July 28, 2000
Terren S. Peizer
Chief Executive Officer
Intellect Capital Group, LLC
11111 Santa Monica Blvd.
Los Angeles, California 90025
Dear Terren:
This letter amends and supplements that certain Stock Purchase
Agreement, dated as of April 18, 2000, supplemented as of May 22, 2000, and
executed as of June 8, 2000 ("Agreement"), by and between Intellect Capital
Group, LLC, a Delaware limited liability company (the "Purchaser" and sometimes
referred to herein as "you"), and PhotoLoft.Com, a Nevada corporation (the
"Company" and sometimes referred to herein as "we" or "us"). Capitalized terms
used but not otherwise defined herein shall have the same meaning as set forth
in the Agreement.
Pursuant to Article 2.2 of the Agreement and in accordance with the
terms of the Series B Certificate of Designations, Rights and Preferences
("Certificate of Designations"), Purchaser received shares of the Company's
Series B Preferred Stock, which were to be converted into a 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 such conversion,
on a fully diluted basis (i.e., taking into account all issued and outstanding
Common Stock, the conversion of all other securities convertible into shares of
Common Stock, the exercise of all warrants and options exercisable for shares of
Common Stock and any commitments of the Company to issue or sell any Common
Stock or securities convertible into shares of Common Stock and the exercise of
such committed securities) (the "Conversion"), in accordance with the terms and
conditions set forth in that certain Series B Certificate of Designations,
Rights and Preferences filed on May 17, 2000 ("Certificate of Designations").
The Agreement was not executed by all parties until 22 days after the
Certificate of Designations was filed with the Nevada Secretary of State. The
Certificate of Designations provides that the Conversion shall automatically
occur "thirty (30) days from the date hereof" (i.e., 30 days following the date
on which the Certificate of Designations was filed); however, it was the mutual
intent of the Company and the Purchaser that the Agreement and the Certificate
of Designations be dated as of the same date and that the 30-day period would
not begin until the Agreement had been executed. Accordingly, the Company shall
file a Certificate of Correction (the form of which is attached hereto as
Exhibit A). Please review the Certificate and initial below to indicate your
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approval of its terms. In addition, our counsel, Cathy Gawne, will provide you
with a shareholder consent, which we ask you to sign and return to her.
- Purchaser approves the Certificate of Correction: __________ (Purchaser)
Terren S. Peizer
July 28, 2000
Page 2
In accordance with our mutual understanding, and as reflected by the
Certificate of Correction, the Conversion was to have occurred automatically on
July 7, 2000 (the "Conversion Date"). For various reasons, including the
Company's inability to fully convert the Preferred Stock into Common Stock due
to an insufficient amount of authorized shares available for issuance, the
Conversion did not occur on that date. Had the Conversion occurred on the
Conversion Date, Purchaser would have received 34,540,266 shares of Common Stock
in exchange for its 900 shares of Preferred Stock, only 27,914,023 of which
could have been actually issued by the Company out of its authorized shares
available for issuance. Accordingly, pursuant to the terms of our May 22, 2000
side letter, you are entitled to receive $13,122,959 as a penalty payment from
the Company. In addition, the May 22, 2000 side letter set forth certain
obligations that the Company failed to meet in connection with obtaining
shareholder approval to increase the number of the Company's authorized shares
of common stock. As a result, you are entitled to an additional penalty payment
of $8,000 from the Company.
By initialing beneath the following paragraph where indicated and by
signing below, Purchaser and the Company hereby agrees as follows:
In consideration of Purchaser waiving its rights to the $13,130,959 in
penalty payments from the Company, and its rights to the 6,626,243 shares it
would have received if the Company had a sufficient amount of authorized shares
available for issuance to Purchaser, the Company shall issue to Purchaser
warrants to purchase 11,900,000 shares of the Company's Common Stock (the
"Warrants"). The terms of the Warrants are as set forth in the Warrant
Agreement attached hereto as Exhibit B.
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__________ (Purchaser) ___________ (Company)
If the foregoing is in accordance with your understanding, please so
indicate by initialing the spaces provided above and by signing this letter in
the space indicated below and return it to us via facsimile today.
Very truly yours,
PHOTOLOFT.COM
By: /s/ Jack Marshall
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Jack Marshall
Chief Executive Officer
ACCEPTED AND AGREED
AS OF JULY __, 2000
INTELLECT CAPITAL GROUP, LLC
By: /s/ Terren S. Peizer
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Terren S. Peizer
Chief Executive Officer