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EXHIBIT 10.1
SIDE AGREEMENT
THIS SIDE AGREEMENT (this "Agreement"), dated 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 (the
"Company"), Xxxxxx Capital Ltd. and Xxxxxxx Capital Ltd. (collectively, Xxxxxx
Capital Ltd. and Xxxxxxx Capital Ltd. are referred to as the "Investors", or
individually as an "Investor") and XXXX.XXX, Inc., a Delaware corporation, with
headquarters located at 0000 Xxxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx
("JFAX").
WHEREAS:
A. The Company and the Investors entered into an Exchange Agreement,
dated as of April 5, 2000 (the "Exchange Agreement").
B. The Company and JFAX currently are engaged in discussions of a
potential merger (such merger, provided that it is on substantially the same
terms as set forth in the Draft Merger Agreement (as defined in the Exchange
Agreement between the Investors and the Company dated as of July 13, 2000 (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) is referred to in this Agreement as the "Merger") in which the
Company will merge with a subsidiary of JFAX and the holders of the Company's
Common Stock, $.01 par value (the "Company Common Stock"), will receive as
consideration in connection with the Merger shares of JFAX's Common Stock, $0.01
par value (the "JFAX Common Stock").
C. The Investors hold shares of the Company's Series B Convertible
Preferred Stock, $.01 par value (the "Series B Shares"), which, prior to the
Merger, will be exchanged into shares of the Series D Convertible Preferred
Stock, $.01 par value (the "Series D Shares"), pursuant to the terms of the
Series D Exchange Agreement.
D. Pursuant to the terms of the Series D Exchange Agreement, prior
to the consummation of the Merger, the Company and JFAX are required to execute
this Agreement which provides for the issuance to each Investor of certain
securities of JFAX upon consummation of the Merger in exchange for the Series D
Shares in accordance with Section 4(p) of the Series D Exchange Agreement.
E. Each Investor holds a warrant pursuant to a Series A Purchase
Agreement (as defined in the Exchange Agreement) (collectively, the "Series A
Warrants") which is exercisable for shares of the Company Common Stock.
F. In connection with the Series A Warrants, the Company and the
Investors entered into a Registration Rights Agreement, dated May 7, 1999 (the
"Series A Registration Rights Agreement"), which provides for registration
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to the Investors for shares of the Company Common Stock acquired upon the
exercise of the Series A Warrants.
NOW THEREFORE, the Company, the Investors and JFAX hereby agree as
follows:
1. Form of New JFAX Warrants. The Investors agree to exchange the
Series A Warrants for warrants of JFAX in the form of Exhibit A attached hereto
(the "New JFAX Warrants") at the time of the Merger. Upon issuance by JFAX of
the New JFAX Warrants, the Series A Warrants will be deemed cancelled and of no
further force or effect. At the time of the Merger, JFAX agrees to issue the New
JFAX Warrants in exchange for the Series A Warrants. JFAX agrees to use its best
efforts to ensure that the JFAX Common Stock into which the New JFAX Warrants
may be converted shall be listed on the Nasdaq National Market.
2. Termination of the Agreements. At the time of the Merger and upon
the conversion, directly or indirectly, of all of the Series D Shares into
capital stock of JFAX and, if applicable, warrants to acquire shares of the
capital stock of JFAX as set forth in Section 4(p) of the Series D Exchange
Agreement and the exchange of the Series A Warrants for the New JFAX Warrants in
accordance with the terms of this Agreement, the Series A Purchase Agreement,
the Series A Registration Rights Agreement, the Exchange Agreement and the
Series D Exchange Agreement (except for Section 4(r) thereof) will terminate.
3. Listing of Shares of Company Common Stock on Nasdaq. The
Investors agree that unless they specifically request in writing, for purposes
of the listing on the Nasdaq National Market of additional shares of Company
Common Stock which may be acquired upon the conversion of the Series D Shares
into Company Common Shares (the "Additional Listing"), the Company will not be
required to make the Additional Listing until the earlier of (i) the public
announcement by the Company or JFAX of the abandonment or termination of the
proposed Merger, and (ii) December 31, 2000, if the Company does not consummate
a merger transaction with JFAX and XXXX.XXX Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of JFAX, on substantially the same terms
as was disclosed 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 (the earlier
of (i) and (ii) being the "Merger Termination Date"). The Company represents
that it has previously listed 4.5 million shares of Company Common Stock which
may be acquired upon the conversion of the Series D Shares.
4. Limitation on Exchange.
(a) Consideration Warrant. If the number of Series D Shares that an
Investor and its affiliates hold at the time of the Merger would, if converted
and
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absent the limitation in Section 4(p) of the Series D Exchange Agreement, result
in such Investor and its affiliates receiving a number of shares of JFAX Common
Stock in connection with the Merger which would exceed 10.00% of the number of
shares of JFAX Common Stock outstanding immediately following the Merger, then
in lieu of issuing shares of JFAX Common Stock for Series D Shares which, if
converted, would result in such Investor and its affiliates receiving a number
of shares of JFAX Common Stock in connection with the Merger which would exceed
10.00% of the number of shares of JFAX Common Stock outstanding immediately
following the Merger (such Series D Shares are referred to herein as the
"Blocked Preferred Shares"), JFAX shall issue such Investor a warrant in the
form of Exhibit B attached hereto (a "Consideration Warrant") to purchase (at an
exercise price of $0.01 per share) a number of shares of JFAX Common Stock equal
to (i) the number of Blocked Preferred Shares which such Investor holds at the
time of the Merger, multiplied by (ii) the quotient of (A) the Conversion Amount
(as defined in the Series D Certificate of Designations (as defined in the
Series D Exchange Agreement), divided by (B) the Conversion Price (as defined in
the Series D Certificate of Designations), multiplied by (iii) the number of
shares of JFAX Common Stock being issued in such Merger for each share of the
Company Common Stock outstanding. Each Consideration Warrant shall expire not
earlier than June 30, 2003, and shall contain such other terms which are set
forth in Exhibit B.
(b) Series D Shares to be Retired. At the time of the Merger, all of
the then outstanding Series D Shares will be converted into shares of JFAX
Common Stock and the Consideration Warrants in accordance with this Agreement
and Section 4(p) of the Series D Exchange Agreement (except for cash in lieu of
fractional shares) and will no longer be outstanding and shall be cancelled and
retired. At the time of the Merger, JFAX shall issue (concurrent with the
issuance of JFAX Common Stock to the holders of the Company Common Stock) to
each Investor which holds Series D Shares at the time of the Merger in exchange
for such Investor's Series D Shares (other than Blocked Preferred Shares) a
number of shares of JFAX Common Stock equal to the product of (i) the number of
Series D Shares which such Investor holds as of the time of the Merger
(excluding any Blocked Preferred Shares, but including any Series D Shares
(other than Blocked Preferred Shares) which such Investor 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 the Merger due to the limitations
of Section 5 or 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 JFAX Common Stock being issued in the Merger for each share
of Company Common Stock outstanding immediately prior to the Merger.
Notwithstanding the foregoing, in no event shall an Investor be obligated to
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exchange its Series D Shares unless such exchange is in accordance with the
requirements of Section 4(p) of the Series D Exchange Agreement.
5. Registration of Warrants. At the time of the Merger, JFAX and the
Investors agree to enter into a registration rights agreement in the form
attached as Exhibit C hereto for the registration by JFAX of the shares of JFAX
Common Stock for which the Consideration Warrants and the New JFAX Warrants may
be exercised.
6. Representation of Investors. The Investors have not granted and
prior to the Merger Termination Date will not grant to any other party any
rights under the Series B Shares, the Series D Shares, the Series A Warrants,
the Exchange Agreement, the Series D Exchange Agreement or the Series A
Registration Rights Agreement and have all rights to waive any rights which they
may have under such documents.
7. Substantially Same Terms. The Investors agree that the provisions
of this Agreement shall not cause the Merger to not be 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). The parties agree that, 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 the Series D Certificate of Designations) set
forth in Section 3(b)(v) or 3(b)(vi) of the Series D Certificate of Designations
shall be deemed to have occurred.
8. Agreements of JFAX. This Agreement, together with the definitive
Merger Agreement between JFAX and the Company, shall suffice as the written
agreements which the Company is required to obtain from JFAX pursuant to
Sections 4(p) and 4(q) of the Series D Exchange Agreement.
9. Waiver of Appraisal Rights, Agreement to Vote. The Investors
waive any appraisal rights which they may have in connection with the Merger
pursuant to Section 262 of the Delaware General Corporation Law.
10. Waiver of Rights. Immediately prior to the Merger, the Company
and the Investors shall execute the Waiver Agreement in the form of Exhibit D
hereto.
11. Termination. This Agreement will terminate at the Merger
Termination Date if the Merger has not occurred by such date 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).
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12. Binding Effect. This Agreement will be binding upon any
affiliate of the Investors to which any Series B Shares, Series D Shares,
Company Common Stock or JFAX Common Stock may be transferred by the Investors
prior to the Merger.
13. 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 parties; 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.
14. Removal of Legends. Notwithstanding anything to the contrary in
the New JFAX Warrants or the Consideration Warrants, JFAX agrees that all
restrictive legends shall be removed and shall not be placed on any shares of
JFAX Common Stock issued or issuable upon exercise of the New JFAX Warrants or
the Consideration Warrants by the Investors, if (i) such Investor sells such
shares pursuant to a registration statement under the Securities Act of 1933, as
amended (the "1933 Act"), (ii) in connection with a sale transaction, such
Investor provides JFAX with an opinion of counsel, in a form reasonably
acceptable to JFAX, to the effect that a public sale, assignment or transfer of
the shares may be made without registration under the 1933 Act, or (iii) such
Investor provides JFAX assurances reasonably acceptable to JFAX that such shares
can be sold pursuant to Rule 144 under the 1933 Act without any restriction as
to the number of securities acquired as of a particular date that can then be
immediately sold.
15. Amendments. This Agreement may only be amended by a written
agreement executed by each of the parties hereto.
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16. Replacement of Warrants. If following the Merger, a
Consideration Warrant or New JFAX Warrant is lost, stolen, mutilated or
destroyed, JFAX shall, upon receipt of an indemnification undertaking in a form
reasonably acceptable to JFAX, issue a new Consideration Warrant or New JFAX
Warrant, as the case may be, of like denomination and tenor as such
Consideration Warrant or New JFAX Warrant which was lost, stolen, mutilated or
destroyed.
IN WITNESS WHEREOF, the Investors, the Company and JFAX have caused
this Agreement to be duly executed as of the date first written above.
XXXX.XXX XXXXXX CAPITAL LTD.
By: /s/ XXXX X. XXXXX By: /s/ XXXXXX X. XXXXXXX
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Name: Xxxx X. Xxxxx Name: Xxxxxx X. Xxxxxxx
Its: Chief Financial Officer Its: Authorized Signatory
XXXX.XXX, INC. XXXXXXX CAPITAL LTD.
By: /s/ XXXXXX X. XXXXXXXXX By: /s/ XXXXXX X. XXXXXXX
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Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxxx
Its: President and CEO Its: Authorized Signatory
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