RESTATED MASTER MODIFICATION AGREEMENT
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This RESTATED MASTER MODIFICATION AGREEMENT (the "Modification
Agreement") is effective as of May 4, 2001, by and between xXXXXXXXXXX.XXX,
INC., a Nevada corporation ("eAutoclaims"), CALP II, LP ("CALP II"), GOVERNORS
ROAD, LLC, ("Governors Road, and together with CALP II, the "Purchasers"), 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 of Series A Convertible Preferred
Stock issued by eAutoclaims (the "Preferred Stock"). eAutoclaims, Agent and
Purchasers are herein collectively called the "Parties".
R E C I T A L S:
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 has filed a registration statement on Form SB-2
(the "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 previously entered into that certain Master
Modification Agreement effective January 12, 2001, and a Letter Agreement
effective April 27, 2001, which modified in certain respects the Preferred Stock
Agreements; and
WHEREAS, the purpose of this Modification Agreement is to set forth in
one document the current arrangements and understandings by and among
eAutoclaims, the Agent and Purchasers as it relates to the Preferred Stock; and
WHEREAS, eAutoclaims has requested that Governors Road fund an
additional $500,000 as bridge financing through the closing of the anticipated
public offering as evidenced by the Binding Bridge Financing Term Sheet, a copy
of which is attached as Exhibit "A" and the terms of which are incorporated
herein by reference; and
WHEREAS, Governors Road wishes to purchase 100 shares of eAutoclaims
Preferred Stock upon the terms and subject to the conditions set forth in this
Agreement and the Purchase; and
WHEREAS, the Parties desire to set forth their agreements with respect
to the modification of certain provisions included in the Preferred Stock
Agreements.
A G R E E M E N T S:
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. Contemporaneous with the execution of this
Modification Agreement, each Purchaser shall execute a Lock-Up Letter in the
form attached hereto as Exhibit "B" and deliver the original executed document
to eAutoclaims as soon as possible, but no later than five (5) business days
prior to the effective date of the Registration Statement. Each Purchaser hereby
consents to such amendments to (i) the Certificate of Designations, Rights,
Preferences and Limitations of Series A Convertible Preferred Stock (the
"Certificate of Designations") and (ii) the Registration Rights Agreement as
described in Sections 4 and 5 below.
2. Lock-Up Shares To be Released for Sale. Notwithstanding the foregoing,
the Parties agree that up to 200,000 shares of eAutoclaims' common stock held by
either of Dominion Capital, Ltd. or Southshore Capital Fund, Ltd. otherwise
subject to the terms of the Lock-Up Letter will be permitted to be sold at the
rate equal to ten percent (10%) of the prior day's average daily volume, and
will be freely tradable without restriction or further registration under the
Securities Act. .
3. Amendment to Purchase Agreement. Section 3.1 of the Purchase Agreement
is amended to increase the number of Preferred Shares issuable eAutoclaims under
the Purchase Agreement from 500 shares to 600 shares.
4. Amendment of Certificate of Designations. Within three (3) business days
after funding, eAutoclaims shall amend and file with the appropriate state
authorities the Certificate of Designations as follows:
(a) Section 1 shall be amended to increase the number of shares of
Preferred Stock from 500 to 600 shares.
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(b) Section 5(b)(ii) shall be revised to indicate that through June 30,
2001 each share of Preferred Stock may be converted into 6,667 shares
of fully paid and non-assessable shares of common stock. If the
currently pending Registration Statement is not declared effective by
June 30, 2001, the conversion price shall equal the lesser of (i)
sixty-two and one-half cents ($0.625) or (ii) seventy-five percent
(75%) of the average of the closing bid prices for the common stock
for the three (3) lowest trading days out of the twenty (20)
consecutive trading days immediately preceding the date of conversion,
as reported on the National Association of Security Dealers OTC
Bulletin Board Market (or such other National Securities Exchange or
market on which the common stock may trade at such time).
(c) A new Section 12 shall be added entitled "Special Mandatory
Redemption", which will provide that the Company is obligated to
redeem the one hundred (100) shares of Preferred Stock being purchased
by Governors Road pursuant to the Binding Bridge Financing Term Sheet
at one hundred twenty percent (120%) of the face amount ($6,000 per
share of Preferred Stock), plus accrued interest, upon the earlier of
August 15, 2001 or the closing of the Company's anticipated public
offering under cover of the Registration Statement underwritten by
Xxxxx & Company. If the Company does not redeem the one hundred (100)
shares of Preferred Stock acquired by Governors Road pursuant to the
Binding Bridge Financing Term Sheet for any reason, then the amended
conversion features set forth in revised Section 5(b)(ii) above shall
apply.
5. Funding Mechanics. $400,000 of the funding will occur in the first
traunch. After the Certificate of Designation is filed, the remaining $100,000
shall be funded within 2 business days. This funding mechanism is required to
that eAuto will have designated a sufficient number of Preferred Shares as of
the date of each funding.
6. Amendment of Registration Rights Agreement. The penalty provisions of
Article 2 of the Registration Rights Agreement are amended as follows:
Section 2.1 The penalty provisions contained in this section for failure
to register underlying shares on a timely basis are waived
subject to the eAutoclaims making a cash payment of $280,000
to the Purchasers on or before June 30, 2001. In the event
this cash payment is not made on or before June 30, 2001,
then the penalty provisions for failure to register on a
timely basis shall apply on a retroactive basis commencing
on April 30, 2001.
7. Amendment of Agent's Warrants. If the Registration Statement is declared
effective, the Agent Warrants and Purchasers' Warrants shall be automatically
amended on such effective date to provide for an Exercise Price (as defined in
the Agent's and Purchaser's Warrants) equal to the lower of (i) the existing
exercise prices of the Purchaser's Warrants and Agent's Warrants or (ii) the
lowest exercise price of the warrants included in the Units.
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8. Registration of Shares Underlying Preferred Stock. 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 Stock and exercise of the Purchaser's Warrants and
Agent's Warrants, provided however, that the Certificate of Designations is
amended as provided in Section 4 above.
9. Conforming Amendments. Upon amendment of the Preferred Stock Agreements
according to the preceding provisions of this Modification 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.
10. 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 "C."
11. Termination of Lock-Up Letters. If the Registration Statement is not
declared effective by June 30, 2001, then the Lock-Up Agreements shall be
terminated and of no further force and effect.
12. Issuance of Additional Shares to CALP II. eAutoclaims agrees that as
additional consideration for extending the terms of the original Master
Modification Agreement, eAutoclaims shall issue to CALP II 24,500 additional
shares of common stock at the closing of the underwriting. The Purchasers agree
to waive any requirement that $2,000,000 of their common shares be sold as part
of the underwriting.
13. Issuance of Preferred Stock Certificate. Contemporaneous with the
execution of this Modification Agreement, (i) Xxxxxxxx shall assign, transfer
and deliver 100 shares of Preferred Stock to Governors Road through one or more
certificates.
14. Conversion Limit. The Purchasers shall not convert any Preferred Stock
if the effective conversion increases their beneficial ownership in eAutoclaims
securities greater than 9.9%. All remaining shares of Preferred Stock will be
converted at such time as the total amount of outstanding Preferred Stock is
less than $250,000 (i.e., 50 shares).
15. Greenfield Fee. eAutoclaims shall pay to Greenfield Investments the sum
of $50,000, as consideration for its investment banking services to eAutoclaims,
within three (3) days after funding.
16. Release by eAutoclaims. eAutoclaims, as well as its successors and
assigns (the collectively, the "Releasing Parties"), hereby forever releases and
discharges the Purchasers, Southridge Capital Management, LLC and Agent as well
as their officers, directors, members, partners, attorneys, employees, agents,
managers, representatives, successors and assigns, in both their individual and
representation capacities (collectively, the "Released Parties"), from any and
all actions, causes of action, obligations, bad faith claims, costs, expenses,
attorney's fees, damages, claims, liabilities and demands of whatsoever
character, nature and kind, whether in contract or tort, known or unknown,
suspected or unsuspected, which the Releasing Parties now may own or hold,
against the Released Parties, directly or indirectly, deriving from, related to,
connected with or incidental to the execution and performance of this
Modification Agreement, the Preferred Stock Agreements and the $500,000 bridge
loan financing.
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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
CALP II, LP
By:
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As:
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GOVERNORS ROAD, LLC
By:
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As:
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EXHIBIT "A"
xXXXXXXXXXX.XXX, INC.
BINDING BRIDGE FINANCING TERM SHEET
$500,000 SERIES A PREFERRED STOCK
BY
GOVERNORS ROAD, LLC
Issuer: xXxxxxxxxxx.xxx, Inc. ("eAuto")
Purchaser: Governors Road, LLC ("Governors Road")
Securities: Series A Preferred Stock
Amount: $500,000
Special Redemption Right:
eAuto and Governor's Road agree that
eAuto shall be obligated to redeem the
Series A Preferred Stock issued pursuant
to this Binding Bridge Funding Term
Sheet upon the earlier of August 15,
2001 or the closing of eAuto's public
offering underwritten by Xxxxx &
Company, Inc. at a redemption price
equal to 120% of the face amount
($600,000) plus accrued interest.
Conversion Rights in the
Event of Non-Redemption:
If eAuto does not redeem the Series A
Preferred Stock for any reason, then the
Series A Preferred Stock shall have
those rights and preferences as
described in the Master Modification
Agreement and related Amendment by
Letter Agreement dated April 27, 2001.
The conversion price of the Series A
Preferred Stock shall be reduced from
$.75 to the lesser or 75% of the market
value at the time of conversion of a
share of Series A Preferred Stock or
62.5 cents.
Registration Rights:
eAuto will include the Common Stock
underlying the Series A Preferred Stock
and related warrants issued pursuant to
this Term Sheet in eAuto's next
amendment to Form SB-2, presently
pending with the SEC.
Warrants:
Purchaser Warrants will be issued with
the same terms and conditions as the
existing Purchaser's Warrants. The
exercise price of the Purchaser's
Warrants will be reset to the lower of
the current exercise price or the lowest
exercise price of the warrants included
in the Units, which is currently $4.00.
Lock-Up Arrangements:
The current lock-up arrangements for
Selling Shareholders as described in
Amendment No. 1 to Form SB-2 shall apply
(copy attached - page 53), except that
200,000 shares of stock will be released
from the lock up and be permitted to be
sold at a rate equal to 10% of the prior
day's average daily volume.
Investment Banking Fee:
$50,000, payable to Greenfield
Investments.
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Other Undertakings:
To the extent applicable, the provisions
under the caption "Master Modification
Agreement and Related Amendment" in
Amendment No. to Form SB-2 shall apply
(copy attached - page 50).
Other Covenants:
eAuto will prepare such documents as
required by counsel to Governors Road.
eAuto shall be responsible for attorneys
fees and costs of Governor Road. It is
anticipated that the definitive
documents will include but not be
limited to the following:
o Amendment to current
Designation Rights and
Preferences of Series A
Preferred Stock.
o Issuance of Series A Preferred
Stock Certificate.
o Escrow of common shares.
o Issuance of Purchaser
Warrants.
o Such other documents as
reasonably requested by
counsel to Governors Road.
Funding:
Governors Road agrees to wire transfer
eAuto $500,000 upon execution final
documentation acceptable to counsel to
Governors Road, receipt in escrow of the
Series A Preferred Stock Certificate,
and execution of this Binding Bridge
Funding Term Sheet. This Term Sheet is
intended to be a legally binding
contract between Governors Road and
eAuto. eAuto will expeditiously proceed
to prepare final documents in accordance
with the provisions required by
Governors Road and its counsel.
xXXXXXXXXXX.XXX, INC.
By:
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Print Name:
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Title:
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GOVERNORS ROAD, LLC
By:
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Print Name:
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Title:
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EXHIBIT "B"
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.
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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:
o 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.
o 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.
o 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.
o 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.
o 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.
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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.
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EXHIBIT "C"
LOCK-UP LETTER
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").
o 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.
o 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.
o 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.
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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 7 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.
If the Form SB-2 is not declared effective by June 30, 2001,
which includes the common shares underlying the Preferred Shares and Warrants,
then this Lock-Up Letter shall be null and void.
Very truly yours,
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Signature
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Print Name
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