Exhibit 2.1
Primal Solutions, Inc. Preliminary Distribution Agreement
Conformed Copy
PRIMAL SOLUTIONS, INC.
PRELIMINARY DISTRIBUTION AGREEMENT
This Primal Solutions, Inc. Preliminary Distribution Agreement (this
"Agreement") is dated as of July 31, 2000, and is entered by and among Xxxxx
Communications, Inc., a Delaware corporation ("Xxxxx"), Primal Solutions, Inc.,
a Delaware corporation and wholly owned subsidiary of Xxxxx ("New Primal"), Xxxx
Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxx
X. Xxxxxxx ("Xxxxxxx"), Xxxx Xxxxx ("Anand"), Xxxxxx Xxxxxxxxxx ("Cholappadi"),
Xxxxxx Xxxxx ("Gupta"), Xxxxxxxx Group, Inc., a Delaware corporation (the
"Xxxxxxxx Group"), Xxxxxxx X. Xxxxxx, III ("Xxxxxx III"), and Xxxx X. XxXxxxxxx
("XxXxxxxxx"). Faltys, Simrell, Xxxxxx and Xxxxxxx are hereinafter referred to
collectively as the "Old Primal Majority Stockholders"; Anand, Cholappadi and
Gupta are hereinafter referred to collectively as the "Old Primal Minority
Stockholders"; the Old Primal Majority Stockholders and the Old Primal Minority
Stockholders are hereinafter referred to collectively as the "Old Primal
Stockholders"; and Xxxxx, Xxxxxxxx Group, Xxxxxx III and XxXxxxxxx are
hereinafter referred to collectively as the "Xxxxx Parties." Xxxxxxxx Group,
Xxxxxx III and XxXxxxxxx are entering into this Agreement for the limited
purposes described in Section 22 below. All other capitalized terms appearing
herein that are not defined herein are used with the same meanings as are
ascribed to such terms in the Primal Merger Agreement (as defined below).
Recitals
A. In order to give effect to this Agreement, the parties desire to amend
(i) that certain Agreement and Plan of Merger, dated as of March 19,1999 (as
amended by Amendment No. 1 thereto, dated as of March 19, 1999, Amendment No. 2
thereto, dated as of September 27, 1999, and Amendment No. 3 thereto, dated as
of October 1, 1999, and in effect on the date hereof, the "Primal Merger
Agreement"), by and among, Xxxxx, ACI Telecommunications Financial Services
Corporation, a Delaware corporation and wholly owned subsidiary of Xxxxx
("Merger Sub"), Primal Systems, Inc., a California corporation ("Old Primal"),
and the Old Primal Stockholders, and (ii) that certain Investors Rights
Agreement, dated as of September 30, 1999 (the "Investors Rights Agreement"), by
and among Xxxxx and the Old Primal Stockholders, and (iii) that certain Escrow
Agreement, dated as of September 30, 1999 (as amended by Amendment No. 1
thereto, dated as October 1, 1999, and in effect on the date hereof, the "Escrow
Agreement"), by and among Xxxxx, Merger Sub, the Old Primal Majority
Stockholders and the Escrow Agent.
B. The Merger was effective at 11:59 p.m., Eastern Daylight Savings Time,
on September 30, 1999, at which time Old Primal was merged with and into Merger
Sub, the separate existence of Old Primal ceased, and the name of Merger Sub was
changed to "Primal Solutions, Inc."
X. Xxxxx and the Old Primal Stockholders have determined that the
stockholders of Xxxxx may better realize the true value of Xxxxx and New Primal
by Xxxxx'x making a distribution (the "Distribution") to the holders of Xxxxx
Common Stock (which will not include the Old Primal Stockholders as more fully
described below), of one share of the common stock, par value $0.01 per
share (the "New Primal Common Stock"), of New Primal for each share of Xxxxx
Common Stock held by such holders on the record date (the "Record Date") for the
Distribution, with New Primal's becoming an independent publicly held company
following the Distribution.
D. To effectuate the Distribution, the parties hereto desire to enter
into the agreements hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto,
intending to be legally bound, agree as follows:
1. The Distribution; Pre-Distribution Covenants.
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1.1 The Distribution. The parties hereto will use their commercially
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reasonable best efforts to cause the Distribution to be made by Xxxxx as soon as
is reasonably practicable and otherwise to give effect to the transactions
described herein or contemplated hereby. Xxxxx and New Primal will cause the
Subsidiary (Wireless Billing Systems) to be wholly owned by New Primal on the
effective date of the Distribution (the "Distribution Date").
1.2 Distribution Concepts.
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(a) Certain Definitions. For purposes of this Agreement, except
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as otherwise expressly provided or unless the context otherwise clearly
requires, the terms defined in this Section 12 have the meanings assigned
to them or referred to in this Section 12, and include the plural as well
as the singular:
"Options"--with respect to an issuer of securities, means
options, warrants, subscriptions, calls, commitments or rights of any
character to purchase, subscribe for or otherwise acquire either capital
stock or Convertible Securities of the issuer.
"Convertible Securities"--with respect to an issuer of
securities, means any capital stock, evidences of indebtedness, shares or
other securities convertible into or exchangeable for capital stock of the
issuer.
"Fully Diluted Basis"--when calculating the number of shares of a
specific security outstanding at any date, means the number of shares of
the specified security outstanding calculated as if all Options had been
fully exercised and the specified securities issued immediately prior to
the relevant date of determination (and, if the exercise thereof resulted
in the issuance of Convertible Securities, such Convertible Securities were
fully converted into shares of the specified security) and were outstanding
as of such date, and all Convertible Securities had been fully converted
into shares of the specified security immediately prior to the relevant
date of determination (and, if the conversion thereof resulted in the
issuance of
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Convertible Securities, such Convertible Securities were fully converted
into shares of the specified security) and were outstanding as of such
date.
"Fully Diluted Basis on the Distribution Date"--when calculating
the number of shares of Xxxxx Common Stock outstanding on the Distribution
Date, after giving effect to the Distribution, means the sum of (i) the
outstanding shares of Xxxxx Common Stock on the Record Date, plus (ii) the
aggregate number of shares of Xxxxx Common Stock, if any, issued between
the Record Date and the Distribution Date upon the exercise of Options and
the conversion or exchange of Convertible Securities, plus (iii) the
aggregate number of shares of Xxxxx Common Stock reserved on the
Distribution Date for issuance upon the exercise of Options and the
conversion or exchange of Convertible Securities (excluding the shares of
Xxxxx Common Stock reserved for issuance upon the conversion of the Series
F Preferred Stock (as defined in Section 31 hereof) and the Series G
Preferred Stock (as defined in Section 34 hereof)) after giving effect to
the adjustments for which provisions are made in Section 13 hereof. For the
purposes of clause (iii) of the preceding sentence, the number of shares of
Xxxxx Common Stock reserved on the Distribution Date for issuance upon the
exercise of Options and the conversion or exchange of Convertible
Securities (excluding the shares of Xxxxx Common Stock reserved for
issuance upon the conversion of the Series F Preferred Stock and the Series
G Preferred Stock) shall be calculated after giving effect to the
adjustments for which provisions are made in Section 13 hereof.
(b) Capitalization of New Primal on the Distribution Date. The
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capitalization of New Primal on the Distribution Date shall be as set forth
in Section 13 hereof. On the Distribution Date, New Primal shall have no
Options or Convertible Securities outstanding.
(c) Ownership of New Primal Following the Distribution. The
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ownership of New Primal on the Distribution Date, after giving effect to
the Distribution, shall be as set forth in Section 36 hereof.
(d) Ownership of Xxxxx Following the Distribution. The ownership
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of Xxxxx on the Distribution Date, after giving effect to the Distribution,
shall be as set forth in Section 36 hereof.
(e) Calculations. For purposes of this Agreement, only (i)
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shares of Series F Preferred Stock acquired by the Old Primal Stockholders
pursuant to the Primal Merger Agreement and this Agreement, (ii) shares of
Series G Preferred Stock acquired pursuant to this Agreement, and (iii)
shares of Xxxxx Common Stock acquired upon conversion of the Series F
Preferred Stock and Series G Preferred Stock shall be used to calculate the
beneficial ownership percentages of the Old Primal Stockholders. If any of
the Old Primal Stockholders has converted his shares
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of the Series F Preferred Stock into Xxxxx Common Stock prior to the date
of the redemption described in Section 35 hereof or prior to the
Distribution Date, such Person shall be deemed to be the beneficial owner
of such shares on the redemption date and the Distribution Date, as the
case may be, to calculate the beneficial ownership percentages of such
Person for all purposes of this Agreement unless such Person establishes to
the satisfaction of Xxxxx and its transfer agent prior to the redemption
date or the Distribution Date, as the case may be, that such Person is not
the beneficial owner of such shares. Exhibit 1.2(e) hereto sets forth
examples of the calculations used in this Agreement. Such examples assume
(i) that the outstanding capitalization of Xxxxx is as set forth in Section
21 hereof, (ii) that all the Old Primal Stockholders are parties hereto,
(iii) that none of Xxxxx'x outstanding Options are exercised for, or
Convertible Securities converted into or exchanged for, shares of Xxxxx
Common Stock between the date hereof and the Distribution Date, and (iv)
that all of such Options and Convertible Securities remain outstanding on
the Distribution Date.
(f) Closing Condition. The parties acknowledge and agree that it
is a condition to making the Distribution and consummating the other
transactions herein contemplated to be consummated on the Distribution Date
that no permanent injunction or preliminary injunction or other order shall
have been entered, and not vacated, by a court or administrative agency of
competent jurisdiction, in any proceeding or action, which enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby, but that the threat or existence of any other
litigation, action or other proceeding at law or in equity shall not
prevent the consummation of such transactions.
1.3 Pre-Distribution Covenants.
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(a) Business of Primal. Subject (until the Distribution Date) to
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the fiduciary duties owed to Xxxxx, as the sole stockholder of New Primal, the
business and affairs of New Primal shall be managed by or under the direction of
New Primal's board of directors. In furtherance of the Distribution and the
other transactions contemplated hereby, however, between the date hereof and the
Distribution Date, Xxxxx, New Primal and the Old Primal Stockholders (i) will
use their commercially reasonable best efforts to cause, except as set forth on
Schedule 13 hereof, New Primal and Subsidiary to conduct their respective
businesses only in the ordinary course consistent with past practice, (ii) will
cause New Primal and Subsidiary not to dispose of any of their respective assets
or incur any liabilities other than, in each case, in the normal course of
business consistent with past practice or as contemplated hereby, and (iii) will
not change the capitalization of New Primal or Subsidiary, whether by merger,
recapitalization, restructuring, amendment to the terms of its capital stock,
sale of stock or otherwise (or distribution of treasury stock), except as
specifically set forth herein.
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(b) Capitalization of Xxxxx; Governance. Between the date hereof
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and the Distribution Date, Xxxxx will not, without the consent of the Old
Primal Majority Stockholders, not to be unreasonably withheld, change the
capitalization of Xxxxx, whether by merger, recapitalization,
restructuring, amendment to the terms of its capital stock, sale of stock
or otherwise (or distribution of treasury stock), except upon the exercise
or conversion of outstanding Options and Convertible Securities and except
as specifically set forth herein. Between the date hereof and the
Distribution Date, Xxxxx will not, without the consent of the Old Primal
Majority Stockholders, not to be unreasonably withheld, amend its
Certificate of Incorporation or Bylaws or take any other action to
increase, decrease or otherwise alter or modify the corporate governance
rights of its stockholders, including, without limitation, distributing
rights commonly known as a "poison pill" plan, implementing staggered terms
for its Board members, or adopting advance notice provisions for its
stockholders meetings.
(c) Capitalization of New Primal. Between the Record Date and
the Distribution Date, Xxxxx and the New Primal board of directors shall
take any and all actions necessary to amend the Certificate of
Incorporation of New Primal to increase the authorized number of shares of
New Primal Common Stock to be equal to (i) the sum of (1) the quotient
obtained by dividing (A) the sum of (x) number of shares of Xxxxx Common
Stock outstanding on the Record Date (excluding treasury shares) plus (y)
the number of shares of Xxxxx Common Stock issuable in the Distribution to
the holders of Xxxxx'x Series A, B, C, D and E Preferred Stocks and the
holder of the Waterside Note as if such securities had been converted into
Xxxxx Common Stock on the Record Date, by (B) .68 (such number of shares
being referred to herein collectively as the "New Primal Distributable
Shares" and individually as a "New Primal Distributable Share"), plus (2)
250,000 shares of New Primal Common Stock; or (ii) such greater number of
shares of New Primal Common Stock as the Old Primal Majority Stockholders
may request.
1.4 Failure to Complete the Distribution. Without limiting any other
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remedies, whether at law or in equity, if the parties fail to complete the
Distribution, the following provisions shall apply. The events described in
paragraphs (a), (b) and (c) of this Section 14 are hereinafter referred to
individually as a "Distribution Failure Event." The date on which a Distribution
Failure Event occurs is hereinafter referred to as the "Distribution Failure
Event Date."
(a) Xxxxx Party or Parties at Fault. If (i) the Distribution has
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not occurred on or before December 31, 2000, (ii) the failure of the
Distribution to have occurred on or before such date shall be due to the
failure of the Xxxxx Parties, or any one or more of the Xxxxx Parties, to
comply fully with its or his, as the case may be, obligations under this
Agreement or their representations and warranties herein are not true in
all material respects, and (iii) the Old Primal Stockholders shall have
substantially complied with their respective obligations under this
Agreement and
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their respective representations and warranties herein are true in all
material respects, then, in such events, Xxxxx shall forgive the Loans (as
defined in Section 5 hereof), return the promissory notes evidencing the
Loans to each of the Old Primal Stockholders, respectively, and release the
shares of Series G Preferred Stock (as defined in Section 34 hereof)
pledged thereunder.
(b) Xxxxxx, Xxxxxxx or Xxxxxx at Fault. If (i) the Distribution
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has not occurred on or before December 31, 2000, (ii) the failure of the
Distribution to have occurred on or before such date shall be due to the
failure of Xxxxxx, Xxxxxxx and Xxxxxx, or any one or more of Xxxxxx,
Xxxxxxx or Xxxxxx, to comply fully with their or his obligations under this
Agreement or their or his representations and warranties herein are not
true in all material respects, and (iii) Xxxxxxx, the Old Primal Minority
Stockholders and the Xxxxx Parties shall have substantially complied with
their respective obligations under this Agreement and their respective
representations and warranties herein are true in all material respects,
then, in such events, each of the Old Primal Stockholders shall deliver, or
cause to be delivered, to Xxxxx their respective pro rata portion, based on
their respective pro rata ownership of Old Primal immediately prior to the
Merger, of such number of shares of the Series G Preferred Stock pledged to
secure the repayment of the Loans as would, if converted into Xxxxx Common
Stock on the Distribution Failure Event Date, when subtracted from the
total number of shares of the Xxxxx Common Stock reserved for conversion of
the Series G Preferred Stock collectively beneficially owned by the Old
Primal Stockholders on the Distribution Failure Event Date, leave
outstanding shares of the Series G Preferred Stock that would equal,
assuming the shares of the Series G Preferred Stock were converted into
Xxxxx Common Stock, in the aggregate 20% of the Xxxxx Common Stock on a
Fully Diluted Basis on the Distribution Failure Event Date.
In addition to returning to Xxxxx their pro rata portion of the
shares of the Series G Preferred Stock referred to above, each of Xxxxxx,
Xxxxxxx and Xxxxxx shall also deliver 20,000 shares of the Series G
Preferred Stock to Xxxxxxx and the Old Primal Minority Stockholders. These
60,000 shares of the Series G Preferred Stock shall be distributed to
Xxxxxxx and the Old Primal Minority Stockholders pro rata based on their
respective pro rata ownership of Old Primal immediately prior to the
Merger, and, following the delivery of such shares, the Loans to Xxxxxxx
and the Old Primal Minority Stockholders shall be forgiven and none of such
Persons shall have any further liability therefor.
(c) Xxxxxxx at Fault. If (i) the Distribution has not occurred
on or before December 31, 2000, (ii) the failure of the Distribution to
have occurred on or before such date shall be due to the failure of Xxxxxxx
to comply fully with his obligations under this Agreement or his
representations and warranties herein are not true in all material
respects, and (iii) Xxxxxx, Xxxxxxx and Xxxxxx, the Old Primal
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Minority Stockholders and the Xxxxx Parties shall have substantially
complied with their respective obligations under this Agreement and their
respective representations and warranties herein are true in all material
respects, then, in such events, each of the Old Primal Stockholders shall
deliver, or cause to be delivered, to Xxxxx their respective pro rata
portion, based on their respective pro rata ownership of Old Primal
immediately prior to the Merger, of such number of shares of the Series G
Preferred Stock pledged to secure the repayment of the Loans as would, if
converted into Xxxxx Common Stock on the Distribution Failure Event Date,
when subtracted from the total number of shares of the Xxxxx Common Stock
reserved for conversion of the Series G Preferred Stock collectively
beneficially owned by the Old Primal Stockholders on the Distribution
Failure Event Date, leave outstanding shares of the Series G Preferred
Stock that would equal, assuming the shares of the Series G Preferred Stock
were converted into Xxxxx Common Stock, in the aggregate 20% of the Xxxxx
Common Stock on a Fully Diluted Basis on the Distribution Failure Event
Date.
In addition to returning to Xxxxx his pro rata portion of the
shares of the Series G Preferred Stock referred to above, Xxxxxxx shall
also deliver 60,000 shares of the Series G Preferred Stock to Faltys,
Simrell, Xxxxxx and the Old Primal Minority Stockholders. These 60,000
shares of the Series G Preferred Stock shall be distributed to Faltys,
Simrell, Xxxxxx and the Old Primal Minority Stockholders pro rata based on
their respective pro rata ownership of Old Primal immediately prior to the
Merger, and, following the delivery of such shares, the Loans to Faltys,
Simrell, Xxxxxx and the Old Primal Minority Stockholders shall be forgiven
and none of such Persons shall have any further liability therefor.
(d) Old Primal Minority Stockholders at Fault. If (i) the
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Distribution has not occurred on or before December 31, 2000, (ii) the
failure of the Distribution to have occurred on or before such date shall
be due to the failure of the Old Primal Minority Stockholders, or any one
or more of the Old Primal Minority Stockholders, to comply fully with their
or his obligations under this Agreement or their or his representations and
warranties herein are not true in all material respects, and (iii) the (A)
Xxxxxx, Xxxxxxx and Xxxxxx, (B) Xxxxxxx and (C) the Xxxxx Parties shall
have substantially complied with their respective obligations under this
Agreement and their respective representations and warranties herein are
true in all material respects, then, in such events, the Old Primal
Stockholders shall deliver, or cause to be delivered, to Xxxxx their
respective pro rata portion, based on their respective pro rata ownership
of Old Primal immediately prior to the Merger, of such number of shares of
the Series G Preferred Stock pledged to secure the repayment of the Loans
as would, if converted into Xxxxx Common Stock on the Distribution Failure
Event Date, when subtracted from the total number of shares of the Xxxxx
Common Stock reserved for conversion of the Series G Preferred Stock
collectively beneficially owned by the Old Primal Stockholders on the
Distribution Failure Event Date, leave
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outstanding shares of the Series G Preferred Stock that would equal,
assuming the shares of the Series G Preferred Stock were converted into
Xxxxx Common Stock, in the aggregate 20% of the Xxxxx Common Stock on a
Fully Diluted Basis on the Distribution Failure Event Date.
In addition to returning to Xxxxx their pro rata portion of the shares
of the Series G Preferred Stock referred to above, each of the Old Primal
Minority Stockholders shall also deliver 20,000 shares of the Series G
Preferred Stock to the Old Primal Majority Stockholders. These 60,000
shares of the Series G Preferred Stock shall be distributed to the Old
Primal Majority Stockholders pro rata based on their respective pro rata
ownership of Old Primal immediately prior to the Merger, and, following the
delivery of such shares, the Loans to the Old Primal Majority Stockholders
shall be forgiven and none of such Persons shall have any further liability
therefor.
(e) More Than One Party at Fault. If (i) the Distribution has not
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occurred on or before December 31, 2000, and (ii) the failure of the
Distribution to have occurred on or before such date shall be due to (A)
the failure of two or more, but less than all, of (1) the Xxxxx Parties or
any one or more of the Xxxxx Parties, (2) Xxxxxx, Xxxxxxx and Xxxxxx, or
any one or more of Xxxxxx, Xxxxxxx or Xxxxxx, (3) Xxxxxxx or (4) the Old
Primal Minority Stockholders, or any one or more of the Old Primal Minority
Stockholders, to comply fully with their, his or its, as the case may be,
obligations under this Agreement or their, his or its, as the case may be,
representations and warranties herein are not true in all material respects
as hereinabove contemplated in paragraphs (a) through (d), inclusive, of
this Section 14 and (B) the other parties hereto shall have substantially
complied with their respective obligations under this Agreement and their
respective representations and warranties herein are true in all material
respects, then, in such events, the provisions set forth in paragraphs (a)
through (d), inclusive, of this Section 14, shall apply with respect to the
parties at fault. The foregoing notwithstanding, however, if any of the
parties at fault are Old Primal Stockholders, and such parties would, but
for this paragraph (e), be entitled to receive additional shares of the
Series G Preferred Stock or have their Loans forgiven, or both, under any
of paragraphs (a) through (d), inclusive, of this Section 14 then, in such
events, such party or parties at fault shall not be entitled to receive any
such additional shares of the Series G Preferred Stock, such shares shall
be distributed to those Old Primal Stockholders who are not at fault pro
rata based on their respective pro rata ownership of Old Primal immediately
prior to the Merger, and the Loans to such party or parties at fault shall
not be forgiven and shall remain in full force and effect.
(f) No Party or All Parties at Fault. If (i) the Distribution
has not occurred on or before December 31, 2000, and (ii) the failure of
the Distribution to have occurred on or before such date shall be due to
(A) the failure of one or more
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of the Old Primal Stockholders and one or more of the Xxxxx Parties to
comply fully with their, his or its, as the case may be, obligations under
this Agreement or their, his or its, as the case may be, representations
and warranties herein are not true in all material respects, or (B) the
occurrence of (1) events or circumstances not within the control of any of
the Old Primal Stockholders or the Xxxxx Parties, and (2) the Old Primal
Stockholders and the Xxxxx Parties shall have substantially complied with
their respective obligations under this Agreement and their representations
and warranties herein are true in all material respects, then, in such
events, the Old Primal Stockholders shall deliver, or cause to be
delivered, to Xxxxx their respective pro rata portion, based on their
respective pro rata ownership of Old Primal immediately prior to the
Merger, of such number of shares of the Series G Preferred Stock pledged to
secure the repayment of the Loans in full payment, satisfaction and
discharge of the promissory notes evidencing the Loans as would, if
converted into Xxxxx Common Stock on the Distribution Failure Event Date,
when subtracted from the total number of shares of the Xxxxx Common Stock
reserved for conversion of the Series G Preferred Stock collectively
beneficially owned by the Old Primal Stockholders on the Distribution
Failure Event Date, leave outstanding shares of the Series G Preferred
Stock that would equal, assuming the shares of the Series G Preferred Stock
were converted into Xxxxx Common Stock, in the aggregate 20% of the Xxxxx
Common Stock on a Fully Diluted Basis on the Distribution Failure Event
Date. Following the delivery to Xxxxx of the shares of the Series F
Preferred Stock as contemplated in this Xxxxxxx 00, xxxx of the Old Primal
Stockholders shall have any further liability for the Loans.
(g) Automatic Extension. The foregoing notwithstanding, however,
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the date on which these transactions are to occur shall be automatically
extended to February 15, 2001, without any action on the part of the
parties hereto if Xxxxx, on the one hand, and the Old Primal Majority
Stockholders, on the other hand, and without any party waiving any rights
hereunder, mutually agree that it is reasonably likely that the
Distribution can be consummated on or before such date.
(h) Closings. The closing of the transactions contemplated by
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this Section 14 and the delivery of the documents, instruments and other
papers contemplated hereby shall take place on or before the tenth business
day following December 31, 2000, or February 15, 2001, as the case may be.
2. Representations and Warranties.
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2.1 Xxxxx Capitalization. Xxxxx represents and warrants to the Old
Primal Majority Stockholders that, as of the date hereof, Xxxxx has (i)
8,745,651 shares of Xxxxx Common Stock outstanding (which excludes 1,215,216
shares of Xxxxx Common Stock held by Xxxxx as treasury shares, and which
excludes shares of Xxxxx Common Stock issuable to the Old Primal Stockholders
upon conversion of their shares of the Series F Preferred Stock); (ii) 2,700,000
shares
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(which excludes the 3,945,175 shares of Xxxxx Preferred Stock issued to the
Former Old Primal Stockholders and Xxxxxxx in the Merger) of convertible
preferred stock outstanding, which, as of the date hereof, are convertible into
an aggregate of 1,674,000 shares of Xxxxx Common Stock; (iii) options and
warrants outstanding, which, as of the date hereof, are exercisable to purchase
an aggregate of 4,444,999 shares of Xxxxx Common Stock; and (iv) a convertible
promissory note (the "Waterside Note") outstanding, which, as of the date
hereof, is (and assuming the Distribution Date is on or before December 31,
2000, will be) convertible into an aggregate of 280,000 shares of Xxxxx Common
Stock. Accordingly, as of the date hereof, Xxxxx has 15,144,650 shares of Xxxxx
Common Stock outstanding on a Fully Diluted Basis (which excludes shares of
Xxxxx Common Stock issuable to the Old Primal Stockholders upon conversion of
their shares of the Series F Preferred Stock). Xxxxx is also obligated to issue
to Waterside Capital Corporation additional warrants to purchase shares of Xxxxx
Common Stock in each year that amounts remain unpaid on the Waterside Note.
Except as set forth above, Xxxxx has no other outstanding options, warrants,
convertible or derivative securities or any other equity securities, or any
outstanding rights to obtain or acquire equity securities. There are no
preemptive rights.
2.2 Ownership of New Primal and Subsidiary. Xxxxx represents and
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warrants to the Old Primal Majority Stockholders that, as of the date hereof,
Xxxxx owns all of the issued and outstanding equity securities of New Primal and
there are no options, warrants, convertible or derivative securities or any
other equity securities, or any outstanding rights to obtain or acquire equity
securities in New Primal; and New Primal owns all of the issued and outstanding
equity securities of Subsidiary, and there are no options, warrants, convertible
or derivative securities or any other equity securities, or any outstanding
rights to obtain or acquire equity securities in Subsidiary. There are no
preemptive rights.
2.3 Authority. Each of the parties hereto represents and warrants to
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the others that it or he, as the case may be, has the full power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, without further consents or approvals, governmental or
otherwise, except for those already obtained and except for those contemplated
hereby.
3. Pre-Distribution Transactions.
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3.1 Release of Escrow Shares. Xxxxx and the Old Primal Stockholders
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hereby agree that, pursuant to Section 3.3 of the Primal Merger Agreement, an
aggregate of 1,945,188 shares of Xxxxx Preferred Stock (hereinafter referred to
as the "Series F Preferred Stock") are to be released from the Escrow Agreement,
and that such Escrow Shares shall be distributed to each of the Old Primal
Stockholders as follows:
Name Percentage Number of Shares
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Xxxxxx 30.4861% 593,013
Xxxxxxx 21.5999% 420,159
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Name Percentage Number of Shares
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Xxxxxx 21.5999% 420,159
Xxxxxxx 16.4969% 320,895
Anand 3.2724% 63,654
Cholappadi 3.2724% 63,654
Gupta 3.2724% 63,654
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Total 1,945,188
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Each of the Old Primal Stockholders hereby acknowledges and confirms
that the 1,945,188 shares of the Series F Preferred Stock constitutes all of the
Escrow Shares, and that 54,812 shares of the Series F Preferred were to be
returned to Xxxxx in consideration for Xxxxx'x granting options to purchase
54,812 shares of Xxxxx Common Stock to former employees of Old Primal on the day
following the Merger. Accordingly, pursuant to the Escrow Agreement, this
Agreement will constitute the joint written instructions of Xxxxx and the Old
Primal Stockholders to release immediately to each of the Old Primal
Stockholders the number of Escrow Shares set forth opposite such Old Primal
Stockholder's name in the table above and held by the Escrow Agent pursuant to
the Escrow Agreement, and to return to Xxxxx 54,812 Escrow Shares. On the first
business day following the date hereof, Xxxxx and the Old Primal Stockholders
will jointly instruct the Escrow Agent promptly to give effect to the foregoing.
3.2 Determination and Issuance of Additional Merger Consideration.
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Xxxxx and the Old Primal Stockholders hereby agree that, pursuant to Section 3.3
of the Primal Merger Agreement, an aggregate of 3,236,531 shares of Series F
Preferred Stock are to be issued to the Old Primal Stockholders as Additional
Merger Consideration, and that such shares shall be distributed to each of the
Old Primal Stockholders as follows:
Name Percentage Number of Shares
------------ -------------- --------------------
Xxxxxx 21.5999% 420,159
Xxxxxx 30.4861% 986,692
Xxxxxxx 21.5999% 699,088
Xxxxxx 21.5999% 699,088
Xxxxxxx 16.4969% 533,927
Anand 3.2724% 105,912
Cholappadi 3.2724% 105,912
Gupta 3.2724% 105,912
--------------------
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Name Percentage Number of Shares
------------ -------------- --------------------
Total 3,236,531
====================
Xxxxx shall cause the shares of the Series F Preferred Stock to be issued
as Additional Merger Consideration to be issued on the first business day
following the date of this Agreement.
3.3 Amendments to Primal Merger Agreement. Pursuant to Section 14.8
-------------------------------------
of the Primal Merger Agreement, each of the Old Primal Stockholders hereby
amends, as to each such Old Primal Stockholder, Section 3.3 of the Primal Merger
Agreement to provide that the number of Escrow Shares to which each of the Old
Primal Stockholders is entitled under Section 3.3 of the Primal Merger Agreement
shall be as set forth in Section 31 hereof. Pursuant to Section 14.8 of the
Primal Merger Agreement, each of the Old Primal Stockholders hereby amends, as
to each such Old Primal Stockholder, Section 3.3 of the Primal Merger Agreement
to provide that the number of shares of Series F Preferred Stock to which each
of the Old Primal Stockholders is entitled as Additional Merger Consideration
pursuant to Section 3.3 of the Primal Merger Agreement shall be as set forth in
Section 32 hereof. Except as set forth in Section 32 hereof, pursuant to Section
14.7 of the Primal Merger Agreement, each of the Old Primal Stockholders hereby
expressly waives any right to receive any other shares of Series F Preferred
Stock as Additional Merger Consideration from and after the date hereof.
3.4 Exchange of Securities. Contemporaneously with the release of the
----------------------
Escrow Shares and the issuance of Series F Preferred Stock as Additional Merger
Consideration as set forth above, Xxxxx will issue one share of a new Series G
Participating Convertible Voting Preferred Stock (the "Series G Preferred
Stock") in exchange for each outstanding share of the Series F Preferred Stock
then outstanding and held by a party to this Agreement. The Series G Preferred
Stock will be identical in all respects to the Series F Preferred Stock, except
that (i) the Series G Preferred Stock will have one vote for each share of Xxxxx
Common Stock into which it is from time to time convertible and will vote with
the holders of Xxxxx Common Stock as a single class, (ii) the Series G Preferred
Stock will not be entitled to participate in the Distribution by Xxxxx of the
New Primal Common Stock to holders of Xxxxx Common Stock and to the holders of
Xxxxx'x Series A, B, C, D and E Preferred Stocks and the holder of the Waterside
Note as herein contemplated, and (iii) the Series G Preferred Stock will become
convertible into Xxxxx Common Stock on the earlier of (i) the Distribution Date
or (ii) a Distribution Failure Event. As is the case with the Series F Preferred
Stock, the Series G Preferred Stock will initially be convertible into Xxxxx
Common Stock on a one-for-one basis, will be entitled to participate on an "if
converted" basis in all dividends and other distributions (except the
Distribution of the New Primal Common Stock contemplated hereby) made by Xxxxx
to holders of Xxxxx Common Stock, and will have a liquidation preference of
$0.01. Except to secure the Loans as herein provided, and except for transfers
pursuant to the laws of descent and distribution, each Person who receives
Series G Preferred Stock pursuant to this Agreement agrees not to sell,
transfer, assign, pledge, mortgage, hypothecate, encumber, option, gift or
otherwise dispose of such shares of Series G Preferred Stock between the date
hereof and the
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earlier of a Distribution Failure Event Date or the Distribution Date without
the express prior written consent of Xxxxx.
3.5 Redemptions. Immediately prior to the Distribution Date, Xxxxx
-----------
will distribute to each of the Old Primal Stockholders, on a pro rata basis
based on their ownership of Old Primal immediately prior to the Merger, an
aggregate of 32% of the New Primal Distributable Shares in redemption of such
number of shares of the Series G Preferred Stock from each of the Old Primal
Stockholders, on a pro rata basis based on their ownership of Old Primal
immediately prior to the Merger, as will, when subtracted from the total number
of shares of Series G Preferred Stock then outstanding, leave outstanding shares
of the Series G Preferred Stock that would equal, assuming such shares were
converted into Xxxxx Common Stock, in the aggregate 15% of the Xxxxx Common
Stock on a Fully Diluted Basis on the date of the redemption.
3.6 Post-Distribution Ownership of Xxxxx and Primal.
-----------------------------------------------
(a) Xxxxx Ownership. On the Distribution Date, after giving
---------------
effect to the Distribution and to the adjustments described in Section 13
hereof, the Old Primal Stockholders shall collectively beneficially own
shares of the Series G Preferred Stock that would equal, assuming such
shares were converted into Xxxxx Common Stock, in the aggregate 15% of the
sum of (i) the shares of the Xxxxx Common Stock on a Fully Diluted Basis on
the Distribution Date, plus (ii) the number of shares of Xxxxx Common Stock
reserved for issuance upon conversion of the Series G Preferred Stock
outstanding on the Distribution Date, and the other security holders of
Xxxxx on the Record Date shall collectively beneficially own shares of
Xxxxx Common Stock and Options and Convertible Securities that would equal,
assuming all Options were exercised for and all Convertible Securities were
converted into or exchanged for Xxxxx Common Stock, in the aggregate 85% of
the sum of (i) the shares of the Xxxxx Common Stock on a Fully Diluted
Basis on the Distribution Date, plus (ii) the number of shares of Xxxxx
Common Stock reserved for issuance upon conversion of the Series G
Preferred Stock outstanding on the Distribution Date.
(b) Primal Ownership. On the Distribution Date, after giving
----------------
effect to the Distribution, but excluding the issuance of the 250,000
shares of New Primal Common Stock contemplated by Section 18 hereof, the
Old Primal Stockholders shall collectively beneficially own shares of New
Primal Common Stock that equal in the aggregate 32% of the New Primal
Distributable Shares, and the other security holders of Xxxxx on the Record
Date shall collectively beneficially own shares of New Primal Common Stock
that would equal in the aggregate 68% of the New Primal Distributable
Shares.
3.7 Amendments to Investors Rights Agreement.
----------------------------------------
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(a) Repurchase Right. Pursuant to Section 5.10 of the Investors
----------------
Rights Agreement, each of the Old Primal Stockholders hereby amends, as to
each such Old Primal Stockholder, Section 3.2 of the Investors Rights
Agreement to provide that Xxxxx shall have no obligation to repurchase from
any of the Old Primal Stockholders any shares of Xxxxx Common Stock issued
upon conversion of the Series F Preferred Stock, and, pursuant to Section
5.10 of the Investors Rights Agreement, each of the Old Primal Stockholders
hereby expressly waives all of his rights under Section 3.2 of the
Investors Rights Agreement to have any of such shares repurchased.
(b) New Primal Board of Directors. Each of the Old Primal
Stockholders hereby amends, as to each such Old Primal Stockholder, Section
3.1.3 of the Investors Rights Agreement to provide that the Board of
Directors of New Primal shall consist of a total of seven members, with two
members being designated by Xxxxx, two members being designated by the Old
Primal Majority Stockholders, two members being independent members, one of
which shall initially be the designee of Franklin Capital Corporation, and
one member being the new chief executive officer of Primal, Xxxx Xxxxxx. At
such time as the New Primal Board elects a new chief executive officer of
New Primal, Xx. Xxxxxx will resign or be removed from the Board and the new
chief executive officer will be elected to fill such vacancy. Xxxxx and
each of the Old Primal Majority Stockholders will each use their
commercially reasonable best efforts to fill the vacancy on the Board for
an independent member as soon as is reasonably practicable following the
date of this Agreement. Except as to the Franklin Capital designee, Rule
4200(a)(14) of the rules of the National Association of Securities Dealers,
Inc. relating to The Nasdaq Stock Market shall be used to determine whether
a member of the Board of Directors is independent. The Old Primal Majority
Stockholders shall not designate Xxxxxxx to the New Primal Board pursuant
to this Section 37, and Xxxxx shall not designate either Xxxxxx III or
XxXxxxxxx to the New Primal Board pursuant to this Section 37. All rights
to designate directors under this Section 37 shall terminate and be of no
further force or effect on and after the 545th day following the date of
this Agreement.
To effectuate the foregoing, the Old Primal Stockholders hereby
request that Xxxxx, in its capacity as the sole stockholder of New Primal,
and Xxxxx agrees that it will, as soon as is reasonably practicable
following the execution and delivery of this Agreement, but in no event
later than the fifth business day following the execution and delivery of
this Agreement, execute and deliver a written consent or consents and take
such other actions as permitted under the Delaware General Corporation Law
to effectuate the elections of the members of the New Primal Board of
Directors as contemplated hereby. In consideration therefor, each of the
Old Primal Stockholders hereby expressly waives, pursuant to Section 5.10
of the Investors Rights Agreement, any right to designate an individual to
serve on Xxxxx'x
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Board of Directors or to serve on Xxxxx'x Board of Directors under Section
3.1.2 of the Investors Rights Agreement and Xxxxx'x further compliance with
Section 3.1.3 of the Investors Rights Agreement and all rights that each
such Old Primal Stockholder has thereunder.
In the event a Distribution Failure Event occurs and the
Distribution is not completed as herein contemplated, however, such waivers
shall be of no further force or effect, and all the Old Primal
Stockholders' rights under Sections 3.1.2 and 3.1.3 of the Investors Rights
Agreement shall remain in full force and effect.
4. New Primal CEO. The new chief executive officer of New Primal shall be
--------------
selected by the New Primal Board of Directors. It is presently the view of the
parties hereto that employing a new chief executive officer of New Primal is a
matter of highest priority.
5. Loans. On the first business day following the date hereof, Xxxxx
-----
shall loan $398,000 to Xxxxxx, $377,000 to each of Xxxxxxx and Xxxxxx, $287,000
to Xxxxxxx, and $41,500 to each of Anand, Cholappadi and Gupta (such loans being
referred to collectively herein as the "Loans"). The Loans shall be non-
recourse, and none of the Old Primal Stockholders shall have any personal
liability for the repayment thereof in excess of the collateral pledged to
secure the repayment thereof. To secure the repayment of such Loans, however,
each of the Old Primal Stockholders shall each pledge to Xxxxx, and shall grant
to Xxxxx a first priority security interest in, all shares of Series F Preferred
Stock and Series G Preferred Stock beneficially owned by him on the date hereof
or hereafter acquired pursuant to this Agreement. Each of the Loans shall bear
interest at the minimum applicable federal rate required to prevent imputed
interest from being recognized for federal income tax purposes. Each of the
Loans shall be due and payable in full on the second anniversary of the
promissory note evidencing such Loans. From and after the Distribution Date,
each of the Old Primal Stockholders shall be permitted to sell the shares of the
Xxxxx Common Stock pledged as collateral to secure repayment of the Loans if,
and only if, all proceeds received upon any such sale are first applied to pay
all accrued but unpaid interest on the Loans and then to reduce the outstanding
principal amount of the Loans then outstanding. The Old Primal Stockholders
shall each execute and deliver a promissory note and a pledge and security
agreement to Xxxxx in the forms attached hereto as Exhibit 5-A and Exhibit 5-B,
respectively.
6. Capital Contribution to New Primal. Xxxxx shall contribute to New
----------------------------------
Primal $4,000,000 to use for general corporate and working capital purposes.
Xxxxx shall contribute $2,000,000 of the $4,000,000 to New Primal on the first
business day following the execution and delivery of this Agreement. Xxxxx shall
contribute the remaining $2,000,000 of the $4,000,000 to New Primal on the first
to occur of the ninetieth day following the execution and delivery of this
Agreement or the Distribution Date, unless, in either case, such date is not a
business day, in which case, the contribution shall be made on the first
business day following such date.
-15-
7. Treatment of Xxxxx'x Convertible Securities in the Distribution. The
---------------------------------------------------------------
holders of Xxxxx'x Series A, B, C, D and E Preferred Stocks and the Waterside
Note shall participate in the Distribution on an "if converted" basis. In other
words, such holders shall not receive any New Primal preferred stock in the
Distribution, and, in lieu thereof, such holders shall receive one share of New
Primal Common Stock for each share of Xxxxx Common Stock that such holder would
have held on the Record Date had such holder converted the Xxxxx preferred stock
or the Waterside Note held by such holder into Xxxxx Common Stock on the day
immediately preceding the Record Date.
8. Registration Statements.
-----------------------
8.1 Distribution Registration Statement. Xxxxx will cause New
-----------------------------------
Primal to file a registration statement to register all shares of New Primal
Common Stock to be issued in the Distribution under the Securities Act and under
all applicable state securities laws as soon as reasonably practicable after the
date hereof, but in no event later than August 18, 2000, will use its
commercially reasonable best efforts to cause such registration statement to be
declared effective by the Securities and Exchange Commission (the "SEC") and
obtain permits under state securities laws, and the Old Primal Majority
Stockholders will use their commercially reasonable best efforts to cooperate
therewith, and Xxxxx will pay all costs and expenses in connection therewith.
Xxxxx will cause such registration statement to comply in substance and as to
form in all material respects with the requirements of the Securities Act and
the rules promulgated thereunder, and will provide the Old Primal Majority
Stockholders with a reasonable opportunity to review and comment upon the
registration statement and any amendments thereto, and Xxxxx shall further keep
the Old Primal Majority Stockholders reasonably apprized as to the status
thereof.
8.2 Xxxxx Resale Registration Statement. Xxxxx will file a
-----------------------------------
registration statement to register all shares of Xxxxx Common Stock beneficially
owned by the Old Primal Stockholders, or that they would be entitled to receive
upon conversion of the Series G Preferred Stock, for resale under the Securities
Act as soon as reasonably practicable after August 28, 2000, will use its
commercially reasonable best efforts to cause such registration statement to be
declared effective by the SEC, and will pay all costs and expenses in connection
therewith. Xxxxx will cause such registration statement to comply in substance
and as to form in all material respects with the requirements of the Securities
Act and the rules promulgated thereunder, and will provide the Old Primal
Majority Stockholders with a reasonable opportunity to review and comment upon
the registration statement and any amendments thereto, and Xxxxx shall further
keep the Old Primal Majority Stockholders reasonably apprized as to the status
thereof.
8.3 New Primal Resale Registration Statement. New Primal will
----------------------------------------
file a registration statement to register all shares of New Primal Common Stock
held by the Old Primal Stockholders for resale under the Securities Act as soon
as practicable, but in no event later than 90 days, after completion of the
Distribution, will use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the SEC, and will pay all
costs and expenses in connection therewith. New Primal will cause such
registration statement to comply in substance and as to form in all material
respects with the requirements of the Securities Act and the rules
-16-
promulgated thereunder, and will provide the Old Primal Majority Stockholders
with a reasonable opportunity to review and comment upon the registration
statement and any amendments thereto, and New Primal shall further keep the Old
Primal Majority Stockholders reasonably apprized as to the status thereof.
9. Irrevocable Proxies. On the first business day following the date of
this Agreement, each of the Old Primal Stockholders shall execute and deliver to
the Xxxxxxxx Group and its affiliates an irrevocable proxy to vote all shares of
the Series G Preferred Stock now owned or held by him or hereafter acquired
whether pursuant to this Agreement or otherwise, and all shares of the Xxxxx
Common Stock now owned or held by him or hereafter acquired in the form attached
hereto as Exhibit 9-A. On the first business day following the date of this
Agreement, each of Xxxxxxxx Group and its affiliates and Xxxxxx III and his
affiliate, Waveland, LLC, shall execute and deliver to the Old Primal
Stockholders an irrevocable proxy to vote all shares of New Primal Common Stock
held by them or hereafter acquired in the form attached hereto as Exhibit 9-X.
Xxxxxx III, the Chairman of Xxxxx, is an affiliate of the Xxxxxxxx Group. Xxxxxx
III, in his capacity as Chairman of Xxxxx, also holds a proxy to vote certain
shares of Xxxxx Common Stock held in escrow in connection with Xxxxx'x
acquisition of its HBS Billing Services subsidiary. Xxxxx will cause Xxxxxx III,
in his capacity as the Chairman of Xxxxx, to grant to the Old Primal
Stockholders an irrevocable proxy to vote the shares of New Primal Common Stock
distributed to Bank One, Texas, NA, as the escrow agent for these shares, until
they are released from escrow or until they are returned to Xxxxx pursuant to
the provisions of the escrow agreement relating thereto. In the event a
Distribution Failure Event occurs and the Distribution is not completed as
herein contemplated, then, in such event, the proxies herein granted shall
automatically terminate and be of no further force or effect.
10. Expenses. Except as otherwise expressly provided herein, Xxxxx shall
--------
pay all legal and accounting fees incurred by Xxxxx, New Primal and the Old
Primal Majority Stockholders in connection with this Agreement and the
Distribution. Xxxxx'x liability under this Section 10 to pay for legal and
accounting fees incurred by New Primal and the Old Primal Majority Stockholders,
however, shall not exceed an aggregate of $75,000.
11. New Primal Interim CEO. Xxxx Xxxxxx shall initially be the chief
----------------------
executive officer of New Primal. Xx. Xxxxxx shall serve in such position on an
interim basis until the New Primal Board of Directors elects a new chief
executive officer, at which time Xx. Xxxxxx will relinquish his title or be
removed as chief executive officer and shall resume his title and duties as the
president and chief operating officer of New Primal. As part of the
Distribution, the New Primal Board of Directors will grant stock options to Xx.
Xxxxxx to replace his Xxxxx stock options, which will be canceled as part of the
Distribution.
12. New Primal Interim Management. From and after the date hereof until
-----------------------------
the Distribution Date, New Primal shall not employ Xxxxxxx in any capacity
whatsoever without the express prior written consent of Xxxxx, nor shall Xxxxxxx
serve as a member of the New Primal Board of Directors without the express prior
written consent of Xxxxx.
-17-
13. Adjustments to Xxxxx'x Options and Convertible Securities in the
----------------------------------------------------------------
Distribution. The parties hereto do hereby agree that Xxxxx'x outstanding
------------
Options and Convertible Securities will be adjusted to give effect to the
Distribution as follows:
Incentive Stock Options
All options intended to qualify as incentive stock options under Section
422 of the Internal Revenue Code and held by employees of New Primal or the
Subsidiary (Wireless Billing Systems) will be canceled as part of the
Distribution, effective on and as of the Distribution Date.
The option spread, whether positive or negative, at the Distribution Date
with respect to existing Xxxxx options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code and held by employees of
Xxxxx and HBS Billing Services Company after the Distribution will be preserved
by adjusting the per share exercise price and the number of shares covered by
each such option to reflect the Distribution. Each such option will be adjusted
so that
. the per share exercise price will equal the original per share
exercise price multiplied the "Xxxxx ratio," as described below, and
. the number of shares of Xxxxx Common Stock covered will equal the
original number of shares stated in the applicable option divided by
the Xxxxx ratio.
The "Xxxxx ratio" is a fraction the numerator of which is 3 and the denominator
of which is 5.
Non-Qualified Stock Options and Common Stock Purchase Warrants
Xxxxxxx'x options to purchase 925,000 shares of Xxxxx Common Stock and Xxxx
Xxxxxx'x options to purchase 300,000 shares of Xxxxx Common Stock will be
canceled as part of the Distribution, effective on and as of the Distribution
Date.
Xxxxx'x remaining outstanding options to purchase Xxxxx Common Stock that
were granted under Xxxxx'x 1999 Flexible Incentive Plan and not intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code, outstanding non-qualified stock options that were not granted under
Xxxxx'x 1999 flexible incentive plan, and Xxxxx'x outstanding Common Stock
purchase warrants will be adjusted to reflect the Distribution. The option or
warrant spread, whether positive or negative, at the Distribution Date with
respect to such options and warrants will be preserved by adjusting the per
share exercise price and the number of shares covered by each such option or
warrant to reflect the Distribution. Each such option or warrant shall be
adjusted so that
. the per share exercise price will equal the original per share exercise
price multiplied the Xxxxx ratio, and
-18-
. the number of shares of Xxxxx Common Stock covered will equal the
original number of shares stated in the applicable option or warrant
divided by the Xxxxx ratio.
Xxxxx'x Convertible Preferred Stocks
Xxxxx'x outstanding convertible preferred stocks will be adjusted to
reflect the Distribution. The conversion spread, whether positive or negative,
at the Distribution Date with respect to such preferred stocks will be preserved
by adjusting the per share conversion price on the Distribution Date to reflect
the Distribution. Because each series of Xxxxx'x outstanding convertible
preferred stock is convertible into as many shares as is determined by dividing
a fixed dollar amount by the current conversion price, and none of such series
is convertible into a fixed number of shares, it is not necessary to make an
adjustment regarding the number of shares to be received upon conversion.
Xxxxx'x outstanding Series A, B, C, D and E Preferred Stocks will be adjusted so
that the per share conversion price of each such series will equal the current
per share conversion price on the Distribution Date multiplied the Xxxxx ratio.
A different adjustment, however, is required for the Series F Preferred Stock
and the Series G Preferred Stock. Because the outstanding shares of these
series are supposed to be equal to, if all such shares were converted into Xxxxx
Common Stock, 15% of the Xxxxx Common Stock on a Fully Diluted Basis both before
and after the Distribution, simply multiplying the current conversion price by
the Xxxxx ratio would result in these shares being equal to more than 15% after
the Distribution because the number of outstanding shares of Xxxxx Common
Stock will not be adjusted in the Distribution. Accordingly, the Series F
Preferred Stock and the Series G Preferred Stock will be adjusted so that the
per share conversion price of each such series will equal the current per share
conversion price on the Distribution Date multiplied by the "Primal Preferred
ratio." The "Primal Preferred ratio" is a fraction (i) the numerator of which
is the number of outstanding shares of Xxxxx Common Stock on a Fully Diluted
Basis immediately preceding the Distribution Date (excluding the shares of Xxxxx
Common Stock reserved for issuance upon conversion of the Series F Preferred
Stock and the Series G Preferred Stock) and (ii) the denominator of which is the
number of outstanding shares of Xxxxx Common Stock on a Fully Diluted Basis on
the Distribution Date (which also excludes the shares of Xxxxx Common Stock
reserved for issuance upon conversion of the Series F Preferred Stock and the
Series G Preferred Stock).
Xxxxx'x Convertible Note
Xxxxx'x outstanding convertible note will be adjusted to reflect the
Distribution. The conversion spread, whether positive or negative, at the
Distribution Date with respect to such note will be preserved by adjusting the
per share conversion price on the Distribution Date to reflect the Distribution.
Because the note is convertible into as many shares as the principal amount
thereof divided by the present conversion price will purchase, and is not
presently convertible into a fixed number of shares, it is not necessary to make
an adjustment regarding the number of shares to be received upon conversion.
The per share conversion price of the note will be adjusted to equal the current
conversion price on the Distribution Date multiplied by the Xxxxx ratio.
-19-
14. Releases.
--------
14.1 Xxxxx Releasees. Each of New Primal, Subsidiary, Faltys, Simrell,
---------------
Haynes, Nielsen, Anand, Cholappadi and Gupta, on behalf of itself or himself, as
the case may be, and each of its or his, as the case may be, Related Persons (as
hereinafter defined), hereby releases and forever discharges Xxxxx, Xxxxxxxx
Group, Xxxxxx III and XxXxxxxxx and each of their respective individual, joint
or mutual, past, present and future Representatives (as hereinafter defined),
affiliates, stockholders, controlling persons, subsidiaries, successors and
assigns (individually, a "Xxxxx Releasee," and collectively, "Xxxxx Releasees")
from any and all claims, demands, Proceedings (as hereinafter defined), causes
of action, Orders (as hereinafter defined), obligations, contracts, agreements,
debts and liabilities whatsoever, whether known or unknown, suspected or
unsuspected, both at law and in equity, which any of New Primal, Subsidiary,
Faltys, Simrell, Haynes, Nielsen, Anand, Cholappadi or Gupta, or any of their
respective Related Persons, now has, have ever had or may hereafter have against
any of the Xxxxx Releasees arising contemporaneously with or prior to the date
of this Agreement, or on account of or arising out of any matter, cause or event
occurring contemporaneously with or prior to the date of this Agreement;
provided, however, that nothing contained herein shall operate to release any
obligations of Xxxxx, Xxxxxxxx Group, Xxxxxx III or XxXxxxxxx arising under this
Agreement, or, with respect to Xxxxx, any obligations of Xxxxx under that
certain Memorandum of Understanding dated and effective as of May 5, 2000, and
the Employment Agreement referred to therein.
14.2 Primal Releasees. Each of Xxxxx, Xxxxxxxx Group, Xxxxxx III and
----------------
XxXxxxxxx, on behalf of itself or himself, as the case may be, and each of its
or his, as the case may be, Related Persons, hereby releases and forever
discharges each of New Primal, Subsidiary, Faltys, Simrell, Haynes, Nielsen,
Anand, Cholappadi and Gupta, and each of their respective individual, joint or
mutual, past, present and future Representatives, affiliates, stockholders,
controlling persons, subsidiaries, successors and assigns (individually, a
"Primal Releasee," and collectively, "Primal Releasees") from any and all
claims, demands, Proceedings, causes of action, Orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown,
suspected or unsuspected, both at law and in equity, which any of Xxxxx,
Xxxxxxxx Group, Xxxxxx III or XxXxxxxxx, or any of their respective Related
Persons, now has, have ever had or may hereafter have against any of the Primal
Releasees arising contemporaneously with or prior to the date of this Agreement,
or on account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the date of this Agreement; provided,
however, that nothing contained herein shall operate to release any obligations
of any of New Primal, Subsidiary, Faltys, Simrell, Haynes, Nielsen, Anand,
Cholappadi or Gupta arising under this Agreement, or, with respect to Xxxxxxx,
any obligations of Xxxxxxx under that certain Memorandum of Understanding dated
and effective as of May 5, 2000, and the Employment Agreement referred to
therein.
14.3 Covenants Not to Xxx. Each of New Primal, Subsidiary, Xxxxxx,
--------------------
Simrell, Haynes, Xxxxxxx, Xxxxx, Xxxxxxxxxx and Gupta, on behalf of itself or
himself, as the case may be, and each of its or his, as the case may be, Related
Persons, hereby irrevocably covenants to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing
-20-
to be commenced, any proceeding of any kind, against any Xxxxx Releasee based
upon any matter purported to be released hereby or based upon the Distribution
or the other transactions contemplated hereby (other than any claim, demand or
proceeding based upon a breach or alleged breach of this Agreement, which
claims, demands and proceedings are expressly excluded herefrom). Each of Xxxxx,
Xxxxxxxx Group, Xxxxxx III and XxXxxxxxx, on behalf of itself or himself, as the
case may be, and each of its or his, as the case may be, Related Persons, hereby
irrevocably covenants to refrain from, directly or indirectly, asserting any
claim or demand, or commencing, instituting or causing to be commenced, any
proceeding of any kind against any Primal Releasee based upon any matter
purported to be released hereby or based upon the Distribution or the other
transactions contemplated hereby (other than any claim, demand or proceeding
based upon a breach or alleged breach of this Agreement, which claims, demands
and proceedings are expressly excluded herefrom).
14.4 Indemnification. Without in any way limiting any of the rights
and remedies otherwise available to any Xxxxx Releasee, each of New Primal and
Subsidiary shall indemnify and hold harmless each Xxxxx Releasee from and
against all loss, liability, claim, damage (including incidental and
consequential damages) or expense (including costs of investigation and defense
and reasonable attorneys' fees), whether or not involving third party claims,
arising directly or indirectly from or in connection with (i) the assertion by
or on behalf of any of New Primal or Subsidiary or any of their respective
Related Persons of any claim or other matter purported to be released hereby or
based upon the Distribution or the other transactions contemplated hereby (other
than any claim, demand or proceeding based upon a breach or alleged breach of
this Agreement, which claims, demands and proceedings are expressly excluded
herefrom) and (ii) the assertion by any third party of any claim or demand
against any Xxxxx Releasee, which claim or demand arises directly or indirectly
from, or in connection with, any assertion by or on behalf of any of New Primal
or Subsidiary or any of their respective Related Persons against such third
party of any claims or other matters purported to be released hereby or based
upon the Distribution or the other transactions contemplated hereby (other than
any claim, demand or proceeding based upon a breach or alleged breach of this
Agreement, which claims, demands and proceedings are expressly excluded
herefrom).
14.4 Indemnification. Without in any way limiting any of the rights
and remedies otherwise available to any Xxxxx Releasee, each of Xxxxxx, Xxxxxxx
and Xxxxxx shall indemnify and hold harmless each Xxxxx Releasee from and
against all loss, liability, claim, damage (including incidental and
consequential damages) or expense (including costs or investigation and defense
and reasonable attorneys' fees), whether or not involving third party claims
arising directly or indirectly from or in connection with (i) the assertion by
or on behalf of any of Xxxxxx, Xxxxxxx or Xxxxxx or any of their respective
Related Persons of any claim or other matter purported to be released hereby or
based upon the Distribution or the other transactions contemplated hereby (other
than any claim, demand or proceeding based upon a breach or alleged breach of
this Agreement, which claims, demands and proceedings are expressly excluded
herefrom) and (ii) the assertion by any third party of any claim or demand
against any Xxxxx Releasee, which claim or demand arises directly or indirectly
from, or in connection with, any assertion by or on behalf of any of Xxxxxx,
Xxxxxxx or Xxxxxx or any of their respective Related Persons against such third
party of any claims or other matters purported to be released hereby or based
upon the Distribution or the other transactions contemplated hereby (other than
any claim, demand or proceeding based upon a breach or alleged breach of this
Agreement, which claims, demand and proceedings are expressly excluded
herefrom).
Without in any way limiting any of the rights and remedies otherwise
available to any Xxxxx Releasee, Xxxxxxx shall indemnify and hold harmless each
Xxxxx Releasee from and against all loss, liability, claim, damage (including
incidental and consequential damages) or expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of Xxxxxxx or any of his
Related Persons of any claim or other matter purported to be released hereby or
based upon the Distribution or the other transactions contemplated hereby (other
than any claim,
-21-
demand or proceeding based upon a breach or alleged breach of this Agreement,
which claims, demands and proceedings are expressly excluded herefrom) and (ii)
the assertion by any third party of any claim or demand against any Xxxxx
Releasee, which claim or demand arises directly or indirectly from, or in
connection with, any assertion by or on behalf of Xxxxxxx or any of his Related
Persons against such third party of any claims or other matters purported to be
released hereby or based upon the Distribution or the other transactions
contemplated hereby (other than any claim, demand or proceeding based upon a
breach or alleged breach of this Agreement, which claims, demands and
proceedings are expressly excluded herefrom).
Without in any way limiting any of the rights and remedies otherwise
available to any Xxxxx Releasee, each of Anand, Cholappadi and Gupta shall
indemnify and hold harmless each Xxxxx Releasee from and against all loss,
liability, claim, damage (including incidental and consequential damages) or
expense (including costs or investigation and defense and reasonable attorneys'
fees), whether or not involving third party claims arising directly or
indirectly from or in connection with (i) the assertion by or on behalf of any
of Anand, Cholappadi or Gupta or any of their respective Related Persons of any
claim or other matter purported to be released hereby or based upon the
Distribution or the other transactions contemplated hereby (other than any
claim, demand or proceeding based upon a breach or alleged breach of this
Agreement, which claims, demands and proceedings are expressly excluded
herefrom) and (ii) the assertion by any third party of any claim or demand
against any Xxxxx Releasee, which claim or demand arises directly or indirectly
from, or in connection with, any assertion by or on behalf of any of Anand,
Cholappadi or Gupta or any of their respective Related Persons against such
third party of any claims or other matters purported to be released hereby or
based upon the Distribution or the other transactions contemplated hereby (other
than any claim, demand or proceeding based upon a breach or alleged breach of
this Agreement, which claims, demand and proceedings are expressly excluded
herefrom).
Without in any way limiting any of the rights and remedies otherwise
available to any Primal Releasee, each of Xxxxx, Xxxxxxxx Group, Xxxxxx III and
XxXxxxxxx shall indemnify and hold harmless each Primal Releasee from and
against all loss, liability, claim, damage (including incidental and
consequential damages) or expense (including costs of investigation and defense
and reasonable attorneys' fees), whether or not involving third party claims,
arising directly or indirectly from or in connection with (i) the assertion by
or on behalf of any of Xxxxx, Xxxxxxxx Group, Xxxxxx III or XxXxxxxxx or any of
its or his, as the case may be, Related Persons of any claim or
-22-
other matter purported to be released hereby or based upon the Distribution or
the other transactions contemplated hereby (other than any claim, demand or
proceeding based upon a breach or alleged breach of this Agreement, which
claims, demands and proceedings are expressly excluded herefrom) and (ii) the
assertion by any third party of any claim or demand against any Primal Releasee,
which claim or demand arises directly or indirectly from, or in connection with,
any assertion by or on behalf of any of Xxxxx, Xxxxxxxx Group, Xxxxxx III or
XxXxxxxxx or any of its or his, as the case may be, Related Persons against such
third party of any claims or other matters purported to be released hereby or
based upon the Distribution or the other transactions contemplated hereby (other
than any claim, demand or proceeding based upon a breach or alleged breach of
this Agreement, which claims, demands and proceedings are expressly excluded
herefrom).
14.5 Certain Definitions. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Section 145:
"Proceeding"--means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator. "Related Person"--means with
respect to a particular individual: (a) each other member of such individual's
Family; (b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family; (c) any Person in
which such individual or members of such individual's Family hold (individually
or in the aggregate) a Material Interest; and (d) any Person with respect to
which such individual or one or more members of such individual's Family serves
as a director, officer, partner, executor, or trustee (or in a similar
capacity); and, with respect to a specified Person other than an individual: (a)
any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; (b) any Person that holds a Material Interest in such
specified Person; (c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity); (d)
any Person in which such specified Person holds a Material Interest; (e) any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity); and (f) any Related Person of any
individual described in clause (b) or (c). For purposes of the definition of
"Related Person," (a) the "Family" of an individual includes (i) the individual,
(ii) the individual's spouse and former spouses, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person. "Representative"--means with respect to a
particular Person, any director, officer, employee, agent, consultant, advisor,
or other representative of such Person, including legal counsel, accountants,
and financial advisors.
14.6 Waiver. The parties each represent and warrant to the others
------
that each understands California Civil Code Section 1542, which provides as
follows:
-23-
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
They, being aware of Section 1542, hereby expressly waive any and all rights
they may have thereunder as well as under any other statute or common law
principles of similar effect under the laws of any state or the United States.
This Agreement shall act as a release of all claims described in Sections 141 or
142, to the extent set forth therein, whether such claims are currently known or
unknown, foreseen or unforeseen including, without limitation, any claims for
damages resulting from the acts or omissions which occurred on or before the
date of this Agreement.
15. Corsair Guarantee. It shall be a condition precedent to making the
-----------------
Distribution that Xxxxx be fully and unconditionally released from any and all
liability under its guarantee of amounts owed by New Primal to Corsair
Computing, or, alternatively, that an arrangement or arrangements in form, scope
and substance reasonably satisfactory to Xxxxx in its sole and absolute
discretion shall be made to mitigate Xxxxx'x liability under such guarantee.
With respect to the foregoing, however, Xxxxx acknowledges and agrees that one
such satisfactory arrangement will be an agreement to indemnify and hold Xxxxx
harmless from and against any and all liabilities of any nature whatsoever
arising from or incidental to such guarantee from New Primal and its Subsidiary,
Wireless Billing Systems.
16. New Primal Management Compensation. From and after the Distribution
----------------------------------
Date, Xxxxxx, Xxxxxxx and Xxxxxx may receive such stock options as may be
granted to them by the New Primal Board of Directors.
17. Prior Agreements Still in Effect. Except as expressly modified
--------------------------------
hereby, each of the other terms and provisions of the Primal Merger Agreement
and the Investors Rights Agreement are hereby ratified and confirmed in all
respects and shall remain in full force and effect in accordance with their
respective terms.
18. Issuance of New Primal Common Stock to Xxxxxxx. On the first business
----------------------------------------------
day following the Distribution Date, New Primal hereby agrees to issue to
Xxxxxxx 250,000 shares of the New Primal Common Stock. Xxxxxxx hereby
acknowledges and agrees that the issuance of such shares is in replacement of
Xxxxxxx'x options to purchase 925,000 shares of Xxxxx Common Stock, which is
being canceled as part of the Distribution, and that the cancellation of such
options is a condition precedent to the receipt of such New Primal Common Stock.
Accordingly, Xxxxxxx hereby agrees and consents to Xxxxx'x cancellation of
Xxxxxxx'x option to purchase 925,000 shares of Xxxxx Common Stock as herein
provided.
-24-
19. Resignations. All parties hereto who are directors of New Primal on
------------
the effective date hereof do hereby resign as directors of New Primal, effective
for all purposes on and as of such date. All parties hereto, other than Xxxxxx,
Xxxxxxx and Xxxxxx, who are officers of New Primal on the effective date hereof
do hereby resign as officers of New Primal, effective for all purposes on and as
of such date. Xxxxxxx hereby resigns as a director of Xxxxx, effective for all
purposes and as of the date hereof.
20. Xxxxx Approval, Authorization and Ratification. Xxxxx, as the sole
----------------------------------------------
stockholder of New Primal, by execution and delivery hereof, hereby authorizes,
approves, ratifies, confirms and adopts in all respects the form, terms and
provisions of this Agreement; hereby authorizes, approves, ratifies, confirms
and adopts in all respects the execution and delivery hereof by New Primal; and
hereby authorizes, approves, ratifies, confirms and adopts in all respects all
actions of any nature whatsoever heretofore taken by each of the officers,
directors, agents, attorneys and other representatives of New Primal incidental
to, contemplated by, arising out of or in connection with, or otherwise relating
to in any manner whatsoever, the foregoing.
21. General Provisions.
------------------
21.1 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of
this Agreement and the transactions contemplated hereby, including all fees
and expenses of agents, representatives, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by another party.
21.2 Public Announcements. Any public announcement or similar
--------------------
publicity with respect to this Agreement or the transactions contemplated
hereby will be issued, if at all, at such time and in such manner as Xxxxx
determines. The content of any such public announcement or similar
publicity shall be mutually agreed between Xxxxx, on the one hand, and Old
Primal Majority Stockholders, on the other hand. Nothing contained herein,
however, shall limit or impair, or be deemed to limit or impair, Xxxxx'x
duty to disclose publicly and in a timely manner material information,
including information regarding the existence of this Agreement and the
transactions contemplated hereby, if the disclosure of such information is
required by or otherwise necessary under the federal securities laws.
Unless consented to by Xxxxx in advance or required by law, the Old Primal
Stockholders shall, and shall cause New Primal and Subsidiary to, keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Representatives of Xxxxx and New Primal will
consult with each other concerning the means by which the New Primal's and
Subsidiary's employees, customers, and suppliers and others having dealings
with New Primal and Subsidiary will be informed of the transactions
contemplated hereby, and representatives of Xxxxx will have the right to be
present for any such communication.
-25-
21.3 Confidentiality. Between the date of this Agreement and the
---------------
Distribution Date, each of the parties hereto will maintain in confidence,
and will cause their respective Related Persons and Representatives to
maintain in confidence, and not use to the detriment of another party, the
fact of the existence of this Agreement, or any written, oral, or other
information obtained in confidence from another party in connection with
this Agreement or the transactions contemplated hereby, unless (i) such
information is already known to such party or to others not bound by a duty
of confidentiality or such information becomes publicly available through
no fault of such party, (ii) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval
required for the consummation of the transactions contemplated hereby, or
(iii) the furnishing or use of such information is required by or necessary
or appropriate in connection with legal proceedings. If the transactions
contemplated hereby are not consummated, each party will return or destroy
as much of such written information as the other party may reasonably
request. Nothing contained herein, however, shall limit or impair, or be
deemed to limit or impair, Xxxxx'x duty to disclose publicly and in a
timely manner material information, including information regarding the
existence of this Agreement and the transactions contemplated hereby, if
the disclosure of such information is required by or otherwise necessary
under the federal securities laws.
21.4 Notices. All notices, consents, waivers, and other
-------
communications under this Agreement must be in writing and will be deemed
to have been duly given when (i) delivered by hand (with written
confirmation of receipt), (ii) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (iii) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier
numbers set forth in the Primal Merger Agreement or the Investors Rights
Agreement (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties). The address for Xxxxxxxx Group,
Xxxxxx III and XxXxxxxxx is 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
XX 00000, and their fax number is (000) 000-0000.
21.5 Jurisdiction; Service of Process. Any action or proceeding
--------------------------------
seeking to enforce any provision of, or based on any right arising out of,
this Agreement (i) may be brought by the Old Primal Stockholders against
any of the parties in the courts of the State of Illinois, County of Xxxx,
or, if it has or can acquire jurisdiction, in the United States District
Court for the judicial district in which Chicago, Illinois, lies, or (ii)
may be brought by the Xxxxx Parties against any of the parties in the
courts of the State of California, County of Orange, or, if it has or can
acquire jurisdiction, in the United States District Court for the judicial
district in which Irvine, California, lies, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to venue laid therein. Process in any action or proceeding referred to in
the preceding sentence may be served on any party anywhere in the world.
-26-
21.6 Further Assurances. The parties agree (i) to furnish upon
------------------
request to each other such further information, (ii) to execute and deliver
to each other such other documents, and (iii) to do such other acts and
things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in
this Agreement.
21.7 Waiver. The rights and remedies of the parties to this Agreement
------
are cumulative and not alternative. Neither the failure nor any delay by
any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any
such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law,
(i) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (ii) no waiver that may be given by a
party will be applicable except in the specific instance for which it is
given; and (iii) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
21.8 Entire Agreement and Modifications. This Agreement supersedes
----------------------------------
all prior agreements between the parties with respect to its subject matter
(including that certain Memo dated June 2000, but specifically not
including the Primal Merger Agreement, the Investors Rights Agreement or
the Escrow Agreement, except as the Primal Merger Agreement or the
Investors Rights Agreement are amended hereby, and the Employment
Agreements between New Primal and each of Xxxxxx, Xxxxxxx and Xxxxxx) and
constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be
amended except by a written agreement executed by the party to be charged
with the amendment. With respect to the foregoing however, any action
required or permitted to be taken hereunder, other than any amendment
hereof, but including voting of any proxy referred to in Section 9 hereof,
by (i) the Old Primal Majority Stockholders or (ii) the Old Primal
Stockholders may be so taken if the former holders of at least 66% of the
issued and outstanding shares of Old Primal immediately prior to the Merger
approve the taking of any such action, other than the amendment hereof, but
including voting of any proxy referred to in Section 9 hereof.
21.9 Assignment, Successors and No Third-Party Beneficiaries. No
-------------------------------------------------------
party may assign any of its rights under this Agreement without the prior
consent of the other parties, which will not be unreasonably withheld.
Subject to the preceding sentence, this Agreement will apply to, be binding
in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Except as expressly provided in Section
14 hereof, nothing
-27-
expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and permitted assigns.
21.10 Severability. If any provision of this Agreement is held invalid
------------
or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid
or unenforceable.
21.11 Section Headings; Construction. The headings of Sections in this
------------------------------
Agreement are provided for convenience only and will not affect its
construction or interpretation. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit
the preceding words or terms. Whenever any act or other event for which
provisions are made herein is specified as occurring contemporaneously
with, on, as of, following or after the Distribution, or is specified as
occurring on, as of, after or following the Distribution Date, then, in
each such event, it shall be a condition precedent to each such act or
event that the Distribution shall have occurred.
21.12 Time of Essence. With regard to all dates and time periods set
---------------
forth or referred to in this Agreement, time is of the essence.
21.13 Governing Law. This Agreement will be governed by the laws of
-------------
the State of Delaware without regard to conflicts of laws principles.
21.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
22. Limited Joinder. Notwithstanding anything contained herein to the
---------------
contrary, Xxxxxxxx Group and Xxxxxx III are joining in this Agreement for the
sole purpose of using their commercially reasonable best efforts to cause the
Distribution to be made by Xxxxx as soon as is reasonably practicable and
otherwise to give effect to the transactions described herein or contemplated
hereby as provided in Section 11 hereof, granting the proxies as provided in
Section 9 hereof, agreeing to the releases and the other provisions of Section
14 hereof, and, with respect to Xxxxxx III, resigning his positions with new
Primal as provided in Section 19 hereof; and XxXxxxxxx is joining in this
Agreement for the sole purpose of using his commercially reasonable best efforts
to cause the Distribution to be made by Xxxxx as soon as is reasonably
practicable and otherwise to give effect to the transactions described herein or
contemplated hereby as provided in Section 11 hereof, agreeing to the releases
and the other provisions of Section 14 hereof, and
-28-
resigning his positions with New Primal as provided in Section 19 hereof. None
of such parties shall have any obligations hereunder of any nature whatsoever
except as expressly provided in those Sections.
[The remainder of this page has been left blank intentionally.
Signatures of the parties appear on the following page.]
-29-
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
XXXXX COMMUNICATIONS, INC.
By: /s/ Xxxx X. XxXxxxxxx
------------------------------------
Xxxx X. XxXxxxxxx
Vice President
PRIMAL SOLUTIONS, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
Vice President
/s/ Xxxx Xxxxxx
----------------------------------------
Xxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx X. Xxxxxxx
----------------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxx Xxxxx
----------------------------------------
Xxxx Xxxxx
/s/ Xxxxxx Xxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxx
/s/ Xxxxxx Xxxxx
----------------------------------------
Xxxxxx Xxxxx
S-1
XXXXXXXX GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------------
Title: Managing Director
--------------------------------
/s/ Xxxxxxx X. Xxxxxx, III
------------------------------------------
Xxxxxxx X. Xxxxxx, III
/s/ Xxxx X. XxXxxxxxx
------------------------------------------
Xxxx X. XxXxxxxxx
S-2
Exhibit 1.2(e)
Xxxxx
Ratio 0.6
Outstanding Proof
--------------------------------------------------------------------------------------------------------------
Today Per Following At After As After As
Distribution Preferred Distribution Redemption Adjusted on Redemption Adjusted on
Agreement Exchange Failure Event Prior To Distribution Prior To Distribution
Date Distribution Date Distribution Date
Date Date
-------------------------------------------------------------------------------------------------------------------
Preferred 0 0 0 0 0 0
Series A 160,000 160,000 160,000 160,000 160,000 266,667 160,000 266,667
Series B 390,000 390,000 390,000 390,000 390,000 650,000 390,000 650,000
Series C 24,000 24,000 24,000 24,000 24,000 40,000 24,000 40,000
Series D 750,000 750,000 750,000 750,000 750,000 1,250,000 750,000 1,250,000
Series E 350,000 350,000 350,000 350,000 350,000 583,333 350,000 583,333
-------------------------------------------------------------------------------------------------------------------
Subtotal 1,674,000 1,674,000 1,674,000 1,674,000 1,674,000 2,790,000 1,674,000 2,790,000
Series F 1,945,175 1,945,175 0 0 0 0 0 0
Series F (New) 0 5,181,719 0 0 0 0 0 0
Series G (New) 0 0 7,126,894 7,126,894 7,126,894 11,878,157 2,672,585 3,425,409
WC Note 280,000 280,000 280,000 280,000 280,000 466,667 280,000 466,667
Options 4,444,999 4,444,999 4,444,999 4,444,999 4,444,999 7,408,332 4,444,999 7,408,332
Common Stock 8,745,651 8,745,651 8,745,651 8,745,651 8,745,651 8,745,651 8,745,651 8,745,651
-------------------------------------------------------------------------------------------------------------------
Subtotal 17,089,825 22,271,544 22,271,544 22,271,544 22,271,544 31,288,807 17,817,235 22,836,059
Series F (1,945,175) 0 0 0 0 0 0 0
Series G (New) 0 0 0 (7,126,894) (7,126,894) (11,878,157)
TOTAL 15,144,650 22,271,544 22,271,544 15,144,650 15,144,650 19,410,650 17,817,235 22,836,059
===================================================================================================================
22,271,544 18,930,812 17,817,235 22,836,059 17,817,235 22,836,059
32% 20% 15% 15% 15% 15%
3,786,162 2,672,585 3,425,409 2,672,585 3,425,409
======================================================================
15,144,650 15,144,650 19,410,650
3,786,162 2,672,585 3,425,409
18,930,812 17,817,235 22,836,059
========================================
Exhibit 5-A
NON-RECOURSE PROMISSORY NOTE
----------------------------
{Amount $} {Date}
FOR VALUE RECEIVED, the undersigned, {Name} (hereinafter referred to as the
"Maker"), hereby unconditionally promises to pay to the order of XXXXX
-----
COMMUNICATIONS, INC., a Delaware corporation (hereinafter referred to as the
"Holder"), at Holder's address at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
-------
Illinois 60603, or, upon notice from Holder, to the person so designated in
said notice to Maker, the principal sum of {Amount Spelled} DOLLARS ({Amount
$}), or so much thereof as may be advanced and outstanding hereunder, together
with interest on the outstanding principal balance from day to day remaining,
payable in lawful money of the United States of America as set forth herein.
1. Interest. This Note shall bear interest on the unpaid principal
--------
balance hereof until paid in full at the rate of 6.6% per annum.
2. Payments. All principal and interest on this Note shall be due and
--------
payable on {Due Date}. Such date is herein referred to as the "Payment Date."
All amounts past due and outstanding on this Note from and after each Payment
Date shall accrue interest at an interest rate equal to the lesser of 6.6% or
the maximum lawful rate until paid in full. Interest due on this Note shall be
calculated for the entire term of the Note on the basis of the actual number of
days elapsed during such term in a year consisting of 365 or 366 days, as the
case may be. This Note may be prepaid in part or in full at any time without
penalty.
3. Distribution Agreement. This Note is being executed and delivered by
----------------------
Maker pursuant to Section 5 of that certain Primal Solutions, Inc. Preliminary
Distribution Agreement (the "Distribution Agreement") dated as of July 31, 2000,
----------------------
by and among Holder, Primal Solutions, Inc., a Delaware corporation and wholly
owned subsidiary of Holder, Xxxx Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxx, Xxxx
X. Xxxxxxx, Xxxx Xxxxx, Xxxxxx Cholapaddi, Xxxxxx Xxxxx, Xxxxxxxx Group Inc., a
Delaware corporation, Xxxxxxx X. Xxxxxx, III, and Xxxx X. XxXxxxxxx. All terms
defined in the Distribution Agreement are used herein with the same meanings as
ascribed to them therein.
This Note evidences the Loan to Maker contemplated by Section 5 of the
Distribution Agreement. This Note may, under certain circumstances, be forgiven
as contemplated by Section 1.4 of the Distribution Agreement. Accordingly, the
provisions of Section 1.4 of the Distribution Agreement are incorporated herein
by reference thereto, and shall be of the same force and effect as if such
provisions were set forth verbatim in this Note.
4. Security. This Note is the Non-Recourse Promissory Note referred to
--------
in that certain Pledge Agreement of even date herewith entered into between
Maker and Holder (the "Security Agreement"). The payment of the principal and
------------------
interest outstanding and due under this Note is secured by the liens granted
pursuant to the Security Agreement. Holder is entitled to exercise all rights
and remedies granted by the Security Agreement in connection with the collection
of this Note.
No delay or omission on the part of Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other right of
such Holder.
5. No Personal Liability. Notwithstanding anything to the contrary
---------------------
contained in this Note or the Security Agreement, Maker shall have no personal
liability for the payment of this Note or for the performance or observance of
any of the covenants, representations and warranties of Maker contained in the
Note, and Holder agrees not to seek any damages or personal money judgment
against Maker for any default under the Note, but in such event will look solely
to the collateral securing this Note.
6. Default. Maker shall be in default hereunder upon the happening of
-------
any of the following events or conditions (each such event or condition
hereinafter referred to as an "Event of Default"):
----------------
(a) Maker shall fail to pay when due any principal of or accrued and
unpaid interest on this Note.
(b) Maker shall commence a voluntary proceeding seeking liquidation,
reorganization, or other relief with respect to himself or his debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect, or
seeking the appointment of a trustee, receiver, liquidator, custodian, or other
similar official for him or a substantial part of his property or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against him or
shall make a general assignment for the benefit of creditors or shall generally
fail to pay his debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(c) Any involuntary proceeding shall be commenced against Maker
seeking liquidation, reorganization, or other relief with respect to him or his
debts under any bankruptcy, insolvency, or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official for him or a substantial part of his
property, and such involuntary proceeding shall remain undismissed and unstayed
for a period of sixty (60) days.
(d) This Note shall cease to be in full force and effect or shall be
declared null and void or the validity or enforceability hereof shall be
contested or challenged by Maker, or Maker shall deny that he has any further
liability or obligation under this Note.
(e) Maker, any guarantor, surety, or other person ever liable for the
payment of this Note shall have died or become incompetent.
Upon the occurrence and during the continuance of any Event of
Default, the holder hereof may, at his option, declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the holder hereof shall have the right to foreclose or otherwise
enforce all liens or
2
security interests securing payment hereof, or any part hereof, and offset
against this Note any sum or sums owed by the holder hereof to Maker. Failure of
the holder hereof to exercise this option shall not constitute a waiver of the
right to exercise the same upon the occurrence of a subsequent Event of Default.
If the Holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all collection
costs and fees incurred by the holder, including reasonable attorneys' fees.
7. Waivers. Maker and each surety, guarantor, endorser, and other party
-------
ever liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace, and all
other formalities of any kind, and consent to all extensions without notice for
any period or periods of time and partial payments, before or after maturity,
and any impairment of any collateral securing this Note, all without prejudice
to Holder. Holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
8. Maximum Interest Rate. If the laws of the State of Illinois or the
---------------------
United States of America are now or ever revised, repealed, or judicially
interpreted, so as to render usurious any amount called for under this Note, or
contracted for, charged, taken, reserved, received, or paid, with respect to the
loan or forbearance evidenced by this Note, or if any prepayment by Maker or
other party, or computations of any sort, result in Maker or any other party to
this instrument having paid, been charged, or contracted for any interest in
excess of that permitted by law, then it is the express intent of Maker, Holder,
and any other party to this instrument that all excess amounts contracted for,
collected, charged, received, or taken by Holder or paid by Maker or any other
party be credited on the principal balance of this Note (or if this Note has
been paid in full, refunded to Maker or to whomever else may be so entitled),
and the provisions of this Note be deemed reformed and the amounts thereafter
collectable hereunder reduced, without the necessity of the execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder. It is expressly
stipulated and agreed to be the intent of Maker and Holder and other parties to
this instrument to at all times comply with the applicable usury laws of
Illinois and of the United States now or hereafter governing the interest paid
on this Note and the loan or forbearance evidenced hereby.
9. Governing Law; Venue. This Note shall be governed by and construed in
--------------------
accordance with the laws of the State of Illinois and the applicable laws of the
United States of America. Any action or proceeding under or in connection with
this Note against Maker or any other party ever liable for payment of any sums
of money payable on this Note shall be brought in any state or federal court in
Xxxx County, Illinois. Maker and each such other party hereby irrevocably (i)
submits to
3
the exclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Any action or
proceeding by Maker or any other party liable hereunder against Holder shall be
brought only in a court located in Xxxx County, Illinois.
10. Renewal and Modification. This Note embodies the final, entire
------------------------
agreement of Maker and Holder with respect to the indebtedness evidenced by this
Note and supersedes any and all prior commitments, agreements, representations
and understandings, whether written or oral, relating to the indebtedness
evidenced by this Note and may not be contradicted or varied by evidence of
prior, contemporaneous or subsequent oral agreements or discussions of Maker and
Holder. There are no oral agreements between Maker and Holder relating to the
indebtedness evidenced by this Note.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and
year above first written.
MAKER
----------------------------------------
Name
4
Exhibit 5-B
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Agreement") is dated as of July ____, 2000,
---------
and is by and between _________________________ (the "Pledgor"), whose address
-------
is as set forth on the signature page hereof, and Xxxxx Communications, Inc., a
Delaware corporation, whose address is 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000 (the "Pledgee").
-------
R E C I T A L S:
---------------
A. This Agreement is being entered pursuant to Section 5 of that certain
Primal Solutions, Inc. Preliminary Distribution Agreement (the "Distribution
------------
Agreement") dated as July ____, 2000, by and among Pledgee, Primal Solutions,
---------
Inc., a Delaware corporation and wholly owned subsidiary of Pledgee, Xxxx
Xxxxxx, Xxxxxx X. Xxxxxxx, and Xxxxx Xxxxxx, Xxxxxxxx Group Inc., a Delaware
corporation, Xxxxxxx X. Xxxxxx, III, and Xxxx X. XxXxxxxxx. All terms defined
in the Distribution Agreement are used herein with the same meanings as ascribed
to them therein.
B. Pledgor and Pledgee have entered into that certain Promissory Note of
even date herewith (such Promissory Note, as amended, restated, extended,
renewed, modified or supplemented and in effect from time to time, the "Note").
----
C.. Pledgor has agreed to grant a security interest in and pledge the
Collateral (as hereinafter defined) as security for the payment of the Note.
A G R E E M E N T:
-----------------
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Security Interest and Pledge
----------------------------
Section 1.1 Security Interest and Pledge. Subject to the terms of this
----------------------------
Agreement, Pledgor hereby pledges and grants to Pledgee a security interest in
the following property, whether now owned or hereafter acquired by Pledgor (such
property being hereinafter referred to as the "Collateral"):
----------
PLEDGE AGREEMENT - Page 5
(a) All of Pledgor's shares of the Series F Participating Convertible
Preferred Stock, par value $0.01 per share (the "Series G Preferred
------------------
Stock"), of Pledgee, now owned or hereafter acquired by Pledgor, including
without limitation _________ shares of the Series F Preferred Stock
evidenced by certificate number 1 (the "Series F Preferred Shares"); and
-------------------------
(b) All of Pledgor's shares of the Series G Participating Convertible
Voting Preferred Stock, par value $0.01 per share (the "Series G Preferred
------------------
Stock"), of Pledgee, now owned or hereafter acquired by Pledgor, including
-----
without limitation _________ shares of the Series G Preferred Stock
evidenced by certificate number 1 (the "Series G Preferred Shares"); and
-------------------------
(c) All of Pledgor's shares of the Common Stock, par value $0.01 per
share (the "Common Stock") of Pledgee acquired by Pledgor upon conversion
------------
of the Series F Preferred Stock and now owned by Pledgor or hereafter
acquired by Pledgor upon conversion of the Series F Preferred Stock (the
"Series F Common Shares"); and
-----------------------
(d) All of Pledgor's shares of the Common Stock of Pledgee acquired
by Pledgor upon conversion of the Series G Preferred Stock and now owned by
Pledgor or hereafter acquired by Pledgor upon conversion of the Series G
Preferred Stock the "Series G Common Shares," and, collectively with the
----------------------
Series F Preferred Shares, the Series G Preferred Shares and the Series F
Common Shares, the "Shares"); and
------
(e) All proceeds that Pledgor receives upon sale, conversion,
exchange, collection or other disposition of the Shares.
Section 1.2 Obligations. The security interest granted, ratified and
-----------
confirmed hereby is to secure the payment or performance of the following
obligations, indebtedness, and liabilities of Pledgor, now existing or hereafter
arising (all of such obligations, indebtedness, and liabilities being
hereinafter sometimes called the "Obligations"):
-----------
(a) the indebtedness, liabilities and obligations of Pledgor to
Pledgee under and pursuant to the Note; and
(b) all amendments, restatements, extensions, renewals, modifications
supplements of any of the same.
Notwithstanding anything to the contrary contained herein, Pledgee shall
have no personal liability for the payment of the Note or for the performance or
observance of any of the covenants, representations and warranties of Pledgee
contained in the Note, and Pledgee agrees not to seek any damages or personal
money judgment against Pledgee for any default under the Note, but in such event
will look solely to the Collateral.
PLEDGE AGREEMENT - Page 6
ARTICLE II
Representations and Warranties of Pledgor
-----------------------------------------
Pledgor represents and warrants to the Pledgee that:
Section 2.1 Title. Pledgor owns, and with respect to Collateral acquired
-----
after the date hereof, Pledgor will own, legally and beneficially, the
Collateral free and clear of any lien, security interest, encumbrance or claim
or any right or option on the part of any third party to purchase or otherwise
acquire the Collateral or any part thereof, except for the proxy granted by
Pledgor pursuant to Section 9 of the Distribution Agreement (the "Proxy").
-----
Section 2.2 Authority. Pledgor has the requisite power and authority to
---------
execute, deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by Pledgor do not and will not violate or conflict
with or any law, rule or regulation or any order, writ, injunction, or decree of
any governmental authority or arbitrator and do not and will not conflict with,
result in a breach of, or constitute a default under the provisions of any
agreement or instrument to which Pledgor is a party or by which Pledgor or any
of its property or assets is bound or subject, including, without limitation,
the Proxy.
Section 2.3 Perfected Security Interest. Upon the filing of Uniform
---------------------------
Commercial Code financing statements and the Pledgee's taking possession of the
certificate(s) representing the stock included in the Collateral, this Agreement
creates in favor of the Pledgee a perfected first priority security interest in
the Collateral. There are no conditions precedent to the effectiveness of this
Agreement that have not been fully and permanently satisfied.
ARTICLE III
Affirmative and Negative Covenants of Pledgor
---------------------------------------------
Pledgor covenants and agrees with the Pledgee that until the Obligations
are paid and performed in full:
Section 3.1 Delivery. Prior to or concurrently with the execution and
--------
delivery of this Agreement, Pledgor shall deliver to the Pledgee all
certificates identified in Section 1.1(a) hereof, accompanied by undated stock
--------------
powers duly executed in blank.
Section 3.2 Encumbrances. Except for the Proxy, Pledgor shall not create,
------------
permit, or suffer to exist, and shall defend the Collateral against, any lien,
security interest or other encumbrance on the Collateral except the pledge and
security interest created hereunder, and shall defend Pledgor's rights in the
Collateral and the Pledgee's security interest in the Collateral against the
claims and demands of all persons and entities.
PLEDGE AGREEMENT - Page 7
Section 3.3 Disposition of Collateral. Pledgor shall not sell, assign or
-------------------------
otherwise dispose of, or grant any option with respect to the Collateral or any
part thereof, without the prior written consent of the Pledgee; provided,
however, as contemplated by Section 5 of the Distribution Agreement, from and
after the Distribution Date, Pledgor shall be permitted to sell the shares of
the Xxxxx Common Stock pledged as Collateral to secure repayment of the Note if,
and only if, all proceeds received upon any such sale are first applied to pay
all accrued but unpaid interest on the Note and then to reduce the outstanding
principal amount of the Note then outstanding. To facilitate the foregoing,
from and after the date upon which such shares of Xxxxx Common Stock have been
duly registered for sale by Pledgee as provided in the Distribution Agreement,
the shares of the Xxxxx Common Stock constituting the Collateral will be
transferred by Pledgee, upon the written request of the Pledgor, into a
Pledgor's securities brokerage account if, and only if, prior thereto (i)
Pledgor, Pledgee and the Pledgor's securities intermediary enter into an account
control agreement in form, scope and substance reasonably satisfactory to
Pledgee and its counsel, and (ii) Pledgee shall have received an opinion of
counsel from Pledgor's counsel that, after transfer of the Collateral to
Pledgor's securities intermediary as herein contemplated, Pledgor will have a
perfected first priority security interest by control in the Collateral.
Section 3.4 Distributions. If Pledgor shall become entitled to receive or
-------------
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any spin-off, split-up, reclassification, increase, or reduction of capital or
issued in connection with any reorganization), option or rights, whether as an
addition to, in substitution of, or in exchange for any Collateral or otherwise,
Pledgor agrees to accept the same as the Pledgee's agent and to hold the same in
trust for the Pledgee, and to deliver the same forthwith to the Pledgee in the
exact form received, with the appropriate endorsement of Pledgor when necessary
and/or appropriate undated stock powers duly executed in blank, to be held by
the Pledgee as additional Collateral for the Obligations, subject to the terms
hereof. Any sums paid upon or in respect of the Collateral upon the liquidation
or dissolution of the issuer thereof shall be paid over to the Pledgee to be
held by it as additional Collateral for the Obligations subject to the terms
hereof; and in case any distribution of capital shall be made on or in respect
of the Collateral or any property shall be distributed upon or with respect to
the Collateral pursuant to any recapitalization or reclassification of the
capital of the issuer thereof or pursuant to any reorganization of the issuer
thereof, the property so distributed shall be delivered to the Pledgee to be
held by it, as additional Collateral for the Obligations, subject to the terms
hereof. All sums of money and property so paid or distributed in respect of the
Collateral that are received by Pledgor shall, until paid or delivered to the
Pledgee, be held by Pledgor in trust as additional security for the Obligations.
Section 3.5 Further Assurances. At any time and from time to time, upon
-----------
the request of the Pledgee, and at the sole expense of Pledgor, Pledgor shall
promptly execute and deliver all such further instruments and documents and take
such further action as the Pledgee may deem reasonably necessary or desirable to
preserve and perfect its security interest in the Collateral and carry out the
provisions and purposes of this Agreement, including, without limitation, the
execution and filing of such financing statements as the Pledgee may require. A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part
PLEDGE AGREEMENT - Page 8
thereof shall be sufficient as a financing statement and may be filed as a
financing statement. Subject to the right of Pledgor to receive cash dividends
and distributions under Section 4.2 hereof, in the event any Collateral is ever
received by Pledgor, Pledgor shall promptly transfer and deliver to the Pledgee
such Collateral so received by Pledgor (together with any necessary endorsements
in blank or undated stock powers duly executed in blank), which Collateral shall
thereafter be held by the Pledgee pursuant to the terms of this Agreement.
Section 3.6 Taxes. The Pledgor agrees to pay or discharge prior to
-----
delinquency all taxes, assessments, levies, and other governmental charges
imposed on the Collateral, except Pledgor shall not be required to pay or
discharge any tax, assessment, levy, or other governmental charge if (i) the
amounts or validity thereof is being contested by Pledgor in good faith by
appropriate proceedings diligently pursued, (ii) such proceedings do not involve
any risk of sale, forfeiture, or loss of the Collateral or any interest therein,
and (iii) adequate reserves therefor have been established.
Section 3.7 Notification. Except for the Proxy, Pledgor shall promptly
------------
notify the Pledgee of any lien, security interest, encumbrance or claim that has
attached to or been made or asserted against the Collateral.
ARTICLE IV
Certain Rights of Pledgee and Pledgor
-------------------------------------
Section 4.1 Voting Rights. Subject to the Proxy, during the term of this
-------------
Agreement and for so long as no Event of Default shall have occurred, Pledgor
shall have the sole and absolute right to vote the Collateral.
Section 4.2 Dividends and Distributions. During the term of this
---------------------------
Agreement and for so long as no Event of Default shall have occurred, Pledgor
shall be entitled to receive and retain any dividends and distributions on the
Collateral paid in cash.
ARTICLE V
Default
-------
Section 5.1. Events of Default. Each of the following shall be deemed an
-----------------
"Event of Default":
-----------------
(a) Pledgor shall fail to pay or perform when due the
Obligations or any part thereof and such failure shall continue for a
period of twenty (20) or more business days following written notice
thereof.
(b) Any representation or warranty made by Pledgor in this
Agreement is false in any material respect on the date when made or deemed
to have been made.
PLEDGE AGREEMENT - Page 9
(c) Pledgor shall fail, in any material respect, to perform,
observe, or comply with any covenant, agreement or term contained in this
Agreement and such failure shall continue for a period of thirty (30) or
more days following written notice thereof.
(d) Pledgor or any issuer of the Collateral shall commence a
voluntary proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
Section 5.2 Rights and Remedies. If any Event of Default shall occur,
-------------------
the Pledgee shall have, subject to the rights of the holder of the Proxy, the
following rights and remedies:
(i) The Pledgee shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code. Pledgor agrees that the
Pledgee may give not less than 30 days' prior written notice of the time
and place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice of
such matters. The Pledgee shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. The Pledgee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Pledgor shall
be liable for all expenses of retaking, holding, preparing for sale, or the
like, and all reasonable attorneys' fees and other expenses incurred by the
Pledgee in connection with the collection of the Obligations and the
enforcement of the Pledgee's rights under this Agreement, all of which
expenses and fees shall constitute additional Obligations secured by this
Agreement. The Pledgee may apply the Collateral against the Obligations in
such order and manner as the Pledgee may elect in its sole discretion.
Pledgor waives all rights of marshaling in respect of the Collateral.
(ii) The Pledgee may cause any or all of the Collateral held by it
to be transferred into the name of the Pledgee (if the Pledgee is not yet
the registered owner of the Collateral) or the name or names of the
Pledgee's nominee or nominees.
(iii) The Pledgee may collect or receive all money or property at
any time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.
(iv) Pledgor hereby acknowledges and confirms that the Pledgee
may be unable to effect a public sale of any or all of the Collateral by
reason of certain prohibitions
PLEDGE AGREEMENT - Page 10
contained in the Securities Act of 1933, as amended, and applicable state
securities laws and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obligated to agree,
among other things, to acquire any shares of the Collateral for their own
respective accounts for investment and not with a view to distribution or
resale thereof. Pledgor further acknowledges and confirms that any such
private sale may result in prices or other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner, and the Pledgee shall be
under no obligation to take any steps in order to permit the Collateral to
be sold at a public sale. The Pledgee shall be under no obligation to delay
a sale of any of the Collateral for any period of time necessary to permit
any issuer thereof to register such Collateral for public sale under the
Securities Act of 1933, as amended, or under applicable state securities
laws.
(v) On any sale of the Collateral, the Pledgee is hereby authorized
to comply with any limitation or restriction with which compliance is
necessary, in the view of the Pledgee's counsel, in order to avoid any
violation of applicable law or in order to obtain any required approval of
the purchaser or purchasers by any applicable governmental authority.
(vi) For the purposes of this Section 52, the parties agree that the
Collateral shall be valued upon an Event of Default at the average of the
closing bid and ask prices for the twenty trading days preceding the fifth
trading day prior to the date an Event of Default occurs.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 No Waiver; Cumulative Remedies. No failure on the part of the
------------------------------
Pledgee to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and
remedies provided for in this Agreement are cumulative and not exclusive of any
rights and remedies provided by law.
Section 6.2 Successors and Assigns. This Agreement shall be binding upon
-----------
and inure to the benefit of Pledgor and the Pledgee and their respective heirs,
successors, and assigns, except that Pledgor may not assign any of its rights or
obligations under this Agreement without the prior written consent of the
Pledgee.
Section 6.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE
---------------------------
FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT
PLEDGE AGREEMENT - Page 11
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES
HERETO. The provisions of this Agreement may be amended or waived only by an
instrument in writing signed by the parties hereto.
Section 6.4 Notices. All notices and other communications provided for in
-------
this Agreement shall be given or made in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party at such other address as shall be designated by such
party in a notice to the other party given in accordance with this Section.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid.
Section 6.5 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT SHALL
----------------------------------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 6.6 Headings. The headings, captions, and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 6.7 Survival. All representations and warranties made in this
--------
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by the Pledgee shall affect the representations and warranties of
Pledgor herein or the right of the Pledgee to rely upon them.
Section 6.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.10 Construction. Pledgor and the Pledgee acknowledge that each
------------
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Pledgor and the
Pledgee.
PLEDGE AGREEMENT - Page 12
Section 6.11 Termination. If all of the Obligations shall have been paid
-----------
and performed in full, the Pledgee shall, upon the written request of Pledgor,
execute and deliver to Pledgor a proper instrument or instruments acknowledging
the release and termination of the security interests created by this
Agreement, and shall duly assign and deliver to Pledgor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and has not previously been sold or otherwise applied
pursuant to this Agreement. The Pledgee shall also return to the Pledgor all
documents, including certificates, instruments of transfer and contract notes in
relation to the Collateral.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
PLEDGOR:
-------
-----------------------------------
Address for Notices:
-----------------------------------
-----------------------------------
-----------------------------------
Fax No.: -------------------------
PLEDGEE:
-------
XXXXX COMMUNICATIONS, INC.,
a Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address for Notices:
000 Xxxxx XxXxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. XxXxxxxxx
PLEDGE AGREEMENT - Page 13
Exhibit 9-A
XXXXX COMMUNICATIONS, INC.
IRREVOCABLE PROXY
This Irrevocable Proxy is dated as of July 31, 2000, and is being delivered
pursuant to Section 9 of that certain Primal Solutions, Inc. Preliminary
Distribution Agreement (the "Agreement") dated as of July 31, 2000, by and among
Xxxxx Communications, Inc., a Delaware corporation (the "Corporation"), Primal
Solutions, Inc., a Delaware corporation and wholly owned subsidiary of Xxxxx,
Xxxx Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxx, Xxxx X. Xxxxxxx, Xxxx Xxxxx,
Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxx, Xxxxxxxx Group Inc., a Delaware corporation
(the "Xxxxxxxx Group"), Xxxxxxx X. Xxxxxx, III, and Xxxx X. XxXxxxxxx. All
terms defined in the Agreement are used herein with the same meanings as
ascribed to them therein.
The undersigned, {Name}, hereby irrevocably constitutes and appoints
Xxxxxxxx Group as the undersigned's true and lawful attorney-in-fact and proxy,
with full power of substitution and resubstitution, and hereby authorizes
Xxxxxxxx Group to act for and on behalf of the undersigned as proxy, to vote or
otherwise act at all annual, special, and other meetings of stockholders of the
Corporation, or to express consent or dissent to corporate action in writing
without a meeting, with respect to all shares (the "Preferred Shares") of the
Series G Preferred Stock of the Corporation now owned or hereafter acquired by
the undersigned and with respect to all shares (the "Common Shares," and,
collectively with the Preferred Shares, the "Shares") of the Xxxxx Common Stock
now owned or hereafter acquired by the undersigned upon conversion of the Series
F Preferred Stock and the Series G Preferred Stock. The undersigned
acknowledges and agrees that the appointment and proxy granted hereby are
irrevocable and coupled with an interest within the meaning of Section 212(c) of
the Delaware General Corporation Law, and, except as hereinafter provided in
this paragraph, shall not terminate by operation of law or the occurrence of any
other event. It is further understood and agreed that the appointment and proxy
granted hereby relate to all voting rights, whether limited, fixed, or
contingent, with respect to all Shares, but do not relate to any other right
incident to the ownership of any of the Shares, including, without limitation,
the right to receive dividends and any other distributions with respect to any
of the Shares. In the event a Distribution Failure Event occurs and the
Distribution is not completed as herein contemplated, then, in such event, the
appointment and proxy herein granted shall automatically terminate and be of no
further force or effect.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy on
and as of the date first written above.
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{Name}
Exhibit 9-B
PRIMAL SOLUTIONS, INC.
IRREVOCABLE PROXY
This Irrevocable Proxy is dated as of July 31, 2000, and is being delivered
pursuant to Section 9 of that certain Primal Solutions, Inc. Preliminary
Distribution Agreement (the "Agreement") dated as July 31, 2000, by and among
Xxxxx Communications, Inc., a Delaware corporation, Primal Solutions, Inc., a
Delaware corporation and wholly owned subsidiary of Xxxxx (the "Corporation"),
Xxxx Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxx, Xxxx X. Xxxxxxx, Xxxx Xxxxx,
Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxx, Xxxxxxxx Group Inc., a Delaware corporation
(the "Xxxxxxxx Group"), Xxxxxxx X. Xxxxxx, III, and Xxxx X. XxXxxxxxx. All
terms defined in the Agreement are used herein with the same meanings as
ascribed to them therein.
The undersigned, {Name}, on behalf of itself and each of its affiliates,
hereby irrevocably constitutes and appoints Xxxx Xxxxxx, Xxxxxx X. Xxxxxxx,
Xxxxx Xxxxxx, Xxxx X. Xxxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxxxxxxx and Xxxxxx Xxxxx as
the undersigned's true and lawful attorneys-in-fact and proxies, with full power
of substitution and resubstitution, and hereby authorizes Xxxx Xxxxxx, Xxxxxx X.
Xxxxxxx, Xxxxx Xxxxxx, Xxxx X. Xxxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxxxxxxx and Xxxxxx
Xxxxx, to act for and on behalf of the undersigned as proxy, to vote or
otherwise act at all annual, special, and other meetings of stockholders of the
Corporation, or to express consent or dissent to corporate action in writing
without a meeting, with respect to all shares of the New Primal Common Stock of
the Corporation now owned or hereafter acquired by the undersigned. With
respect to the foregoing, however, any action required or permitted to be taken
hereunder by Xxxx Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxx, Xxxx X. Xxxxxxx, Xxxx
Xxxxx, Xxxxxx Xxxxxxxxxx and Xxxxxx Xxxxx, including any voting of the shares
covered hereby, may be so taken if the former holders of at least 66% of the
issued and outstanding shares of Old Primal immediately prior to the Merger
approve the taking of any such action. The undersigned acknowledges and agrees
that the appointment and proxy granted hereby are irrevocable and coupled with
an interest within the meaning of Section 212(c) of the Delaware General
Corporation Law, and, except as hereinafter provided in this paragraph, shall
not terminate by operation of law or the occurrence of any other event. It is
further understood and agreed that the appointment and proxy granted hereby
relate to all voting rights, whether limited, fixed, or contingent, with respect
to all shares of the New Primal Common Stock, but do not relate to any other
right incident to the ownership of any of the shares of the New Primal Common
Stock, including, without limitation, the right to receive dividends and any
other distributions with respect to any of the shares of the New Primal Common
Stock. In the event a Distribution Failure Event occurs and the Distribution is
not completed as herein contemplated, then, in such event, the appointment and
proxy herein granted shall automatically terminate and be of no further force or
effect.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy on
and as of the date first written above.
{NAME}
By:
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