MODIFICATION AGREEMENT
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This MODIFICATION AGREEMENT (the "Modification Agreement") is effective
as of _______________, 2001, by and between xXXXXXXXXXX.XXX, INC., a Nevada
corporation ("eAutoclaims"), CANADIAN ADVANTAGE LIMITED PARTNERSHIP and
ADVANTAGE (BERMUDA) FUND, LTD. (collectively "CALP"), GOVERNORS ROAD, LLC,
("Governors Road, and together with CALP, the "Purchasers"), and THOMSON
KERNAGHAN & CO., LTD., a corporation organized under the laws of Ontario, Canada
("Agent"). Agent is entering into this Modification Agreement for itself and as
agent for the Purchasers of Series A Convertible Preferred Stock issued by
eAutoclaims (the "Preferred Stock"). eAutoclaims, Agent and Purchasers are
herein collectively called the "Parties".
R E C I T A L S:
WHEREAS, eAutoclaims and Agent entered into that certain Securities
Purchase Agreement dated as of June 27, 2000 (the "Purchase Agreement"); and
WHEREAS, eAutoclaims and Agent entered into that certain Security
Agreement dated as of August 25, 2000 (the "Security Agreement"); and
WHEREAS, in accordance with the terms set forth in the Purchase
Agreement, eAutoclaims has issued shares of its Preferred Stock and Purchasers'
Warrants ("Purchaser Warrants") to each Purchaser upon each funding under the
Purchase Agreement; and
WHEREAS, as further required under the Purchase Agreement, eAutoclaims
and Agent entered into a Registration Rights Agreement dated as of August 25,
2000 pursuant to which eAutoclaims is obligated to register shares of its $.001
par value common stock underlying the Preferred Stock, the Purchaser Warrants,
and the hereinafter described Agent's Warrants ("Registration Agreement"); and
WHEREAS, in consideration for services performed by the Agent under the
Purchase Agreement, eAutoclaims issued Agent's Warrants to the Agent ("Agent
Warrants"); and
WHEREAS, eAutoclaims filed a registration statement on Form SB-2 (the
"Registration Statement") with the Securities and Exchange Commission to
register Units comprised of shares of its common stock and redeemable common
stock purchase warrants ("Units"), File No. 333-55664, which registration has
been withdrawn due to market conditions; and
WHEREAS, the Parties desire to amend certain terms of the Purchase
Agreement, the Security Agreement, the Registration Agreement, the Purchaser
Warrants, and the Agent Warrants (such agreements are collectively referred to
as the "Preferred Stock Agreements"); and
WHEREAS, the Parties previously entered into that certain Master
Modification Agreement effective January 12, 2001, and a Letter Agreement
effective April 27, 2001 and a Restated Master Modification Agreement and
Addendum thereto effective May, 2001, which modified in certain respects the
Preferred Stock Agreements; and
WHEREAS, the purpose of this Modification Agreement is to set forth in
one document the current arrangements and understandings by and among
eAutoclaims, the Agent and Purchasers as it relates to the Preferred Stock; and
WHEREAS, the Parties desire to set forth their agreements with respect
to the modification of certain provisions included in the Preferred Stock
Agreements.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:
1. Termination of Lock-Up Letter. Because the Registration Statement
referred to in the recitals was withdrawn, any prior lock-up agreements are
terminated and are of no further force and effect.
2. Satisfaction of Penalty Provisions of Registration Rights
Agreement. The Purchasers and Agent acknowledge that eAutoclaims has issued
344,500 shares of its Common Stock in complete and total satisfaction of any
penalty provisions set forth in Article 2 of the Registration Rights Agreement
for failure to register underlying shares on a timely basis.
3. Conversion Price. The conversion price and formulas set forth in
paragraph 4(b) of the Restated Master Modification Agreement effective as of
May, 2001, shall remain in full force and effect as follows:
(a) Section 5(b)(ii) shall be revised to indicate that through
June 30, 2001 each share of Preferred Stock may be converted
into 6,667 shares of fully paid and non-assessable shares of
common stock. If the currently pending Registration
Statement is not declared effective by June 30, 2001, the
conversion price shall equal the lesser of (i) sixty-two and
one-half cents ($0.625) or (ii) seventy-five percent (75%)
of the average of the closing bid prices for the common
stock for the three (3) lowest trading days out of the
twenty (20) consecutive trading days immediately preceding
the date of conversion, as reported on the National
Association of Security Dealers OTC Bulletin Board Market
(or such other National Securities Exchange or market on
which the common stock may trade at such time).
4. Conversion Limit. The provisions of Section 14 of the Restated
Master Modification Agreement effective May, 2001, shall remain in full force
and effect such that the Purchasers and Agent shall not convert any Preferred
Stock or exercise any Warrants if the effect of the conversion or exercise
increases the beneficial ownership of such party in eAutoclaims securities
greater than 4.9% (this is a decrease from the 9.9%). All remaining shares of
Preferred Stock will be converted at such time as the total amount of
outstanding Preferred Stock is less than $250,000 (i.e., 50 shares). Likewise,
the Purchasers and Agent cannot acquire any additional shares of our Common
Stock in the open market, such a purchase would increase such entity's
beneficial ownership position above 4.9%.
5. Consent to Withdrawal of Registration Statement. The Purchasers and
Agent consent to the actions taken by eAutoclaims in withdrawing the above
referenced Registration Statement, which included registration of eAutoclaims
Common Stock underlying the conversion rights of the Preferred Stock and
exercise provisions of the Purchasers' Warrants and Agent Warrants. eAutoclaims
agrees that the piggyback registration rights granted in the Registration Rights
Agreement shall remain in full force and effect and that the Purchasers and
Agent shall maintain their demand registration rights upon 60 days notice to
eAutoclaims, signed by the holders of a majority of the outstanding shares of
the Preferred Stock.
6. Agent's Exclusive Right to Future Equity Line Financing Agreement.
eAutoclaims agrees that the Agent shall have the exclusive right as the
financing source for any future equity line of credit for similar arrangements
based upon current agreed upon terms summarized on Exhibit "C" to the Restated
Master Modification Agreement through May 31, 2003.
7. Extension of Automatic Conversion Date. The two (2) year automatic
conversion date set forth in the original Certificate of Designation for the
Series A Preferred Stock is extended to a three (3) year date provided that such
conversion does not result in the Purchasers or their affiliates increasing
their respective beneficial ownership in eAutoclaims common stock to greater
than 4.9%. The automatic conversion date shall be extended without further
action to successive annual anniversary dates until such time as conversion
would not increase beneficial ownership above 4.9%. At such time as conversion
would not result in beneficial ownership exceeding 4.9% all Series A Preferred
Stock shall be automatically converted.
8. Conforming Amendments. Upon amendment of the Preferred Stock
Agreements according to the preceding provisions of this Modification Agreement,
any other provision of any Preferred Stock Agreement that conflicts with the
terms of this Modification Agreement shall be deemed to be modified or amended
to be consistent with the terms hereof. All other provisions of the Preferred
Stock Agreements shall remain in full force and effect and are unmodified
hereby. eAutoclaims covenants to make a timely filing of the Certificate of
Designation for the Preferred Stock to reflect the provisions of the
Modification Agreement.
9 Successors, Assigns and Affiliates. The terms and conditions of this
Modification Agreement shall apply to successors and assigns of the parties. The
provisions of this Modification Agreement, including but not limited to the 4.9%
beneficial ownership conversion limitation in Sections 4 and 7 shall apply to
affiliates of the Purchasers, including but not limited to, Dominion Capital,
Ltd., Southshore Capital Fund, Southridge Capital Management, LLC and Sovereign
Partners, LLC.
10. Release by eAutoclaims. eAutoclaims, as well as its successors and
assigns (the collectively, the "Releasing Parties"), hereby forever releases and
discharges the Purchasers, Southridge Capital Management, LLC and Agent as well
as their officers, directors, members, partners, attorneys, employees, agents,
managers, representatives, successors and assigns, in both their individual and
representation capacities (collectively, the "Released Parties"), from any and
all actions, causes of action, obligations, bad faith claims, costs, expenses,
attorney's fees, damages, claims, liabilities and demands of whatsoever
character, nature and kind, whether in contract or tort, known or unknown,
suspected or unsuspected, which the Releasing Parties now may own or hold,
against the Released Parties, directly or indirectly, deriving from, related to,
connected with or incidental to the execution and performance of this
Modification Agreement and the Preferred Stock Agreements.
IN WITNESS WHEREOF, the parties below have executed this Modification
Agreement, effective as of the date first set forth above.
eAUTOCLAIMS, INC.
By: --------------------------------------------------
Xxxx Xxxxxx, President
THOMSON KERNAGHAN & CO., INC., individually and as Agent
By: --------------------------------------------------
Xxxxx Xxxxxx, Senior Vice President
CALP II, LP
By:
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As:
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CALP II, LD, has assigned
its ownership to the
entities it holds for
CANADIAN ADVANTAGE LIMITED
PARTNERSHIP as to 73% and
ADVANTAGE (BERMUDA) FUND
LTD.
By:
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As:
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DOMINION CAPITAL, LTD.
By:
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As:
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SOUTHRIDGE CAPITAL MANAGEMENT, LLC
By:
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As:
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SOVEREIGN PARTNERS, LLC
By:
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As:
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GOVERNORS ROAD, LLC
By:
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As:
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