REFORMATION AGREEMENT
Exhibit
10.45
This
Reformation Agreement (this “Agreement”) is effective as of June 13,
2007, by and among BPO Management Services, Inc., a Delaware corporation
(the
“Company”), and the purchasers listed on the signature pages hereto (the
“Purchasers”). Each of the Company and the Purchasers is
individually referred to herein as a “Party” and are, collectively, the
“Parties.”
RECITALS
WHEREAS,
the Parties entered into that certain Series D Convertible Preferred Stock
Purchase Agreement dated as of June 13, 2007 (the “Stock Purchase
Agreement”) and certain other documents required by, or provided for in, the
Stock Purchase Agreement (together with the Stock Purchase Agreement, the
“Transaction Documents”);
WHEREAS,
pursuant to the Transaction Documents, the Purchasers purchased an aggregate
of
1,458,333.8 shares of the Company’s Series D Convertible Preferred Stock, Series
A, B, C, and D Warrants exercisable for the purchase of an aggregate of
approximately 70.0 million shares of the Company’s common stock, and Series J
Warrants exercisable for the purchase of an aggregate of 1,458,333.8 shares
of
the Company’s Series D-2 Convertible Preferred Stock, for an aggregate purchase
price of approximately $14 million (the “Investment Funds”);
WHEREAS,
the agreed-upon use of the proceeds from the Transaction Documents was for
the
completion of certain specified acquisitions and such other subsequent
acquisitions as, under certain circumstances, might be proposed by the Company,
subject to certain approval provisions in favor of the Purchasers, as well
as to
fund the Company’s general working capital requirements;
WHEREAS,
the Parties’ intention in connection with the transactions contemplated by the
Transaction Documents (collectively, the “Transaction”) was that
(a) the Purchasers were purchasing, for their own account for the purpose
of investment and not with a view to or for sale in connection with
distribution, equity capital and warrants exercisable for the purchase of
equity
securities of the Company, (b) the Company’s obligation to issue its equity
securities upon conversion of the Series D Convertible Preferred Stock and
upon
exercise of the warrants purchased in the Transaction was absolute and
unconditional, (c) the Company would not treat the Series D Convertible
Preferred Stock in any way other than as equity capital or the dividends
paid
thereon other than as dividends paid on equity capital, and (d) the dividends
paid on the Series D Convertible Preferred Stock would be eligible for the
dividends received deduction provided by Section 243(a)(1) of the Internal
Revenue Code of 1986, as amended, or any successor provision thereto; by
way of
illustration (and not limitation), see Sections 2.1(cc), 2.2(d), 3.10 and
8.1 of
the Stock Purchase Agreement evidencing such intent;
WHEREAS,
the Transaction Documents referenced an “Acquisition Failure,” which event could
occur if the Company were to fail to use at least $10 million of the Investment
Funds for the completion of certain specified acquisitions that the Purchasers
approved in the Transaction Documents (two of which were consummated shortly
after the closing of the Transaction) and such other subsequent acquisitions
as,
under certain circumstances, might be proposed by the Company, subject to
certain approval provisions in favor of the Purchasers; and the Transaction
Documents provide that upon the occurrence of an Acquisition Failure, the
Company is to redeem a pro rata portion of the Series D Convertible Preferred
Stock and the warrants purchased in the Transaction (“Acquisition Failure
Redemption”);
WHEREAS,
the Parties intended that the Transaction fully close on June 13, 2007, and
each
of the Parties confirms that it had no intention of causing or permitting
an
Acquisition Failure to occur, which could, thereby, trigger an Acquisition
Failure Redemption;
WHEREAS,
contrary to the stated intentions of the Parties and covenants of the Company
that the Investment Funds were always to be classified as having been paid
for
the purchase of equity capital and warrants exercisable for the purchase
of
equity securities of the Company, the concept of an Acquisition Failure could
cause, under United States generally accepted accounting principles, a portion
of the Investment Funds to be characterized as a mezzanine loan to the Company
and certain of the warrants to be characterized as derivative liabilities
and
treated as debt, rather than as equity capital; and
WHEREAS,
in light of the apparent internal inconsistency in the Transaction Documents
between (a) treatment of the Transaction as wholly a purchase of equity capital
and warrants exercisable for the purchase of equity securities of the Company,
as intended by the Parties, and (b) treatment of the Transaction as partially
a
purchase of equity and partially as a mezzanine loan and related derivative
instrument debt to the Company, as unintentionally drafted by counsel in
the
Transaction immediately prior to closing without the understanding by the
Parties that the accounting implications of such language were contrary to
their
business agreements, the Parties desire to reform the Transaction Documents
to
(x) memorialize and confirm their intent, understanding and agreement that
the
Transaction was solely a purchase of equity capital and warrants exercisable
for
the purchase of equity securities of the Company and (y) remove any
apparent inconsistency caused by the drafting by counsel to the
Parties.
NOW,
THEREFORE, in consideration of the premises and covenants made herein, and
for
such other good and valuable consideration, the receipt and sufficiency of
which
are hereby acknowledged, the Parties hereby agree as follows:
1. Reformation
of Transaction Documents. In order to resolve the apparent
internal inconsistency in the Transaction Documents, the Parties agree that
each
and every appearance of the words “Acquisition Failure,” “Acquisition Failure
Redemption,” “Acquisition Failure Percentage,” “Acquisition Failure Amount,”
“Acquisition Failure Redemption Amount,” “Acquisition Failure Redemption Price,”
and similar such words or derivations therefrom shall be deleted from the
Transaction Documents. By way of clarification (and not of
limitation), the Parties agree as follows:
a. Clause
(a) in its entirety shall be deleted from Section 2.1(ll) of the Stock Purchase
Agreement;
b. Section
3.11(b) in its entirety shall be deleted from the Stock Purchase
Agreement;
c. Section
8(h) shall be deemed waived by the Purchasers (on their own behalf and on
behalf
of any successor or assign of Purchasers) from both (i) the Certificate of
Designation of the Relative Rights and Preferences of the Series D Convertible
Preferred Stock of the Company and (ii) the Certificate of Designation of
the
Relative Rights and Preferences of the Series D-2 Convertible Preferred Stock
of
the Company. Each of the Purchasers hereby (x) agrees that it
shall give written notice of such waiver to any successor or assign of the
Purchaser and (y) consents to (I) the amendment of each such Certificate
of
Designation solely to delete Section 8(h) in its entirety and (II) the filing
by
the Company of such amended Certificates of Designation with the Secretary
of
State of the State of Delaware.
d. Section
4(j) in its entirety shall be deleted from each and every Series A, B, J,
C and
D Warrant issued by the Company to the Purchasers.
2. General.
a. Entire
Agreement. Except as reformed by this Agreement, the Transaction
Documents remain unmodified and in full force and effect. In the
event of any inconsistency between the provisions of the Transaction Documents
and the provisions of this Agreement, the provisions of this Agreement shall
prevail. The Transaction Documents, as reformed by this Agreement,
contain the entire understanding among the Parties and supersede any prior
written or oral agreements between them respecting the subject matter contained
herein. There are no representations, agreements, arrangements or
understandings, oral or written, between and among the Parties relating to
the
subject matter hereof that are not fully expressed herein.
b. Amendments
and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented,
and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and holders
of at
least seventy-five percent (75%) of the Series D and Series D-2 Convertible
Preferred Stock then-outstanding.
c. Notices. Notice
given hereunder shall be given in accordance with Section 9.4 of the Stock
Purchase Agreement.
d. Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Parties and their successors and permitted
assigns. The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of each
Purchaser. Each Purchaser may assign its rights hereunder in the
manner and to the Persons (as defined in the Registration Rights Agreement
among
the Parties dated as of June 13, 2007) as permitted under the Stock
Purchase Agreement.
e. Counterparts. This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together,
shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each Party and delivered to the other Parties,
it being understood that all Parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile or PDF transmission, such signature shall create a valid binding
obligation of the Party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile or
PDF
signature were the original thereof.
f. Governing
Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York,
without
giving effect to any of the conflicts of law principles which would result
in
the application of the substantive law of another jurisdiction. This
Agreement shall not be interpreted or construed with any presumption against
the
Party causing this Agreement to be drafted. The Company and the
Purchasers agree that venue for any dispute arising under this Agreement
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the Parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper
venue. The Company and the Purchasers irrevocably consent to personal
jurisdiction in the state and federal courts of the state of New
York. The Company and the Purchasers consent to process being served
in any such suit, action or proceeding by delivering a copy thereof to such
Party at the address in effect for notices to it under this Agreement and
agrees
that such service shall constitute good and sufficient service of process
and
notice thereof. Nothing in this Section 2(f) shall affect or limit
any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any
suit,
action or proceeding arising out of or relating to this Agreement or the
Stock
Purchase Agreement, shall be entitled to reimbursement for reasonable legal
fees
from the non-prevailing party. The Parties hereby waive all rights to
a trial by jury.
g. Severability. If
any term, provision, covenant or restriction of this Agreement is held to
be
invalid, illegal, void or unenforceable in any respect, the remainder of
the
terms, provisions, covenants and restrictions set forth herein shall remain
in
full force and effect and shall in no way be affected, impaired or invalidated,
and the Parties shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that
contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the
Parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
h. Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
i. Shares
Held by the Company and its Affiliates. Whenever the consent or
approval of holders of a specified percentage of the Series D or Series D-2
Convertible Preferred Stock is required hereunder, any such class of stock
held
by the Company or its affiliates (other than any Purchaser or transferees
or
successors or assigns thereof if such Purchaser is deemed to be an affiliate
solely by reason of its holdings of such securities) shall not be counted
in
determining whether such consent or approval was given by the holders of
such
required percentage.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the Parties have
caused this Reformation Agreement to be duly executed by their respective
authorized persons as of the date first indicated above.
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BPO
MANAGEMENT SERVICES, INC.
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By: /s/
Xxxxxxx Xxxxx
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Name:
Xxxxxxx Xxxxx
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Title:
Chairman & CEO
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PURCHASERS:
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VISION
OPPORTUNITY MASTER FUND, LTD.:
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By:
/s/ Xxxx Xxxxxxxx
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Name:
Xxxx Xxxxxxxx
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Title:
Director
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RENAISSANCE
US GROWTH INVESTMENT TRUST PLC:
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By:
/s/ Z. Xxxx Xxxxxxxx
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Name:
Z. Xxxx Xxxxxxxx
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Title:
VP of XXXX Capital Group, the
Company's
investment adviser
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RENAISSANCE
CAPITAL GROWTH & INCOME FUND III, INC.:
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By:
/s/ Z. Xxxx Xxxxxxxx
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Name:
Z. Xxxx Xxxxxxxx
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Title:
VP of XXXX Capital Group, the
Company's
investment
adviser
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[Signature
Page to Reformation Agreement]
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US
SPECIAL OPPORTUNITIES TRUST PLC:
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By:
/s/ Z. Xxxx Xxxxxxxx
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Name:
Z. Xxxx Xxxxxxxx
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Title:
VP of XXXX Capital Group, the
Company's
investment adviser
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PREMIER
XXXX US EMERGING GROWTH FUND LTD.:
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By:
/s/ Z. Xxxx Xxxxxxxx
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Name:
Z. Xxxx Xxxxxxxx
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Title:
VP of XXXX Capital Group, the
Company's
investment adviser
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BRIDGEPOINTE
MASTER FUND LTD.:
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By:
/s/ Xxxx X. Xxxxxx
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Name:
Xxxx X. Xxxxxx
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Title:
Director
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XXXXXX
CAPITAL INVESTMENTS LLC:
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By:
/s/ Xxxxxx X. Xxxxxx
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Name:
Xxxxxx X. Xxxxxx
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Title:
CIO
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[Signature
Page to Reformation Agreement]
