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EXHIBIT 10.3
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the "AGREEMENT"), dated as of July 13, 2000, by and
among xXxx.xxx (formerly known as xXxx.xxx, Inc.), a Delaware corporation, with
headquarters located at 0000 Xxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000 (the
"COMPANY"), and the investors listed on the Schedule of Investors attached
hereto (individually, an "INVESTOR" and collectively, the "INVESTORS").
WHEREAS:
A. Each of the Investors owns shares of Series B Convertible Preferred
Stock, par value $.01 per share (the "SERIES B PREFERRED SHARES"), which has the
rights set forth in the Company's Certificate of Designations, Preferences and
Rights of the Series B Convertible Preferred Stock (the "SERIES B CERTIFICATE OF
DESIGNATIONS"), and which were issued pursuant to the Exchange Agreement, dated
as of April 5, 2000, between the Company and the Investors (the "SERIES B
EXCHANGE AGREEMENT").
B. The Company has agreed and each of the Investors, severally and not
jointly, has agreed that, subject to the terms and conditions of this Agreement,
each Investor will tender to the Company that number of shares of Series B
Preferred Stock set forth opposite such Investor's name on the Schedule of
Investors and the Company will exchange the Series B Preferred Stock for an
equal number of shares of a newly created series of preferred stock, par value
$.01 per share, designated Series D Convertible Preferred Stock (the "SERIES B
PREFERRED SHARES"), which shall be convertible into shares of the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK") (as converted, the
"SERIES D CONVERSION SHARES"), in accordance with the terms of the Company's
Certificate of Designations, Preferences and Rights of the Series D Convertible
Preferred Stock (the "SERIES D CERTIFICATE OF DESIGNATIONS"), substantially in
the form attached hereto as Exhibit A.
C. Subject to the terms and conditions of this Agreement, each Investor
shall have the right to exchange any of such Investor's Series D Preferred
Shares for an equal number of shares of the Company's series of preferred stock,
par value $.01 per share, designated Series E Convertible Preferred Stock (the
"SERIES E PREFERRED SHARES" and, collectively with the Series D Preferred
Shares, the "PREFERRED SHARES"), which shall be convertible into shares of the
Common Stock (as converted, the "SERIES E CONVERSION SHARES" and, collectively
with the Series D Conversion Shares, the "CONVERSION SHARES") in accordance with
the terms of the Company's Certificate of Designations, Preferences and Rights
of the Series E Convertible Preferred Stock (the "SERIES E CERTIFICATE OF
DESIGNATIONS"), substantially in the form attached hereto as Exhibit B.
D. The execution and delivery of this Agreement by the Company and the
Investors and the offer and issuance by the Company of Preferred Shares is being
made in reliance upon the provisions of Section 3(a)(9) of the Securities Act of
1933, as amended (the "1933 ACT"). The
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Preferred Shares and the Conversion Shares issuable upon conversion thereof are
sometimes collectively referred to in this Agreement as the "SECURITIES".
NOW THEREFORE, the Company and the Investors hereby agree as follows:
1. AGREEMENT TO EXCHANGE.
(a) Exchange. Each Investor, severally and not jointly, hereby
agrees that at the Closing (as defined below) it will exchange shares of Series
B Preferred Stock for shares of Series D Convertible Preferred Stock in the
amounts set forth in the Schedule of Investors and on the terms and conditions
set forth herein. At the Closing, the Company shall issue to each Investor one
(1) Series D Preferred Share for each Series B Preferred Share being exchanged
by such Investor, in the denominations as such Investor shall request and in the
name of such Investor or its designee.
(b) The Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 1:00 p.m. Central Time within two (2) business days
following the execution by the Company and XXXX.XXX, Inc., a Delaware
corporation ("XXXX.XXX"), and XXXX.XXX Merger Sub, a Delaware corporation and a
wholly-owned subsidiary of XXXX.XXX ("XXXX.XXX MERGER SUB"), of a merger
agreement for a proposed merger of the Company with XXXX.XXX Merger Sub on
substantially the same terms set forth in the Draft Merger Agreement (as defined
in Section 4(i)) (including, without limitation, on terms no less favorable to
the Investors than the terms set forth in Exhibit B to the Draft Merger
Agreement (as defined in Section 4(i))) (the "DEFINITIVE MERGER AGREEMENT"),
subject to satisfaction (or waiver) of the conditions to the Closing set forth
in Sections 6 and 7 (or such later date as is mutually agreed to by the Company
and the Investors). The Closing shall occur on the Closing Date at the offices
of Xxxxxx Xxxxxx Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000-0000 or at such other place as the Company and the Investors may mutually
agree. The Company and each of the Investors agree that as used in this
Agreement, unless waived in writing by each of the Investors, the Merger will
not be deemed to be on substantially the same terms as set forth in the Draft
Merger Agreement if the Triggering Event (as defined in Section 3(b) of the
Series D Certificate of Designations) set forth in either Section 3(b)(v) or
3(b)(vi) of the Series D Certificate of Designations shall have occurred.
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
Each Investor represents and warrants with respect to only
itself that:
(a) Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in order to
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determine the availability of such exemptions and the eligibility of such
Investor to acquire the Securities.
(b) No Governmental Review. Such Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(c) Transfer or Resale. Such Investor understands that: (i)
the Securities have not been and are not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Investor
shall have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Investor provides the Company with
assurances reasonably acceptable to the Company that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) ("RULE 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
(d) Legends. Such Investor understands that, subject to the
last paragraph of this Section 2(d), the certificates or other instruments
representing the Preferred Shares and the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT.
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The legend set forth above shall be removed and the Company shall issue a
certificate or other instrument without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that a public sale, assignment or transfer of the Securities may be
made without registration under the 1933 Act, or (iii) such holder provides the
Company assurances reasonably acceptable to the Company that such Securities can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.
(e) Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Investor and
constitutes valid and binding agreements of such Investor enforceable against
such Investor in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(f) Residency. Such Investor is a resident of that country
specified in its address on the Schedule of Investors.
(g) Ownership of Shares. Such Investor has not granted to any
other party any rights under the Series B Exchange Agreement or the securities
purchase agreement, dated as of May 5, 1999, between the Company and the
Investors (the "SERIES A PURCHASE AGREEMENT") and has all rights to waive any
rights which it may have under the Series B Exchange Agreement and the Series A
Purchase Agreement to permit such Investor to tender its Series B Preferred
Shares to the Company in exchange for Series D Preferred Shares pursuant to the
terms of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Investors
that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest, except for DocuMagix, Inc.) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated
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hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a). DocuMagix, Inc. has no or
only de minimis assets and has no liabilities in excess of $250,000.
b. Authorization; Enforcement; Validity. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Series D Certificate of Designations, the Series E Certificate of
Designations and the Irrevocable Transfer Agent Instructions (as defined in
Section 5) and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders (except such stockholder approval as may be required (A) by the
Nasdaq National Market for the issuance of a number of Conversion Shares which
is greater than 20% of the number of shares of Common Stock outstanding on the
Closing Date ("20% APPROVAL") or (B) to increase the number of authorized shares
of Common Stock of the Company), (iii) this Agreement and the Irrevocable
Transfer Agent Instructions have been duly executed and delivered by the
Company, (iv) the Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies, and (v) prior to the Closing Date, the Series
D Certificate of Designations will be filed with the Secretary of State of the
State of Delaware and will not have been amended since the date it was filed.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 35,000,000 shares of Common Stock,
of which as of July 7, 2000, 13,520,895 shares are issued and outstanding,
5,470,000 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 895,092 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares, the Series B
Preferred Shares and shares of Common Stock which are reflected in the preceding
figure of 5,470,000 and which are issuable upon options which have been issued
or are issuable under the Company's 1995 Stock Plan or 1997 Employee Stock
Purchase Plan) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) 5,000,000 shares of preferred stock, of which as of the
date hereof, 1,500 shares were designated as Series A Convertible Preferred
Stock and no shares of Series A Convertible Preferred Stock were issued and
outstanding, 1,500 shares were designated as Series B Convertible Preferred
Stock and 1,447 shares of Series B Convertible Preferred Stock were issued and
outstanding, and 1,500 shares were designated as Series C Convertible Preferred
Stock and no shares of Series C Convertible Preferred Stock were issued and
outstanding. As of the Closing Date, the Company shall not have issued or
reserved for issuance any shares of Common Stock since June 30, 2000 except (A)
pursuant to the exercise of options for which
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shares of Common Stock were reserved as of June 30, 2000 and are reflected in
the number of reserved shares set forth in clause (i) of the immediately
preceding sentence, and (B) the Conversion Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is bound to issue currently or potentially in the future additional
shares of capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act,
(v) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions (other than
the Series B Preferred Shares), and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is bound to redeem currently or potentially in the future a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement, and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement. The Company has furnished to the
Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as amended and as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non- assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the respective Series D Certificate of Designations
or Series E Certificate of Designations. At least 4,500,000 of shares of Common
Stock (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(f) below) have been duly authorized and reserved for issuance upon
conversion of the Preferred Shares. Upon conversion in accordance with the
Certificate of Designations, the Conversion Shares will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, with the holders being entitled to all rights accorded to
a holder of Common Stock. Assuming the accuracy as to factual matters of the
representations set forth in Section 2, the issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the
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Company of its obligations under the Series D Certificate of Designations and
the Series E Certificate of Designations and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares in accordance
with Section 4(e)) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market (as defined below)) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designation, Preferences and Rights of any outstanding series of preferred stock
of the Company or By-laws or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 3(e), neither the Company nor any
of its Subsidiaries is in violation of any term of or in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by the Transaction Documents and except for
a notice of filing pursuant to the California Corporation Code, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain on or prior to the Closing Date pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be
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stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except for the
potential delisting of the Common Stock from the Nasdaq National Market (as set
forth on Schedule 3(e) hereto) and the proposed revised terms of a possible
merger transaction with XXXX.XXX each as disclosed to each Investor by Xxxx
Xxxxx, the Company's Chief Financial Officer, on June 28, 2000 (the "DISCLOSED
INFORMATION"), neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided any of the Investors with
any material, nonpublic information.
g. Acknowledgment Regarding Investors' Exchange of Preferred
Shares. The Company acknowledges and agrees that each of the Investors is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that each Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
any advice given by any of the Investor or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Investor's purchase of the Securities. The Company further represents to each
Investor that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
h. Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has paid or given,
either directly or indirectly, a commission or other remuneration for soliciting
the exchange of the Securities.
i. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. Neither the
Company nor any of its Subsidiaries has taken any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings for purposes of
provisions relating to the 20% Approval.
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j. Transactions With Affiliates. Except as set forth on
Schedule 3(j) and in the SEC Documents filed at least ten days prior to the date
hereof and other than the grant of stock options disclosed on Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
k. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Investors as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and the
Investor's ownership of the Securities.
l. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
(b) Blue Sky. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary to
qualify the Securities for, or obtain exemption for the Securities for, sale to
the Investors at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Investors on or prior to the
Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date which
is one (1) year after the date as of which the Investors may sell all of the
Conversion Shares without restriction pursuant to Rule 144(k) promulgated under
the 1933 Act (or successor thereto); or (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares, and (B) none of the Preferred Shares
is outstanding (the "REPORTING PERIOD"); the Company (I) shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and (II) except as a
result of a Major Corporate Event (as defined in the Series E Certificate of
Designations) (provided that the
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Company has complied with Section 4(j) of this Agreement, with Section 4 of the
Series D Certificate of Designations, with respect to the Series D Preferred
Shares, and Sections 4(a) and 4(b) of the Series E Certificate of Designations,
with respect to the Series E Preferred Shares, if any), shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) within two (2)
business days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements or amendments (other than on Form S-8)
filed pursuant to the 1933 Act; (ii) using the Company's reasonable best
efforts, on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries, and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
(e) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the number of shares of Common Stock needed to provide
for the issuance of the Conversion Shares (without regard to any limitations on
conversions), based on the then current Conversion Price; provided, however,
that prior to the date of the Merger Termination (as defined in Section 4(l)),
the Company shall not be required to reserve in excess of 12,000,000 shares of
Common Stock (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions) (less any shares of Common Stock
issued upon conversion of Preferred Shares after the date of this Agreement) to
provide for the issuance of Conversion Shares.
(f) Listing. The Company shall promptly secure the listing of
all of the Conversion Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of the Transaction
Documents. The Company shall use its best efforts to maintain the Common Stock's
authorization for listing on the Nasdaq National Market, AMEX or NYSE, except as
a result of a Major Corporate Event (provided that the Company has complied with
Section 4(j) of this Agreement, with Section 4 of the Series D Certificate of
Designations with respect to the Series D Preferred Shares, and Sections 4(a)
and 4(b) of the Series E Certificate of Designations with respect to the Series
E Preferred Shares, if any). If despite the Company's use of its best efforts or
otherwise, it fails to maintain the Common Stock's authorization for listing on
the Nasdaq National Market, AMEX or NYSE, except as a result of a Major
Corporate Event (provided that the Company has complied with Section 4(j) of
this Agreement, with Section 4 of the Series D Certificate of Designations with
respect to the Series D Preferred Shares, and Sections 4(a) and 4(b) of the
Series E Certificate of Designations with respect to the Series E Preferred
Shares, if any), then the Company shall use its best efforts to secure the
inclusion of the Common Stock for reporting on the over-the-counter electronic
bulletin board (sponsored by the Nasdaq National Market, Inc.) and shall arrange
for at least two (2) market makers to register with the National Association of
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Securities Dealers, Inc. as such with respect to the Common Stock. Neither the
Company nor any of its Subsidiaries shall take any action which would reasonably
be expected to result in the delisting or suspension of the Common Stock on the
Nasdaq National Market, AMEX or NYSE (other than to switch listings from the
Nasdaq National Market to AMEX or NYSE or from AMEX to the Nasdaq National
Market or NYSE or as a result of a Major Corporate Event (provided that the
Company has complied with Section 4(j) of this Agreement, with Section 4 of the
Series D Certificate of Designations, with respect to the Series D Preferred
Shares, and Sections 4(a) and 4(b) of the Series E Certificate of Designations,
with respect to the Series E Preferred Shares, if any). The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(f).
(g) Expenses. Subject to Section 9(l) below, by July 21, 2000
the Company shall reimburse the Investors for the Investors' attorneys' fees and
expenses in connection with negotiating and preparing the Transaction Documents
and consummating the transactions contemplated thereby up to an aggregate of
$35,000.
(h) Filing of Form 8-K. On or before the earlier of (i) 4:30
p.m., Central Time, on the date which is one (1) business day after the date the
Company signs a merger agreement with XXXX.XXX and XXXX.XXX Merger Sub for a
proposed merger transaction, (ii) the time of the public announcement of a
signed merger agreement between the Company and XXXX.XXX or an affiliate of
XXXX.XXX, and (iii) 4:30 p.m., Central Time, on July 14, 2000 (such earlier time
is referred to herein as the "FORM 8-K DEADLINE"), the Company shall file a Form
8-K with the SEC describing the terms of the transaction contemplated by the
Transaction Documents and including as exhibits to such Form 8-K (I) this
Agreement, (II) the Series D Certificate of Designations, (III) the Series E
Certificate of Designations, (IV) the signed Side Agreement, dated July 13,
2000, by and among the Company, XXXX.XXX and each of the Investors in the form
attached hereto as Exhibit E (the "SIDE AGREEMENT") (including all exhibits
thereto), and (V) a press release by the Company which discloses that: "The
Company has been notified by the Nasdaq National Market (the "NNM") that the NNM
intends to delist the Company's Common Stock because the Company no longer meets
the listing requirements. The Company has appealed the decision of the NNM. The
appeal will be heard on July 13, 2000. The Company does not meet the NNM
continued listing requirements, but has asked that delisting be stayed until the
Merger is completed."
(i) Disclosure of Disclosed Information. Prior to or
concurrent with the first public announcement of a signed merger between the
Company and XXXX.XXX or an affiliate of XXXX.XXX or, if earlier, on the Form 8-K
Deadline Date, the Company (i) shall publicly disclose the Disclosed Information
(as defined in Section 3(f)), and (ii) file a Form 8-K with the SEC which
includes as an exhibit thereto (A) the signed merger agreement (including all
exhibits thereto) between the Company and XXXX.XXX and XXXX.XXX Merger Sub or,
if no such merger agreement has been signed by such date, the draft of the
merger agreement between the Company and XXXX.XXX and XXXX.XXX Merger Sub
(including all exhibits thereto) which the Company delivered to the Investors
and which is attached hereto as Exhibit C (the "DRAFT MERGER AGREEMENT"), and
(B) the agreement of understanding, dated June 30, 2000, among the Company,
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Integrated Global Concepts, Inc. ("IGC") and XXXX.XXX, a copy of which agreement
is set forth in the form of Exhibit F hereto (the "AGREEMENT OF UNDERSTANDING").
(j) Corporate Existence. So long as an Investor beneficially
owns any Preferred Shares, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market, NYSE or AMEX.
(k) Rule 144. The Company shall not, directly or indirectly,
dispute or otherwise interfere with any claim by a holder of Preferred Shares
that such holder's holding period of any Security for purposes of Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("RULE 144")
relates back (i.e., tacks) to the holding period for the Series B Preferred
Shares and the Company's Series A Convertible Preferred Stock.
(l) Right to Exchange Series D Preferred Shares. If the
Company does not consummate a merger transaction with XXXX.XXX and XXXX.XXX
Merger Sub on substantially the same terms as was disclosed in the Disclosed
Information and the Draft Merger Agreement (including, without limitation, on
terms no less favorable to the Investors than the terms set forth in Exhibit B
to the Draft Merger Agreement) or the proposed merger transaction between the
Company and XXXX.XXX and XXXX.XXX Merger Sub is terminated or abandoned, then at
any time beginning on and including the date of the Merger Termination (as
defined below), subject to the exceptions described below, any holder of Series
D Preferred Shares may exchange all or any portion of such holder's Series D
Preferred Shares for an equal number of Series E Preferred Shares by delivering
written notice to the Company of such holder's election to exchange its Series D
Preferred Shares for Series E Preferred Shares (a "SERIES E ELECTION NOTICE").
The consummation of such an exchange of Series D Preferred Shares for Series E
Preferred Shares shall be at 10:00 a.m. Central Time on the date which is three
(3) business days after the date such investors delivers a Series E Election
Notice to the Company (a "SERIES E CLOSING"). Each of the Company and such
Investor shall deliver at such Series E Closing documents substantially similar
to those described in Sections 6 and 7 and each of the Company's and such
Investor's obligations at such Series E Closing shall be subject to the
satisfaction or waiver of the same type of conditions described in Sections 6
and 7, respectively. Each Series E Closing shall occur at the offices of Xxxxxx
Xxxxxx Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 60661- 3693
or at such other place as the Company and the applicable Investor(s) may
mutually agree. "MERGER TERMINATION" means the earlier of (i) the public
announcement by the Company or XXXX.XXX of the abandonment or termination of a
proposed merger transaction between the Company and XXXX.XXX and XXXX.XXX Merger
Sub, and (ii) December 31, 2000, if the Company does not consummate a merger
transaction with XXXX.XXX and XXXX.XXX Merger Sub on substantially the same
terms as set forth in the Draft Merger Agreement (including, without limitation,
on terms no less favorable to the Investors than the terms set forth in Exhibit
B to the Draft Merger Agreement) on or prior to December 31, 2000.
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(m) Intentionally omitted.
(n) Right to Exchange Series E Preferred Shares. Subject to
the exceptions described below, so long as any Series E Preferred Shares are
outstanding, if the Company issues or agrees to issue any equity securities or
any instrument convertible into or exercisable or exchangeable for equity
securities of the Company (other than pursuant to a firm commitment,
underwritten public offering) ("NEW EQUITY SECURITIES") after the first date on
which the Company receives a Series E Election Notice, the Company shall provide
written notice thereof via facsimile and overnight courier to each holder of
Preferred Shares ("NEW FINANCING NOTICE") at least ten (10) days prior to the
date that the Company enters into any agreement with respect to any New Equity
Securities or issues any New Equity Securities. Within one business day after
each issuance of New Equity Securities, the Company shall make an irrevocable
exchange offer to each holder of Preferred Shares on such terms and conditions
as each such holder shall reasonably require to exchange any or all of such
holder's Preferred Shares for a like amount (based on the following formula to
value each Preferred Share: the Stated Value plus any accrued and unpaid
dividends) of the New Equity Securities. Each such exchange offer shall remain
open until the earlier of (i) the date which is 15 business days after the
receipt by each holder of Preferred Shares of the New Financing Notice or (ii)
such time as all of the holders of Preferred Shares accept or reject, in
writing, such exchange offer (the "EXCHANGE OFFER NOTICE PERIOD").
Notwithstanding the foregoing, a holder of Preferred Shares shall not be
entitled pursuant to this Section 4(n) to exchange such Preferred Shares for
securities issued by the Company as part of (i) a loan from a commercial bank
which does not have any equity feature, (ii) any transaction involving the
Company's issuances of securities (A) as consideration in a merger or
consolidation, (B) in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), (C) as
consideration for the acquisition of a business, product, license or other
assets by the Company, or (D) equipment lease financing, (iii) the issuance of
Common Stock in a firm commitment, underwritten public offering, (iv) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of June 30, 2000, (v)
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option plan, restricted stock plan or stock
purchase plan for the benefit of the Company's employees, officers, directors or
consultants for services provided to the Company.
(o) Reports Under the 1934 Act for Rule 144. With a view to
making available to the Investors the benefits of Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public without
registration ("RULE 144"), the Company agrees to use all reasonable best efforts
to, at all times prior to the merger of the Company with XXXX.XXX Merger Sub on
substantially the same terms set forth in the Draft Merger Agreement (including,
without limitation, on terms no less favorable to the Investors than the terms
set forth in Exhibit B to the Draft Merger Agreement):
i. make and keep public information available, as those
terms are understood and defined in Rule 144;
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ii. file with the SEC in a timely manner all reports and
other documents required of the Company under the
1933 Act and the 1934 Act so long as the Company
remains subject to such requirements and the filing
of such reports and other documents is required for
the applicable provisions of Rule 144; and
iii. furnish to each Investor so long as such Investor
owns any of the Securities, promptly upon request,
(i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company
and such other reports and documents so filed by the
Company, and (iii) such other information as may be
reasonably requested to permit the investors to sell
such securities pursuant to Rule 144 without
registration.
(p) Issuance of Shares of XXXX.XXX for Series D Preferred
Shares. Prior to the consummation of a merger transaction with XXXX.XXX or an
affiliate of XXXX.XXX, the Company shall obtain the written agreement of
XXXX.XXX in the form of the Side Agreement (as defined in Section 4(h)) to issue
to each holder of Series D Preferred Shares concurrent with the issuance of
XXXX.XXX Common Stock (as defined below) to the holders of the Company's Common
Stock, in exchange for outstanding Series D Preferred Shares, (x) a number of
shares of XXXX.XXX's common stock ("XXXX.XXX COMMON STOCK") equal to the product
of (i) the number of Series D Preferred Shares which such holder holds as of the
time of such merger (excluding any Series D Preferred Shares which if converted
would result in such holder and its affiliates receiving a number of shares of
XXXX.XXX Common Stock in connection with the merger of the Company with XXXX.XXX
Merger Sub which would exceed 10.00% of the number of shares of XXXX.XXX Common
Stock outstanding immediately following such merger (such Series D Preferred
Shares are referred to herein as the "BLOCKED PREFERRED SHARES"), but including
Series D Preferred Shares (other than Blocked Preferred Shares) which such
holder is not able to convert, or with respect to which the Company is not
obligated to issue Common Stock, as of the date of the consummation of such
merger due to the limitations of Section 5 or Section 14, respectively, of the
Series D Certificate of Designations), multiplied by (ii) the quotient of (A)
the Conversion Amount (as defined in the Series D Certificate of Designations),
divided by (B) the Conversion Price (as defined in the Series D Certificate of
Designations), multiplied by (iii) the number of shares of XXXX.XXX Common Stock
being issued in such merger for each share of Common Stock outstanding, and (y)
a warrant (a "CONSIDERATION WARRANT") to purchase (at an exercise price of $0.01
per share) a number of shares of XXXX.XXX Common Stock equal to (i) the number
of Blocked Preferred Shares (as described above) which such holder holds as of
the time of such merger, multiplied by (ii) the quotient of (A) the Conversion
Amount (as defined in the Series D Certificate of Designations), divided by (B)
the Conversion Price (as defined in the Series D Certificate of Designations),
multiplied by (iii) the number of shares of XXXX.XXX Common Stock being issued
in such merger for each share of Common Stock outstanding. Each Consideration
Warrant shall expire not earlier than June 30, 2003, and shall be in the form
attached as Exhibit B to the Side Agreement. The
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provisions of this Section 4(p) shall replace and supersede the terms of Section
4(p) of the Series B Exchange Agreement.
(q) Issuance of Shares of XXXX.XXX Warrants for Series A
Warrants. Prior to the consummation of a merger transaction with XXXX.XXX or an
affiliate of XXXX.XXX, the Company shall obtain the written agreement of
XXXX.XXX to issue, in exchange for outstanding warrants issued pursuant to the
Series A Purchase Agreement (the "SERIES A WARRANTS"), a warrant to each
Investor, on substantially the same terms as the Series A Warrants, to purchase
shares of XXXX.XXX Common Stock, which new warrant shall be in form and
substance reasonably satisfactory to such Investors.
(r) Restriction on Sales Following Merger. If the Closing has
occurred and the Company consummates a merger transaction with XXXX.XXX and
XXXX.XXX Merger Sub on terms substantially similar to the terms set forth in the
Draft Merger Agreement (including, without limitation, on terms no less
favorable to the Investors than the terms set forth in Exhibit B to the Draft
Merger Agreement) on or before December 31, 2000, then beginning immediately
following each Investor's receipt of the Merger Closing Notice (as defined
below), each Investor agrees that following receipt of written notice (the
"MERGER CLOSING NOTICE") from XXXX.XXX that such merger has been consummated
neither such Investor nor any of its affiliates shall sell during any calendar
month ending on or after the date of such Investor's receipt of the Merger
Closing Notice (beginning with the first calendar month which ends on or after
the date of such Investor's receipt of the Merger Closing Notice), more than 10%
of such Investor's XXXX.XXX Merger Shares (as defined below) on a cumulative
basis (with partial calendar months prorated). "XXXX.XXX MERGER SHARES" means
the sum of (i) the number of shares of XXXX.XXX Common Stock which such Investor
or its affiliates received pursuant to the merger of the Company with XXXX.XXX
or an affiliate of XXXX.XXX, plus (ii) the number of shares of XXXX.XXX Common
Stock which such Investor or its affiliates has the right to purchase pursuant
to a Consideration Warrant. The Company and each Investor agree that following
the Closing the terms of this Section 4(r) shall replace and supersede the terms
of Section 4(r) of the Series B Exchange Agreement.
(s) Trading Restrictions. Each Investor agrees that during the
period beginning on and including the date of this Agreement and ending on and
including the first date on or after the consummation of a merger of the Company
with XXXX.XXX and XXXX.XXX Merger Sub on terms substantially similar to the
terms set forth in the Draft Merger Agreement (including, without limitation, on
terms no less favorable to the Investors than the terms set forth in Exhibit B
to the Draft Merger Agreement), neither such Investor nor any of such Investor's
affiliates shall engage in any transaction constituting a "short sale" (as
defined in Rule 3b-3 of the 0000 Xxx) of the XXXX.XXX Common Stock, including
without limitation the purchase of a "put option" or the sale of a "call option"
on XXXX.XXX Common Stock; provided, however, the restrictions set forth in this
sentence shall not apply at any time on and after the earlier of the date of a
Merger Termination (as defined in Section 4(l)) and the date on which this
Agreement is terminated in accordance with Section 9(l). Each Investor agrees
that during the period (A) beginning on the first day after the date on which
the Company and XXXX.XXX and XXXX.XXX Merger Sub sign a definitive merger
agreement for the merger of the Company with XXXX.XXX Merger Sub on
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terms substantially similar to the terms set forth in the Draft Merger Agreement
(including, without limitation, on terms no less favorable to the Investors than
the terms set forth in Exhibit B to the Draft Merger Agreement) and the Company
satisfies its disclosure obligations under Sections 4(h) and 4(i) (such date is
referred to herein as the "RESTRICTION TRIGGER DATE") and (B) ending on the
earlier of (I) the date of a Merger Termination, (II) the date which this
Agreement is terminated in accordance with Section 9(l), and (III) the date of
the consummation of the merger of the Company with XXXX.XXX or an affiliate of
XXXX.XXX on terms substantially similar to the same terms set forth in the Draft
Merger Agreement (including, without limitation, on terms no less favorable to
the Investors than the terms set forth in Exhibit B to the Draft Merger
Agreement), neither such Investor nor any of such Investor's affiliates shall
make Net Sales (as defined below) of the Common Stock during any calendar month
ending on or after the Restriction Trigger Date in excess of 400,000 shares of
Common Stock (with partial calendar months prorated) (subject to adjustment for
stock splits, stock dividends, stock combinations and other similar
transactions). Notwithstanding the foregoing, the restrictions set forth in the
preceding sentence shall not apply on and after any date on which the Company
materially breaches any of its obligations or covenants in this Agreement or in
the Series D Certificate of Designations. For purposes of this Section 4(s),
"NET SALES" means the result of total sales of Common Stock during a specific
calendar month minus total purchases of Common Stock during such calendar month.
The Company and each Investor agree that following the Closing the terms of this
Section 4(s) shall replace and supersede the terms of Section 4(s) of the Series
B Exchange Agreement.
(t) Waiver and Consent Under Series A Purchase Agreement. Each
Investor waives the Company's obligations to comply with its obligations under
Sections 4(c) and 4(g) of the Series A Purchase Agreement in connection with the
Company's merger with XXXX.XXX Merger Sub on substantially the terms set forth
in the Draft Merger Agreement (including, without limitation, on terms no less
favorable to the Investors than the terms set forth in Exhibit B to the Draft
Merger Agreement), provided that the Closing occurs on or before July 17, 2000
and the Company otherwise is in compliance with its obligations in this
Agreement.
(u) Waiver and Consent Under Series B Exchange Agreement. Each
Investor waives the Company's obligations to comply with its obligations under
Section 4(p) of the Series B Exchange Agreement in connection with the Company's
merger with XXXX.XXX Merger Sub on substantially the terms set forth in the
Draft Merger Agreement (including, without limitation, on terms no less
favorable to the Investors than the terms set forth in Exhibit B to the Draft
Merger Agreement), provided that the Closing occurs on or before July 17, 2000
and the Company otherwise is in compliance with its obligations in this
Agreement.
(v) Restrictions on the Issuance of Securities. During the
period beginning on and including the date of this Agreement and ending on and
including the earlier of the date of a Merger Termination and the date of the
consummation of the Company's merger with XXXX.XXX Merger Sub on substantially
the terms set forth in the Draft Merger Agreement (including, without
limitation, on terms no less favorable to the Investors than the terms set forth
in Exhibit B to the Draft Merger Agreement), the Company shall not (i) issue or
agree to issue any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock (other than (A) the
issuance of shares of Common Stock pursuant to the terms of
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securities issued prior to the date of this Agreement and set forth on Schedule
3(c) hereto provided that the terms of such securities have not been amended or
modified in any respect after the date of this Agreement, (B) the Securities,
(C) shares of Common Stock issued upon exercise of the Series A Warrants and
upon conversion of the Series B Preferred Shares), (D) options to purchase up to
1,084,000 shares of Common Stock, provided that such options (I) are issued
after the date of this Agreement, (II) are issued to employees of the Company,
(III) are set forth on Schedule 3(c) hereto, (IV) are issued pursuant to the
Company's 1995 Stock Plan, (V) are not exercisable until after the earlier of a
Merger Termination and the consummation of a merger of the Company with XXXX.XXX
Merger Sub on substantially the terms set forth in the Draft Merger Agreement
(including, without limitation, on terms no less favorable to the Investors than
the terms set forth in Exhibit B to the Draft Merger Agreement, and (VI)
pursuant to the terms of the Definitive Merger Agreement, are to be assumed by
XXXX.XXX upon consummation of a merger of the Company with XXXX.XXX Merger Sub
and are ignored for purposes of determining the number of shares of XXXX.XXX
Common Stock to be received by holders of Common Stock upon such merger, and (E)
shares of Common Stock issued pursuant to the Company's 1997 Employee Stock
Purchase Plan, provided that such issuance of shares of Common Stock does not in
any way impact the formula set forth in Exhibit B to the Draft Merger Agreement
or otherwise effect in any way the Conversion Number (as defined in Section
4.1(a)) of the Merger Agreement, or (ii) amend or otherwise modify any
securities issued by the Company prior to the date of this Agreement.
(w) Certain Matters with Respect to the Proposed Merger. The
Company represents, acknowledges and agrees that the terms of the merger of the
Company with XXXX.XXX Merger Sub as set forth in the Draft Merger Agreement
(including, without limitation, on the terms set forth in Exhibit B to the Draft
Merger Agreement) provide that (i) IGC will not receive more than 2,000,000
shares of XXXX.XXX Common Stock in connection with the proposed merger of the
Company with XXXX.XXX Merger Sub as set forth in the Draft Merger Agreement and
the Agreement of Understanding (except for any shares of XXXX.XXX Common Stock
which IGC receives in accordance with Section 4.1(a) of the Draft Merger
Agreement in exchange for shares of Common Stock which IGC holds as of the date
of this Agreement or acquires after the date of this Agreement from a party
other than the Company, XXXX.XXX or any affiliates of the Company or XXXX.XXX),
(ii) except as set forth in the immediately preceding clause (i), IGC is not
entitled to receive and will not receive any other securities of the Company or
XXXX.XXX or affiliates of the Company or XXXX.XXX prior to or in connection with
the proposed merger of the Company with XXXX.XXX Merger Sub as set forth in the
Draft Merger Agreement and the Agreement of Understanding, and (iii) holders of
the Common Stock shall not receive any consideration in exchange for such shares
of Common Stock in connection with the proposed merger of the Company with
XXXX.XXX Merger Sub except for (A) shares of XXXX.XXX Common Stock, (B) cash in
lieu of fractional shares of XXXX.XXX Common Stock and (C) in the event the
Common Stock is delisted from the Nasdaq National Market, consideration pursuant
to the exercise of appraisal rights pursuant to and in accordance with Section
262 of the Delaware General Corporation Law. The Company further represents,
acknowledges and agrees that terms of a merger of the Company with XXXX.XXX
Merger Sub which were inconsistent in any way with the terms described in the
immediately
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preceding sentence would not be on substantially the same terms as set forth in
the Draft Merger Agreement.
(x) Proxy Statement. In the event that a Merger Termination
occurs, then the Company shall provide each stockholder entitled to vote at the
next meeting of stockholders of the Company following such Merger Termination,
which meeting shall occur on or before the date which is 70 days after the date
of such Merger Termination (the "STOCKHOLDER MEETING DEADLINE"), a proxy
statement, which has been previously reviewed by the Investors and their legal
counsel, soliciting each such stockholder's affirmative vote at such annual
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in this Agreement in accordance with applicable law and
the rules and regulations of the Principal Market and to increase the number of
shares of Common Stock authorized under the Certificate of Incorporation to an
amount at least sufficient to satisfy the Company's obligations under this
Agreement and the Series A Warrants, and the Company shall use its reasonable
best efforts to solicit its stockholders' approval of such proposals and to
cause the Board of Directors of the Company to recommend to the stockholders
that they approve such proposals.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Investor or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each
Investor to the Company upon conversion of the Preferred Shares (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(d) of this Agreement until such legend
is permitted to be removed pursuant to the last paragraph of Section 2(g). The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(e) (in the case of the Conversion Shares, prior to
registration of the Conversion Shares under the 0000 Xxx) will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Section 5 shall affect in any way
each Investor's obligations and agreements set forth in Section 2(d) to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If an Investor provides the Company with an opinion of counsel, in a
form reasonably acceptable to the Company, to the effect that the public sale,
assignment or transfer of the Securities may be made without registration under
the 1933 Act or the Investor provides the Company with assurances reasonably
acceptable to the Company that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Investor and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Investors by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 5 will be
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inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Investors shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE.
The obligation of the Company hereunder to consummate the
exchange of Series B Preferred Shares for Series D Preferred Shares as
contemplated hereby at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Investor with prior written
notice thereof:
(i) Each Investor shall have executed each of this Agreement
and delivered the same to the Company.
(ii) The Series D Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware.
(iii) Each Investor shall have delivered to the Company
certificates representing that number of shares of Series B Preferred
Stock being tendered by such Investor as set forth on the Schedule of
Investors.
(iv) The representations and warranties of each Investor set
forth in this Agreement shall be true and correct as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Investor shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor
at or prior to the Closing Date.
(v) The Company and XXXX.XXX and XXXX.XXX Merger Sub shall
have executed the Definitive Merger Agreement (as defined in Section
1(b)).
7. CONDITIONS TO EACH INVESTOR'S OBLIGATION TO EXCHANGE.
The obligation of each Investor hereunder to consummate the
exchange of the Series B Preferred Shares for Series D Preferred Shares as
contemplated hereby at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Investor's sole benefit and may be waived by such
Investor at any time in its sole discretion:
(i) The Company shall have executed this Agreement and
delivered the same to such Investor.
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(ii) The Series D Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware, and a copy
thereof certified by such Secretary of State shall have been delivered
to such Investor.
(iii) The Common Stock shall be authorized for quotation on
the Nasdaq National Market or listing on AMEX or NYSE, trading in the
Common Stock issuable upon conversion of the Preferred Shares to be
traded on the Nasdaq National Market, AMEX or NYSE shall not have been
suspended by the SEC, The Nasdaq Stock Market, Inc., AMEX or NYSE and
all of the Conversion Shares issuable upon conversion of the Series D
Preferred Shares to be exchanged at the Closing shall be listed upon
the Nasdaq National Market, AMEX or NYSE.
(iv) The representations and warranties of the Company set
forth in this Agreement shall be true and correct as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the Closing Date. Such Investor shall have received a
certificate, executed by the Chief Financial Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Investor
including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
(v) Such Investor shall have received the opinion of Howard,
Rice, Nemerovski, Canady, Xxxx & Xxxxxx, dated as of the Closing Date,
in form, scope and substance reasonably satisfactory to such Investor
and in substantially the form of Schedule 7(v) attached hereto.
(vi) The Company shall have executed and delivered to such
Investor the Stock Certificates (in such denominations as such Investor
shall request) for the Series D Preferred Shares.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Investor (the "RESOLUTIONS").
(viii) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Series D Preferred Shares, at least
that number of shares of Common Stock required to be reserved by the
Company pursuant to Section 4(e).
(ix) The Irrevocable Transfer Agent Instructions, in the form
set forth in Exhibit D attached hereto, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
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(x) The Company shall have delivered to such Investor a
certificate evidencing the incorporation and good standing of the
Company in Delaware and the qualification and good standing of the
Company in California issued by the Secretary of State of each such
state as of a date within ten days of the Closing Date.
(xi) The Company shall have delivered to such Investor a
secretary's certificate certifying as to (A) the Resolutions, (B)
certified copies of its Certificate of Incorporation and (C) By-laws,
each as in effect at the Closing.
(xii) The Company shall have delivered to such Investor a
certified copy of its Certificate of Incorporation as certified by the
Secretary of State of the State of Delaware within ten days of the
Closing Date.
(xiii) The Company shall have delivered to such Investor a
letter from the Company's transfer agent certifying the number of
shares of Common Stock outstanding as of a date within five (5) days of
the Closing Date.
(xiv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits or adversely affects any of the
transactions contemplated by this Agreement, nor shall any proceeding
have been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement.
(xv) The Company and XXXX.XXX and XXXX.XXX Merger Sub shall
have executed the Definitive Merger Agreement (as defined in Section
1(b)) and, if requested by such Investor, the Company shall have
delivered a copy of such executed Definitive Merger Agreement to such
Investor.
(xvi) The Company shall have delivered to such Investor such
other documents relating to the transactions contemplated by the
Transaction Documents as such Investor or its counsel may reasonably
request.
8. INDEMNIFICATION. In consideration of each Investor's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Investor and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty
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made by the Company in the Transaction Documents or the Certificate of
Designations or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or the Certificate of
Designations or any other certificate, instrument or document contemplated
hereby or thereby, (c) any cause of action, suit or claim brought or made
against such Indemnitee (other than a cause of action, suit or claim by another
Investor) and arising out of or resulting from the execution, delivery or
performance by such Investor of the Transaction Documents or the enforcement of
the Transaction Documents by such Investor. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
California. Each party hereby irrevocably waives any right it may have, and
agrees not to request, a jury trial for the adjudication of any dispute
hereunder or in connection with or arising out of this agreement or any
transaction contemplated hereby.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investors, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. The Series A
Purchase Agreement, the Series B Exchange Agreement,
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the Series A Warrants (as defined in the Series A Purchase Agreement) and the
Registration Rights Agreement (as defined in the Series A Purchase Agreement)
shall remain in full force and effect with respect to the securities and the
transactions contemplated thereby. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and the holders of
at least two-thirds (2/3) of the Preferred Shares then outstanding, and no
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Preferred Shares then outstanding. No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents or the Certificate of Designations unless the
same consideration also is offered to all of the parties to the Transaction
Documents or holders of Preferred Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
xXxx.xxx
0000 Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx, Chief Financial Officer
With a copy to:
Howard, Rice, Nemerovski, Canady, Xxxx & Xxxxxx,
A Professional Corporation
Three Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
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If to the Transfer Agent:
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxx
If to an Investor, to it at the address and facsimile number set forth on the
Schedule of Investors, with copies to such Investor's representatives as set
forth on the Schedule of Investors, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, including by merger or consolidation, except pursuant
to a Major Corporate Event (as defined in Section 4(b) of the Series E
Certificate of Designations), provided that the Company has complied with
Section 4(j) of this Agreement, with Section 4 of the Series D Certificate of
Designations, with respect to the Series D Preferred Shares, and Sections 4(a)
and 4(b) of the Series E Certificate of Designations, with respect to the Series
E Preferred Shares, if any. An Investor may assign some or all of its rights
hereunder to (i) a Permitted Transferee (as defined below) without the consent
of the Company and (ii) to a person which is not a Permitted Transferee with the
prior consent of the Company, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Investors shall be entitled to pledge the Securities in connection with a
bona fide margin account or other loan secured by such Securities. For purposes
of this Section 9(i), a "PERMITTED TRANSFEREE" shall mean (i) an Investor, (ii)
an Affiliate (as that term is defined in Rule 501(b) under the 1933 act) of an
Investor, (iii) any holder of Preferred Shares or Series A Warrants and (iv) any
Affiliate of a holder of Preferred Shares or Series A Warrants.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person (other than XXXX.XXX with respect to Section 4(r)
and Section 4(s)). In the event that the Investors are able to obtain agreement
from XXXX.XXX to change or remove the trading restrictions set forth in
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25
Section 4(r) or Section 4(s), the Company agrees to amend this Agreement and any
other agreement to which it is a party to enable the Investors to change or
remove such restrictions in accordance with the Investors' agreement with
XXXX.XXX.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Investors
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing and each Series E Closing. Each Investor shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. Publicity. The Company and each Investor shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Investor, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Investor shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to an Investor on or before July 17, 2000 due to the
Company's or such Investor's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at any time after
5:00 p.m., California time, on July 17, 2000 without liability of any party to
any other party. In the event that the Closing shall not have occurred with
respect to any Investor on or before July 17, 2000 due to the failure of the
condition set forth in Section 6(v), with respect to the Company, and Section
7(xv), with respect to any Investor, to be satisfied (and such party's failure
to waive such unsatisfied condition), either the Company or any Investor shall
have the option to terminate this Agreement with respect to such party at any
time after 5:00 p.m., California time, on July 17, 2000. Notwithstanding the
foregoing, that if this Agreement is terminated by the Investors pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the Investors
for the expenses described in Section 4(g) above.
m. Placement Agent. The Company acknowledges that it has not
engaged any placement agent in connection with the sale of the Preferred Shares.
The Company shall be responsible for the payment of any placement agent's fees
or broker's commissions (other than those of placement agents or brokers engaged
by an Investor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Investor harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and
out of pocket expenses) arising in connection with any such claim. Each
Investor, severally and not
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jointly, represents that it has not engaged any placement agent or broker for
the exchange of the Series B Preferred Shares for the Series D Preferred Shares.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Investor and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investors hereunder or pursuant to the Certificate of
Designations or the Investors enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
* * * * * *
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IN WITNESS WHEREOF, the Investors and the Company have caused this
Exchange Agreement to be duly executed as of the date first written above.
COMPANY: INVESTORS:
XXXX.XXX XXXXXX CAPITAL LTD.
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------- --------------------------------------
Name: Xxxx X. Xxxxx Name: Xxxxxx X. Xxxxxxx
Its: Chief Financial Officer Its: Authorized Signatory
XXXXXXX CAPITAL LTD.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
28
SCHEDULE OF INVESTORS
NUMBER OF
SERIES B
PREFERRED
INVESTOR ADDRESS SHARES INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER EXCHANGED AND FACSIMILE NUMBER
------------- -------------------- ---------- ------------------------------------
Xxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 941 Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Illinois
Xxxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 506 Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Illinois
29
LIST OF SCHEDULES
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(j) Transactions with Affiliates
SCHEDULE 7(v) Legal Opinion
LIST OF EXHIBITS
EXHIBIT A Form of Certificate of Designations, Preferences and
Rights of the Series D Preferred Stock
EXHIBIT B Form of Certificate of Designations, Preferences and
Rights of the Series E Preferred Stock
EXHIBIT C Draft Merger Agreement
EXHIBIT D Form of Irrevocable Transfer Agent Instructions
EXHIBIT E Side Agreement
EXHIBIT F Agreement of Understanding
30
EXHIBIT D
MUTUAL GENERAL RELEASE
This Mutual General Release (the "RELEASE") is made as of ____ __, 2000
by and between xXxx.xxx (formerly known as xXxx.xxx, Inc.), a Delaware
corporation ("EFAX"), XXXX.XXX, Inc., a Delaware corporation ("JFAX" and,
collectively with EFAX, the "ISSUERS"), Xxxxxx Capital Ltd., a Cayman Islands
company ("XXXXXX"), and Xxxxxxx Capital Ltd., a Cayman Islands company
("XXXXXXX" and, collectively with Xxxxxx, the "HOLDERS").
A. Pursuant to that Exchange Agreement, dated as of July 13 2000 (the
"SERIES D EXCHANGE AGREEMENT"), by and between EFAX and each of the Holders,
EFAX issued to each of the Holders shares of the Company's Series D Convertible
Preferred Stock (the "SERIES D PREFERRED SHARES") with the designations,
preferences and rights set forth in the Company's Certificate of Designations,
Preferences and Rights of the Series D Convertible Preferred Stock (the "SERIES
D CERTIFICATE OF DESIGNATIONS").
B. Pursuant to that Side Agreement, dated July 13, 2000, by and among
EFAX, JFAX and each of the Holders (the "SIDE AGREEMENT"), each of the Holder's
has agreed to certain transactions in connection with the proposed merger of
EFAX with JFAX or a subsidiary of JFAX (the "MERGER"). Capitalized terms used
herein and not defined herein shall have the meanings ascribed to them in the
Side Agreement.
C. The parties obligation to consummate the transactions contemplated
by the Side Agreement are subject to the condition that each party execute and
deliver to this Release.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Waivers and Releases.
(a) In further consideration for the execution of the Side Agreement
and the consummation of the transactions contemplated thereby, effective on the
Effective Date (as defined below) each of EFAX and JFAX, on behalf of itself and
its heirs, executors, administrators, devisees, trustees, partners, directors,
officers, shareholders, employees, consultants, representatives, predecessors,
principals, agents, parents, associates, affiliates, subsidiaries, attorneys,
accountants, successors, successors-in-interest and assignees (collectively, the
"ISSUER RELEASING PERSONS"), hereby waives and releases, to the fullest extent
permitted by law, any and all claims, rights and causes of action, whether known
or unknown (collectively, the "ISSUER CLAIMS"), that any of the Issuer Releasing
Persons had or currently has against (i) the Holders, (ii) any of the Holders'
respective current or former parents, shareholders, affiliates, subsidiaries,
predecessors or assigns, or (iii) any of the Holders' or such other persons' or
entities' current or former officers, directors, employees, agents, principals,
investors, signatories, advisors, consultants, spouses, heirs, estates,
executors, attorneys, auditors and associates and members of
D-1
31
their immediate families (collectively, the "HOLDER RELEASED PERSONS"), arising
out of or relating to the Series D Exchange Agreement, the Series A Purchase
Agreement (as defined in the Series D Exchange Agreement), the Series A
Certificate of Designations (as defined in the Series D Exchange Agreement), the
Registration Rights Agreement (as defined in the Series A Purchase Agreement),
the Warrants (as defined in the Series A Purchase Agreement), the Series B
Exchange Agreement (as defined in the Series D Exchange Agreement), the Series D
Certificate of Designations or the Series B Certificate of Designations (as
defined in the Series D Exchange Agreement) (collectively, the "TRANSACTION
DOCUMENTS") or arising out of or relating to matters leading up to the
consummation of the Merger (other than arising out of or relating to the Side
Agreement).
(b) In consideration of the foregoing, effective on the Effective Date
each Holder, severally and not jointly, on behalf of itself and its heirs,
executors, administrators, devisees, trustees, partners, directors, officers,
shareholders, employees, consultants, representatives, predecessors, principals,
agents, parents, associates, affiliates, subsidiaries, attorneys, accountants,
successors, successors-in-interest and assignees (collectively, the "HOLDER
RELEASING PERSONS"), hereby waives and releases, to the fullest extent permitted
by law, any and all claims, rights and causes of action, whether known or
unknown (collectively, the "HOLDER CLAIMS"), that any of the Holder Releasing
Persons had or currently has against (i) the Issuers, (ii) any of the Issuers'
respective current or former parents, shareholders, affiliates, subsidiaries,
predecessors or assigns, or (iii) any of the Issuers' or such other persons' or
entities' current or former officers, directors, employees, agents, principals,
investors, signatories, advisors, consultants, spouses, heirs, estates,
executors, attorneys, auditors and associates and members of their immediate
families (collectively, the "ISSUER RELEASED PERSONS"), arising out of or
relating to the Transaction Documents or arising out of or relating to matters
leading up to the consummation of the Merger (other than arising out of or
relating to the Side Agreement).
2. California Matters.
(a) It is the intention of the parties that effective as of the
Effective Date this release shall be effective as a full and final accord and
satisfactory release of each and every matter specifically or generally referred
to. In furtherance of this intention, the parties acknowledge that each is
familiar with Section 1542 of the Civil Code of the State of California
("Section 1542"), which provides as follows:
A general release does not extend to claims a creditor does not know or
suspect to exist in his favor at the time of executing the release,
which if known to him must have materially affected his settlement with
the debtor.
(b) The parties hereto waive and relinquish any rights and benefits
which they may have under Section 1542, including the right to seek relief from
the terms and conditions of this release for any reason whatsoever. The parties
acknowledge that they may hereafter discover facts in addition to or different
from those which they now know or believe to be true as regards the subject of
this release, but it is their intention to fully and finally forever settle and
release any
D-2
32
and all matters, disputes and differences, known or unknown, suspected and
unsuspected, which do now exist, may exist or heretofore have existed between
them arising out of or relating to the Transaction Documents or arising out of
or relating to matters leading up to the consummation of the Merger (other than
arising out of or relating to the Side Agreement). In furtherance of this
intention, the releases herein shall be and remain in effect as full and
complete releases notwithstanding the discovery or existence of any such
additional or different facts.
(c) The parties warrant and represent to one another that they know and
understand the effect and import of the provisions of Section 1542.
3. Subject Matter of Release. Each party acknowledges that the parties to this
Release specifically intend to exclude the subject matter of this Release from
Section 6 and Section 7 of the Registration Rights Agreement (as defined in the
Series A Purchase Agreement), the Side Agreement (including the Consideration
Warrants and the New JFAX Warrants (each as defined in the Side Agreement)) and
the registration rights agreement referred to in Section 5 of the Side Agreement
(the "WARRANTS REGISTRATION RIGHTS AGREEMENT") and agree that this Release does
not relate to the same subject matter of the Side Agreement (including the
Consideration Warrants and the New JFAX Warrants), the Warrants Registration
Rights Agreement and Section 6 and Section 7 of the Registration Rights
Agreement. Accordingly, this Release does not affect any claim which any Issuer
Releasing Person or Holder Releasing Person may have under the Side Agreement,
the Consideration Warrants, the New JFAX Warrants, the Warrants Registration
Rights Agreement or Section 6 or Section 7 of the Registration Rights Agreement.
4. Effective Date. None of the releases in this Release shall be effective or
have any force or effect unless and until the later of (a) the consummation of
the Merger on substantially the terms set forth in the Draft Merger Agreement
(as defined in the Series D Exchange Agreement) (including, without limitation,
on terms no less favorable to the Investors than the terms set forth in Exhibit
B to the Draft Merger Agreement), provided such merger is consummated on or
prior to December 31, 2000 and (b) the consummation of the transactions
contemplated by the Side Agreement concurrent with the consummation of the
Merger.
5. Amendments. This Release may not be modified except by a written document
signed by each of the Holders and each of the Issuers or their respective
successors.
6. Governing Law. This Release will be governed by and construed in accordance
with the laws of the State of California without regard to conflicts of law
principles.
7. Acknowledgment. Each party hereto has read and understands this Release, has
had the opportunity to consult with an attorney prior to signing it, and
voluntarily enters into it with full knowledge of its terms and conditions and
that such terms and conditions are binding on.
D-3
33
IN WITNESS WHEREOF, the undersigned has executed this Release as of the
date first above written.
ISSUERS:
XXXX.XXX
-----------------------------------------
By:
Its:
XXXX.XXX, INC.
-----------------------------------------
By:
Its:
HOLDERS:
XXXXXX CAPITAL LTD.
-----------------------------------------
By:
Its:
XXXXXXX CAPITAL LTD.
-----------------------------------------
By:
Its:
X-0
00
XXXXXXX X
TRANSFER AGENT INSTRUCTIONS
XXXX.XXX
July __, 2000
American Stock Transfer and Trust Company
0000 - 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx
Ladies and Gentlemen:
Reference is made to that certain Exchange Agreement dated July 13, 2000
by and among xXxx.xxx, a Delaware corporation (the "COMPANY"), and the buyers
named therein (collectively, the "HOLDERS") pursuant to which the Company is
issuing to the Holders shares of its Series D Convertible Preferred Stock, par
value $.01 per share (the "PREFERRED SHARES"), convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK"). This
letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Preferred Shares (the "CONVERSION
SHARES") to or upon the order of a Holder from time to time upon surrender to
you of a completed and duly executed Conversion Notice or Exercise Notice, as
the case may be, in the form attached as Exhibit I, which has been acknowledged
by the Company as indicated by the signature of a duly authorized officer of the
Company thereon.
Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Exchange Agreement and, accordingly, each Holder is
a third party beneficiary to these instructions.
D-1
35
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (000) 000-0000.
Very truly yours,
XXXX.XXX
By:
--------------------------------------
Xxxx X. Xxxxx
V.P., Finance, CFO
ACKNOWLEDGED AND AGREED:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Date:
-----------------------------------
D-2
36
EXHIBIT I
XXXX.XXX
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series B Convertible Preferred
Stock, par value $.01 per share (the "PREFERRED SHARES"), of xXxx.xxx (formerly
known as xXxx.xxx, Inc.), a Delaware corporation (the "COMPANY"), indicated
below into shares of Common Stock, par value $.01 per share (the "COMMON
STOCK"), of the Company.
Date of Conversion: ____________________________________________________
Number of Preferred Shares to be converted:_____________________________
Stock certificate no(s). of Preferred Shares to be converted:___________
Please confirm the following information:
Conversion Price: ____________________________________________________
Number of shares of Common Stock to be issued:__________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: ________________________________________________
________________________________________________
Facsimile Number: ________________________________________________
Authorization: ________________________________________________
By:_____________________________________________
Title: _________________________________________
Dated: ________________________________________________
Account Number (if electronic book entry transfer):_____________________
Transaction Code Number (if electronic book entry transfer):____________
[NOTE TO HOLDER - THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
D-3
37
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated __________, 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
XXXX.XXX
By:
------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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