority to do and perform each and every act
and thing necessary or convenient to be done as fully as might or could be done
if were personally present. This power of attorney shall be deemed coupled with
an interest, shall be irrevocable and shall survive the death, incapacity or
bankruptcy of the undersigned.
This Action by Written Consent is taken pursuant to the authority
conferred in Section 73.320 of the Nevada Revised Statutes. This Action by
Written Consent is one of several that may be executed by the holders of the
Series A Stock, each of which shall be deemed an original, but all of which
together with the consents executed by other stockholders shall constitute one
and the same instrument.
The actions taken by this consent shall have the same force and effect
as if taken by the undersigned at a special meeting of the stockholders of the
Corporation, duly called and constituted pursuant to the bylaws of the
Corporation and the laws of the State of Nevada.
IN WITNESS WHEREOF, the undersigned has executed these Special
Corporate Actions by Written Consent for the purpose of consenting thereto, and
does hereby affirm that the foregoing are the acts and deeds of the Corporation
and that the facts stated herein are true.
SHAREHOLDER:
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Signature
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Print Name
Number of Shares of Series A Stock owned:
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Date: , 2001
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EXHIBIT "B"
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We have granted Thomson Kernaghan (also referred to as Initial
Investor) an exclusive right to provide and act as agent for equity line
financing arrangements. The terms of a Securities Purchase Agreement and Equity
Line of Financing Agreement have been agreed upon. The Securities Purchase
Agreement and Equity Line Financing Agreement are collectively referred to as
the "Financing Agreement." The Financing Agreement entitles us to issue and sell
our common stock to the Initial Investor for up to an aggregate of $5,000,000
from time to time during the 24-month period, beginning on the effective date of
a to be filed registration statement. Each election by us to sell stock to the
Initial Investor is referred to as a "Put" Right.
Put Rights
In order to invoke a Put Right, we must have an effective registration
statement on file with the SEC registering the resale of the shares of our
Common Stock that may be issued as a result of exercising that Put Right. We
must give at least 15 trading days notice following any previous Put Notice to
deliver a Put notice to the Initial Investor. The Put Notice will specify the
investment amount, which shall not exceed the lessor of (A) $500,000 or (B) 150%
of the weighted volume average for the 20 trading days prior to the notice date
(the "Put Amount") and (ii) shall not be less than $50,000. The weighted volume
average the product of (A) stock price times (B) the trading volume of our stock
on the principal marketing which it is traded. The stock price on any given
trading day is the volume waited average trading price for our Common Stock
during such trading day as reported by Bloomberg Financial Press. The purchase
price per share of our common stock the Initial Investor shall pay is an amount
equal to 85% of the simple average of the three lowest closing bid prices of our
common stock over the 10 trading days beginning on the notice date, as reported
on Bloomberg. Subject to our meeting certain conditions, the Initial Investor is
required to fund and close within eleven (11) trading days of each Put Notice
date.
Conditions
The Initial Investor is not required to fund any Puts which causes the
Initial Investor or its affiliates to beneficially own more than 9.99% of our
outstanding shares of common stock. If we deliver a Put notice that would cause
the Initial Investor to exceed 9.99% of our outstanding shares of common stock,
we have agreed to reduce the amount of the Put Notice so that the 9.99% limit
will not be exceeded.
Certain conditions apply to our right to issue a Put Notice and the
Initial Investor's obligation to purchase our shares of Common Stock, including
but not limited to:
(i) The registration statement for the Common Stock underlying the
Financing Agreement must remain effective;
(ii) The representations, warranties and covenants made in the
Financing Agreement by us and the Initial Investor must remain
true;
(iii) There must be no material adverse change in our business;
(iv) The weighted average trading volume of our Common Stock for
the 10 trading days preceding both the Put Date and the
Closing Date with respect to each Put Notice shall be at least
100,000;
(v) The simple average of the closing bid price for our Common Stock
as reported on Bloomberg for the 10 trading days preceding both
the Put Date and the Closing Date must be greater than one dollar
($1.00) per share.
Right of First Refusal
The Initial Investor has a right of first refusal for a period of 24
months to purchase any proposed offering of our equity securities, including any
convertible securities or equity line structures or format similar in nature to
the Financing Agreement. Furthermore, if we issue any of our equity securities
with a price per shares, exercise price, or conversion price, for consideration
that is less than the fair market value of our Common Stock on the date issued,
we are required to issue to the Initial Investor additional shares of our Common
Stock to the extent necessary to lower the effective purchase price by the
Initial Investor for all shares of our Common Stock purchased by that Initial
Investor to the lower of 85% of the purchase price for a below market offer or
the purchase original paid by the Initial Investor pursuant to our Put Notices.
Fees and Warrants
The Initial Investor and Xxxxxx Xxxxxxxxx are also entitled to
additional warrants and fees as follows:
- Warrants to the Initial Investor. We are required to issue
warrants to the Initial Investor equal to 20% of the number of
our shares purchased pursuant to each Put Right. Each warrant
shall bear an exercise price per share equal to 120% of the
simple average of the closing bid prices of our Common Stock
as reported by Bloomberg for the 5 trading days immediately
preceding an applicable closing date. The warrants will
provide for cashless exercise at the Initial Investor's option
and piggyback registration rights.
- Standby fee to the Initial Investor. Generally, the Initial
Investor is entitled to a standby fee equal to one percent
(1%) per annum of the undrawn portion of the equity line. Such
fees shall be payable in cash or Common Stock, at our option.
- Set-up fee to the Agent. We are obligated to pay Xxxxxx
Xxxxxxxxx, as the agent, a set-up fee of $50,000. At our
option, we may pay the set-up fee either in cash or shares of
our Common Stock based upon a 5 day trading average.
- Placement fee to the Agent. On the closing date of each Put
Notice, we are required to pay Xxxxxx Xxxxxxxxx, as the agent,
a fee equal to 8% of the investment amount; provided, however,
we are not obligated to pay this placement fee until such time
as the aggregate amount of the placement fees exceed the
amount of the $50,000 set-up fee.
- Warrants to Agent. On each closing date we are obligated to
issue to Xxxxxx Xxxxxxxxx, as the agent, warrants to purchase
a number of shares of our Common Stock equal to 10% of the
number of shares purchased pursuant to each Put Notice. Such
warrants shall bear an exercise price equal to 120% of the
simple average of the closing bid price of our Common Stock as
reported on Bloomberg for the 5 trading days immediately
preceding the applicable closing date. These warrants will
contain cashless exercise and piggyback registration rights
provisions.
Indemnity
We are obligated to indemnify the Initial Investor and Xxxxxx Xxxxxxxxx
(including their stockholders, officers, directors, employees and agents) from
all liability and losses resulting from any misrepresentations or breaches made
by us in connection with the Financing Agreement or this registration statement.
Termination
We and the Initial Investor may, by mutual written consent, at any
time, terminate the Financing Agreement and any obligation by the Initial
Investor to purchase shares of our Common Stock thereunder. The Initial Investor
may terminate this agreement if we breach any of our representations, warranties
or covenants including in the Financing Agreement, if there is a change in law
or regulation that makes the provisions of the Financing Agreement or materially
impractical. The Initial Investor may also terminate the Financing Agreement at
any time after suspension of the availability of this registration statement for
use by the Initial Investor if we so not cure such suspension within 30 days.
