INVESTMENT AND CONVERSION AGREEMENT
INVESTMENT AND CONVERSION AGREEMENT, dated as of April 30, 2001 (the
"Agreement") by and between Origin Investment Group, Inc., a Maryland
corporation ("Buyer"), and Cromerica Technologies, LLC, a California limited
liability company ("Seller"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Share Exchange Agreement, dated as of
the date hereof (as such agreement may be amended from time to time, the "Share
Exchange Agreement").
WHEREAS, concurrently herewith, Buyer and Seller are entering into the
Share Exchange Agreement, which provides for, among other things, the purchase
by Buyer of all of the issued and outstanding shares of Vivocom, Inc.
("Company");
WHEREAS, Seller wishes Buyer to make certain investments in the Company
after the consummation of the transactions contemplated by the Share Exchange
Agreement;
WHEREAS, Buyer wishes to make the Series B Convertible Preferred Stock
of Buyer issuable to Seller pursuant to the Share Exchange Agreement to become
convertible into the common stock, par value $.001 per share, of Buyer ("Common
Stock") upon the happening of certain events; and
WHEREAS, Seller and Buyer, as a condition to entering into the Share
Exchange Agreement, have agreed to enter into this Agreement.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
Section 1. Certain Definitions. The following terms, when used in this
Agreement, shall have the following meanings (such definitions to be equally
applicable to both singular and plural terms of the terms defined):
"Series B Preferred" shall mean the Series B Convertible Preferred
Stock, par value $.001 per share, of Buyer required to be issued to the
shareholders of the Company pursuant to the Share Exchange Agreement. A Form of
the Certificate of Designation, the Series B Convertible Preferred Stock, as
attached as Exhibit 2.2(B) of the Share Exchange Agreement is incorporated
herein by reference. The Series B Preferred does not carry any voting powers,
rights to dividends or any other rights, preferences or privileges other than
its ability to convert into common stock of Origin Investment Group, Inc.,
subject to the occurrence of certain conversion events as outlined in Section 2
of this Agreement and a liquidation preference which will be parri pasu with the
liquidation preference that will be offered to Series A Convertible Preferred
Shareholders. Buyer and Seller agree that all exhibits, including all schedules
and the Certificate of Designation shall be exhibits to be provided to Seller
prior to close and receipt and approval of such exhibits shall be a condition of
close.
"Shares" shall mean any voting security of the Company.
"Closing Date" shall mean the date of Closing as described within
Paragraph 2.3 within the Share Exchange Agreement is terminated in accordance
with its terms (unless such termination is being contested in good faith by
Buyer in a court of competent jurisdiction, in which event the termination date
shall mean the date determined in such action from which there is no further
right of appeal).
"Vivocom Revenue" shall mean the aggregate gross license fees, royalty
fees, subscriptions, or other cash or non-cash consideration received by,
required to be paid to, or accrued by the Company or any of its subsidiaries or
affiliates pursuant to agreements between the Company and ""Qualified Third
Parties" for the use of the Vivocom SIS ("Smart Internet Switch") technology or
any variation of such technology and any derivative works of such technology
owned or developed by the Company or any of its subsidiaries or affiliates, as
determined in accordance with the provisions of this definition. With respect to
any agreement in which any consideration is to be paid to the Company by a
Qualified Third Party (as defined herein) on a deferred or installment basis
following the effective date of such agreement, the amount of Vivocom Revenue
deemed to have been received by the Company at the time such agreement is
entered into shall consist of all such consideration to be paid to the Company
under such agreement or arrangement over a period of time of up to twenty-four
(24) months following the date of such agreement (notwithstanding any applicable
revenue recognition standards under United States Generally Accepted Accounting
Principles ("GAAP")), and any consideration to be received after such
twenty-four (24) month period shall be deemed to have been received as it is
recognized in accordance with applicable revenue recognition standards under
GAAP. With respect to any agreement in which any consideration is to be paid to
the Company on a deferred or installment basis by a party other than a Qualified
Third Party, the amount of Vivocom Revenue deemed to have been received by the
Company shall be such amount of revenue as is recognized, and at such time as it
is recognized, in accordance with applicable revenue recognition standards under
GAAP. The Vivocom Revenue shall not be subject to any deductions, offsets or
other claims that the Company or Buyer may have against any licensee or third
party with respect to such technology.
For purposes hereof, a "Qualified Third Party" shall be defined as an entity
that satisfies at least three of the following conditions: (a) such entity has
greater than $50,000,000 in total capitalization; (b) such entity has been in
business at least 4 years prior to entering into an agreement with the Company
as contemplated within this section; (c) such entity is currently generating
revenues in excess of $10,000,000 per year; and (d) such entity has sufficient
current assets, based on its financial position as of the end of its most recent
fiscal quarter, to fulfill its entire financial obligation to the Company under
such agreement. Within five days of execution of any agreement with an entity
that either Seller or Buyer or the Company believes is a Qualified Third Party,
such party shall provide the other parties including all members of Seller with
written notice of such agreement and provide all details available to the other
parties and all members of the Seller regarding the third party's financial
position. If such financial information of the third party is not readily
available, then Seller and Buyer will mutually and in good faith determine
whether such third party qualifies as a Qualified Third Party as defined within
this Section. In the event that Seller, Buyer and/or Company disagree as to
whether a third party constitutes a Qualified Third Party, such determination
will then be turned over to a certified public accounting firm mutually chosen
by Buyer and Seller, whose decision will be final and binding with respect to
the status of such third party as a Qualified Third Party hereunder. Buyer and
Seller mutually agree that no revenue will be realized, as Vivocom Revenue or
otherwise, from any third party that is an affiliate of Seller or any of
Seller's members.
Section 2. Conversion Events. If, on the first anniversary of the Closing Date,
Vivocom Revenue shall equal or exceed $5 million ("Revenue Rate Breakpoint A"),
then each holder of Series B Preferred shall have the right to convert 1/3 of
the Series B Preferred owned by such holder into Common Stock, on or after such
anniversary. If, on the second anniversary of the Closing Date, cumulative
Vivocom Revenue since the Closing Date shall equal or exceed $10 million, then
each holder of Series B Preferred shall have the right to convert 2/3 of the
Series B Preferred owned by such holder into Common Stock, on or after such
second anniversary. If, on the third anniversary of the Closing Date, cumulative
Vivocom Revenue since the Closing Date shall equal or exceed $15,000,000, then
each holder of Series B Preferred shall have the right to convert all of the
Series B Preferred owned by such holder (and not previously forfeited, as
provided below) into Common Stock on or after such third anniversary of the
Closing Date.
Section 3. Forfeiture of Series B Preferred if Targets Not Reached. If, on the
second anniversary of the Closing Date, $5 million of cumulative Vivocom Revenue
has not been reached, then the holder of Series B Preferred shall forfeit to
Buyer, for no consideration, 1/3 of the Series B Preferred owned by such holder
at the Closing Date. If, on the third anniversary of the Closing Date, $10
million of cumulative Vivocom Revenue has not been reached, then such holder of
Series B Preferred shall forfeit to Buyer, for no consideration, 1/3 of the
Series B Preferred owned by such holder at the Closing Date. If, on the fourth
anniversary of the Closing Date, $15 million of cumulative Vivocom Revenue has
not been reached, then each holder of Series B Preferred shall forfeit to Buyer,
for no consideration, 1/3 of the Series B Preferred owned by such holder at the
Closing Date.
Section 4. Investments in the Company. The forfeitures provided for in Section 3
are conditioned upon Buyer making a total investment of $3,250,000 during the
first twelve months after the Closing Date for the purpose of further developing
and marketing the Vivocom SIS technology. On the Closing Date, Buyer agrees to
invest $250,000 ("Payment One") in cash into the Company as a contribution to
capital to be used for working capital and marketing. Subject to Section 5
below, Buyer agrees to invest the following additional amounts in the Company on
the following schedule:
Payment Two: 75 days after the Closing Date: $500,000
Payment Three: 120 days after the Closing Date: $500,000
Payment Four: 240 days after the Closing Date: $1,000,000
Payment Five: 60 days after the Closing Date: $1,000,000
Subject to year end reviews and determination by the Board of Directors
of the Company and Buyer, Buyer may determine to make additional investments
within the Company.
Buyer shall invest an additional $10,000,000 in the Company as a
contribution to capital during the one year period commencing on the first
anniversary date of the Closing Date ($2,500,000 of which shall be invested in
the first quarter of such period), if the Revenue Rate Breakpoint A is achieved.
Subject to Section 5, Buyer shall invest $20,000,000 in the Company as
a contribution to capital during the one year period commencing on the second
anniversary of the Closing Date.
Section 5. Acceleration or Deferral of Funding. Prior to the first anniversary
of the Closing Date, Buyer shall conduct a review of the performance of the
Company for the nine-month period following the Closing Date. If Buyer
determines in good faith that Vivocom Revenue is not likely to reach $5 million
for the one year period following the Closing Date, then Buyer shall not be
obligated to make the final $1.0 million investment in the Company ("Payment
Five") scheduled to be disbursed 360 days after the Closing Date as provided for
in the preceding section. If Vivocom Revenue does not equal or exceed $5 million
for the twelve month period ending on the first anniversary of the Closing Date,
then Buyer shall not be obligated to make the $10 million investment in the
Company required above for the second year, provided, however, that if, on the
second anniversary of the Closing Date, Vivocom Revenue has equaled or exceeded
$10 million, then Buyer shall be required to invest $20 million over the
following year. Buyer may, in its sole and absolute discretion, invest more in
the Company or invest on a faster schedule than provided above.
Section 6. Accelerated Conversion. If an offer to purchase all of the issued and
outstanding capital stock of the Company is approved by the respective boards of
directors of Buyer and the Company, then all Series B Preferred shall become
immediately convertible on the effective date of any such sale. If Buyer shall
fail to make the investments defined as Payment Two, Payment Three and Payment
Four required above within twelve months of the Closing Date, then all Series B
Preferred shall become immediately convertible.
Section 7. Certain Covenants of Seller. Except in accordance with the terms of
this Agreement, Seller hereby ---------------------------- covenants and agrees
as follows:
7.1 Prior to the Closing Date, Seller shall not, directly or indirectly (i)
except pursuant to the terms of the Share Exchange Agreement or this Agreement,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, enforce or permit the execution of the provisions of any redemption
agreement with the Company, enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, or
exercise any discretionary powers to distribute, any or all of the Shares or any
interest therein, including any trust income or principal; (ii) except as
contemplated hereby, grant any proxies or powers of attorney with respect to any
Shares, deposit any Shares into a voting trust or enter into a voting agreement
with respect to any Shares; or (iii) take any action that would make any
representation or warranty of Seller contained herein or in the Share Exchange
Agreement untrue or incorrect or have the effect of preventing or disabling
Seller from performing any of Seller's obligations under this Agreement.
Section 8. Certain Covenants, Representations and Warranties of Buyer.
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8.1 Reserve for Conversion of Series B Preferred. Buyer shall at all times
reserve and keep available out of its authorized but unissued shares of common
stock, for the purpose of effecting the conversion of the Series B Preferred and
otherwise complying with the terms of this Agreement and the Share Exchange
Agreement, such number of its duly authorized shares of common stock as shall be
sufficient to effect the conversion of the Series B Preferred from time to time
outstanding or otherwise to comply with the terms of this Agreement. If at any
time the number of authorized but unissued shares of common stock shall not be
sufficient to effect the conversion of the Series B Preferred or otherwise to
comply with the terms of this Agreement, Buyer will forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of common stock to such number of shares as shall be sufficient for such
purposes. Buyer will use reasonable efforts to obtain any authorization,
consent, approval, or other action by or make any filing with any court or
administrative body that may be required under applicable state securities laws
in connection with the issuance of shares of common stock upon conversion of the
Series B Preferred.
8.2 Buyer shall:
(a) make and keep available adequate current public information regarding Buyer,
as those terms are understood and defined in Rule 144(c) under the Securities
Act of 1933, as amended (the "Securities Act").
(b) file with the Securities and Exchange Commission (the "Commission") in a
timely manner all reports and other documents required of the company under the
Securities Act and the Securities and Exchange Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇");
and
(c) furnish to each holder of Series B Preferred, forthwith upon request but not
more than three times per year, (i) a written statement by Buyer as to its
compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Buyer; (iii) such other reports an documents so filed by
the Buyer as such holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing such holder to sell any Series B
Preferred or Common Stock.
(d) at any time, at the request of any holder of Series B Preferred or Common
Stock make available to such holder and to any prospective transferee of such
shares the information concerning Buyer described in Rule 144A(d)(4) under the
Securities Act.
(e) provide to Seller on a quarterly basis, a report, together with supporting
documentation, setting forth in detail its calculation of the Vivocom Revenue.
8.3 Registration Rights. If, at any time, Buyer determines to register any of
its securities under the Securities Act for sale to the public, where the
aggregate proceeds to be received by Buyer from such sale of securities sold by
Buyer is in excess of $7,500,000, whether for its own account or for the account
of other security holders or both (except with respect to registration
statements on Form S-8 or its then equivalent, or in connection with a Rule 145
transaction or Form S-4 or its equivalent, or another form not available for
registering any shares of common stock owned by Seller or its assigns) (the
"Registrable Securities"), each such time it will give prompt written notice to
all holders of outstanding Registrable Securities, including each holder who has
the right to acquire Registrable Securities, of its intention so to do and of
the proposed method of distribution of such securities. Upon the written request
of any such holder, received by Buyer within 20 days after the giving of any
such notice by Buyer, to include in the registration all or any part of
Registrable Securities actually owned and in possession by holder at the time
such notice is given, Buyer shall cause that portion of Registrable Securities
actually owned and in possession by a holder as to which registration shall have
been so requested under this Section to be included in the securities to be
covered by the registration statement proposed to be filed by Buyer, all to the
extent and under the conditions such registration is permitted under the
Securities Act. In the event that any registration pursuant to this Section
shall be, in whole or in part, an underwritten public offering of Common Stock,
the number of shares of Registrable Securities to be included in such an
underwriting may be reduced (pro rata among the requesting holders under this
Section based upon the number of shares of Registrable Securities owned by such
holders) if and to the extent that the managing underwriter shall be of the
opinion that the inclusion of some or all of the Registrable Securities would
adversely affect the marketing of the securities to be sold by Buyer therein.
Any such limitation shall be imposed in such manner so as to avoid any
diminution in the number of shares Buyer may register for sale by giving first
priority for the shares to be registered for issuance and sale by the Buyer, by
giving second priority for the shares to be registered pursuant to this Section
and by giving third priority for the shares to be registered for sale by any
shareholder of Buyer pursuant to the terms of any other agreement.
Section 8.4. Antidilution. In case Origin Investment Group shall (i)
pay a dividend to holders of Common Stock in shares of Common Stock or make a
distribution to holders of Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a larger number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of Origin Investment Group, Inc.
(including any such reclassification in connection with a consolidation or
merger in which Origin Investment Group, Inc. is the surviving corporation), the
number of Common Stock issuable upon exercise of each Series B Preferred
immediately prior thereto shall be adjusted so that the Series B Preferred
Holder shall be entitled to receive the kind and number of Common Stock or other
securities of Origin Investment Group, Inc. which he would have owned or have
been entitled to receive after the happening of any of the events described
above, had such Series B Preferred been exercised immediately prior to the
happening of such event or any record date with respect thereto regardless of
whether the Series B Preferred are exercisable at the time of the happening of
such event or at the time of any record date with respect thereto. An adjustment
made pursuant to this Section 8.4 shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
Section 9. Independent Third Party Accountant. Seller may, not more than twice a
year, request an independent third party accountant (the "Auditor") (mutually
selected by Buyer and Seller) to perform an audit with respect to a calculation
of Vivocom Revenue. The Auditor's calculation of Vivocom Revenue, which shall be
in accordance with Generally Accepted United States Accounting Principals
("GAAP") and Generally Accepted Auditing Standards, as to Non-Qualified Third
Parties and in accordance with the definition of Vivocom Revenue as set forth in
this Agreement as to Qualified Third Parties, shall be conclusive, binding and
non-appealable absent manifest error. The costs and fees of the Auditor shall be
borne by Seller unless the Auditor's calculation of Vivocom Revenue varies in
excess of 5.0% of the Seller's calculation of Vivocom Revenue in which case
Seller shall bear all of the costs and fees of the Auditor.
Section 10. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
Section 11. Termination. The obligations of Seller contained in this Agreement
shall terminate upon the first to occur of (a) the Closing Date and (b) the
Termination Date; provided, that the provisions of Section 11 shall survive the
Termination Date.
Section 12. Miscellaneous.
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12.1 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made (i) when delivered in person, (ii) the business day after sending by
overnight courier service or by facsimile, or (iii) three business days after
mailing by registered or certified mail (postage prepaid, return receipt
requested), to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.1):
If to Sellers:
Cromerica Technologies, LLC
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▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
If to Buyer:
Origin Investment Group, Inc.
The Water Garden
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▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq., LLM
Chairman of the Board and President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
12.2 Headings. The headings contained in this Agreement are for the convenience
of reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.3 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect.
12.4 Entire Agreement. This Agreement, the Share Exchange Agreement and the
documents referred to herein and therein constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral with respect to the subject
matter hereof and thereof.
12.5 Assignability. This Agreement shall not be assigned by operation of law or
otherwise, except that Buyer and Seller may assign all or any of its respective
rights and obligations hereunder to any of its their respective Affiliates,
provided, however, that no such assignment shall relieve the assigning party of
its obligations hereunder.
12.6 Waivers. No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach hereof, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
12.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a California state or federal court sitting in the State of
California, and the parties hereto hereby irrevocable submit to the exclusive
jurisdiction of such courts in any such action or proceeding and irrevocably
waive the defense of an inconvenient forum to the maintenance of any such action
or proceeding.
12.8 Waiver of Jury by Trial. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT.
12.9 Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ORIGIN INVESTMENT GROUP, INC.
By: __/s/ ▇▇▇▇ ▇. Rizvi__________________
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq., LLM
Title: Chairman of the Board and President
CROMERICA TECHNOLOGIES, LLC
By: __/s/ Nenad Krtolica__________________
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Member
By: __/s/ ▇▇▇▇▇ Krtolica__________________
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Member
By: _/s/ ▇▇▇▇▇ Gammon__________________
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Member