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EXHIBIT 99
OPTION AGREEMENT
AMONG
XXXX X. XXXXX, XXXXXX XXXXX, XXXXXXXX XXXXX,
XXXXXXX XXXXX, XXXXXXX XXXXX, XXXX XXXXX,
XXXXXX XXXX, BROADWAY PARTNERS AND
XXXXX XXXXX, INDIVIDUALLY AND AS CUSTODIAN
FOR XXXXXXXXX XXXXX, XXXXXX XXXXX, XXXXX XXXXX
AND XXXXXX XXXXX
DATED JULY 15, 1998
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OPTION AGREEMENT
This Option Agreement ("Agreement") is made as of July 15, 1998 by Xxxx X.
Xxxxx, an individual resident in Maryland ("Buyer"), Xxxxxx Xxxxx, an individual
resident in New York, Xxxxxxxx Xxxxx, an individual resident in New York,
Xxxxxxx Xxxxx, an individual resident in New York, Xxxxxxx Xxxxx, an individual
resident in New York, Xxxx Xxxxx, an individual resident in New York, Xxxxxx
Xxxx, an individual resident in Florida, Broadway Partners, a general
partnership, and Xxxxx Xxxxx, an individual resident in New York and custodian
for Xxxxxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxx (collectively,
the "Sellers").
RECITALS
Sellers desire to grant, and Buyer desires to acquire, an option to
purchase all of Sellers' Series A and Series B Preferred stock set forth on
Schedule A hereto ("Preferred Stock") of Incomnet, Inc., a California
corporation (the "Company"), for the consideration and on the terms set forth in
this Agreement.
Now therefore, the parties, intending to be legally bound, agree as
follows:
1. PURCHASE AND SALE OF OPTION; CLOSING.
1.1 The Option.
Subject to the terms and conditions of this Agreement, Sellers
hereby grant and transfer to Buyer and Buyer hereby acquires from Sellers an
irrevocable option to purchase during the Option Term (as defined below) (the
"Option") the aggregate number of shares of Preferred Stock as set forth in
Schedule A, with each Seller being obligated to deliver to Buyer, upon exercise
of the Option, the number of shares of Preferred Stock set forth opposite such
Seller's name on Schedule A to this Agreement, together with an Assignment (as
defined below) and any and all Common Stock of the Company received by Sellers
in respect of any conversion of the Preferred Stock at the Purchase Price (as
defined below).
1.2 Term of the Option.
The term during which the Option may be exercised ("Option Term")
commenced at 2:00 p.m. (Pacific Time) on July 15, 1998 and shall terminate at
11:59 p.m. (Pacific Time) on October 14, 1998.
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1.3 Option Price.
The purchase price for the Option will be $300,000 (the "Option
Price") payable in two installments. The first installment shall be $150,000,
paid on July 15, 1998, the receipt of which is hereby acknowledged, and the
balance of $150,000 shall be delivered on August 15, 1998. If Buyer fails to pay
the second installment under this Agreement, this Agreement shall automatically
terminate and Sellers shall be entitled to keep the first installment and no
party shall have any further obligations under the terms of this Agreement other
than the continuing covenant under Section 5.2 of this Agreement and Buyer
continues to be obligated to pay the second installment. The Option
Price shall be paid by check made payable to Camhy Xxxxxxxxx & Xxxxx LLP (the
"Camhy Firm"). Sellers shall cause the Camhy Firm to disburse the funds
representing the Option Price to the Sellers in proportion to the number of
shares of Preferred Stock owned by Sellers. Buyer shall have no responsibility
for such disbursement and, upon receipt of Buyer's checks representing the
Option Price by the Camhy Firm, Buyer shall be deemed to have performed Buyer's
obligation to deliver the Option Price. The Option Price shall be credited in
full against the Purchase Price as described below. If Buyer does not exercise
the Option during the Option Term, then this Agreement shall automatically
terminate and Sellers shall be entitled to retain all funds representing the
Option Price and no party shall have any obligation to the other pursuant to
this Agreement other than the continuing covenant set forth in Section 5.2 of
this Agreement.
1.4 Exercise of Option.
At any time during the Option Term, Buyer may exercise the Option,
in whole only, by notifying Sellers in writing of Buyer's intention to exercise
the Option (the "Exercise Notice"). The Exercise Notice shall provide that, upon
satisfaction of all conditions set forth in Section 6 hereof, Buyer shall
purchase the Preferred Stock set forth in Schedule A (or the underlying
Common Stock) for a total purchase price of $2,300,000, less an amount equal to
the Option Price (or portion thereof) paid through the date of the Exercise
Closing (as defined below) plus an additional amount owed to reflect the unpaid
dividends and penalties that accrue on the Preferred Stock from July 9, 1998 to
and until the Exercise Closing (the "Purchase Price"). If the Company shall pay
to Sellers accrued dividends or penalties in respect of the Preferred Stock
during the Option Term for the period prior to July 9, 1998, such payments shall
be credited against the Purchase Price.
1.5 Closing of Exercise of Option.
The closing for the exercise of the Option and purchase of the
Preferred Stock (or underlying Common Stock) shall take place at the offices of
Buyer's counsel at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at
such time as is mutually agreed upon by the parties, but in any event not later
than three business days after satisfaction of the conditions set forth in
Section 6 of this Agreement (the "Exercise Closing"). At the Exercise Closing,
Buyer shall deliver by wire transfer or certified
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check, the Purchase Price and Sellers shall deliver the stock certificates
representing the Preferred Stock, (or in the event of a conversion, the Common
Stock received in respect of the Preferred Stock) set forth opposite their names
on Schedule A. Sellers shall immediately undertake and use their best efforts to
obtain certificates evidencing their shares of Preferred Stock. Sellers shall
also deliver at the Exercise Closing such opinions of their counsel required by
the Company pursuant to the Certificate of Determination and Stock Purchase
Agreements signed by Sellers in connection with the purchase of the Preferred
Stock. At the Exercise Closing, Sellers shall all execute an assignment in form
and substance reasonably satisfactory to Buyer and his counsel whereby Sellers
assign and transfer to Buyer all of Sellers' assignable rights, entitlements,
claims and causes of action against all persons, including the Company, whenever
accrued, in respect of the Preferred Stock and the Common Stock of the Company
into which the Preferred Stock is convertible and specifically including any
claim or cause of action arising from or relating to the Company's failure to
honor Sellers' attempted conversion of the Preferred Stock on June 10 and 11,
1998 (the "Assignment").
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represents and warrants to Buyer as follows with
respect to such Seller:
2.1 Authority, No Conflict.
This Agreement constitutes the legal, valid and binding obligations
of such Seller, enforceable against such Seller in accordance with its terms.
Such Seller has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and to perform the obligations
under this Agreement.
Neither the execution and delivery of this Agreement nor the
consummation and performance of any of the transactions contemplated by this
Agreement will:
(i) to the actual knowledge of such Seller without any duty of
inquiry, directly or indirectly contravene, conflict with, or result in the
violation of any provision of the organizational documents of the Company;
(ii) contravene, conflict with or result in the violation of or give
any governmental body or any other person the right to challenge the
contemplated transaction or to exercise any remedy or obtain any relief under
any order to which such Seller or, to the actual knowledge of such Seller
without any duty of inquiry, the Company or any of the assets owned or used by
the Company, may be subject; or
(iii) contravene, conflict with or result in a violation or breach
of any agreement or any provision of any agreement to which such Seller is a
party or give any person the right to declare a default or exercise any remedy
under, or accelerate the
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maturity or performance of or to cancel, terminate or modify any agreement to
which such Seller is a party.
2.2 Ownership of Preferred Stock; Legends and Restrictions on
Transfer.
Such Seller is the sole, true, lawful, record and beneficial owner
of the Preferred Stock listed opposite such Seller's name on Schedule A, free
and clear of all encumbrances and without restrictions on voting rights or
rights of disposition other than pursuant to this Agreement. Such Seller's
shares of Preferred Stock are such Seller's sole and separate property, and the
execution of a spousal consent to the transactions contemplated by this
Agreement is not required. There are no legends or encumbrances on any Preferred
Stock other than a securities legend that is substantially identical to the
securities legend set forth in Section 4.1 of the Stock Purchase Agreement dated
July 29, 1997 under which Xxxxxxxx Xxxxx purchased 134 shares of the Preferred
Stock. Except for this Agreement, such Seller has not entered into any contract
relating to the issuance, sale, or transfer of any equity securities or
securities of the Company. At the Exercise Closing, Buyer will convey good and
valid title to such Seller's Preferred Stock or underlying Common Stock being
purchased free and clear of any and all claims, liens, charges, encumbrances and
security interests.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
3.1 Authority.
This Agreement constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform his obligations under this Agreement.
3.2 Investment Representation.
Buyer is a sophisticated investor. If Buyer exercises the Option,
Buyer will acquire the Preferred Stock (or underlying Common Stock) for his own
account for investment and will not engage in a distribution thereof, except
transfers exempt from registration requirements of the Securities Act of 1993,
as amended, or pursuant to an effective registration statement.
3.3 Review of Public Filings.
Buyer has had an opportunity to review the public filings of the
Company and to the extent that there may be any omission or misstatement in such
filings made by the Company, Buyer may not use the fact of such misstatement or
omission as the basis for any recission of the Option.
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4. COVENANTS OF SELLERS.
4.1 No Sales, Transfers, Pledges or Encumbrances.
During the Option Term, none of the Sellers shall sell, transfer,
pledge or otherwise encumber any of the Preferred Stock or Common Stock issuable
on conversion of the Preferred Stock other than pursuant to this Agreement and
none of the Sellers shall take any actions to convert the Preferred Stock into
Common stock of the Company without the prior written consent of Buyer. Sellers
agree to take all reasonable actions to preserve their rights as holders of the
Preferred Stock (and underlying Common Stock), provided that such actions are
not otherwise inconsistent with the express terms of this Agreement.
4.2 Voting of Preferred During Option Term.
During the Option Term, Sellers shall be entitled to vote their
shares of Preferred Stock (and any Common Stock underlying the Preferred Stock),
provided that they give Buyer written notice at least five business days prior
to the date that they intend to vote such Preferred Stock (the "Voting Notice
Period"). Such notice must specify the Sellers' intention as to how they intend
to vote their respective Preferred Stock (or underlying Common Stock). If Buyer
delivers an Exercise Notice during the Voting Notice Period, upon receipt of
such Exercise Notice Sellers shall, without further action hereunder become
obligated to vote their shares of Preferred Stock (and any Common Stock received
upon conversion of such Preferred Stock) that they are entitled to vote in a
manner as directed by Buyer and Sellers shall deliver an irrevocable proxy to
Buyer whereby Buyer shall be entitled to vote all of Sellers' Preferred Stock.
4.3 Required Filings.
As promptly as practicable after the date of the Exercise Notice,
Sellers will make, and will cause each of their affiliates to make, all filings,
if any, required by legal requirements to be made by them to consummate the sale
of the Preferred Stock set forth on Schedule A (or underlying Common Stock).
4.4 Legend.
Sellers agree to use their best efforts to immediately cause a
legend to be placed on each certificate evidencing Preferred Stock which legend
reflects the existence of this Agreement (the "Option Legend") and to promptly
provide to Buyer copies of all such Preferred Stock certificates bearing the
Option Legend.
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5. COVENANTS OF BUYER.
5.1 Required Filings.
As promptly as practicable after the date of Exercise Notice, Buyer
will make all required filings, if any, to be made by him to consummate the
purchase of the Preferred Stock set forth on Schedule A, including all filings
under the HSR Act.
5.2 Covenant of Buyer Regarding Authorized Stock of the Company.
During the period from July 15, 1998 through April 14, 1999, Buyer
agrees to vote the shares of Common Stock currently owned by Buyer as directed
by Sellers in connection with any proposal by the Company to increase in the
authorized shares of the Company's Common Stock or in favor of a reverse stock
split that will enable the Company to honor the conversion of the Preferred
Stock.
6. CONDITIONS TO PURCHASE OF SHARES.
Buyer's obligation to purchase the Preferred Stock or the Common Stock
following an Exercise Notice shall be conditioned upon (i) there being no
proceedings involving a challenge or seeking damages or relief in connection
with this Agreement or the transactions contemplated hereby or that might have
the effect of preventing, delaying, making illegal or otherwise interfering with
any of the transactions contemplated by this Agreement; (ii) receipt of an
opinion of counsel addressed to the Company confirming the validity of an
exemption from securities registration relating to the transfer from Sellers to
Buyer; (iii) Sellers' ability to deliver stock certificates representing the
Preferred Stock free and clear of all liens and encumbrances; (iv) delivery by
Sellers of an Assignment in form and substance reasonably acceptable to Buyer
and his counsel; and (v) receipt of all required consents, if any, including
governmental consents required under the HSR Act.
7. GENERAL PROVISIONS.
7.1 Expenses.
Each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel and accountants.
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7.2 Notices.
All notices, consents, waivers and other communications pursuant to
or in connection with this Agreement shall be in writing and will be deemed to
have been duly given when (i) delivered by hand (with written confirmation of
receipt); (ii) sent by telecopier (with confirmation received), or (iii)
received by the addressee if sent by a nationally recognized overnight delivery
service (receipt requested); in each case to the appropriate address and
telecopier number set forth below, or such other addresses and telecopier
numbers as a party may designate by notice to the other parties.
SELLERS:
Xxxxxx Xxxxx
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Xxxxxxxx Xxxxx
000 Xxxx Xxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Xxxxxxx Xxxxx
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Xxxxxxx Xxxxx
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Xxxx Xxxxx
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Xxxxx Xxxxx
(individually and as custodian for
Xxxxxxxxx Xxxxx, Xxxxxx Xxxxx,
Xxxxx Xxxxx and Xxxxxx Xxxxx)
0 Xxxxxx Xxxx
Xxx Xxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
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Xxxxxx Xxxx
0000 00xx Xxxxxx
Xxx Xxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Broadway Partners
Xxxxxxx Xxxxx, Partner
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Copy (which shall not constitute notice) to:
Xxxxxx X. Xxxxxx, Esq.
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
BUYER:
Xxxx X. Xxxxx
c/o Meridian
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
7.3 Further Assurances.
The parties agree to furnish upon request to each other such further
information, to execute and deliver to each other such other documents, and to
do such acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents and
transactions contemplated by this Agreement.
7.4 Entire Agreement and Modification.
This Agreement constitutes a complete and exclusive statement of the
terms of the contractual relationships of the parties with respect to the
subject matter. This Agreement may not be amended except by written agreement
executed by the party to be charged with the amendment. The parties may not
assign any of their rights under this Agreement without the prior written
consent of the other party or parties, except that this restriction shall not be
deemed to prevent Buyer from selling, assigning, or otherwise transferring any
of the Preferred Stock or Common Stock underlying such Preferred Stock, provided
that Buyer has complied with his investment representations under
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Section 3.2 of this Agreement. Subject to the preceding sentence, this Agreement
will apply to and be binding in all respects upon, and inure to the benefit of
the successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any person other than
the parties to this Agreement any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties and their successors and assigns.
7.5 Severability.
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid and unenforceable only in part or degree will remain and full force and
effect to the extent not held invalid or unenforceable.
7.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
7.7 Termination.
Notwithstanding any other provisions of this Agreement, in the event
that the Company asserts, by not later than 11:59 p.m. (Pacific Time) on July
17, 1998 (the "July 17 Time"), the position that the grant of the Option to
Buyer or Buyer's exercise of the Option would trigger any type of shareholder
rights plan (or so called "poison pill") that the Company might purport to adopt
or to have adopted and either Buyer chooses (in his sole discretion) not to
contest such assertion or is unsuccessful in challenging such assertion, then
upon notice by Buyer to Sellers on or before the July 17 Time, this Agreement
shall terminate and Sellers shall immediately return to Buyer such portion of
the Option Price paid to Sellers as of the date of such notice.
7.8 Headings.
Section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
/s/ Xxxx X Xxxxx
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Xxxx X. Xxxxx
XXXXXXX:
/s/ Xxxxxx Xxxxx
--------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxxx Xxxxx
--------------------------------------------
Xxxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxx Xxxxx
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Xxxx Xxxxx
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/s/ Xxxxxx Xxxx
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Xxxxxx Xxxx
BROADWAY PARTNERS
By /s/ Xxxxxxx Xxxxx
---------------------------------------
Xxxxxxx Xxxxx, Partner
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx as custodian for Xxxxxxxxx
Xxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx as custodian for Xxxxxx Xxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx as custodian for Xxxxx Xxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx as custodian for Xxxxxx Xxxxx
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SCHEDULE A
Number of Shares of
Name of Seller Preferred Stock
-------------- -----------------------
Xxxxxx Xxxxx Series A 416.373
Series B 100.738
Xxxxxxxx Xxxxx Series A 5.0
Series B 172.0
Xxxxxxx Xxxxx Series B 100.0
Xxxxxxx Xxxxx Series B 100.0
Xxxx Xxxxx Series B 100.0
Xxxxx Xxxxx Series B 100.0
Xxxxxxxxx Xxxxx Series A 50.0
Xxxxxx Xxxxx Series A 50.0
Xxxxx Xxxxx Series A 50.0
Xxxxxx Xxxxx Series A 50.0
Xxxxxx Xxxx Series A 104.1
Broadway Partners Series B 200.0
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TOTAL 1,598.211
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