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EXHIBIT 10.10
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Agreement (this "Agreement") is made and entered into
the 30th day of September, 1996 (the "Effective Date"), by and between Exsorbet
Industries, Inc., an Idaho corporation ("Exsorbet") and American Physicians
Service Group, Inc., a Texas corporation ("APS").
R E C I T A L S
WHEREAS, APS has purchased 1,200,000 shares of Exsorbet common stock and
has entered into a Stock Put Agreement (the "Stock Put") pursuant to which APS
may cause Exsorbet to repurchase such common stock; and
WHEREAS, the obligations of Exsorbet under the Stock Put will be secured
by a first lien security interest in all the capital stock of the Exsorbet
subsidiary which acquires 7-7, Inc., an Ohio corporation, by merger, and will
be further secured by the payment and performance guarantees of all
subsidiaries of Exsorbet (all such guarantees, together with the security
agreement and other documents entered into from time to time by or for the
benefit of APS in connection with securing the obligations of Exsorbet under
the Stock Put are hereinafter collectively referred to as the "Security
Documents"); and
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WHEREAS, APS has received a warrant (the "Warrant") to acquire 300,000
shares of the common stock of Exsorbet and has further received options (the
"Options") from certain stockholders of Exsorbet pursuant to which APS is
entitled to purchase, in the aggregate, an additional 1,700,000 shares of the
common stock of Exsorbet; and
WHEREAS, the parties hereto desire for APS to have certain registration
rights with regard to the 1,200,000 shares of common stock of Exsorbet
purchased by APS, and such additional Exsorbet common stock as may be acquired
by APS pursuant to the exercise of the Warrant and/or the Options, and to agree
on certain other matters concerning the governance of their affairs, on the
terms and conditions contained herein.
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Registration Rights.
(a) APS shall have the registration rights set forth herein
with respect to (i) the 1,200,000 shares of Exsorbet common stock purchased by
APS in connection with which this Agreement was entered into, and (ii) any
shares of the common stock of Exsorbet which APS acquires upon exercise of
rights granted pursuant to the Warrant, the Options or this Agreement, and
(iii) all stock (and rights related thereto) received with respect to any stock
described in (i) and/or (ii) by virtue of any stock dividends, stock splits,
mergers, consolidations, reclassifications or similar
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transactions or occurrences. The stock of Exsorbet owned by APS which is
subject to the registration rights provided in this Agreement is hereinafter
referred to as the "Registerable Stock." To exercise its registration rights,
APS must deliver to Exsorbet a written request (the "Request") requesting that
Exsorbet effect the registration under the Securities Act of 1933, as amended
(the "Securities Act"), and the registration and/or qualification under
applicable state securities laws (the "State Laws") of all or a specified
portion of the Registerable Stock, and specifying the intended method of
methods of disposition thereof, the jurisdictions in which such offering will
be made and whether such requested registration is to be an underwritten
offering.
(b) Exsorbet will use its best efforts to effect the
registration under the Securities Act and the registration and/or qualification
under the State Laws of the Registerable Stock, to the extent required to
permit the disposition thereof in accordance with the methods and in the
jurisdictions set forth in the Request; provided that Exsorbet may include in
such registration statement securities of Exsorbet ("Other Registerable
Securities") to be offered and sold by or on behalf of Exsorbet or any other
security holder of Exsorbet who possesses a right to have such securities
included in such registration statement and who timely exercises such right in
connection with the registration hereunder; provided that whenever Exsorbet
shall effect a registration pursuant to this Agreement in connection with an
underwritten offering, if (A) any underwriter representing APS in such offering
advises APS in writing that, in its opinion, the inclusion of Other
Registerable Securities would adversely affect such offering and (B) APS shall
not have consented in writing to the inclusion of such Other Registerable
Securities, then no securities other than shares of Registerable Stock shall be
included among the securities covered by such registration. A registration
requested pursuant to this Agreement shall be deemed to have been effected (i)
if and
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when a registration statement filed with the Securities and Exchange Commission
(the "Commission") relating to the Registerable Stock has been declared
effective by the Commission or otherwise has become effective and registration
and/or qualification under all applicable State Laws has been completed;
provided that a registration requested pursuant to this Agreement shall not be
deemed to have been effected if after such registration has become effective,
such registration statement is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court due to reasons that are not the fault of APS and/or are not based on any
act or omission of APS, or (ii) if Exsorbet has commenced preparation of such a
registration statement under the Securities Act and such registration and/or
qualification under the State Laws and such registration statement does not
become effective or such registration and/or qualification is not completed in
either case by reason of the unreasonable refusal to proceed or lack of
reasonable cooperation of APS, Exsorbet shall be deemed to have effected a
registration under this Agreement and shall have no further obligation pursuant
hereto. If a requested registration pursuant to this Agreement involves an
underwritten offering, the underwriter(s) thereof shall be selected or approved
by APS. Notwithstanding the foregoing, APS agrees that for a period of one (1)
year after the Effective Date, APS will not request Exsorbet (except for
requests pursuant to subsection (f) below) to register more than 1,000,000
shares of Registerable Stock and that if APS requests the registration of any
excess Registerable Stock during the one (1) year period, then Exsorbet will
have sole discretion as to whether to allow APS to include in the registration
any additional Registerable Stock over such 1,000,000 share maximum. However,
if APS requests a registration in the one (1) year period after the Effective
Date and Exsorbet declines to allow APS to include all of the shares of
Registerable Stock owned by APS in such registration, then Exsorbet
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will cause all remaining shares of Registerable Stock owned by APS at the
conclusion of the one (1) year period to be fully registered and freely
tradeable within thirty (30) days after the expiration of the one (1) year
period after the Effective Date. Except for multiple registrations required by
the foregoing provisions, or as a result of registrations pursuant to
subsection (f) below, Exsorbet will not be required to effect more than one (1)
registration pursuant to this Agreement. Furthermore, in the event APS acquires
at least 1,000,000 shares of registered and freely tradeable Exsorbet common
stock within the sixty (60) day period immediately following the Effective
Date, then APS will not request Exsorbet to register (other than a registration
pursuant to subsection (f) below) any Registerable Stock before the expiration
of one (1) year after the Effective Date.
(c) Except as otherwise prohibited by applicable law, Exsorbet
will pay all fees and expenses incurred by Exsorbet in connection with the
registration of the Registerable Stock; except for any underwriting
commissions, transfer taxes, and fees and expenses of counsel for APS, if any,
attributable to the sale of the Registerable Stock, all of which shall be borne
by APS.
(d) If Exsorbet is required to use its best efforts to effect
a registration of the Registerable Stock under this Agreement, Exsorbet shall:
(i) promptly prepare and use its best efforts to file
with the Commission (but in no event more than thirty (30) days after receipt
of the Request from APS) a registration statement, on such appropriate
registration form of the Commission as shall permit the disposition of the
Registerable Stock and any Other Registerable Securities in accordance with the
intended method(s) of distribution specified in the Request for such
registration and use its best efforts thereafter to cause such registration
statement to become effective within thirty (30) days after filing;
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(ii) prepare and file as soon as reasonably practicable
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective and such prospectus current and
to comply with the provisions of the Securities Act with respect to the
disposition of the Registerable Stock until the earliest of (A) such time as
all of the Registerable Stock has been disposed of in accordance with the
intended methods of disposition by APS, or (B) the expiration of the three (3)
year period that shall commence on the filing of the registration statement
pursuant to subparagraph (i) above;
(iii) furnish to APS such number of copies of preliminary
prospectuses and prospectuses included in such registration statement and each
amendment and supplement thereto as APS may reasonably request in order to
facilitate the disposition of the Registerable Stock;
(iv) use its best efforts to register or qualify the
Registerable Stock under the State Laws within thirty (30) days after the
filing of the registration statement with the Commission and to keep such
registration or qualification in effect for so long as the registration
statement filed with the Commission remains in effect as provided in (ii),
above, provided that Exsorbet shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
in which it would not otherwise be obligated to be so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction, or to qualify as a dealer in securities;
(v) notify APS, at any time when a prospectus is
required to be delivered by APS under the Securities Act, upon discovery by
Exsorbet that the prospectus included in such registration statement, as then
in effect, or filed with the Commission pursuant to Rule 424(b),
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includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, whereupon APS shall
suspend any offers or sales of Registerable Stock until such time as such
prospectus, as amended or supplemented from time to time, shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing; and
(vi) furnish, at the request of APS, on the date that
such shares are delivered to the underwriter or underwriters for sale in
connection with a registration pursuant to this Agreement, if such shares of
Registerable Stock are being sold through underwriters, (i) an opinion, dated
such date, of the counsel representing Exsorbet for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters and (ii) a
letter dated such date, from the independent certified public accountants of
Exsorbet, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters.
(e) APS shall cooperate fully with Exsorbet in connection with
effecting a registration pursuant to this Agreement, including but not limited
to furnishing such information as Exsorbet may from time to time reasonably
request and as shall be required by law or by the Commission in connection with
such registration. In connection with the preparation and filing of any
registration statement under the Securities Act pursuant to this Agreement,
Exsorbet will give APS, APS' underwriters, if any, and APS' counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them
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reasonable access to its books and records and such opportunities to discuss
the business of Exsorbet with its officers and the independent public
accountants who have certified its financial statements as shall be reasonably
necessary to conduct a reasonable investigation within the meaning of the
Securities Act.
(f) If Exsorbet at any time (including, without limitation, at
any time during the one (1) year period after the Effective Date) proposes to
register any of its securities for sale to the public for its own account
and/or for the account of any other person, under the Securities Act (other
than by a registration on Form X-0, X-0 or any successor similar forms or any
other Commission form of limited applicability which would not permit such
additional registration), and if at such time APS has, or has the right to
acquire, any stock of Exsorbet that could qualify as Registerable Stock,
Exsorbet will, at least sixty (60) days prior to filing the registration
statement, give written notice to APS of its intention to do so and, subject to
the provisions hereof, permit APS to include in such registration their
Registerable Stock. Any such registration shall be at Exsorbet's expense,
except for underwriter's discounts or commissions or broker's commissions, if
any, attributable to such Registerable Stock and except for any other expenses
which APS elects to incur in connection therewith or is otherwise required to
bear pursuant to this Agreement. To exercise its rights pursuant to this
subsection, APS must deliver a Request to Exsorbet in accordance with the
provisions of Section 1(a), and Exsorbet will use its best efforts to effect
the registration under the Securities Act of all Registerable Stock which
Exsorbet has been so requested to register; provided that if, any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, Exsorbet shall determine for any reason not to register or to
delay registration of such securities, Exsorbet may, at its election, give
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written notice of such determination to APS and, thereupon, (i) in the case of
a determination not to register, shall be relieved of its obligation to
register any Registerable Stock in connection with such registration, and (ii)
in the case of a determination to delay registering shall be permitted to delay
registering any Registerable Stock being registered pursuant to this subsection
for the same period as the delay in registering such other securities.
If a registration pursuant to this subsection involves an underwritten
offering of the securities so being registered for sale for the account of
Exsorbet, to be distributed by or through one or more underwriters, whether or
not the Registerable Stock so requested to be registered for sale is also to be
included in such underwritten offering, and the managing underwriter of such
underwritten offering informs Exsorbet in writing of its belief that the number
of securities requested to be included in such registration exceeds the number
which can be sold in (or during) the time of such offering, then Exsorbet may
include in such offering all securities proposed by Exsorbet to be sold for its
own account; and Exsorbet shall only be required to use its best efforts to
include Registerable Stock in such registration on a pro rata basis (based on
the number of shares of securities held by all persons who have a contractual
right to have their securities included in the proposed registration and who
make a written request for inclusion of their shares in the proposed
registration) to the extent possible such that the total number of securities
to be included does not exceed the level recommended by the managing
underwriter. The obligations of Exsorbet described in subparagraphs (iii) and
(v) of Section 1(d) shall apply to any registration under this Section 1(f)
which includes Registerable Stock. Furthermore, the provision in Section 1(b)
that Exsorbet shall not be required
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to effect a registration prior to the expiration of one (1) year after the
Effective Date, shall not apply to any registration pursuant to this Section
1(f).
(g) In connection with any registration or qualification of
the Registerable Stock under this Agreement: (i) Exsorbet shall indemnify and
hold harmless APS and each underwriter thereof, including but not limited to
each person, if any, who controls APS or such underwriter within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including but not limited to reasonable expenses
incurred in investigation, preparing and defending against any claim) to which
such APS, underwriters or controlling persons may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise, insofar as the same arise out of or are based upon or are
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (as amended or
supplemented if Exsorbet shall have furnished any amendments or supplements
thereto) furnished pursuant to this Agreement or insofar as the same arise out
of or are based upon or are caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or insofar as the same arise out of or are
based upon any violation by Exsorbet of the Securities Act or the Exchange Act
or any rule or regulation thereunder; except that the foregoing indemnity
obligations shall not apply insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon or are caused by any
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished in writing by or on behalf of APS or any such
underwriter or control person, or arise out of or are based upon any violation
of the Securities Act, Exchange Act or any rule or regulation thereunder by APS
or any such underwriter or control person,
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and (ii) APS shall indemnify Exsorbet, its affiliates and their respective
officers, directors and control persons against all such losses, claims,
damages, liabilities and expenses (including but not limited to reasonable
expenses incurred in investigating, preparing and defending against any claim)
insofar as the same arise out of or are based upon or are caused by any such
untrue statement or alleged untrue statement or any such omission or alleged
omission based upon information furnished in writing by or on behalf of APS or
any such underwriter or control person or arise out of or are based upon any
violation of the Securities Act, Exchange Act or any rule or regulation
thereunder by APS or any such underwriter or control person; provided, however,
that the liability of APS hereunder shall be limited to the lesser of (i) the
net proceeds, if any, received by APS upon sale of the Registerable Stock
pursuant to any registration effected hereunder, or (ii) the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of shares of Registerable Stock sold by APS
under such registration statement bears to the total public offering price of
all securities sold thereunder.
Promptly upon receipt by a party indemnified under this Agreement
of notice of the commencement of any action against such indemnified party with
respect to which indemnity or reimbursement may be sought against any
indemnifying party under this Agreement, such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Agreement unless such failure shall materially adversely affect the defense of
such action. In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
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entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable expenses incurred in investigating, preparing and defending against
any claim) shall be paid by the indemnified party unless (a) the indemnifying
party agrees to pay the same, (b) the indemnifying party fails to assume the
defense of such action with counsel reasonably satisfactory to the indemnified
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party), or (c) the
named parties to any such action (including any impleaded parties) have been
advised by such counsel that representation of such indemnified party and the
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party). In the event that either of the circumstances described in
clauses (b) and (c) of the immediately preceding sentence shall occur, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defense and otherwise to participate in the defense of any
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred. No indemnifying party shall be liable for any settlement
entered into without its consent.
(h) With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of the shares
of Registerable Stock to the public without registration, Exsorbet agrees to
(i) make and keep, at all times, public information available
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as those terms are understood and defined in Rule 144 under the Securities Act,
(ii) use its diligent best efforts to file with the Commission in a timely
manner all reports and other documents required of Exsorbet under the
Securities Act and the Securities Exchange Act of 1934, as amended, at any time
after it has become subject to such reporting requirements, and (iii) furnish
to APS, upon request, a written statement as to Exsorbet's compliance with the
reporting requirements of Rule 144 and a copy of the most recent annual and
quarterly report of Exsorbet, and such other reports and documents so filed as
APS may reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
2. Representations and Warranties. Exsorbet represents and warrants
to APS as follows:
(a) Exsorbet is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Idaho and has
full corporate power and authority to carry on its business as now conducted
and to enter into and perform this Agreement. This Agreement has been duly and
validly authorized, executed and delivered by Exsorbet and constitutes the
valid and binding obligation of Exsorbet enforceable against it in accordance
with its terms.
(b) The 1,200,000 initial shares of Exsorbet common stock
purchased by APS, and any other common stock of Exsorbet issued to APS by
Exsorbet pursuant to the Warrant or this Agreement, when issued, will have been
duly and validly authorized and issued, will be fully paid and nonassessable
and will not have been issued in violation of the preemptive rights of any
person or applicable federal or state securities laws.
(c) There is only one class of common stock of Exsorbet
outstanding and such stock trades on the Nasdaq Stock Market, Inc. SmallCap
Market under the symbol "EXSO."
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(d) Exsorbet has made available to APS copies of Exsorbet's
annual report on Form 10-K for the year ended December 31, 1995, and its
quarterly reports on Form 10-Q (or Form 10-Q/A where applicable) for the
quarters ended March 31, 1996 and June 30, 1996, (collectively, the "Periodic
Reports"), in the form filed with the Commission pursuant to the requirements
of the Exchange Act. At the time of filing, the Periodic Reports were
appropriately responsive to the requirements of the Exchange Act, were complete
and proper in form and did not contain an untrue statement of a fact or omit to
state a fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since June 30, 1996, and through the date of this Agreement, no
event has occurred as a consequence of which Exsorbet would be required to
file, on or before the date of this Agreement, a current report on Form 8-K
pursuant to the requirements of the Exchange Act.
3. Other Agreements.
(a) Exsorbet agrees to reimburse APS for APS' legal fees up to
$10,000, plus travel and other out-of-pocket expenses incurred by legal counsel
for APS in connection with the transactions contemplated by this Agreement, the
Warrant and the Options and in connection with the loan evidenced by the
Security Documents. Such amount shall be payable upon execution of this
Agreement.
(b) APS agrees to hold 1,000,000 of the shares of common stock
of Exsorbet initially purchased by APS for at least one (1) year after the
Effective Date; except that APS may sell such shares prior to such time (i)
pursuant to the Stock Put, and/or (ii) pursuant to a registration of such
shares as contemplated by this Agreement. Furthermore, in the event APS
desires to sell
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more than 20,000 shares of Exsorbet common stock for cash on any particular day
(other then pursuant to a registration statement in effect with respect
thereto), then APS will give Exsorbet five (5) days advance written notice of
such intention, specifying the price, or other pricing methodology, and any
other terms and conditions of such sale, and Exsorbet shall be entitled, during
such five (5) day period to elect to purchase such stock from APS on the same
terms and conditions, provided such purchase by Exsorbet must be concluded
within three (3) days of exercising the election; provided the restriction
contained in this sentence shall not apply to APS unless all Exsorbet
shareholders owning five percent (5%) or more of Exsorbet common stock agree to
be bound in writing by the same restrictions.
(c) Exsorbet agrees to cause one (1) individual designated by
APS to be appointed to Exsorbet's Board of Directors promptly after the
October, 1996 Exsorbet shareholder meeting, and to nominate and use its best
efforts to cause the Exsorbet shareholders to elect and thereafter maintain a
designee of APS as an Exsorbet Board member for the period designated below.
In the event APS acquires fifty percent (50%) of the aggregate shares of
Exsorbet common stock APS is entitled to purchase under the Warrant and Options
pursuant to exercise of the Warrant and/or any of the Options, then APS shall
be entitled to designate a second individual to serve on the Board of Directors
of Exsorbet, and Exsorbet agrees to cause such person to be promptly appointed
to its Board of Directors and to nominate and use its best efforts to cause the
Exsorbet shareholders to elect and thereafter maintain such second designee in
place for the period specified below. Once APS has the right to designate a
second Exsorbet Board member, in the event the size of the Exsorbet Board of
Directors is increased or otherwise becomes larger then ten directors, then APS
shall be entitled to designate a third individual to serve on the Board of
Directors of Exsorbet, and
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Exsorbet shall cause such person to be promptly appointed and shall nominate
and use its best efforts to cause the Exsorbet shareholders to elect and
thereafter maintain a third APS designee on the Board of Directors for the
period stated below. The foregoing provisions related to the designation by
APS of individuals to serve on the Board of Directors of Exsorbet shall remain
in place until APS (together with its subsidiaries and affiliates) owns less
than five percent (5%) of the issued and outstanding common stock of Exsorbet,
and thereafter in the event APS exercises its rights under the Stock Put until
APS has been paid in full all amounts due APS upon sale of the stock to
Exsorbet pursuant to the Stock Put. All APS designees to the Board of
Directors of Exsorbet may be changed from time to time by written notice of APS
to Exsorbet. Exsorbet agrees to cause such new designees to be elected to its
Board of Directors promptly upon receipt of such notice. Each individual
designated by APS to serve on the Board of Directors of Exsorbet shall be the
beneficiary of at least $3 million of director and officer insurance coverage
maintained by Exsorbet (subject to reasonable deductibles, which deductibles
shall be paid by Exsorbet) and otherwise reasonably acceptable to APS.
Exsorbet further agrees that, as long as APS has the right to designate any
Exsorbet directors, Exsorbet will take such steps as may be necessary to cause
its articles of incorporation and bylaws to contain indemnity provisions in
favor of such directors to the maximum extent allowed by applicable law.
(d) Exsorbet agrees to consult with APS concerning the form of
any and all press releases related to the transactions contemplated by the
purchase of the 1,200,000 shares of Exsorbet common stock, this Agreement, the
exercise of the Stock Put, the Warrant and/or any of the Options, and the
acquisition of 7-7, Inc., and to obtain the approval of APS prior to the
dissemination thereof, which approval shall not be unreasonably withheld.
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(e) In the event that, at any time during a period of three
(3) years after the Effective Date, Exsorbet proposes to engage in any
transaction that involves the issuance of additional Exsorbet equity
securities, options or other rights to acquire Exsorbet equity securities, or
rights convertible into any Exsorbet equity securities, or proposes to engage
in any other non-equity related transaction that involves amounts in excess of
$100,000 (all the foregoing are collectively referred to as "Target
Transactions"), in which any person or entity who owns five percent (5%) or
more of Exsorbet's outstanding common stock ("Major Shareholders") is to be a
participant, or has the right to participate, APS shall have a right of first
refusal to participate in any such transaction on the same basis and terms as
the applicable Major Shareholder(s). Exsorbet agrees to give APS sixty (60)
days advance written notice of any proposed Target Transaction, including a
full description of the terms and conditions thereof, and to make available
such information as APS shall reasonably request in connection with reaching a
decision as to whether to exercise APS' right of first refusal. To exercise
its right of first refusal, APS must notify Exsorbet in writing prior to the
expiration of such sixty (60) day period and, if it exercises such right, shall
be entitled to participate in the Target Transaction on the same terms and
conditions as the applicable Major Shareholder(s). In the event there are
substantial modifications to the proposed terms of any such Target Transaction
during such sixty (60) day period, APS shall be entitled to a new notice and
sixty (60) day period in which to determine to exercise its right of first
refusal. Furthermore, Exsorbet agrees to cause all Exsorbet shareholders who
are also directors of Exsorbet, as of the Effective Date, or thereafter, to
execute and deliver to APS an agreement in form and substance acceptable to
APS, to vote their shares in favor of the election of APS designees to the
Exsorbet Board of Directors as contemplated in subsection (c) above.
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(f) In the event any shareholder defaults under any of the
Options and APS is unable, within thirty (30) days of such default (without
recourse to litigation), to acquire the Exsorbet common stock subject to any of
such Options, then Exsorbet will sell to APS such number of shares of Exsorbet
common stock, at the exercise price stated in the applicable Option, as APS
would have been able to purchase under the Options in default.
(g) For a period of sixty (60) days after the Effective Date,
APS shall be entitled to full access to the books, records and management of
Exsorbet and its subsidiaries, during reasonable business hours, to afford APS
a full opportunity to perform a due diligence review with regard to the
business, financial and legal affairs of Exsorbet.
(h) APS acknowledges and agrees that Exsorbet has disclosed to
APS that Exsorbet is considering a merger into a Delaware corporation, whereby
the Delaware corporation will be the surviving corporation, and which would
result in the change of the name Exsorbet to "Consolidated Eco-Systems, Inc."
For all purposes of this Agreement the term "Exsorbet" shall refer to such
surviving successor corporation in the event that such merger and/or name
change is consummated, and all terms and provisions of this Agreement,
including all terms providing for receipt of Exsorbet common stock and other
terms and conditions shall apply with regard to such proposed merger. APS
shall be entitled to cause the surviving corporation after any such merger to
re-execute documents evidencing the Stock Put, any or all of the Security
Documents, the Warrant and this Agreement in the name of the successor
corporation, but otherwise to be identical in terms to the terms of the
original agreements.
(i) In the event APS purchases any Exsorbet common stock
during the sixty (60) day period immediately following the Effective Date,
other than the initial 1,200,000 shares
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purchased as described in the recitals hereto and other than any purchases
through exercise of the Warrant or any of the Options, at a per share price of
$2.75 or less ("Other Purchased Stock"), then APS will not exercise its right
to purchase, under the Options, the number of shares equal to the number of
shares of Other Purchased Stock it acquired during such sixty (60) day period.
The foregoing shall not in any way limit APS' ability to exercise all of its
rights under and pursuant to the Warrant.
4. Remedies. This Agreement may be enforced at either law or in
equity, including, but not limited to, injunctive relief. In case any one or
more of the provisions of this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, any other provision hereof in
this Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. Such invalid, illegal or
unenforceable provisions shall be given effect to the maximum extent then
permitted by law. Exsorbet shall be deemed to be in default under this
Agreement if there is a default (which is not cured after any required notices
of default and opportunity to cure) under the Warrant or any of the Security
Documents.
5. Governing Law and Venue. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of Texas
(except the laws of that jurisdiction that would render such choice of law
ineffective). Venue for any action relating to this Agreement shall be proper
only in Texas.
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6. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
7. Inurement. This Agreement shall be binding upon the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns. This Agreement shall not be assignable by any party hereto
without the express written consent of the other party hereto in each instance;
provided that upon written notice to Exsorbet, APS may assign its rights and
obligations under this Agreement to any affiliate or subsidiary of APS.
8. Reservation of Shares. Exsorbet shall at all times until the
expiration of the rights provided under the Warrant and the Options, reserve
for issuance and delivery the number of shares of Exsorbet common stock as
shall be required for issuance and delivery pursuant to the Warrant and this
Agreement.
9. Notices. Any notices required or permitted to be given under
this Agreement shall be given in writing and shall be deemed received (a) when
personally delivered to the relevant party at its address as set forth below or
(b) if sent by mail, on the third day following the date when deposited in the
United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
1301 Capital of Xxxxx Xxxxxxx, Xxxxx X-000
00
00
Xxxxxx, Xxxxx 00000-0000
Attn: President
Exsorbet: Exsorbet Industries, Inc.
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Xx.
Each party may change its address for purposes of this Agreement by proper
notice to the other party.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EXSORBET: EXSORBET INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Printed Name: Xxxxx Xxxxxxx
------------------------
Title: Executive Vice President
-------------------------------
APS: AMERICAN PHYSICIANS SERVICE
GROUP, INC.
By: /s/ Xxxxx X. Xxxx, Xx.
----------------------------------
Printed Name: Xxxxx X. Xxxx, Xx.
------------------------
Title: President
-------------------------------
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