SERIES F CONVERTIBLE PREFERRED STOCK ISSUANCE AGREEMENT Dated as of August 29, 2008 among BPO MANAGEMENT SERVICES, INC. and THE EXCHANGING HOLDERS LISTED ON EXHIBIT A
EXHIBIT
10.74
SERIES
F CONVERTIBLE PREFERRED STOCK ISSUANCE
AGREEMENT
Dated
as of August 29, 2008
among
BPO
MANAGEMENT SERVICES, INC.
and
THE
EXCHANGING HOLDERS LISTED ON EXHIBIT A
TABLE OF
CONTENTS
| Page | |||
| ARTICLE I ISSUANCE OF PREFERRED STOCK |
3
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1.1 | Exchange of Warrants and Issuance of Stock |
3
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| 1.2 | Conversion Shares |
3
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| 1.3 | Exchanged Warrants and Closing |
3
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| ARTICLE II REPRESENTATIONS AND WARRANTIES |
4
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| 2.1 | Representations and Warranties of the Company |
4
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| 2.2 | Representations and Warranties of the Exchanging Holders |
8
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| ARTICLE III COVENANTS |
11
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| 3.1 | Securities Compliance |
11
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| 3.2 | Compliance with Laws |
11
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| 3.3 | Amendments |
11
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| 3.4 | Other Agreements |
11
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| 3.5 | Reservation of Shares |
11
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| 3.6 | Transfer Agent Instructions |
12
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| 3.7 | Disclosure of Transaction |
12
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3.8 | Disclosure of Material Information |
12
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| 3.9 | Pledge of Securities |
13
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| ARTICLE IV CONDITIONS |
13
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| 4.1 | Conditions Precedent to the Obligation of the Company to Issue the Shares |
13
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| 4.2 | Conditions Precedent to the Obligation of the Exchanging Holders to Purchase the Shares |
14
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| ARTICLE V STOCK CERTIFICATE LEGEND |
15
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| 5.1 | Legend |
15
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| ARTICLE VI INDEMNIFICATION |
16
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| 6.1 | Company Indemnity |
16
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| 6.2 | Indemnification Procedure |
16
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| ARTICLE VII MISCELLANEOUS |
17
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| 7.1 | Fees and Expenses |
17
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| 7.2 | Specific Enforcement, Consent to Jurisdiction |
17
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| 7.3 | Entire Agreement; Amendment |
18
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| 7.4 | Notices |
18
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| 7.5 | Waivers |
19
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| 7.6 | Headings |
19
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| 7.7 | Successors and Assigns |
19
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| 7.8 | No Third-Party Beneficiaries |
19
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| 7.9 | Governing Law |
19
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| 7.10 | Survival |
19
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| 7.11 | Counterparts |
20
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| 7.12 | Publicity |
20
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| 7.13 | Severability |
20
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| 7.14 | Further Assurances |
20
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| 7.15 | 2007 Stock Incentive Plan Amendment |
20
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|
-i-
This
SERIES F CONVERTIBLE PREFERRED STOCK ISSUANCE AGREEMENT (the “Agreement”) is dated
as of August 29, 2008 by and among BPO Management Services, Inc., a Delaware
corporation (the “Company”), and each
of the persons who are exchanging certain warrants for shares of Series F
Convertible Preferred Stock of the Company, whose names are set forth on Exhibit A hereto
(individually, an “Exchanging Holder”
and collectively, the “Exchanging
Holders”).
The
parties hereto agree as follows:
ARTICLE
I
ISSUANCE OF PREFERRED
STOCK
1.1 Exchange of Warrants and
Issuance of Stock.
Upon the following terms and conditions, the Company shall issue to the
Exchanging Holders that number of shares of the Company’s Series F Convertible
Preferred Stock, par value $0.01 per share and stated value of $4.25 per share
(the “Preferred
Shares”), each Preferred Share initially convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”) at the
Conversion Price (as defined in the Certificate of Designation (as defined
below)), which Conversion Price shall initially be $0.17, subject to adjustment
as set forth therein, in the amounts set forth opposite such Exchanging Holder’s
name on Exhibit A hereto and, in exchange therefor, each of the Exchanging
Holders shall transfer to the Company for cancellation all and not less than all
of the Series A Warrants to Purchase Shares of Common Stock of the Company,
Series B Warrants to Purchase Shares of Common Stock of the Company, and those
Series D Warrants to Purchase Shares of Common Stock of the Company that have a
current exercise price of $1.10 that are owned by such Exchanging Holders
(collectively, the “Warrants”), which
Warrants are presently exercisable for shares of Common Stock, in the amounts
set forth opposite such Exchanging Holder’s name on Exhibit A
hereto. The designation, rights, preferences, and other terms and
provisions of the Series F Convertible Preferred Stock are set forth in the
Certificate of Designation of the Relative Rights and Preferences of the Series
F Convertible Preferred Stock attached hereto as Exhibit B (the “Certificate of
Designation”). The Company and the Exchanging Holders are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Section 3(a)(9) of the
Securities Act of 1933, as amended (the “Securities Act”), or
Section 4(2) of the Securities Act.
1.2 Conversion
Shares.
The Company has authorized and, subject to an amendment of its Certificate of
Designation, has reserved and covenants to continue to reserve, free of
preemptive rights and other similar contractual rights of stockholders, a number
of shares of Common Stock equal to one hundred twenty percent (120%) of the
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Preferred Shares then outstanding, which
reservation shall be in effect not later than one year following the Closing
Date and thereafter. The Preferred Shares and the Conversion Shares
are collectively referred to as the “Shares.”
1.3 Exchanged Warrants and
Closing.
Subject to the terms and conditions hereof, the Company agrees to issue to the
Exchanging Holders and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms, and conditions of this Agreement,
the Exchanging Holders, severally but not jointly, agree to exchange all and not
less than all of the Warrants for the Preferred Shares. The Preferred
Shares shall be issued in a single closing (the “Closing”). The
Closing shall take place not later than upon the execution of this Agreement by
the minimum number of parties required to amend the Series D Convertible Stock
Purchase Agreement (the “Closing
Date”). The Closing shall take place at the offices of Xxxxx
Xxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m.,
California time, on such date. Subject to the terms and conditions of
this Agreement, at the Closing, (x) the Company shall deliver or cause to be
delivered to each Exchanging Holder a certificate for the number of Preferred
Shares as is set forth opposite the name of such Exchanging Holder on Exhibit A attached
hereto, (y) each Exchanging Holder shall deliver or cause to be delivered to the
Company certificates representing all and not less than all of its Warrants as
is set forth opposite the name of such Exchanging Holder on Exhibit A attached
hereto, and (z) each of the Company and each Exchanging Holder shall deliver or
cause to be delivered to the relevant party any other documents required to be
delivered pursuant to Article IV hereof.
-3-
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES
2.1 Representations and
Warranties of the Company.
The Company hereby represents and warrants to the Exchanging Holders, as of the
date hereof and the Closing Date (except as set forth on the Schedule of
Exceptions attached hereto with each numbered Schedule corresponding to the
section number herein), as follows:
(a) Organization, Good Standing
and Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any subsidiaries except as
referenced in Section 2.1(g), below. The Company and each such
subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect (as defined in Section 2.1(h)
hereof) on the Company’s financial condition.
(b) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Irrevocable Transfer
Agent Instructions (as defined in Section 3.8), and the Certificate of
Designation (collectively, the “Transaction
Documents”) and to issue the Preferred Shares in accordance with the
terms hereof. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the
Company. This Agreement constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.
-4-
(c) Capitalization. The
authorized capital stock of the Company and the shares thereof issued and
outstanding as of March 31, 2008 are set forth on the Company’s Quarterly Report
on Form 10-Q, as filed with the United States Securities and Exchange Commission
(the “Commission”) on May
20, 2008. All of the outstanding shares of the Common Stock and the
Preferred Shares have been duly and validly authorized. The offer and
sale of all capital stock, convertible securities, rights, warrants, or options
of the Company issued prior to the Closing complied with all applicable Federal
and state securities laws, and no stockholder has a right of rescission or claim
for damages with respect thereto. The Company has furnished or made
available to the Exchanging Holders true and correct copies of the Company’s
Certificate of Incorporation as in effect on the date hereof (the “Certificate”), and
the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).
(d) Issuance of
Shares. The Preferred Shares to be issued at the Closing have
been duly authorized by all necessary corporate action and the Preferred Shares,
when issued in accordance with the terms hereof, shall be validly issued and
outstanding, fully paid and nonassessable and entitled to the rights and
preferences set forth in the Certificate of Designation. When the
Conversion Shares are issued in accordance with the terms of the Certificate of
Designation, such shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and nonassessable, and the
holders shall be entitled to all rights accorded to a holder of Common
Stock.
(e) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the consummation by the
Company of the transactions contemplated herein and therein do not and will not
(i) violate any provision of the Company’s Certificate or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration, or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument, or
obligation to which the Company is a party or by which it or its properties or
assets are bound, (iii) create or impose a lien, mortgage, security interest,
charge, or encumbrance of any nature on any property of the Company under any
agreement or any commitment to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (iv) result in a violation of any federal, state, local, or foreign
statute, rule, regulation, order, judgment, or decree (including Federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in cases other than violations
pursuant to clauses (i) and (iv) above, for such conflicts, defaults,
terminations, amendments, accelerations, and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its subsidiaries is not being conducted in violation
of any laws, ordinances, or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not or will not have
a Material Adverse Effect. The Company is not required under Federal,
state, or local law, rule, or regulation to obtain any consent, authorization,
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver, or perform any of its obligations
under the Transaction Documents, or issue the Preferred Shares and the
Conversion Shares in accordance with the terms hereof or thereof (other than any
filings which may be required to be made by the Company with the Commission or
state securities administrators subsequent to the Closing, or any other
Transaction Document); provided that, for purposes
of the representation made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Exchanging Holders herein.
-5-
(f) Financial
Statements. The Company’s audited financial statements for the
fiscal year ended December 31, 2007 and unaudited financial statements for the
fiscal quarter ended March 31, 2008 (the “Unaudited Financial
Statements Date”) (such annual and quarterly financial statements are
collectively referred to herein as the “Financial
Statements”) have been filed with the Commission as part of the Company’s
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007, and
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2008. The Financial Statements complied in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
the rules and regulations of the Commission promulgated thereunder, and the
Financial Statements do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the
Financial Statements were complete and correct in all material respects and
complied with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such Financial Statements have been prepared in
accordance with accounting principles generally accepted in the United States
(“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. The
subsidiaries of the Company are listed on Exhibit 21 to the Company’s Annual
Report on Form 10-KSB, as filed with the Commission on April 15,
2008. For the purposes of this Agreement, “subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. All of the outstanding shares
of capital stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion, or other rights, options, warrants, or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for, or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company
nor any subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of any
subsidiary or any convertible securities, rights, warrants, or options of the
type described in the preceding sentence. Neither the Company nor any
subsidiary is party to, nor has any knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of any
subsidiary.
(h) Material Adverse
Effect. For the purposes of this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, properties,
assets, operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Document or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents and/or any condition, circumstance,
or situation that would prohibit or otherwise materially interfere with the
ability of the Company to perform any of its obligations under the Transaction
Documents in any material respect.
-6-
(i)
No Undisclosed Events
or Circumstances. No event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations, or financial condition, which,
under applicable law, rule, or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(j)
Compliance with
Law. The business of the Company and the subsidiaries has been
and is presently being conducted in accordance with all applicable federal,
state, and local governmental laws, rules, regulations, and ordinances, except
for such noncompliance that, individually or in the aggregate, would not cause a
Material Adverse Effect. The Company and each of its subsidiaries
have all franchises, permits, licenses, consents, and other governmental or
regulatory authorizations, and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess such
franchises, permits, licenses, consents, and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) Certain
Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary or any Exchanging
Holder with respect to the transactions contemplated by this
Agreement.
(l)
Disclosure. Neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Exchanging Holders by or on behalf of the Company
or any subsidiary in connection with the transactions contemplated by this
Agreement contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made herein or therein,
in the light of the circumstances under which they were made herein or therein,
not misleading.
(m) Securities Act of
1933. Based in part upon the representations herein of the
Exchanging Holders, the Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer and issuance of
the Shares hereunder. Neither the Company nor anyone acting on its
behalf, directly or indirectly, has or will sell, offer to sell or solicit
offers to buy any of the Shares or similar securities to, or solicit offers with
respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the Shares under the
registration provisions of the Securities Act and applicable state securities
laws, and neither the Company nor any of its affiliates, nor any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the issuance of any of the Shares.
(n) Governmental
Approvals. Except for the filing of any notice prior or
subsequent to the Closing Date that may be required under applicable state
and/or Federal securities laws (which, if required, shall be filed on a timely
basis), including the filing of the Certificate of Designation with the
Secretary of State for the State of Delaware, no authorization, consent,
approval, license, exemption of, filing, or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic, or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Preferred Shares, or for the performance by the
Company of its obligations under the Transaction Documents.
-7-
(o) Dilutive
Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designation, is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interest of other stockholders of the Company.
(p) Independent Nature of
Exchanging Holders. The Company acknowledges that the
obligations of each Exchanging Holder under the Transaction Documents are
several and not joint with the obligations of any other Exchanging Holder, and
no Exchanging Holder shall be responsible in any way for the performance of the
obligations of any other Exchanging Holder under the Transaction
Documents. The Company acknowledges that the decision of each
Exchanging Holder to purchase securities pursuant to this Agreement has been
made by such Exchanging Holder independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its subsidiaries which may have made or given by any other Exchanging Holder or
by any agent or employee of any other Exchanging Holder, and no Exchanging
Holder or any of its agents or employees shall have any liability to any
Exchanging Holder (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document, and
no action taken by any Exchanging Holder pursuant hereto or thereto, shall be
deemed to constitute the Exchanging Holders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Exchanging Holders are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by the Transaction
Documents. The Company acknowledges that each Exchanging Holder shall
be entitled to protect and enforce its rights independently, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Document, and it shall not be necessary for any other Exchanging
Holder to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all
Exchanging Holders with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Exchanging Holders. The Company acknowledges that such
procedure with respect to the Transaction Documents in no way creates a
presumption that the Exchanging Holders are in any way acting in concert or as a
group with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
(q) No General Solicitation;
Placement Agent’s Fees. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Shares. The
Company has not engaged any placement agent or other agent in connection with
the issuance of the Shares or the transactions contemplated herein.
2.2 Representations and
Warranties of the Exchanging Holders.
Each of the Exchanging Holders hereby makes the following representations and
warranties to the Company with respect solely to itself and not with respect to
any other Exchanging Holder:
-8-
(a) Incorporation and Standing
of the Exchanging Holders. If the Exchanging Holder is an
entity, such Exchanging Holder is a corporation, limited liability company or
partnership duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
(b) Authorization and
Power. Each Exchanging Holder has the requisite power and
authority to enter into and perform this Agreement and to exchange the Warrants
for the Preferred Shares being issued to it hereunder. The execution,
delivery and performance of this Agreement by such Exchanging Holder and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Exchanging Holder or its Board of Directors,
stockholders, or partners, as the case may be, is required. This
Agreement has been duly authorized, executed, and delivered by such Exchanging
Holder and constitutes a valid and binding obligation of the Exchanging Holder
enforceable against the Exchanging Holder in accordance with the terms
thereof.
(c) No
Conflicts. The execution, delivery and performance of this
Agreement and the consummation by such Exchanging Holder of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Exchanging Holder’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Exchanging Holder is a party or by which its properties or assets are
bound, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Exchanging Holder or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect on such Exchanging Holder). Such Exchanging Holder is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or to
exchange the Warrants for the Preferred Shares in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Exchanging Holder is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Acquisition for
Investment. Each Exchanging Holder is acquiring the Preferred
Shares solely for its own account, or that of its Affiliates, for the purpose of
investment and not with a view to or for sale in connection with
distribution. Each Exchanging Holder does not have a present
intention to sell the Preferred Shares, except to an Affiliate, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of the Preferred Shares to or through any person or entity, except
to an Affiliate; provided, however, that by making the
representations herein and subject to Sections 2.2(h) and (k) below, such
Exchanging Holder does not agree to hold the Shares for any minimum or other
specific term and reserves the right to dispose of the Shares at any time in
accordance with Federal and state securities laws applicable to such
disposition. Each Exchanging Holder acknowledges that it is able to
bear the financial risks associated with an investment in the Preferred Shares
and that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company’s stage of
development so as to be able to evaluate the risks and merits of its exchange of
the Warrants for the Preferred Shares.
-9-
(e) Status of Exchanging
Holders. Each Exchanging Holder is an “accredited investor” as
defined in Rule 501(a) promulgated under the Securities Act. Each
Exchanging Holder has knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of purchasing the
Shares. Such Exchanging Holder is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act and such Exchanging Holder is
not a broker-dealer.
(f) Opportunities for Additional
Information. Each Exchanging Holder acknowledges that such
Exchanging Holder has had the opportunity to ask questions of and receive
answers from, or obtain additional information from, the executive officers of
the Company concerning the financial and other affairs of the Company, and to
the extent deemed necessary in light of such Exchanging Holder’s personal
knowledge of the Company’s affairs, such Exchanging Holder has asked such
questions and received answers to the full satisfaction of such Exchanging
Holder, and such Exchanging Holder desires to invest in the
Company.
(g) No General
Solicitation. Each Exchanging Holder acknowledges that the
Preferred Shares were not offered to such Exchanging Holder by means of any form
of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Exchanging Holder was invited by any
of the foregoing means of communications.
(h) Rule
144. Such Exchanging Holder understands that the Shares must
be held indefinitely unless such Shares are registered under the Securities Act
or an exemption from registration is available. Such Exchanging
Holder acknowledges that such Exchanging Holder is familiar with Rule 144 of the
rules and regulations of the Commission, as amended, promulgated pursuant to the
Securities Act (“Rule
144”), and that such person has been advised that Rule 144 permits
resales only under certain circumstances. Such Exchanging Holder
understands that to the extent that Rule 144 is not available, such Exchanging
Holder will be unable to sell any Shares without either registration under the
Securities Act or the existence of another exemption from such registration
requirement.
(i) General. Such
Exchanging Holder understands that the Preferred Shares are being offered in
exchange for the Warrants in reliance on a securities exemption from the
registration requirement of Federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments, and understandings of such Exchanging Holder set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Exchanging Holder to acquire the Preferred
Shares.
(j) Independent
Investment. Except as may be disclosed in any filings with the
Commission by the Exchanging Holders under Section 13 and/or Section 16 of the
Exchange Act, no Exchanging Holder has agreed to act with any other Exchanging
Holder for the purpose of acquiring, holding, voting or disposing of the Shares
purchased hereunder for purposes of Section 13(d) under the Exchange Act, and
each Exchanging Holder is acting independently with respect to its investment in
the Shares.
-10-
(k) Trading Activities;
No Short
Sales. Each Exchanging Holder’s trading activities with
respect to the Shares shall be in compliance with all applicable federal and
state securities laws. No Exchanging Holder or any of its affiliates
has an open short position in the Common Stock. Each Exchanging
Holder, whether in its own capacity or through a representative, agent, or
affiliate agrees that it will not enter into or effect any “short sales” (as
such term is defined in Rule 3b-3 of the Exchange Act) of the Shares or any
hedging transaction, including obtaining borrow, which establishes a net short
position with respect to the Shares, whether on a U.S. domestic exchange or any
foreign exchange. Additionally, each Exchanging Holder further agrees
that it shall not, and that it will cause its affiliates not to, engage in any
short sales with respect to the Common Stock.
ARTICLE
III
COVENANTS
The
Company covenants with each of the Exchanging Holders as follows, which
covenants are for the benefit of the Exchanging Holders and their permitted
assignees (as defined herein).
3.1 Securities
Compliance.
The Company shall notify the Commission in accordance with their
rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a Current Report on Form 8-K with
respect to the transactions contemplated hereby, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Preferred
Shares and the Conversion Shares to the Exchanging Holders or subsequent
holders.
3.2 Compliance with
Laws.
The Company shall comply, and cause each subsidiary to comply, with
all applicable laws, rules, regulations, and orders, noncompliance with which
could have a Material Adverse Effect.
3.3 Amendments.
Except as otherwise provided herein, the Company shall not amend or
waive any provision of the Certificate or Bylaws of the Company in any way that
would adversely affect the liquidation preferences, dividends rights, conversion
rights, or voting rights of the Preferred Shares; provided, however, that any creation
and issuance of another series of Junior Stock (as defined in the Certificate of
Designation) or any other class or series of equity securities which by its
terms shall rank on parity with the Preferred Shares shall not be deemed to
materially and adversely affect such rights, preferences or
privileges.
3.4 Other
Agreements.
The Company shall not enter into any agreement in which the terms of
such agreement would restrict or impair the right or ability to perform of the
Company or any subsidiary under any Transaction Document.
3.5 Reservation of
Shares.
From and after the first anniversary hereof and thereafter so long
as any of the Preferred Shares remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than one hundred twenty percent (120%) the aggregate number
of shares of Common Stock needed to provide for the issuance of the Conversion
Shares.
-11-
3.6 Transfer Agent
Instructions.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Exchanging Holder or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each
Exchanging Holder to the Company upon conversion of the Preferred Shares in the
form substantially similar to one previously used by the Company (the “Irrevocable Transfer Agent
Instructions”). The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 3.6 will be
given by the Company to its transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement. If an Exchanging Holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Shares may be made
without registration under the Securities Act or the Exchanging Holder provides
the Company with reasonable assurances that the Shares can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Exchanging Holder and without any restrictive
legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.6 will
cause irreparable harm to the Exchanging Holders by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.6 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.6, that the
Exchanging Holders shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
3.7 Disclosure of
Transaction.
The Company shall issue a press release describing the material
terms of the transactions contemplated hereby (the “Press Release”) as
soon as practicable after the Closing but in no event later than 9:00 A.M.
Eastern Time on the first Trading Day following the Closing Date. The
Press Release shall be subject to prior review and comment by the Exchanging
Holders. “Trading Day” means
any day during which the OTC Bulletin Board (or other quotation venue or
principal exchange on which the Common Stock is quoted or traded) shall be open
for trading.
3.8 Disclosure of Material
Information.
The Company covenants and agrees that neither it nor any other
person acting on its behalf has provided or will provide any Exchanging Holder
or its agents or counsel with any information that the Company believes
constitutes material non-public information (other than with respect to the
transactions contemplated by this Agreement or information provided in the
ordinary course to a member of the Board of Directors in his capacity as such),
unless prior thereto such Exchanging Holder shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Exchanging Holder shall be relying on
the foregoing representations in effecting transactions in securities of the
Company. Notwithstanding the requirements in this Section 3.8 in the
event of a breach of the foregoing covenant by the Company, any of its
subsidiaries, or any of its or their respective officers, directors, employees,
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, an Exchanging Holder shall have the right to make a
public disclosure, in the form of a press release, public advertisement, or
otherwise, of such material, nonpublic information without the prior approval by
the Company, its subsidiaries, or any of its or their respective officers,
directors, employees, or agents. No Exchanging Holder shall have any
liability to the Company, its subsidiaries, or any of its or their respective
officers, directors, employees, stockholders, or agents for any such
disclosure.
-12-
3.9 Pledge of
Securities.
The Company acknowledges and agrees that the Shares may be pledged
by an Exchanging Holder in connection with a bona fide margin agreement or
other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock shall not be deemed to be a
transfer, sale, or assignment of the Common Stock hereunder, and no Exchanging
Holder effecting a pledge of Common Stock shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document; provided that an Exchanging
Holder and its pledgee shall be required to comply with the provisions of Article V hereof in
order to effect a sale, transfer or assignment of Common Stock to such
pledgee. At the Exchanging Holders’ expense, the Company hereby
agrees to execute and deliver such documentation as a pledgee of the Common
Stock may reasonably request in connection with a pledge of the Common Stock to
such pledgee by an Exchanging Holder. Notwithstanding the above, no
Exchanging Holder shall permit any such pledgee, or such pledgee’s affiliates,
to engage in any short sales in respect of any such pledged shares.
ARTICLE
IV
CONDITIONS
4.1 Conditions Precedent to the
Obligation of the Company to Issue the Shares.
The obligation hereunder of the Company to issue the Preferred
Shares to the Exchanging Holders is subject to the satisfaction or waiver, at or
before the Closing, of each of the conditions set forth below. These
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Accuracy of Each Exchanging
Holder’s Representations and Warranties. The representations
and warranties of each Exchanging Holder shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time, except for representations and warranties that are expressly
made as of a particular date, which shall be true and correct in all material
respects as of such date.
(b) Performance by the
Exchanging Holders. Each Exchanging Holder shall have
performed, satisfied, and complied in all respects with all covenants,
agreements, and conditions required by this Agreement to be performed,
satisfied, or complied with by such Exchanging Holder at or prior to the
Closing.
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling, or injunction shall have been enacted, entered, promulgated, or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of the
Warrants. The Warrants have been delivered to the Company at
the Closing Date.
-13-
(e) Delivery of Transaction
Documents. The Transaction Documents, as relevant, shall have
been duly executed and delivered by the Exchanging Holders to the
Company.
4.2 Conditions Precedent to the
Obligation of the Exchanging Holders to Purchase the Shares.
The obligation hereunder of each Exchanging Holder to deliver the
Warrants to the Company in exchange for the Preferred Shares is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for each Exchanging Holder’s sole
benefit and may be waived by such Exchanging Holder at any time in its sole
discretion.
(a) Accuracy of the Company’s
Representations and Warranties. Each of the representations
and warranties of the Company in this Agreement shall be true and correct in all
respects as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that are expressly made as
of a particular date), which shall be true and correct in all respects as of
such date.
(b) Performance by the
Company. The Company shall have performed, satisfied, and
complied in all respects with all covenants, agreements, and conditions required
by this Agreement to be performed, satisfied, or complied with by the Company at
or prior to the Closing.
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling, or injunction shall have been enacted, entered, promulgated, or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or
Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors, or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(e) Delivery of Transaction
Documents. The Transaction Documents shall have been duly
executed and, as relevant, delivered by the Company to the Exchanging
Holders.
(f) Certificate of Designation
of Rights and Preferences. Prior to the Closing, the
Certificate of Designation in the form of Exhibit B attached
hereto shall have been filed with the Secretary of State of the State of
Delaware.
(g) Certificates. The
Company shall have executed and delivered to the Exchanging Holders the
certificates (in such denominations as such Exchanging Holder shall request) for
the Preferred Shares being issued to such Exchanging Holder at the Closing (in
such denominations as such Exchanging Holder shall request).
(h) Resolutions. The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 2.1(b) hereof in a form reasonably acceptable to such Exchanging Holder
(the “Resolutions”).
-14-
(i)
Reservation of
Shares. Not later than one year following the Closing Date and
thereafter, the Company shall reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Preferred
Shares, a number of shares of Common Stock equal to one hundred twenty percent
(120%) of the aggregate number of Conversion Shares issuable upon conversion of
the Preferred Shares outstanding on the Closing Date.
(j)
Material Adverse
Effect. No Material Adverse Effect shall have occurred at or
before the Closing Date.
ARTICLE
V
STOCK CERTIFICATE
LEGEND
5.1 Legend.
Each certificate representing the Preferred Shares and the
Conversion Shares, if appropriate, shall be stamped or otherwise imprinted with
a legend substantially in the following form (in addition to any legend required
by applicable state securities or “blue sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR BPO MANAGEMENT SERVICES, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
The
Company agrees to reissue certificates representing any of the Conversion
Shares, without the legend set forth above if at such time, prior to making any
transfer of any such securities, such holder thereof shall give written notice
to the Company describing the manner and terms of such transfer and removal as
the Company may reasonably request. Such proposed transfer and
removal will not be effected until: (a) either (i) the Company has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of the Conversion Shares under the Securities Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Company with the Commission and has become effective under the
Securities Act, (iii) the Company has received other evidence reasonably
satisfactory to the Company that such registration and qualification under the
Securities Act and state securities laws are not required, or (iv) the holder
provides the Company with reasonable assurances that such security can be sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Company
has received an opinion of counsel reasonably satisfactory to the Company, to
the effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The
Company will respond to any such notice from a holder within five (5) business
days. In the case of any proposed transfer under this Section 5.1, the
Company will use reasonable efforts to comply with any such applicable state
securities or “blue sky” laws, but shall in no event be required, (x) to qualify
to do business in any state where it is not then qualified, (y) to take any
action that would subject it to tax or to the general service of process in any
state where it is not then subject, or (z) to comply with state securities or
“blue sky” laws of any state for which registration by coordination is
unavailable to the Company. The restrictions on transfer contained in
this Section
5.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this
Agreement. Whenever a certificate representing the Conversion Shares
is required to be issued to an Exchanging Holder without a legend, in lieu of
delivering physical certificates representing the Conversion Shares, the Company
shall cause its transfer agent to electronically transmit the Conversion Shares
or Warrant Shares to an Exchanging Holder by crediting the account of such
Exchanging Holder’s Prime Broker with the Depository Trust Company (“DTC”) through its
Deposit Withdrawal Agent Commission (“DWAC”) system (to the
extent not inconsistent with any provisions of this Agreement and provided that
the provisions of Rule 144 so permit) provided that the Company and the
Company’s transfer agent are participating in DTC through the DWAC
system.
-15-
ARTICLE
VI
INDEMNIFICATION
6.1 Company
Indemnity.
The Company agrees to indemnify and hold harmless the Exchanging
Holders (and their respective directors, officers, managers, partners, members,
stockholders, affiliates, agents, successors and assigns) from and against any
and all losses, liabilities, deficiencies, costs, damages, and expenses
(including, without limitation, reasonable attorneys’ fees, charges, and
disbursements) incurred by the Exchanging Holders as a result of any inaccuracy
in or breach of the representations, warranties, or covenants made by the
Company herein.
6.2 Indemnification
Procedure.
Any party entitled to indemnification under this Article VI (an
“indemnified party”) will give written notice to the indemnifying party of any
matters giving rise to a claim for indemnification; provided, that the failure
of any party entitled to indemnification hereunder to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Article VI
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any action, proceeding or claim is
brought against an indemnified party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to participate in
and, unless in the reasonable judgment of the indemnified party a conflict of
interest between it and the indemnifying party may exist with respect of such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any
event, unless and until the indemnifying party elects in writing to assume and
does so assume the defense of any such claim, proceeding or action, the
indemnified party’s costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the indemnified party
which relates to such action or claim. The indemnifying party shall
keep the indemnified party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party
shall not be liable for any settlement of any action, claim, or proceeding
effected without its prior written consent. Notwithstanding anything
in this Article
VII to the contrary, the indemnifying party shall not, without the
indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such
claim. The indemnification required by this Article VI shall be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party irrevocably
agrees to refund such moneys if it is ultimately determined by a court of
competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be
in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
-16-
ARTICLE
VII
MISCELLANEOUS
7.1 Fees and
Expenses.
Each party shall pay the fees and expenses of its advisors, counsel,
accountants, and other experts, if any, and all other expenses, incurred by such
party incident to the negotiation, preparation, execution, delivery, and
performance of this Agreement.
7.2 Specific Enforcement,
Consent to Jurisdiction
(a) The
Company and the Exchanging Holders acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Document were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(b) Each
of the Company and the Exchanging Holders (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Document or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the
Exchanging Holders consents to process being served in any such suit, action or
proceeding by mailing 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 9.2 shall affect or limit any right to serve process in any other
manner permitted by law.
-17-
7.3 Entire Agreement;
Amendment.
This Agreement and the Transaction Documents contain the entire
understanding and agreement of the parties with respect to the matters covered
hereby and, except as specifically set forth herein or in the Transaction
Documents, neither the Company nor any of the Exchanging Holders makes any
representations, warranty, covenant, or undertaking with respect to such matters
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the Company and the holders of at least seventy-five percent (75%) of the
Preferred Shares then outstanding, and no provision hereof may be waived other
than by an a written instrument signed by the party against whom enforcement of
any such amendment or waiver is sought. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Preferred Shares then outstanding. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents or holders of
Preferred Shares, as the case may be.
7.4 Notices.
Any notice, demand, request, waiver or other communication required
or permitted to be given hereunder shall be in writing and shall be effective
(a) upon hand delivery or delivery by telex (with correct answer back received),
e-mail or facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
|
If
to the Company:
|
BPO
Management Services, Inc.
0000
X. Xxxxxxx, Xxx 000
Xxxxxxx,
XX 00000
Attention:
Chief Executive Officer
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
E-mail: xxxxxxx.xxxxx@xxxxx.xxx
|
|
with
copies to (which copy shall
not
constitute notice):
|
Xxxxx
Xxxx LLP
0000
Xxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxx, Esq.
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
E-mail:
xxxxxx@xxxxxxxxx.xxx
|
-18-
|
and:
|
|
|
Xxxxxxx
& Xxxxxx
00000
XxxXxxxxx Xxxx., Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxx, Esq.
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
|
|
|
If
to any Exchanging Holder:
|
At
the address of such Exchanging Holder set forth on
Exhibit A
to this Agreement, with copies to Exchanging Holder’s
counsel as set forth on Exhibit A or as
specified in writing
by such Exchanging Holder
|
|
with
copies to (which copy shall not constitute notice):
|
Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days’ written notice of such changed address to the other party
hereto.
7.5 Waivers.
No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
7.6 Headings.
The article, section and subsection headings in this Agreement are
for convenience only and shall not constitute a part of this Agreement for any
other purpose and shall not be deemed to limit or affect any of the provisions
hereof.
7.7 Successors and
Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns.
7.8 No Third-Party
Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.
7.9 Governing
Law.
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.
7.10 Survival.
The representations and warranties of the Company and the Exchanging
Holders shall survive the execution and delivery hereof and the Closing until
the second anniversary of the Closing Date, except the agreements and covenants
set forth in Articles
I, III, V, VI, and VII of this Agreement
shall survive the execution and delivery hereof and the Closing hereunder,
provided, that the covenants set forth in Article III of this Agreement which
contain a term shall so survive only until expiration of said term.
-19-
7.11 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 hereto, it being understood that all parties need not sign the
same counterpart. In the event that any signature is delivered by
facsimile 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 signature were the original
thereof.
7.12 Publicity.
The Company agrees that it will not disclose, and will not include
in any public announcement, the name of the Exchanging Holders without the
consent of the Exchanging Holders unless and until such disclosure is required
by law or applicable regulation, and then only to the extent of such
requirement.
7.13 Severability.
The provisions of this Agreement and the Transaction Documents are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement or the Transaction Documents shall, for any reason,
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
or part of a provision of this Agreement or the Transaction Documents and such
provision shall be reformed and construed as if such invalid or illegal or
unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.
7.14 Further
Assurances.
From and after the date of this Agreement, upon the request of any
Exchanging Holder or the Company, each of the Company and the Exchanging Holders
shall execute and deliver such instrument, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Certificate of
Designation.
7.15 2007 Stock Incentive
Plan
Amendment.
The Exchanging Holders hereby acknowledge and agree that the Company
shall have the right to amend the 2007 Stock Incentive Plan (the “Plan”), if
unanimously approved by the Board of Directors for the benefit of the current
and future management of the Company and its subsidiaries pursuant to which up
to Twelve Million Three Hundred Sixty-six Thousand Six Hundred Sixty-seven
(12,366,667) shares of Common Stock may be issued, provided that options to
purchase up to an aggregate Eight Million Three Hundred Thirty-three Thousand
Three Hundred Thirty-four (8,333,334) shares of the Common Stock available for
issuance under the Plan shall be granted (including options to purchase Common
Stock) to Xxxxxxx Xxxxx and Xxxxx Xxxxxxx. The vesting provisions of
stock options pursuant to the Plan shall be on terms no more favorable than the
Company’s vesting provisions for awards of stock options under its 2007 Stock
Incentive Plan.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-20-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
|
BPO
MANAGEMENT SERVICES, INC.
|
|
|
By: /s/
Xxxxxxx X. Xxxxx
|
|
|
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
|
|
|
VISION
OPPORTUNITY MASTER FUND, LTD.
|
|
| By: /s/ Xxxx Xxxxxxxx | |
|
Name: Xxxx Xxxxxxxx
Title: Director
|
|
|
RENAISSANCE
CAPITAL GROWTH & INCOME FUND III, INC.
|
|
| By: /s/ Xxxxxxx Xxxxxxxxx | |
|
Xxxxxxx Xxxxxxxxx
President
|
|
|
RENAISSANCE
US GROWTH INVESTMENT TRUST PLC
|
|
| By: /s/ Xxxxxxx Xxxxxxxxx | |
|
Xxxxxxx Xxxxxxxxx
President
|
|
|
US
SPECIAL OPPORTUNITIES TRUST PLC
|
|
| By: /s/ Xxxxxxx Xxxxxxxxx | |
|
Xxxxxxx
Xxxxxxxxx
President
|
-21-
|
PREMIER
XXXX US EMERGING GROWTH FUND LTD.
|
|
| By: /s/ Xxxxxxx Xxxxxxxxx | |
|
Xxxxxxx Xxxxxxxxx
President
|
|
|
BRIDGEPOINTE
MASTER FUND LTD.
|
|
| By: | |
|
Name:
Title:
|
|
|
XXXXXX
CAPITAL INVESTMENTS LLC
|
|
| By: /s/ Xxxxxx X. Xxxxxx | |
|
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
|
EXHIBIT
A to the
BPO
MANAGEMENT SERVICES, INC.
|
Legal Entity Name and
Address of Exchanging Holder
|
Number of Preferred
Shares Issued
|
Number and Class of
Warrants Exchanged
|
||||
|
VISION
OPPORTUNITY MASTER FUND, LTD.
|
||||||
|
00
X. 00xx Xxxxxx, 0xx floor
|
145,057
|
A-Warrant
|
5,666,667
|
|||
|
Xxx
Xxxx, XX 00000
|
226,667
|
B-Warrant
|
11,333,334
|
|||
|
Tel:
Fax: 000-000-0000
|
164,267
|
D-Warrant
|
7,333,334
|
|||
|
Attn: Xxxx
Xxxxxxxx and Antti Uusiheimala
|
536,001
|
|
||||
|
E-mail:
xxxx@xxxxxxx.xxx & xxxxx@xxxxxxx.xxx
|
|
|||||
|
RENAISSANCE
US GROWTH INVESTMENT TRUST PLC (“RUSGIT”)
|
||||||
|
Frost
National Bank
|
26,667
|
A-Warrant
|
1,041,667
|
|||
|
000
X. Xxxxxxx Xxxxxx
|
41,667
|
B-Warrant
|
2,083,334
|
|||
|
ATTN:
Xxxxx Xxxxxxxxx T-8
|
23,334 |
D-Warrant
|
1,041,667
|
|||
|
Xxx
Xxxxxxx, XX 00000
|
91,668
|
4,166,668
|
||||
|
Contact
for docs: Xxxx Xxxxxxxx
|
||||||
|
Tel:
(000) 000-0000/ Fax:
|
||||||
|
Email:
xxxxxxxxx@xxxxxxxxxx.xxx
|
||||||
|
RENAISSANCE
CAPITAL GROWTH & INCOME FUND III, INC. (“RENN3”)
|
||||||
|
Frost
National Bank
|
21,334
|
A-Warrant
|
833,334
|
|||
|
000
X. Xxxxxxx Xxxxxx
|
33,334
|
B-Warrant
|
1,666,667
|
|||
|
ATTN:
Xxxxx Xxxxxxxxx T-8
|
18,667
|
D-Warrant
|
833,334
|
|||
|
Xxx
Xxxxxxx, XX 00000
|
73,335
|
3,333,335
|
||||
|
Contact
for docs: Xxxx Xxxxxxxx
|
||||||
|
Tel:
(000) 000-0000/ Fax:
|
||||||
|
Email:
xxxxxxxxx@xxxxxxxxxx.xxx
|
||||||
|
US
SPECIAL OPPORTUNITIES TRUST PLC (“USSO”)
|
||||||
|
Frost
National Bank
|
26,667
|
A-Warrant
|
1,041,667
|
|||
|
000
X. Xxxxxxx Xxxxxx
|
41,667
|
B-Warrant
|
2,083,334
|
|||
|
ATTN:
Xxxxx Xxxxxxxxx T-8
|
23,334
|
D-Warrant
|
1,041,667
|
|||
|
Xxx
Xxxxxxx, XX 00000
|
91,668
|
4,166,668
|
||||
|
Contact
for docs: Xxxx Xxxxxxxx
|
||||||
|
Tel:
(000) 000-0000/ Fax:
|
||||||
|
Email:
xxxxxxxxx@xxxxxxxxxx.xxx
|
||||||
|
PREMIER XXXX US EMERGING GROWTH
FUND LTD. (“PREMIER”)
|
||||||
|
Premier
XXXX US Emerging Growth Fund Ltd.
|
||||||
|
Acct
# PRN01/17-28085
|
10,667
|
A-Warrant
|
416,667
|
|||
|
c/o
Xxxxxxxx Xxxxxxx
|
16,667
|
B-Warrant
|
833,334
|
|||
|
The
Northern Trust Company
|
9,334
|
D-Warrant
|
416,667
|
|||
|
000
Xxxxx Xxxxx Xxxxxx, X-0-Xxxxx
|
36,668
|
1,666,668
|
||||
|
Xxxxxxx,
XX 00000
|
||||||
|
Contact
for docs: Xxxx Xxxxxxxx
|
||||||
|
Tel:
(000) 000-0000/ Fax:
|
||||||
|
Email:
xxxxxxxxx@xxxxxxxxxx.xxx
|
||||||
|
BRIDGEPOINTE
MASTER FUND LTD.
|
||||||
|
0000
Xxxxxxxxx Xxxxxxx, Xxxxx 000
|
42,667
|
A-Warrant
|
1,666,667
|
|||
|
Xxxxxxxxxx,
XX 00000
|
66,667
|
B-Warrant
|
3,333,334
|
|||
|
Contact
for docs: Xxxx Xxxxxxx
|
42,400
|
D-Warrant
|
1,000,000
|
|||
|
Tel:
000-000-0000 xxx 000 Fax: 000.000.0000
|
131,734
|
6,000,001
|
||||
|
Email:
xxxxxxxxxxx@xxxxxxxxxxxxxxxxxxxxxx.xxx
|
||||||
|
XXXXXX
CAPITAL INVESTMENTS LLC
|
||||||
|
000
X. Xxxxxxxx Xxx
|
||||||
|
Xxxxxxxxx
Xxxxxx, XX 00000
|
25,601
|
A-Warrant
|
1,000,001
|
|||
|
Contacts
for docs: Xxxxxx Xxxx
|
40,001
|
B-Warrant
|
2,000,001
|
|||
|
Tel:
000-000-0000/ Fax: 000-000-0000
|
00,000
|
D-Warrant
|
0,000,000
|
|||
|
Email:
xxxxx@xxxxxxxxxxxxxxxxxxxxx.xxx
|
65,602
|
3,000,002
|
EXHIBIT
B to the
BPO
MANAGEMENT SERVICES, INC.
FORM
OF CERTIFICATE OF DESIGNATION
EXHIBIT
C
BPO
MANAGEMENT SERVICES, INC.
CONVERSION
NOTICE
Reference
is made to the Certificate of Designation of the Relative Rights and Preferences
of the Series F Convertible Preferred Stock of BPO Management Services, Inc.
(the “Certificate of Designation”). In accordance with and pursuant
to the Certificate of Designation, the undersigned hereby elects to convert the
number of shares of Series F Convertible Preferred Stock, par value $0.01 per
share (the “Preferred Shares”), of BPO Management Services, Inc., a Delaware
corporation (the “Company”), indicated below into shares of Common Stock, par
value $0.01 per share (the “Common Stock”), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
| Date of Conversion: | ||
| Number of Preferred Shares to be converted: | ||
| Stock certificate no(s). of Preferred Shares to be converted: |
Please
confirm the following information:
| Conversion Price: | ||
| Number of shares of Common Stock to be issued: |
Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Please
issue the Common Stock into which the Preferred Shares are being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
| Issue to: | ||
| Facsimile Number: | ||
| Authorization: | ||
| By: | ||
| Title: | ||
| Dated: |
