May 22, 2000
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇▇▇▇▇.▇▇▇
Suite ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇▇▇:
This letter supplements that certain Stock Purchase Agreement, dated
as of April 18, 2000 and executed as of the date hereof ("Agreement"), by and
among Intellect Capital Group, LLC, a Delaware limited liability company (the
"Purchaser"), and ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Nevada corporation (the "Company").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as set forth in the Agreement.
In accordance with Article 2 of the Agreement, Purchaser shall receive
shares of the Company's Series B Preferred Stock, which, no later than 30 days
from the date upon which such Purchased Stock shall be issued (the "Purchased
Stock Issuance Date"), shall be convertible into that number of fully paid and
nonassessable shares of the Company's Common Stock equal to fifty percent (50%)
of the Company's Common Stock then outstanding following the conversion (the
"Conversion Date").
Pursuant to Section 3.2 of the Agreement, Company represents and
warrants to Purchaser as follows:
The Company has sufficient number of shares of Common Stock authorized
in order to reserve a number of shares to permit the conversion of the
Purchased Shares.
As of the date hereof, Company has 50,000,000 shares of Common Stock
authorized, with 12,914,377 shares of Common Stock issued and outstanding (the
"Outstanding Shares"); an additional 7,640,739 shares of Common Stock obligated
for issuance pursuant to (i) agreements for the conversion of other securities
into shares of Common Stock, (ii) agreements for the exercise of warrants and
options in exchange for shares of Common Stock and (iii) other commitments of
the Company to issue or sell shares of Common Stock and/or securities
convertible into shares of Common Stock (the "Obligated Shares"); and
contemplates issuing at least 4,800,000 shares in conjunction with the current
private placement of common stock ("Placement Shares"). Thus, as of the date
hereof and in accordance with the terms of the Agreement, the Purchaser is
entitled to receive at least 25,355,116 shares of the Company's Common Stock
upon conversion of the Purchased Stock into shares of Common Stock (the
"Conversion Shares").
If the Company were to immediately convert its Purchases Shares into
Conversion Shares, the Company would not have a sufficient number of shares of
Common Stock authorized in order to reserve a number of shares to permit the
conversion of the Purchased Shares into the Conversion Shares, as indicated by
the following table:
OUTSTANDING SHARES 12,914,377
OBLIGATED SHARES 7,640,739
PLACEMENT SHARES 4,800,000
CONVERSION SHARES 25,355,116
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TOTAL SHARES SUBJECT TO ISSUANCE 50,710,232
SHARES AUTHORIZED 50,000,000
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SHARES IN EXCESS OF AUTHORIZATION 710,232
In order for there to be a sufficient number of shares of Common Stock
authorized to reserve a number of shares for the Conversion Shares, the Company
must increase the number of authorized shares of its Common Stock. In order to
increase the number of authorized shares of its Common Stock, the Company must
amend its Articles of Incorporation, which requires the approval of the
Company's shareholders in accordance with Nevada law.
In consideration of the mutual covenants and agreements set forth in
the Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, by signing this letter ("Letter
Agreement"), the Company hereby agrees as follows:
1. As an inducement to the Purchaser for entering into the
Agreement and contemporaneously with the execution thereof by the Purchaser, and
contemporaneously with the execution of this Letter Agreement by the Company,
the Company shall cause each of its directors and officers and all of its
shareholders who have beneficial ownership of at least 10% of the Company's
currently outstanding Common Stock to enter into a Shareholder Agreement with
Purchaser in the form attached hereto as Exhibit A ("Shareholder Agreement").
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2. No later than five (5) business days after the Purchased Stock
Issuance Date, the Company shall file with the Securities and Exchange
Commission a form of proxy seeking shareholder approval of an amendment to the
Company's Articles of Incorporation that will increase the authorized number of
shares of our Common Stock from 50,000,000 to 200,000,000 shares (the "Proxy).
The Company may include other matters for shareholder consideration and approval
in the Proxy as it deems necessary or advisable, including but not limited to,
seeking shareholder approval for changing the Company's name from
"▇▇▇▇▇▇▇▇▇.▇▇▇" to "PhotoLoft, Inc."
3. In the event that the Company does not file the Proxy within
five (5) business days after the Purchased Stock Issuance Date, Purchaser shall
be entitled to receive from Company, and Company shall pay to Purchaser, a
penalty of $1,000 for each day during which the Proxy remains unfiled.
4. In the event that the Company is unable to obtain the
necessary shareholder approval of the amendment to the Company's Articles of
Incorporation that will increase the authorized number of shares of our common
stock from 50,000,000 to 200,000,000 shares prior to the Conversion Date and to
the extent that the Company has insufficient shares of Common Stock available to
issue the Conversion Shares, then for each Conversion Share that cannot be
issued on the Conversion Date as a result of such deficit, the Company shall pay
to Purchaser an amount equal to the market value of a share of the Company's
Common Stock on the Conversion Date.
If the foregoing is in accordance with your understanding, please so
indicate by signing this letter in the space indicated below and return it to us
no later than May __, 2000.
Very truly yours,
INTELLECT CAPITAL GROUP, LLC
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
ACCEPTED AND AGREED
AS OF MAY 22, 2000
▇▇▇▇▇▇▇▇▇.▇▇▇
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
EXHIBIT A
SHAREHOLDER AGREEMENT
This Shareholder Agreement (the "Agreement"), dated as of May 22, 2000, is
by and between ___________________________________, a shareholder (the
"Shareholder") of ▇▇▇▇▇▇▇▇▇.▇▇▇, a Nevada corporation (the "Company"), and
Intellect Capital Group, LLC, a Delaware limited liability company ("ICG"). All
terms used herein and not defined herein shall have the meanings assigned
thereto in the Purchase Agreement or the Letter Agreement, as applicable (each
as defined below).
WHEREAS, ICG and the Company have agreed to enter into a Stock Purchase
Agreement, dated as of April 18, 2000 and executed as of the date hereof (the
"Purchase Agreement") whereby the Company shall issue to ICG shares of the
Company's Series B Preferred Stock convertible into a number of shares of the
Company's Common Stock (the "Conversion");
WHEREAS, the Purchase Agreement is supplemented by a Letter Agreement dated
the date hereof ("Letter Agreement") which sets forth certain obligations of the
Company to ICG relating to the Conversion, including the requirement that the
Company amend its Articles of Incorporation to increase the number of its
authorized shares of Common Stock from 50,000,000 to 200,000,000 ("Amendment");
WHEREAS, the Amendment requires the approval of at least a majority of the
outstanding shares of the Company's Common Stock;
WHEREAS, the Shareholder owns the number of shares of Company Common Stock
set forth beneath the Shareholder's signature (the "Shares"); and
WHEREAS, in consideration of the substantial risks and expenses incurred
and to be incurred by ICG in connection with the Purchase Agreement and the
Letter Agreement, the Shareholder, solely in such Shareholder's capacity as a
shareholder of the Company and not in any other capacity, has agreed to enter
into and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder shall vote or cause to
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be voted, or execute a written consent with respect to, the Shares then held of
record or beneficially owned, directly or indirectly, by such Shareholder in
favor of the Amendment either at a meeting of the shareholders of the Company at
which such Amendment is considered and at every adjournment thereof or in
connection with every proposal to take action by written consent with respect
thereto.
2. No Voting Trusts. Shareholder agrees that Shareholder will
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not, nor will Shareholder permit any entity under Shareholder's control to,
deposit any Shares in a voting trust or subject the Shares to any agreement,
arrangement or understanding with respect to the voting of the Shares
inconsistent with this Agreement,
3. Representations and Warranties of Shareholder. Shareholder
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represents and warrants to and agrees with ICG as follows:
a. Capacity. Shareholder has all requisite capacity and authority
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to enter into and perform his or her obligations under this Agreement.
b. Binding Agreement. This Agreement constitutes the valid and
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legally binding obligation of Shareholder, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
c. Non-Contravention. The execution and delivery of this
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Agreement by Shareholder does not, and the performance by Shareholder of his or
her obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute, rule or
regulation to which Shareholder is subject or, in the event that Shareholder is
a corporation, partnership, trust or other entity, any charter, bylaw or other
organizational document of the Shareholder.
d. Ownership of Shares. Shareholder has good title to all of the
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Shares as of the date hereof, and, except as set forth on Annex A hereto, the
Shares are so owned free and clear of any liens, security interests, charges or
other encumbrances.
4. Specific Performance and Remedies. Shareholder acknowledges
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that it will be impossible to measure in money the damage to ICG if Shareholder
fails to comply with the obligations imposed by this Agreement and that, in the
event of any such failure, ICG will not have an adequate remedy at law or in
damages. Accordingly, ▇▇▇▇▇▇▇▇▇▇▇ agrees that injunctive relief or other
equitable remedy, in addition to remedies at law or in damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that ICG has an adequate remedy at law. Shareholder agrees
that it will not seek, and agrees to waive any requirement for, the securing or
posting of a bond in connection with ICG's seeking or obtaining such equitable
relief. In addition, after discussing the matter with Shareholder, ICG shall
have the right to inform any third party that ICG reasonably believes to be, or
to be contemplating, participating with Shareholder or receiving from
Shareholder assistance in violation of this Agreement, of the terms of this
Agreement and of the rights of ICG hereunder, and that participation by any such
persons with Shareholder in activities in violation of Shareholder's agreement
with ICG set forth in this Agreement may give rise to claims by ICG against such
third party.
5. Term of Agreement; Termination.
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a. The term of this Agreement shall commence on the date hereof.
b. This Agreement shall terminate upon the date, if any, of the
termination of the Purchase Agreement prior to the Conversion Date in accordance
with its terms. Upon such termination, no party shall have any farther
obligations or liabilities hereunder; provided however, such termination shall
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not relieve any party from liability for any breach of this Agreement prior to
such termination.
6. Entire Agreement. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by each party hereto. No waiver of
any provisions hereof by either party shall be deemed a waiver of any other
provisions hereof by any such party, nor shall any such waiver be deemed a
continuing waiver of any provision hereof by such party.
7. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by a
reputable overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to ICG:
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Intellect Capital Group, LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
Suite 650
Los Angeles, California 90025
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
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▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
Los Angeles, California 90064
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Shareholder:
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_______________________________
_______________________________
_______________________________
Attention: ______________________
Facsimile: ______________________
8. Miscellaneous.
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a. Severability. If any provision of this Agreement or the
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application of such provision to any person or circumstances shall be held
invalid or unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or circumstances,
other than the party as to which it is held invalid, and the remainder of this
Agreement, shall not be affected.
b. Capacity. The covenants contained herein shall apply to
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Shareholder solely in his or her capacity as a shareholder of the Company, and
no covenant contained herein shall apply to Shareholder in his or her capacity
as a director or officer, if applicable, of the Company.
c. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
d. Headings. All Section headings herein are for convenience of
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reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
e. Choice of Law. This Agreement shall be deemed a contract made
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under, and for all purposes shall be construed in accordance with, the laws of
the State of California, without reference to its conflicts of law principles.
9. Attorney's Fees. The prevailing party or parties in any
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litigation, arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party or parties all fees and disbursements of
counsel (including expert witness and other consultants' fees and costs)
relating to or arising out of (a) the Proceeding (whether or not the Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding
including, without limitation, one to enforce or collect any judgment or award
resulting from the Proceeding. All such judgments and awards shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and fees and disbursements of counsel.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
INTELLECT CAPITAL GROUP, LLC
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
SHAREHOLDER:
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(Print or type name)
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(Signature)
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Shares