Exhibit 10.3
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into this 14th day of
August 2002, by and among Xxxxx 0 Systems, Inc., a Delaware corporation (the
"Company"), and the undersigned holders of Series A1 Convertible Redeemable
Preferred Stock (the "Series A1 Preferred Stock") and Series B1 Convertible
Redeemable Preferred Stock (the "Series B1 Preferred Stock") of the Company
(collectively, the "Holders").
WITNESSETH
WHEREAS, the Company and the Holders, as applicable, are parties to
that certain Securities Purchase Agreement dated as of June 28, 1999 (including
the exhibits and schedules thereto) (the "Series A Purchase Agreement"), that
certain Securities Purchase Agreement dated as of July 20, 2000 (including the
exhibits and schedules thereto) (the "Series B Purchase Agreement"), and that
certain Exchange Agreement dated October 16, 2001 (including the exhibits and
schedules thereto) (the "2001 Exchange Agreement"); and
WHEREAS, the Series A Purchase Agreement, the Series B Purchase
Agreement, the 2001 Exchange Agreement, the Certificates of Designation for the
Series A1 Convertible Redeemable Preferred Stock and B1 Convertible Redeemable
Preferred Stock of the Company (the "Series A1 and B1 Certificates of
Designation") and the Series A1 Warrants and Series B1 Warrants (as such terms
are defined in the 2001 Exchange Agreement) contain certain provisions which
afford the Holders certain rights in the event the Company desires to consummate
certain financing transactions including, without limitation, conversion price
adjustments; and
WHEREAS, the Holders desire to consent to the proposed issuance by the
Company of shares of the Company's Series C Preferred Stock (the "Senior
Preferred Stock") in accordance with the terms of that certain Securities
Purchase Agreement (the "Series C Purchase Agreement"), dated even date
herewith, by and among the Company and the purchasers listed on Schedule I
thereto (such issuance, the "Proposed Transaction") and (a) waive the conversion
price adjustments set forth in Section 7.1(g) of the Series A1 and B1
Certificates of Designation, respectively, in connection with the Proposed
Transaction, (b) waive the exercise price adjustments set forth in Section 6(h)
of the Series A1 Warrants and the Series B1 Warrants and (c) enter into an
Exchange Agreement (the "2002 Exchange Agreement") to exchange the Series A1
Preferred Stock and Series B1 Preferred Stock for new Series A2 Convertible
Redeemable Preferred Stock (the "Series A2 Preferred Stock") and Series B2
Convertible Redeemable Preferred Stock (the "Series B2 Preferred Stock")
respectfully, having the rights, preferences and limitations set forth in those
certain Certificates of Designation of Rights, Preferences and Limitations of
Preferred Stock with respect to the Series A2 Preferred Stock and Series B2
Preferred Stock attached hereto as Exhibit A and Exhibit B, respectively (the
"Series A2 and B2 Certificates of Designation").
NOW, THEREFORE, in consideration of the provisions referred to above,
the covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Waivers and Consents. Each Holder hereby authorizes and consents to
the adoption by the Company's Board of Directors and the filing with the
Secretary of State of Delaware of the Certificate of Designation of Rights,
Preferences and Limitations of Preferred Stock with respect to the Senior
Preferred Stock, in the form annexed to the Series C Purchase Agreement. Each
Holder further consents to the issuance by the Company of the Senior Preferred
Stock in accordance with the terms of the Series C Purchase Agreement and waives
the applicability of the following provisions in connection with such issuance:
(i) Sections 3.8 (Future Financings) and Section 3.10 (Transactions with
Affiliates) of each of the Series A Purchase Agreement, the Series B Purchase
Agreement and the 2001 Exchange Agreement, (ii) Sections 3.1(e) and (f) (Voting
Rights) and Section 7.1(g) (Adjustment of Conversion Price) of each of the
Series A1 Certificates of Designation and the Series B1 Certificates of
Designation and (iii) except as contemplated by Section 3 hereof, Section 6(h)
of each of the Series A1 Warrants and Series B1 Warrants.
2. Exchange Agreement; Registration Rights. As soon as practicable
following the date of this Agreement, the Company and the Holders shall enter
into the 2002 Exchange Agreement, in the form of Exchange Agreement attached
hereto as Exhibit C, pursuant to which the Holders shall (i) exchange the Series
A1 Preferred Stock and Series B1 Preferred stock for the Series A2 Preferred
Stock and Series B2 Preferred Stock, respectively, having the rights,
preferences and limitations set forth in the respective Series A2 and B2
Certificates of Designation and (ii) exchange the Series A1 Warrants and the
Series B1 Warrants for Series A2 Warrants (the "Series A2 Warrants") and Series
B2 Warrants (the "Series B2 Warrants"), respectively, which shall be identical
in all respects to the Series A1 Warrants and the Series B1 Warrants,
respectively, except that the Exercise Price (as defined in the Series A1
Warrants and Series B1 Warrants) shall be reduced as provided in Section 3
hereof. The Company and the Holders shall also enter into a new registration
rights agreement, substantially in the form in the form of Exhibit D annexed
hereto, which shall provide for the registration under the Securities Act of
1933, as amended (the "Securities Act"), of the shares of common stock
underlying the Series A1 Preferred Stock, Series B2 Preferred Stock, the Series
A2 Warrants and the Series B2 Warrants.
3. Warrant Repricing. As consideration for the waivers and consents set
forth in paragraph 1 above, the Company shall, at each Holder's option and
pursuant to the terms of the 2002 Exchange Agreement, modify or exchange the
existing Series A1 Warrants and Series B1 Warrants so that the Exercise Price
(as defined in the Series A1 Warrants and Series B1 Warrants) shall be reduced
to equal to the average closing bid price of the Company's common stock for the
three (3) trading days immediately preceding the sale of the Company's Senior
Preferred Stock pursuant to the terms of the Series C Purchase Agreement (the
"New Exercise Price"). Such adjustment shall become effective upon the closing
of the Series C Purchase Agreement. The Company acknowledges and agrees that
until the Series A2 Warrants and Series B2 Warrants are issued pursuant to the
terms of the 2002 Exchange Agreement, the Series A1 Warrants and the Series B1
Warrants shall be exercisable at the New Exercise Price.
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4. Increase of Authorized Shares. The parties acknowledge and agree
that the Company will be required to obtain the approval of its shareholders to
increase the amount of authorized Common Stock available for issuance upon
exercise of any warrants issuable pursuant to Article V of the Series A2 and B2
Certificates of Designation. The Company shall use its best efforts to obtain
shareholder approval as soon as practicable following the date hereof, but in
any event not later than 120 days after the date hereof. The Holders shall vote
all of their shares then entitled to vote thereat in favor of any such proposal.
In the event the Company has failed to obtain such shareholder approval within
120 days following the date hereof, the Holders shall be entitled receive, as
liquidated damages for a loss of a bargain and not as a penalty, a cash payment,
payable quarterly, in an amount equal to 10% of the aggregate Liquidation Value
of the outstanding shares of Series A2 Preferred Stock and Series B2 Preferred
Stock (as determined pursuant to the Series A2 and B2 Certificates of
Designation), which amount shall be paid by the Company on the last business day
of each fiscal quarter (pro rated for partial quarters) until such time as such
shareholder approval is obtained.
5. Stock Legend. Each Holder agrees to the imprinting of the
following legend on the Series A1 Preferred Stock and the Series B1 Preferred
Stock.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THAT CERTAIN
AGREEMENT AMONG THE COMPANY AND HOLDERS OF THE COMPANY'S
SERIES A1 CONVERTIBLE REDEEMALE PREFERRED STOCK AND SERIES B1
CONVERTIBLE REDEEMABLE PREFERRED STOCK DATED AS OF AUGUST __,
2002, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
6. Representation. Each Holder represents and warrants that (a) it has
the full power and authority to deliver this Agreement, and (b) it has not
assigned to any third party any of its rights to such stock or its rights under
the Series A Purchase Agreement, the Series B Purchase Agreement, the 2001
Exchange Agreement and the Series A1 and B1 Certificates of Designation with
respect to such stock.
7. Entire Agreement and Effect. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter of this
Agreement and shall supersede any prior agreements, representations, warranties,
or communications, whether oral or written, among the parties hereto with
respect to the matters contained in this Agreement.
8. Governing Law. Regardless of the place of contracting, the place of
performance, the principal residence of the parties or otherwise, it is the
intent of the parties that all questions with respect to the construction of
this Agreement and all amendments, modifications, authorizations or supplements
to this Agreement and the rights, duties, obligations and liabilities of the
parties under said documents shall be determined in accordance with the
applicable provisions of the laws of the State of New York, without reference to
its doctrines or principles of conflicts of laws. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of this Agreement), and hereby irrevocably waives, and agrees
not to assert in any proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such proceeding is improper.
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9. Waiver. No covenant, agreement, term or condition of this Agreement
to be performed or complied with by the parties, nor any breach thereof, shall
be waived, altered or modified except by a written instrument executed by the
parties. No waiver of any breach shall affect or alter this Agreement, but each
and every covenant, agreement, term and condition of this Agreement shall
continue in full force and effect with respect to any other existing or
subsequent breach thereof.
10. Specific Performance. The parties agree that any failure to perform
the obligations under this Agreement may result in irreparable damage to the
other party and that in addition, and not in lieu of any other legal or
equitable remedies available, specific performance of these obligations may be
enforced by a suit in equity.
11. Further Documents. The parties agree that they and each of them
shall take whatever action or actions as are deemed by legal counsel to the
Company to be reasonably necessary or desirable from time to time to effectuate
the provisions or intent of this Agreement, and to that end the parties agree
that they shall execute, acknowledge, seal and deliver any further instruments
or documents that may be necessary to give force and effect to this Agreement or
any of its provisions, or to carry out the intent of this Agreement or any of
its provisions.
12. Counterparts. This Agreement may be executed in counterparts
with the same effect as if all parties hereto had signed the same document. All
counterparts shall be construed as and shall constitute one and the same
document.
13. Reliance. The Holders acknowledge and agree that the Company and
the purchasers of its Senior Preferred Stock may, in connection with their
investment pursuant to the Proposed Transaction, rely upon the waivers and
consents given by the Holders in Section 1 of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized persons as of the date first
indicated above.
XXXXX 0 SYSTEMS, INC.
By:
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Xxxx X. Xxxxxxxxx,
Chief Financial and Operating Officer,
Corporate Secretary
XXXXX XXXXXXX PARTNERS I, LTD.
By:
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Name:
Title: Attorney-in-Fact
SENECA CAPITAL, L.P.
By: Seneca Capital Advisors, LLC, its
general partner
By:
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Name:
Title:
SENECA CAPITAL INTERNATIONAL, LTD.
By:
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Name:
Title:
ADVANCED SYSTEMS EUROPE B.V.
By:
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Name:
Title:
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