EXCHANGE AGREEMENT
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THIS AGREEMENT is made and entered into as of May 12, 1999, by
and among THE PANDA PROJECT, INC., a Florida corporation (the
Company ), and the holders of the Company s Series A Preferred Stock
executing this Agreement ( Holders ).
WHEREAS, each of the Holders owns the number of shares of the
Company s Series A Preferred Stock (as defined in the Company s
Articles of Incorporation, as amended) set forth opposite its name at
the foot of this Agreement; and
WHEREAS, the Company desires to exchange shares of the
Company s common stock for shares of Series A Preferred Stock, and the
Holders desire to accept such shares of Company common stock, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties hereto
do hereby agree as follows:
1. Exchange of Shares. On the Closing Date, the Company
agrees to issue and deliver to each of the Holders, and each of the
Holders agrees to accept, the number of shares of Company common stock
set forth opposite Holder s name on Schedule A (the Exchange Shares )
in exchange for (a) all of Holder s shares of Series A Preferred Stock
and (b) the amount to be paid by Holders upon exchange, both as set
forth opposite the Holder s name on Schedule A (the Exchange ). On or
prior to the Closing Date, each of the Holders agrees to deliver to
the Company the certificates representing the shares of Series A
Preferred Stock to be so exchanged, together with stock powers duly
endorsed to transfer the shares to the Company. Closing of the
Exchange shall be conditioned upon the representations, warranties and
agreements of the parties hereto being true and complete on the
Closing Date as if they had been made on such date. The Closing Date
for the Exchange will be on any day or days at least five business
days prior the record date for the Company shareholders meeting
relating to the sale of substantially all of its assets to Silicon
Bandwidth, Inc. ( Silicon ) (such sale is referred to herein as the
Acquisition ).
2. Holder's Representations, Warranties and Agreements.
Each Holder represents and warrants to, and agrees with, the Company,
with respect to only itself, that:
(a) Investment Purpose. Such Holder is acquiring the
Exchange Shares for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted
under the Securities Act of 1933, as amended (the "1933 Act");
provided, however, the Holders may transfer the Exchange Shares to the
extent permitted in the Voting Agreement, dated May 12, 1999, by and
among Silicon, the shareholders of the Company listed therein and the
Company (the "Voting Agreement").
(b) Transfer or Resale. Such Holder understands that (i)
the Exchange Shares have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) such Holder shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that such Exchange Shares to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an
exemption from such registration or (C) such Holder provides the
Company with reasonable assurance that such Exchange Shares can be
sold, assigned or transferred pursuant to Rule 144 promulgated under
the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii) any sale
of the Exchange Shares made in reliance on Rule 144 may be made only
in accordance with the terms of Rule 144 and, further, if Rule 144 is
not applicable, any resale of the Exchange Shares under circumstances
in which the seller (or the person through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to
register such Exchange Shares under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any
exemption thereunder; provided, however, the Holders may transfer the
Exchange Shares to the extent permitted in the Voting Agreement.
(c) Legends. Such Holder understands that the certificates
or other instruments representing the Exchange Shares shall bear a
restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of the
Exchange Shares upon which it is stamped, if, unless otherwise
required by state securities laws, (i) such shares are sold pursuant
to registration under the 1933 Act, (ii) in connection with a sale
transaction, such 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 such shares may be made without
registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that such 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.
(d) Authorization; Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of such
Holder and is a valid and binding agreement of such Holder enforceable
in accordance with its terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) Risk Factors. Such Holder has read and understands all
of the "Risk Factors" relating to an investment in the Exchange Shares
of the Company as set forth in the Prospectus contained in the
Company's Post-Effective Amendment No. 1 to Form S-3 Registration
Statement (No. 333-47595) filed with the Securities and Exchange
Commission on February 8, 1999. Such Risk Factors are incorporated
herein by reference. Receipt of a copy of such Prospectus is hereby
acknowledged by each of the Holders.
3. Representations, Warranties and Agreements of the
Company. The Company represents and warrants to, and agrees with,
each of the Holders that:
(a) Authorization. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to
issue and deliver the Exchange Shares in accordance with the terms
hereof. This Agreement constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and
remedies.
(b) Issuance of Exchange Shares. The Exchange Shares to be
issued in the Exchange and the Penalty Shares (as defined herein) are
duly authorized and, upon issuance in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable.
(c) Delivery of Converted Shares. The Company agrees (i)
to cause delivery to each of the Holders of stock certificates
evidencing the shares of Company common stock into which such Holder
has converted shares of Series A Preferred Stock prior to this
Agreement and (ii) to comply with all the requirements of the
Company's Articles of Incorporation, as amended, when issuing such
shares of Company common stock upon conversion of the Series A
Preferred Stock.
(d) Liabilities. On or prior to the closing of the
Acquisition, the Company agrees to pay or otherwise provide for all of
its outstanding accounts payable.
(e) Registration Statement. The Company agrees to take all
actions necessary to maintain the effectiveness, for at least one year
from the date hereof, of the Registration Statement No. 333-47595 with
respect to shares issuable upon conversion of the Series A Preferred
Stock. The Company agrees to file a post-effective amendment updating
Registration Statement No. 333-47595 on or within one business day
after the date of the Company's public announcement of the expected
Silicon Transaction and to use best efforts to secure effectiveness of
such post-effective amendment.
(f) Special Committee Recommendation. The Company agrees
to deliver to the Holders copies of (i) the recommendation of the
Special Committee to the Board of Directors (the "Special Committee")
in favor of the acquisition of certain assets and liabilities of the
Company by Silicon (the "Silicon Transaction") (which shall not be
subject to conditions other than receipt of a fairness opinion) (ii)
the recommendation of the Special Committee in favor of the Silicon
Transaction not subject to any conditions and (iii) any fairness
opinion relied upon by the Special Committee in issuing its
recommendation.
(g) Amendment of the Articles of Incorporation. The
Company agrees to amend Section B.3.20 to allow waiver by the Company
of the limitation set forth therein upon sixty-one (61) days' prior
written notice by the Holder of its intent to exceed such limitation.
(h) No Other Representations. Except as set forth above,
the Company makes no other representations or warranties to the
Holders with respect to the Exchange Shares or the Company's business,
prospects or financial condition.
4. Penalty Shares. Upon execution of this Agreement, the
Company agrees to deliver 171 shares of Series A Preferred Stock to
the Holders in payment for penalties owed to such Holders. The
Holders hereby agree to waive all penalties owed by the Company to
such Holders pursuant to previously issued Company securities.
5. Series A Preferred Stock Standstill.
(a) Except as set forth in Section 5(b), from the date
hereof through the Expiration Date (as defined in the Voting
Agreement), each of the Holders agrees not be sell or otherwise
transfer or assign any shares of Series A Preferred Stock and agrees
not to covert into Company common stock any shares of Series A
Preferred Stock in accordance with the conversion rights of holders of
the Series A Preferred Stock contained in the Company's Articles of
Incorporation, as amended.
(b) Permitted Sales and Conversions. From the date hereof
through the Expiration Date, each of the Holders may, from time to
time, (i) sell or otherwise transfer or assign the number of Series A
Preferred Stock set forth on Schedule B opposite Holder's name and
(ii) convert into Company common stock the number of shares of Series
A Preferred Stock set forth on Schedule B opposite Holder's name in
accordance with the conversion rights of holders of the Series A
Preferred Stock contained in the Company's Articles of Incorporation,
as amended; provided, however, that the aggregate number of Series A
Preferred Stock sold, converted or otherwise transferred pursuant to
this Section 5(b) may not exceed the number of shares set forth on
Schedule B opposite Holder's name.
(c) Conversion Price. The Company agrees to convert any
shares of Series A Preferred Stock converted into Company common stock
pursuant to Section 5(b) using a Conversion Date Market Price of $.261
per common stock share received.
6. Voting Agreement. In consideration of the Exchange and
as an inducement for Silicon to enter into the definitive agreement
relating to the Silicon Transaction, each of the Holders agrees, on
the date hereof, to enter into, and deliver to Silicon, the Voting
Agreement.
7. Indemnification. The Company, on the one hand, and each
Holder (severally and not jointly), on the other hand, shall indemnify
the other against any loss, cost or damages (including reasonable
attorneys' fees and expenses) suffered or incurred as a result of such
party's breach of any representation, warranty, covenant or agreement
in this Agreement. The Company shall indemnify each Holder against
any loss, cost or damages (including reasonable attorneys' fees and
expenses) suffered or incurred as a result of Holder's (i) entrance
into this Agreement or (ii) entrance into the Voting Agreement.
8. Releases.
(a) In consideration of this Agreement, the Company does
hereby release, acquit, satisfy and forever discharge each of the
Holders, in the absence of willful misconduct by such Holder, from and
against all actions, causes of action, indebtedness, accounts, claims
and demands of every kind and character, known or unknown, liquidated
or contingent, which it has or may have from the beginning of time to
the date hereof, except as created by this Agreement.
(b) In consideration of this Agreement, each of the Holders
does hereby release, acquit, satisfy and forever discharge the
Company, in the absence of willful misconduct by the Company, from and
against all actions, causes of action, indebtedness, accounts, claims
and demands of every kind and character, known or unknown, liquidated
or contingent, which it has or may have from the beginning of time to
the date hereof, except as created by this Agreement.
9. Termination. This Agreement, including all rights and
obligations of the parties hereunder, shall terminate upon the
Expiration Date (as defined in the Voting Agreement); provided,
however, that the provisions of Section 8(a), including all rights and
obligations of the parties thereunder, will survive the termination of
the Agreement under this Section 8 if the Holders have not breached
this Agreement.
10. Opinion of Counsel. The obligations of the Holders
under this Agreement are subject to their receipt of an opinion from
Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to the Company, dated May 12,
1999, to the effect that this Agreement constitutes the valid and
legally binding obligation of the Company under the laws of the State
of Florida, enforceable against the Company in accordance with its
terms except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement, fraudulent
conveyance and other similar laws affecting the rights of creditors
and except as such enforceability may be subject to the effect of
general principles of equity.
11. Public Announcement. Upon the execution of the
agreement and all related documents for the Silicon Transaction, the
Company agrees to issue a press release announcing the agreement. The
Company also agrees to issue a press release announcing the closing of
the acquisition of substantially all of the Company's assets by
Silicon.
12. Governing Law; Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Florida
without regard to the principles of conflict of laws.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, each or 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
party. In the event all of the Holders do not execute and deliver
this Agreement, it will be and remain a binding agreement among the
Company and the Holders which do execute and deliver the Agreement.
(c) Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the
Holders, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this
Agreement contains the entire understanding of the parties with
respect to the matters covered herein.
(d) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the Company and the Holders have caused
this Agreement to be duly executed of the date first written above.
COMPANY:
THE PANDA PROJECT, INC.
By _________________________________
Name: Xxxxxxxx X. Xxxxx, Xx.
Title: President
AGR HALIFAX FUND, LTD.
By: AG Ramius Partners, LLC,
Investment Advisor
By _________________________________
Name:
Title:
XXXXXXXX, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.,
General Partner
By _________________________________
Name:
Title:
GAM ARBITRAGE INVEST-
MENTS, INC.
By: Xxxxxx, Xxxxxx & Co., L.P.,
Investment Advisor
By _________________________________
Name:
Title:
AG SUPER FUND INTER-
NATIONAL PARTNERS, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.,
General Partner
By _________________________________
Name:
Title:
RAPHAEL, L.P.
By _________________________________
Name:
Title:
RAMIUS FUND, LTD.
By: AG Ramius Partners, LLC,
Investment Advisor
By _________________________________
Name:
Title:
SCHEDULE A
Exchange Shares
Shares of
Shares of Common Stock Amount to
Series A Preferred Received upon be Paid by
Shares to be Exchange of Series Holders
Holder Exchanged A Preferred Stock upon Exchange
SCHEDULE B
Permitted Sales and Conversions
Number of Shares of
Series A Preferred Stock
Which May Be Converted into
Holder Common Stock Prior to Closing
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AGR Halifax Fund, Ltd.
Xxxxxxxx, L.P.
GAM Arbitrage Investments, Inc.
AG Super Fund International Partners, X.X.
Xxxxxxx, L.P.
Ramius Fund, Ltd.
