Exhibit 10.19
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Agreement (this "Agreement") is made and entered into
the 30th day of September, 1996 (the "Effective Date"), by and between Exsorbet
Industries, Inc., an Idaho corporation ("Exsorbet") and American Physicians
Service Group, Inc., a Texas corporation ("APS").
R E C I T A L S
WHEREAS, APS has purchased 1,200,000 shares of Exsorbet common stock
and has entered into a Stock Put Agreement (the "Stock Put") pursuant to which
APS may cause Exsorbet to repurchase such common stock; and
WHEREAS, the obligations of Exsorbet under the Stock Put will be
secured by a first lien security interest in all the capital stock of the
Exsorbet subsidiary which acquires 7-7, Inc., an Ohio corporation, by merger,
and will be further secured by the payment and performance guarantees of all
subsidiaries of Exsorbet (all such guarantees, together with the security
agreement and other documents entered into from time to time by or for the
benefit of APS in connection with securing the obligations of Exsorbet under the
Stock Put are hereinafter collectively referred to as the "Security Documents");
and
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WHEREAS, APS has received a warrant (the "Warrant") to acquire 300,000
shares of the common stock of Exsorbet and has further received options (the
"Options") from certain stockholders of Exsorbet pursuant to which APS is
entitled to purchase, in the aggregate, an additional 1,700,000 shares of the
common stock of Exsorbet; and
WHEREAS, the parties hereto desire for APS to have certain registration
rights with regard to the 1,200,000 shares of common stock of Exsorbet purchased
by APS, and such additional Exsorbet common stock as may be acquired by APS
pursuant to the exercise of the Warrant and/or the Options, and to agree on
certain other matters concerning the governance of their affairs, on the terms
and conditions contained herein.
NOW, THEREFORE, for and in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Registration Rights.
(a) APS shall have the registration rights set forth herein
with respect to (i) the 1,200,000 shares of Exsorbet common stock purchased by
APS in connection with which this Agreement was entered into, and (ii) any
shares of the common stock of Exsorbet which APS acquires upon exercise of
rights granted pursuant to the Warrant, the Options or this Agreement, and (iii)
all stock (and rights related thereto) received with respect to any stock
described in (i) and/or (ii) by virtue of any stock dividends, stock splits,
mergers, consolidations, reclassifications or similar
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transactions or occurrences. The stock of Exsorbet owned by APS which is subject
to the registration rights provided in this Agreement is hereinafter referred to
as the "Registerable Stock." To exercise its registration rights, APS must
deliver to Exsorbet a written request (the "Request") requesting that Exsorbet
effect the registration under the Securities Act of 1933, as amended (the
"Securities Act"), and the registration and/or qualification under applicable
state securities laws (the "State Laws") of all or a specified portion of the
Registerable Stock, and specifying the intended method of methods of disposition
thereof, the jurisdictions in which such offering will be made and whether such
requested registration is to be an underwritten offering.
(b) Exsorbet will use its best efforts to effect the
registration under the Securities Act and the registration and/or qualification
under the State Laws of the Registerable Stock, to the extent required to permit
the disposition thereof in accordance with the methods and in the jurisdictions
set forth in the Request; provided that Exsorbet may include in such
registration statement securities of Exsorbet ("Other Registerable Securities")
to be offered and sold by or on behalf of Exsorbet or any other security holder
of Exsorbet who possesses a right to have such securities included in such
registration statement and who timely exercises such right in connection with
the registration hereunder; provided that whenever Exsorbet shall effect a
registration pursuant to this Agreement in connection with an underwritten
offering, if (A) any underwriter representing APS in such offering advises APS
in writing that, in its opinion, the inclusion of Other Registerable Securities
would adversely affect such offering and (B) APS shall not have consented in
writing to the inclusion of such Other Registerable Securities, then no
securities other than shares of Registerable Stock shall be included among the
securities covered by such registration. A registration requested pursuant to
this Agreement shall be deemed to have been effected (i) if and
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when a registration statement filed with the Securities and Exchange Commission
(the "Commission") relating to the Registerable Stock has been declared
effective by the Commission or otherwise has become effective and registration
and/or qualification under all applicable State Laws has been completed;
provided that a registration requested pursuant to this Agreement shall not be
deemed to have been effected if after such registration has become effective,
such registration statement is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court due to reasons that are not the fault of APS and/or are not based on any
act or omission of APS, or (ii) if Exsorbet has commenced preparation of such a
registration statement under the Securities Act and such registration and/or
qualification under the State Laws and such registration statement does not
become effective or such registration and/or qualification is not completed in
either case by reason of the unreasonable refusal to proceed or lack of
reasonable cooperation of APS, Exsorbet shall be deemed to have effected a
registration under this Agreement and shall have no further obligation pursuant
hereto. If a requested registration pursuant to this Agreement involves an
underwritten offering, the underwriter(s) thereof shall be selected or approved
by APS. Notwithstanding the foregoing, APS agrees that for a period of one (1)
year after the Effective Date, APS will not request Exsorbet (except for
requests pursuant to subsection (f) below) to register more than 1,000,000
shares of Registerable Stock and that if APS requests the registration of any
excess Registerable Stock during the one (1) year period, then Exsorbet will
have sole discretion as to whether to allow APS to include in the registration
any additional Registerable Stock over such 1,000,000 share maximum. However, if
APS requests a registration in the one (1) year period after the Effective Date
and Exsorbet declines to allow APS to include all of the shares of Registerable
Stock owned by APS in such registration, then Exsorbet
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will cause all remaining shares of Registerable Stock owned by APS at the
conclusion of the one (1) year period to be fully registered and freely
tradeable within thirty (30) days after the expiration of the one (1) year
period after the Effective Date. Except for multiple registrations required by
the foregoing provisions, or as a result of registrations pursuant to subsection
(f) below, Exsorbet will not be required to effect more than one (1)
registration pursuant to this Agreement. Furthermore, in the event APS acquires
at least 1,000,000 shares of registered and freely tradeable Exsorbet common
stock within the sixty (60) day period immediately following the Effective Date,
then APS will not request Exsorbet to register (other than a registration
pursuant to subsection (f) below) any Registerable Stock before the expiration
of one (1) year after the Effective Date.
(c) Except as otherwise prohibited by applicable law, Exsorbet
will pay all fees and expenses incurred by Exsorbet in connection with the
registration of the Registerable Stock; except for any underwriting commissions,
transfer taxes, and fees and expenses of counsel for APS, if any, attributable
to the sale of the Registerable Stock, all of which shall be borne by APS.
(d) If Exsorbet is required to use its best efforts to effect
a registration of the Registerable Stock under this Agreement, Exsorbet shall:
(i) promptly prepare and use its best efforts to
file with the Commission (but in no event more than thirty (30) days after
receipt of the Request from APS) a registration statement, on such
appropriate registration form of the Commission as shall permit the disposition
of the Registerable Stock and any Other Registerable Securities in accordance
with the intended method(s) of distribution specified in the Request for such
registration and use its best efforts thereafter to cause such registration
statement to become effective within thirty (30) days after filing;
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(ii) prepare and file as soon as reasonably
practicable with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and such prospectus
current and to comply with the provisions of the Securities Act with respect
to the disposition of the Registerable Stock until the earliest of (A)
such time as all of the Registerable Stock has been disposed of in
accordance with the intended methods of disposition by APS, or (B) the
expiration of the three (3) year period that shall commence on the filing of
the registration statement pursuant to subparagraph (i) above;
(iii) furnish to APS such number of copies of preliminary prospectuses and
prospectuses included in such registration statement and each amendment and
supplement thereto as APS may reasonably request in order to facilitate the
disposition of the Registerable Stock;
(iv) use its best efforts to register or qualify the Registerable Stock
under the State Laws within thirty (30) days after the filing of the
registration statement with the Commission and to keep such registration or
qualification in effect for so long as the registration statement filed
with the Commission remains in effect as provided in (ii), above, provided
that Exsorbet shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which it
would not otherwise be obligated to be so qualified, or to subject itself
to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction, or to qualify as a dealer in securities;
(v) notify APS, at any time when a prospectus is required to be delivered
by APS under the Securities Act, upon discovery by Exsorbet that the prospectus
included in such registration statement, as then in effect, or filed with the
Commission pursuant to Rule 424(b),
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includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, whereupon APS shall
suspend any offers or sales of Registerable Stock until such time as such
prospectus, as amended or supplemented from time to time, shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(vi) furnish, at the request of APS, on the date that such shares are
delivered to the underwriter or underwriters for sale in connection with a
registration pursuant to this Agreement, if such shares of Registerable Stock
are being sold through underwriters, (i) an opinion, dated such date, of the
counsel representing Exsorbet for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter dated such date, from
the independent certified public accountants of Exsorbet, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
(e) APS shall cooperate fully with Exsorbet in connection with
effecting a registration pursuant to this Agreement, including but not limited
to furnishing such information as Exsorbet may from time to time reasonably
request and as shall be required by law or by the Commission in connection with
such registration. In connection with the preparation and filing of any
registration statement under the Securities Act pursuant to this Agreement,
Exsorbet will give APS, APS' underwriters, if any, and APS' counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them
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reasonable access to its books and records and such opportunities to discuss the
business of Exsorbet with its officers and the independent public accountants
who have certified its financial statements as shall be reasonably necessary to
conduct a reasonable investigation within the meaning of the Securities Act.
(f) If Exsorbet at any time (including, without limitation, at
any time during the one (1) year period after the Effective Date) proposes to
register any of its securities for sale to the public for its own account and/or
for the account of any other person, under the Securities Act (other than by a
registration on Form X-0, X-0 or any successor similar forms or any other
Commission form of limited applicability which would not permit such additional
registration), and if at such time APS has, or has the right to acquire, any
stock of Exsorbet that could qualify as Registerable Stock, Exsorbet will, at
least sixty (60) days prior to filing the registration statement, give written
notice to APS of its intention to do so and, subject to the provisions hereof,
permit APS to include in such registration their Registerable Stock. Any such
registration shall be at Exsorbet's expense, except for underwriter's discounts
or commissions or broker's commissions, if any, attributable to such
Registerable Stock and except for any other expenses which APS elects to incur
in connection therewith or is otherwise required to bear pursuant to this
Agreement. To exercise its rights pursuant to this subsection, APS must deliver
a Request to Exsorbet in accordance with the provisions of Section 1(a), and
Exsorbet will use its best efforts to effect the registration under the
Securities Act of all Registerable Stock which Exsorbet has been so requested to
register; provided that if, any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Exsorbet
shall determine for any reason not to register or to delay registration of such
securities, Exsorbet may, at its election, give
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written notice of such determination to APS and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registerable Stock in connection with such registration, and (ii) in the
case of a determination to delay registering shall be permitted to delay
registering any Registerable Stock being registered pursuant to this subsection
for the same period as the delay in registering such other securities.
If a registration pursuant to this subsection involves an underwritten
offering of the securities so being registered for sale for the account of
Exsorbet, to be distributed by or through one or more underwriters, whether or
not the Registerable Stock so requested to be registered for sale is also to be
included in such underwritten offering, and the managing underwriter of such
underwritten offering informs Exsorbet in writing of its belief that the number
of securities requested to be included in such registration exceeds the number
which can be sold in (or during) the time of such offering, then Exsorbet may
include in such offering all securities proposed by Exsorbet to be sold for its
own account; and Exsorbet shall only be required to use its best efforts to
include Registerable Stock in such registration on a pro rata basis (based on
the number of shares of securities held by all persons who have a contractual
right to have their securities included in the proposed registration and who
make a written request for inclusion of their shares in the proposed
registration) to the extent possible such that the total number of securities to
be included does not exceed the level recommended by the managing underwriter.
The obligations of Exsorbet described in subparagraphs (iii) and (v) of Section
1(d) shall apply to any registration under this Section 1(f) which includes
Registerable Stock. Furthermore, the provision in Section 1(b) that Exsorbet
shall not be required
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to effect a registration prior to the expiration of one (1) year after the
Effective Date, shall not apply to any registration pursuant to this Section
1(f).
(g) In connection with any registration or qualification of
the Registerable Stock under this Agreement: (i) Exsorbet shall indemnify and
hold harmless APS and each underwriter thereof, including but not limited to
each person, if any, who controls APS or such underwriter within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including but not limited to reasonable expenses
incurred in investigation, preparing and defending against any claim) to which
such APS, underwriters or controlling persons may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise, insofar as the same arise out of or are based upon or are
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (as amended or
supplemented if Exsorbet shall have furnished any amendments or supplements
thereto) furnished pursuant to this Agreement or insofar as the same arise out
of or are based upon or are caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or insofar as the same arise out of or are
based upon any violation by Exsorbet of the Securities Act or the Exchange Act
or any rule or regulation thereunder; except that the foregoing indemnity
obligations shall not apply insofar as such losses, claims, damages, liabilities
or expenses arise out of or are based upon or are caused by any untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished in writing by or on behalf of APS or any such underwriter
or control person, or arise out of or are based upon any violation of the
Securities Act, Exchange Act or any rule or regulation thereunder by APS or any
such underwriter or control person,
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and (ii) APS shall indemnify Exsorbet, its affiliates and their respective
officers, directors and control persons against all such losses, claims,
damages, liabilities and expenses (including but not limited to reasonable
expenses incurred in investigating, preparing and defending against any claim)
insofar as the same arise out of or are based upon or are caused by any such
untrue statement or alleged untrue statement or any such omission or alleged
omission based upon information furnished in writing by or on behalf of APS or
any such underwriter or control person or arise out of or are based upon any
violation of the Securities Act, Exchange Act or any rule or regulation
thereunder by APS or any such underwriter or control person; provided, however,
that the liability of APS hereunder shall be limited to the lesser of (i) the
net proceeds, if any, received by APS upon sale of the Registerable Stock
pursuant to any registration effected hereunder, or (ii) the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of shares of Registerable Stock sold by APS under
such registration statement bears to the total public offering price of all
securities sold thereunder.
Promptly upon receipt by a party indemnified under this
Agreement of notice of the commencement of any action against such indemnified
party with respect to which indemnity or reimbursement may be sought against any
indemnifying party under this Agreement, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Agreement unless such failure shall materially adversely affect the defense of
such action. In case notice of commencement of any such action shall be given to
the indemnifying party as above provided, the indemnifying party shall be
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entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable expenses incurred
in investigating, preparing and defending against any claim) shall be paid by
the indemnified party unless (a) the indemnifying party agrees to pay the same,
(b) the indemnifying party fails to assume the defense of such action with
counsel reasonably satisfactory to the indemnified party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party), or (c) the named parties to any such
action (including any impleaded parties) have been advised by such counsel that
representation of such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). In the event
that either of the circumstances described in clauses (b) and (c) of the
immediately preceding sentence shall occur, the indemnified party shall have the
right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of any such action, with the expenses
and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party shall be liable for any settlement entered into without its
consent.
(h) With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of the shares
of Registerable Stock to the public without registration, Exsorbet agrees to (i)
make and keep, at all times, public information available
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as those terms are understood and defined in Rule 144 under the Securities Act,
(ii) use its diligent best efforts to file with the Commission in a timely
manner all reports and other documents required of Exsorbet under the Securities
Act and the Securities Exchange Act of 1934, as amended, at any time after it
has become subject to such reporting requirements, and (iii) furnish to APS,
upon request, a written statement as to Exsorbet's compliance with the reporting
requirements of Rule 144 and a copy of the most recent annual and quarterly
report of Exsorbet, and such other reports and documents so filed as APS may
reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
2. Representations and Warranties. Exsorbet represents and warrants to APS
as follows:
(a) Exsorbet is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Idaho and has full corporate
power and authority to carry on its business as now conducted and to enter
into and perform this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by Exsorbet and constitutes the valid
and binding obligation of Exsorbet enforceable against it in accordance with
its terms.
(b) The 1,200,000 initial shares of Exsorbet common stock
purchased by APS, and any other common stock of Exsorbet issued to APS by
Exsorbet pursuant to the Warrant or this Agreement, when issued, will have been
duly and validly authorized and issued, will be fully paid and nonassessable and
will not have been issued in violation of the preemptive rights of any person or
applicable federal or state securities laws.
(c) There is only one class of common stock of Exsorbet
outstanding and such stock trades on the Nasdaq Stock Market, Inc. SmallCap
Market under the symbol "EXSO."
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(d) Exsorbet has made available to APS copies of Exsorbet's
annual report on Form 10-K for the year ended December 31, 1995, and its
quarterly reports on Form 10-Q (or Form 10-Q/A where applicable) for the
quarters ended March 31, 1996 and June 30, 1996, (collectively, the "Periodic
Reports"), in the form filed with the Commission pursuant to the requirements of
the Exchange Act. At the time of filing, the Periodic Reports were appropriately
responsive to the requirements of the Exchange Act, were complete and proper in
form and did not contain an untrue statement of a fact or omit to state a fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Since
June 30, 1996, and through the date of this Agreement, no event has occurred as
a consequence of which Exsorbet would be required to file, on or before the date
of this Agreement, a current report on Form 8-K pursuant to the requirements of
the Exchange Act.
3. Other Agreements.
(a) Exsorbet agrees to reimburse APS for APS' legal fees up to
$10,000, plus travel and other out-of-pocket expenses incurred by legal counsel
for APS in connection with the transactions contemplated by this Agreement, the
Warrant and the Options and in connection with the loan evidenced by the
Security Documents. Such amount shall be payable upon execution of this
Agreement.
(b) APS agrees to hold 1,000,000 of the shares of common stock
of Exsorbet initially purchased by APS for at least one (1) year after the
Effective Date; except that APS may sell such shares prior to such time (i)
pursuant to the Stock Put, and/or (ii) pursuant to a registration of such shares
as contemplated by this Agreement. Furthermore, in the event APS desires to sell
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more than 20,000 shares of Exsorbet common stock for cash on any particular day
(other then pursuant to a registration statement in effect with respect
thereto), then APS will give Exsorbet five (5) days advance written notice of
such intention, specifying the price, or other pricing methodology, and any
other terms and conditions of such sale, and Exsorbet shall be entitled, during
such five (5) day period to elect to purchase such stock from APS on the same
terms and conditions, provided such purchase by Exsorbet must be concluded
within three (3) days of exercising the election; provided the restriction
contained in this sentence shall not apply to APS unless all Exsorbet
shareholders owning five percent (5%) or more of Exsorbet common stock agree to
be bound in writing by the same restrictions.
(c) Exsorbet agrees to cause one (1) individual designated by
APS to be appointed to Exsorbet's Board of Directors promptly after the October,
1996 Exsorbet shareholder meeting, and to nominate and use its best efforts to
cause the Exsorbet shareholders to elect and thereafter maintain a designee of
APS as an Exsorbet Board member for the period designated below. In the event
APS acquires fifty percent (50%) of the aggregate shares of Exsorbet common
stock APS is entitled to purchase under the Warrant and Options pursuant to
exercise of the Warrant and/or any of the Options, then APS shall be entitled to
designate a second individual to serve on the Board of Directors of Exsorbet,
and Exsorbet agrees to cause such person to be promptly appointed to its Board
of Directors and to nominate and use its best efforts to cause the Exsorbet
shareholders to elect and thereafter maintain such second designee in place for
the period specified below. Once APS has the right to designate a second
Exsorbet Board member, in the event the size of the Exsorbet Board of Directors
is increased or otherwise becomes larger then ten directors, then APS shall be
entitled to designate a third individual to serve on the Board of Directors of
Exsorbet, and
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Exsorbet shall cause such person to be promptly appointed and shall nominate and
use its best efforts to cause the Exsorbet shareholders to elect and thereafter
maintain a third APS designee on the Board of Directors for the period stated
below. The foregoing provisions related to the designation by APS of individuals
to serve on the Board of Directors of Exsorbet shall remain in place until APS
(together with its subsidiaries and affiliates) owns less than five percent (5%)
of the issued and outstanding common stock of Exsorbet, and thereafter in the
event APS exercises its rights under the Stock Put until APS has been paid in
full all amounts due APS upon sale of the stock to Exsorbet pursuant to the
Stock Put. All APS designees to the Board of Directors of Exsorbet may be
changed from time to time by written notice of APS to Exsorbet. Exsorbet agrees
to cause such new designees to be elected to its Board of Directors promptly
upon receipt of such notice. Each individual designated by APS to serve on the
Board of Directors of Exsorbet shall be the beneficiary of at least $3 million
of director and officer insurance coverage maintained by Exsorbet (subject to
reasonable deductibles, which deductibles shall be paid by Exsorbet) and
otherwise reasonably acceptable to APS. Exsorbet further agrees that, as long as
APS has the right to designate any Exsorbet directors, Exsorbet will take such
steps as may be necessary to cause its articles of incorporation and bylaws to
contain indemnity provisions in favor of such directors to the maximum extent
allowed by applicable law.
(d) Exsorbet agrees to consult with APS concerning the form of
any and all press releases related to the transactions contemplated by the
purchase of the 1,200,000 shares of Exsorbet common stock, this Agreement, the
exercise of the Stock Put, the Warrant and/or any of the Options, and the
acquisition of 7-7, Inc., and to obtain the approval of APS prior to the
dissemination thereof, which approval shall not be unreasonably withheld.
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(e) In the event that, at any time during a period of three
(3) years after the Effective Date, Exsorbet proposes to engage in any
transaction that involves the issuance of additional Exsorbet equity securities,
options or other rights to acquire Exsorbet equity securities, or rights
convertible into any Exsorbet equity securities, or proposes to engage in any
other non-equity related transaction that involves amounts in excess of $100,000
(all the foregoing are collectively referred to as "Target Transactions"), in
which any person or entity who owns five percent (5%) or more of Exsorbet's
outstanding common stock ("Major Shareholders") is to be a participant, or has
the right to participate, APS shall have a right of first refusal to participate
in any such transaction on the same basis and terms as the applicable Major
Shareholder(s). Exsorbet agrees to give APS sixty (60) days advance written
notice of any proposed Target Transaction, including a full description of the
terms and conditions thereof, and to make available such information as APS
shall reasonably request in connection with reaching a decision as to whether to
exercise APS' right of first refusal. To exercise its right of first refusal,
APS must notify Exsorbet in writing prior to the expiration of such sixty (60)
day period and, if it exercises such right, shall be entitled to participate in
the Target Transaction on the same terms and conditions as the applicable Major
Shareholder(s). In the event there are substantial modifications to the proposed
terms of any such Target Transaction during such sixty (60) day period, APS
shall be entitled to a new notice and sixty (60) day period in which to
determine to exercise its right of first refusal. Furthermore, Exsorbet agrees
to cause all Exsorbet shareholders who are also directors of Exsorbet, as of the
Effective Date, or thereafter, to execute and deliver to APS an agreement in
form and substance acceptable to APS, to vote their shares in favor of the
election of APS designees to the Exsorbet Board of Directors as contemplated in
subsection (c) above.
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(f) In the event any shareholder defaults under any of the
Options and APS is unable, within thirty (30) days of such default (without
recourse to litigation), to acquire the Exsorbet common stock subject to any of
such Options, then Exsorbet will sell to APS such number of shares of Exsorbet
common stock, at the exercise price stated in the applicable Option, as APS
would have been able to purchase under the Options in default.
(g) For a period of sixty (60) days after the Effective Date,
APS shall be entitled to full access to the books, records and management of
Exsorbet and its subsidiaries, during reasonable business hours, to afford APS a
full opportunity to perform a due diligence review with regard to the business,
financial and legal affairs of Exsorbet.
(h) APS acknowledges and agrees that Exsorbet has disclosed to
APS that Exsorbet is considering a merger into a Delaware corporation, whereby
the Delaware corporation will be the surviving corporation, and which would
result in the change of the name Exsorbet to "Consolidated Eco-Systems, Inc."
For all purposes of this Agreement the term "Exsorbet" shall refer to such
surviving successor corporation in the event that such merger and/or name change
is consummated, and all terms and provisions of this Agreement, including all
terms providing for receipt of Exsorbet common stock and other terms and
conditions shall apply with regard to such proposed merger. APS shall be
entitled to cause the surviving corporation after any such merger to re-execute
documents evidencing the Stock Put, any or all of the Security Documents, the
Warrant and this Agreement in the name of the successor corporation, but
otherwise to be identical in terms to the terms of the original agreements.
(i) In the event APS purchases any Exsorbet common stock
during the sixty (60) day period immediately following the Effective Date, other
than the initial 1,200,000 shares
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purchased as described in the recitals hereto and other than any purchases
through exercise of the Warrant or any of the Options, at a per share price of
$2.75 or less ("Other Purchased Stock"), then APS will not exercise its right to
purchase, under the Options, the number of shares equal to the number of shares
of Other Purchased Stock it acquired during such sixty (60) day period. The
foregoing shall not in any way limit APS' ability to exercise all of its rights
under and pursuant to the Warrant.
4. Remedies. This Agreement may be enforced at either law or in equity,
including, but not limited to, injunctive relief. In case any one or more of the
provisions of this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, any other provision hereof in this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. Such invalid, illegal or
unenforceable provisions shall be given effect to the maximum extent then
permitted by law. Exsorbet shall be deemed to be in default under this Agreement
if there is a default (which is not cured after any required notices of default
and opportunity to cure) under the Warrant or any of the Security Documents.
5. Governing Law and Venue. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas
(except the laws of that jurisdiction that would render such choice of law
ineffective). Venue for any action relating to this Agreement shall be proper
only in Texas.
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6. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, and all
of which together shall constitute one and the same instrument.
7. Inurement. This Agreement shall be binding upon the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns. This Agreement shall not be assignable by any party hereto without the
express written consent of the other party hereto in each instance; provided
that upon written notice to Exsorbet, APS may assign its rights and obligations
under this Agreement to any affiliate or subsidiary of APS.
8. Reservation of Shares. Exsorbet shall at all times until the
expiration of the rights provided under the Warrant and the Options, reserve for
issuance and delivery the number of shares of Exsorbet common stock as shall be
required for issuance and delivery pursuant to the Warrant and this Agreement.
9. Notices. Any notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (a) when
personally delivered to the relevant party at its address as set forth below or
(b) if sent by mail, on the third day following the date when deposited in the
United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxx X-000
00
Xxxxxx, Xxxxx 00000-0000
Attn: President
Exsorbet: Exsorbet Industries, Inc.
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Xx.
Each party may change its address for purposes of this Agreement by proper
notice to the other party.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EXSORBET: EXSORBET INDUSTRIES, INC.
By:
Printed Name:
Title:
APS: AMERICAN PHYSICIANS SERVICE
GROUP, INC.
By:
Printed Name:
Title:
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