EXCHANGE AGREEMENT
THIS
EXCHANGE AGREEMENT, dated as of June __, 2008, is
made
by and between Lattice Incorporated, a Delaware corporation (“Company”),
and
Xxxxxx Partners LP, a Delaware Limited Partnership (the “Holder”).
WHEREAS,
the Holder is the owner of 7,861,698 shares of the Company’s Series A Preferred
Stock (the “Series A Preferred”) and 1,955,132 Warrants A to purchase shares of
the Company’s common stock with an exercise price of $0.35 per share expiring
9/19/2011 registered pursuant to an SB2 registration statement filed on 2/12/07
and subsequently amended. (the “Registered Warrant”).
WHEREAS,
the Holder also owns 10,544,868 unregistered Warrants A to purchase shares
of
the Company’s common stock with an exercise price of $0.35 per share expiring
9/19/2011, 12,500,000 Warrants B to purchase shares of the Company’s common
stock with an exercise price of $0.875 per share expiring 9/19/2011 and
1,900,000 warrants to purchase shares of the Company’s common stock with an
exercise price of $0.50 expiring 2/8/2012(collectively, the “Unregistered
Warrants”).
WHEREAS,
pursuant to the Certificate of Designation, the Conversion Price of the Series
A
Preferred, as adjusted in accordance with Section 7(c) of the Certificate of
Designation is currently $0.161 per share and the Conversion Ratio is
3.5714;
WHEREAS,
the Company and the Holder currently desire that the Holder return the
Unregistered Warrants to the Company for cancellation;
WHEREAS,
in consideration for the cancellation of the Unregistered Warrants, the Company
desires to issue 520,000 of its newly designated Series C Preferred Stock
(“Series C Preferred”) to the Holder, 5,200,000 shares of the Company’s common
stock will be issuable to the Holder upon conversion of the Series C Preferred
shares owned by the Holder;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which the parties hereby acknowledge, the parties agree as follows:
1. a. Cancellation
and Reissue of Warrants.
The
Company and the Holder agree that the Holder will return the Unregistered
Warrants to the Company for cancellation. The Company and the Holder also agree
that the Holder will return the Registered Warrants to be reissued by the
Company with the same terms as currently stated within 5 days of the
receipt.
b. Filing
of Certificate of Designation and Issuance of Series C shares.
The
Company and the Holder agree that upon the return and cancellation of the
Unregistered Warrants, the Company shall within five (5) days of the signing
of
this Agreement, file the Certificate of Designation for the Series C Preferred,
a copy of which is annexed hereto as Exhibit A, such that each share of Series
C
Preferred shall be convertible into 10 shares of the Company’s common stock
subject to adjustment pursuant to the Certificate of Designation. Upon the
effectiveness of the Certificate of Designation, the Company shall promptly
issue certificates to the Holder representing the Series C Preferred
shares.
3. Further
Assurances.
In
connection with the exchange and the cancellation of the Unregistered Warrants
and amendment to the Certificate of Designation, the Holder, by entering into
this Exchange Agreement, agrees to execute all agreements and other documents
as
reasonably requested by the Company.
4. Investor
Representations and Warranties and Covenants.
The
Holder represents, warrants and covenants to the Company as
follows:
a.
No
Registration.
The
Holder understands that the Series C Preferred Shares have not been, and will
not be, registered under the Securities Act of 1933, as amended (the
“Securities
Act”)
by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things,
the
bona fide nature of the investment intent and the accuracy of such Holder’s
representations as expressed herein or otherwise made pursuant
hereto.
b. Investment
Intent.
The
Holder acquired the Series C Preferred Shares, for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale
in
connection with,
any
distribution thereof, and such Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same. Such Holder
further represents that it will not violate the Securities Act and does not
have
any contract, undertaking, agreement or arrangement with any person or entity
to
sell, transfer or grant participation to such person or entity or to any third
person or entity with respect to the Preferred Shares.
c. Investment
Experience.
Such
Holder has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company and
acknowledges that such Holder can protect its own interests. Such Holder has
such knowledge and experience in financial and business matters so that such
Holder is capable of evaluating the merits and risks of its investment in the
Company.
d. Transfer
Restrictions.
The
Holder acknowledges that the shares of the Company’s common stock issuable upon
conversion of the Series C Preferred have not been registered under the 1933
Act, and may not be transferred unless (i) they are subject to a current and
effective registration statement under the 1933 Act, or (ii) the Investor shall
have delivered to the Company an opinion of counsel, which counsel and opinion
shall be reasonably satisfactory to the Company, to the effect that the
securities to be sold or transferred may be sold or transferred pursuant to
an
exemption from such registration; and (b) any sale of the securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule, to the extent that such Rule is
applicable.
e. Access
to Data.
The
Holder and its advisors, if any, have been furnished with or have been given
access to all materials relating to the business, finances and
operations of
the
Company and any reasonably requested materials requested by the Holder. The
Holder and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management and have received complete and
satisfactory answers to any such inquiries.
f. Accredited
Investor.
The
Holder is an “accredited investor’ within the meaning of Regulation D, Rule
501(a), promulgated by the Securities and Exchange Commission under the
Securities Act and shall submit to the Company such further assurances of such
status as may be reasonably requested by the Company.
g. Restrictive
Legend. The
Holder acknowledges and agrees that the Series A Preferred Shares and the shares
of the Company’s common stock issuable upon conversion of the Series C Preferred
Shares shall bear a restrictive legend and a stop-transfer order may be placed
against transfer of any such securities except that the requirement for a
restrictive legend shall not apply to shares sold pursuant to a current and
effective registration statement or a sale pursuant Rule 144 or any successor
rule
h. Authorization.
i. The
Holder has all requisite power and authority to execute and deliver this
Exchange Agreement, and to carry out and perform its obligations under the
terms
hereof. All action on the part of the Holder necessary for the authorization,
execution, delivery and performance of this Exchange Agreement, and the
performance of all of the Holder’s obligations herein, has been
taken.
ii. This
Exchange Agreement, when executed and delivered by the Holder, will constitute
valid and legally binding obligations of the Holder, enforceable in accordance
with its terms except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies or by general principles of equity.
iii. No
consent, approval, authorization, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to
be
obtained by the Holder in connection with the execution and delivery of this
Exchange Agreement by the Holder or the performance of the Holder’s obligations
hereunder.
i. Tax
Advisors.
Such
Holder has reviewed with its own tax advisors the U.S. federal, state, local
and
foreign tax consequences of this investment and the transactions contemplated
by
this Exchange Agreement. With respect to such matters, such Holder relies solely
on such advisors and not on any statements or representations of the Company
or
any of its agents, written or oral. The Holder understands that it (and not
the
Company) shall be responsible for its own tax liability that may arise as a
result of this investment or the transactions contemplated by this Exchange
Agreement.
j. All
parties acknowledge and represent that: (a) they have read this Exchange
Agreement; (b) they clearly understand the Exchange Agreement and each of its
terms; (c) they fully and unconditionally consent to the terms of this Exchange
Agreement; (d) they have had the benefit and advice of counsel of their own
selection; (e) they have executed this Exchange Agreement, freely, with
knowledge, and without influence or duress; (f) they have not relied upon any
other representations, either written or oral, express or implied, made to
them
by any person; and (g) the consideration received by them has been actual and
adequate.
k. This
Exchange Agreement contains the entire agreement and understanding concerning
the subject matter hereof between the parties and supersedes and replaces all
prior negotiations, proposed agreement and agreements, written or oral. Each
of
the parties hereto acknowledges that neither any of the parties hereto, nor
agents or counsel of any other party whomsoever, has made any promise,
representation or warranty whatsoever, express or implied, not contained herein
concerning the subject hereto, to induce it to execute this Exchange Agreement
and acknowledges ands warrants that it is not executing this Exchange Agreement
in reliance on any promise, representation or warranty not contained
herein.
l. This
Exchange Agreement may not be modified or amended in any manner except by an
instrument in writing specifically stating that it is a supplement, modification
or amendment to the Exchange Agreement and signed by each of the parties
hereto.
m. Should
any provision of this Exchange Agreement be declared or be determined by any
court or tribunal to be illegal or invalid, the validity of the remaining parts,
terms or provisions shall not be affected thereby and said illegal or invalid
part, term or provision shall be severed and deemed not to be part of this
Exchange Agreement.
n. This
Exchange Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to principles of conflicts of
laws. Any action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New York.
Both parties, and the individuals executing this Exchange Agreement and other
agreements on behalf of the Company, agree to submit to the jurisdiction of
such
courts and waive trial by jury. The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs.
o. This
Exchange Agreement may be executed in counterparts, each of which, when all
parties have executed at least one such counterpart, shall be deemed an
original, with the same force and effect as if all signatures were appended
to
one instrument, but all of which together shall constitute one and the same
Exchange Agreement.
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IN WITNESS
WHEREOF, the parties have caused this Exchange Agreement to be duly executed
by
their respective officers thereonto duly authorized as of the day and year
first
above written.
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LATTICE
INCORPORATED
|
|
By:__________________________________________
Name:
Xxxx Xxxxxxx
Title: Chief Executive Officer
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[REMAINDER
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SIGNATURE
PAGES FOR HOLDERS TO FOLLOW]
[SIGNATURE
PAGE OF HOLDERS TO LATTICE INCORPORATED EXCHANGE AGMT]
Name
of
Holder: XXXXXX
PARTNERS LP
By:
Xxxxxx Capital Advisors, LLC, its General Partner
By:________________________________
Xxxxxx
Xxxxxx Xxxxxx
Managing
Partner
000
Xxxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx
XX 00000
