Exhibit 10.63
Strong River Investments, Inc. and Bay Harbor Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Augusta Street LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
June 24, 1999
Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxx Xxxx 00000
Attention: President
Re: Fidelity Holdings, Inc. (the "Company").
Gentlemen:
Reference is made to the Securities Purchase Agreement (the
"Purchase Agreement"), of even date hereof, between the Company and the
undersigned (the "Purchasers"), pursuant to which the Company will issue and
sell to the Purchasers (i) an aggregate of 285,714 shares of Common Stock (the
"Initial Shares"), (ii) Common Stock purchase warrants, each in the form of
Exhibit A to the Purchase Agreement, pursuant to which the holder thereof shall
have the right, under certain circumstances described therein, to acquire shares
of Common Stock upon the terms set forth therein (the "Initial Adjustable
Warrant") and (iii) Common Stock purchase warrants, each in the form of Exhibit
D to the Purchase Agreement, pursuant to which the holder thereof shall have the
right at any time and from time to time thereafter through the fifth anniversary
of the Closing Date to acquire an aggregate of 285,714 shares of Common Stock at
an exercise price per share (subject to adjustment as provided therein) of
$23.00 (the "Initial Closing Warrants" and together
with the Initial Adjustable Warrants, the "Initial Warrants"), for an aggregate
purchase price of $6,000,000. Capitalized terms used and not otherwise defined
in this letter that are defined in the Purchase Agreement shall have the
meanings set forth in the Purchase Agreement. The Initial Warrants and the
Initial Shares are sometimes collectively referred to herein as the "Initial
Securities."
The Purchasers shall, severally and not jointly, commit, subject to
and upon the terms and conditions hereof, to purchase from the Company, and the
Company shall sell to the Purchasers (A) on the First Additional Closing Date
(as defined herein) (i) [ ](1) shares of Common Stock (the "First Additional
Shares"), (ii) additional Initial Adjustable Warrants (the "First Additional
Adjustable Warrants") and (iii) additional Initial Closing Warrants pursuant to
which the holders thereof shall have the right at any time and from time to time
thereafter through the fifth anniversary of the First Additional Closing (as
defined herein) to acquire an aggregate of [ ](1) shares of Common Stock (the
"First Additional Closing Warrants"), for an aggregate purchase price of
$7,000,000 and (B) on the Second Additional Closing Date (as defined herein) (i)
[ ](2) shares of Common Stock (the "Second Additional Shares"), (ii) additional
Initial Adjustable Warrants (the "Second Additional Adjustable Warrants" and
together with the First Additional Adjustable Warrants, the "Additional
Adjustable Warrants") and (iii) additional Initial Closing Warrants pursuant to
which the holders thereof shall have the right at any time and from time to time
thereafter through the fifth anniversary of the Second Additional Closing (as
defined herein) to acquire an aggregate of [ ](2) shares of Common Stock (the
"Second Additional Closing Warrants" and together with the First Additional
Closing Warrants, the "Additional Closing Warrants"), for an aggregate purchase
price of $7,000,000.
The commitment of the Purchasers set forth in this letter is subject
to the terms, conditions and qualifications set forth below:
1. Form of Additional Adjustable Warrants. The Additional Adjustable
Warrants shall be identical to the Initial Adjustable Warrants except that (A)
for purposes of the First Additional Adjustable Warrants, (i) the Purchase Price
(as defined in the Initial Adjustable Warrants) shall equal 105% of the average
of the Per Share Market Values for the five (5) Trading Days immediately
preceding the First Additional Closing Date (the "First Additional Price"), (ii)
the Floor Price (as defined in the Initial Adjustable Warrants) shall equal 60%
of the First Additional Price, and (iii) the Threshold Price (as defined in the
Initial Adjustable Warrants) shall equal 150% of the
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(1) The number which equals $7,000,000 divided by 105% of the average of the
closing bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the First Additional Closing Date.
(2) The number which equals $7,000,000 divided by 105% of the average of the
closing bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the Second Additional Closing Date.
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First Additional Price and (B) for purposes of the Second Additional Adjustable
Warrants, (i) the Purchase Price shall equal 105% of the average of the Per
Share Market Values for the five (5) Trading Days immediately preceding the
Second Additional Closing Date (the "Second Additional Price"), (ii) the Floor
Price shall equal 60% of the Second Additional Price and (iii) the Threshold
Price shall equal 150% of the Second Additional Price.
2. Form of Additional Closing Warrants. The Additional Closing
Warrants shall be identical to the Initial Closing Warrants except that the
Exercise Price (as defined in the Initial Closing Warrants) applicable to (i)
the First Additional Closing Warrants shall be equal to 115% of the average of
the closing bid prices of the Common Stock for the five (5) Trading Days
immediately preceding the First Additional Closing Date and (ii) the Second
Additional Closing Warrants shall be equal to 115% of the average of the closing
bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the Second Additional Closing Date.
3. First Additional Documentation. In order to effectuate a purchase
and sale of the First Additional Shares, the First Additional Adjustable
Warrants and the First Additional Closing Warrants (collectively, the "First
Additional Securities"), prior to their issuance, the Company and the Purchasers
shall enter into the following agreements: (a) a securities purchase agreement
identical to the Purchase Agreement, mutatis mutandis (the "First Additional
Purchase Agreement") and (b) a registration rights agreement identical to the
Registration Rights Agreement, mutatis mutandis (the "First Additional
Registration Rights Agreement", and together with the First Additional Purchase
Agreement, the First Additional Adjustable Warrants and the First Additional
Closing Warrants, collectively the "First Additional Transaction Documents").
The Purchasers shall prepare the First Additional Transaction Documents.
4. Second Additional Documentation. In order to effectuate a
purchase and sale of the Second Additional Shares, the Second Additional
Adjustable Warrants and the Second Additional Closing Warrants (collectively,
the "Second Additional Securities"), prior to their issuance, the Company and
the Purchasers shall enter into the following agreements: (a) a securities
purchase agreement identical to the Purchase Agreement, mutatis mutandis (the
"Second Additional Purchase Agreement") and (b) a registration rights agreement
identical to the Registration Rights Agreement, mutatis mutandis (the "Second
Additional Registration Rights Agreement", and together with the Second
Additional Purchase Agreement, the Second Additional Adjustable Warrants and the
Second Additional Closing Warrants, collectively the "Second Additional
Transaction Documents"). The Purchasers shall prepare the Second Additional
Transaction Documents.
5. The First Additional Closing. (i) The Purchasers and the Company
shall each have the right to deliver a written notice to the other (the "First
Additional Financing Notice") requiring such other party to either sell or buy
(severally and not jointly), as the case may be, the First Additional Securities
for an aggregate purchase price of $7,000,000 (the "First Additional Purchase
Price"). The First Additional Financing Notice may be delivered no earlier than
sixty (60) Trading Days following the Expiration Date (as defined in the Initial
Adjustable Warrant) and no later than one hundred (100) Trading Days following
the Expiration Date, provided, that such 60th Trading Day
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following the Expiration Date (but not the 100th Trading Day following the
Expiration Date) shall be extended for the number of days during which the
prospectus included in the Underlying Shares Registration Statement may not be
used by the Purchasers for the resale of Registrable Securities (as defined in
the Registration Rights Agreement), or as otherwise agreed to by the parties
hereto. At the First Additional Closing (as defined herein) each Purchaser shall
(subject to the terms and conditions herein) purchase such portion of the First
Additional Securities as equals such Purchaser's pro-rata portion of the Initial
Securities issued and sold at the Closing. The closing of the purchase and sale
of the First Additional Securities (the "First Additional Closing") shall take
place at the offices of Xxxxxxxx Xxxxxxxxx,1290 Avenue of the Americas, Xxx
Xxxx, Xxx Xxxx 00000, on the fifth (5th) Business Day after the First Additional
Financing Notice is received by the Purchasers or the Company, as the case may
be, or on such other date as otherwise agreed to by the parties hereto;
provided, however, that in no case shall the First Additional Closing take place
unless and until all of the conditions listed in Section 7 of this letter shall
have been satisfied by the Company or waived by the Purchasers. The date of the
First Additional Closing is hereinafter referred to as the "First Additional
Closing Date." Notwithstanding anything to the contrary contained in this
letter, each Purchaser may, prior to the First Additional Closing Date,
designate an Affiliate thereof to acquire all or any portion of the First
Additional Securities.
(ii) At the First Additional Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to (x) each Purchaser or its designated Affiliate, (1) the number of
First Additional Shares equal to such Purchaser's pro rata portion of the
Initial Shares issued and sold at the Closing, registered in the name of such
Purchaser or its designated Affiliate, representing the shares of Common Stock
to be issued and sold to such Purchaser at the First Additional Closing; (2) a
First Additional Adjustable Warrant registered in the name of such Purchaser or
its designated Affiliate, (3) a First Additional Closing Warrant registered in
the name of such Purchaser or its designated Affiliate, entitling the holder
thereof to purchase such number of shares of Common Stock as equals such
Purchaser's pro-rata portion of the shares of Common Stock underlying the
Initial Closing Warrants issued and sold at the Closing, (4) a legal opinion in
form and substance acceptable to the Purchasers, and (5) executed First
Additional Transaction Documents and the Transfer Agent Instructions relating to
the First Additional Securities, and (y) Xxxxxxxx Xxxxxxxxx, the legal fees and
expenses incurred by the Purchasers to prepare the First Additional Transaction
Documents, which amount shall not exceed $20,000 (and Xxxxxxxx Xxxxxxxxx shall
only be required to deliver its customary form of invoice), shall be deducted by
the Purchasers from the amount due to the Company for the First Additional
Securities and shall be paid directly to Xxxxxxxx Xxxxxxxxx and (b) each
Purchaser shall deliver to the Company (1) its pro rata portion of the First
Additional Purchase Price, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose prior to the First Additional Closing Date and (2) the executed
First Additional Transaction Documents.
6. The Second Additional Closing. (i) The Purchasers and the Company
shall each have the right to deliver a written notice to the other (the "Second
Additional Financing Notice") requiring such other party to either sell or buy
(severally and not jointly), as the case may be, the
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Second Additional Securities for an aggregate purchase price of $7,000,000 (the
"Second Additional Purchase Price"). The Second Additional Financing Notice may
be delivered no earlier than twenty (20) Trading Days following the satisfaction
by the Company or the waiver by the Purchasers of the conditions listed in
Section 8 of this letter. At the Second Additional Closing (as defined herein)
each Purchaser shall (subject to the terms and conditions herein) purchase such
portion of the Second Additional Securities as equals such Purchaser's pro-rata
portion of the Initial Securities issued and sold at the Closing. The closing of
the purchase and sale of the Second Additional Securities (the "Second
Additional Closing") shall take place at the offices of Xxxxxxxx Xxxxxxxxx,1290
Avenue of the Americas, Xxx Xxxx, Xxx Xxxx 00000, on the fifth (5th) Business
Day after the Second Additional Financing Notice is received by the Purchasers
or the Company, as the case may be, or on such other date as otherwise agreed to
by the parties hereto. The date of the Second Additional Closing is hereinafter
referred to as the "Second Additional Closing Date." Notwithstanding anything to
the contrary contained in this letter, each Purchaser may, prior to the Second
Additional Closing Date, designate an Affiliate thereof to acquire all or any
portion of the Second Additional Securities.
(ii) At the Second Additional Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to (x) each Purchaser or its designated Affiliate, (1) the number of
Second Additional Shares equal to such Purchaser's pro rata portion of the
Initial Shares issued and sold at the Closing, registered in the name of such
Purchaser or its designated Affiliate, representing the shares of Common Stock
to be issued and sold to such Purchaser at the Second Additional Closing; (2) a
Second Additional Adjustable Warrant registered in the name of such Purchaser or
its designated Affiliate, (3) a Second Additional Closing Warrant registered in
the name of such Purchaser or its designated Affiliate, entitling the holder
thereof to purchase such number of shares of Common Stock as equals such
Purchaser's pro-rata portion of the shares of Common Stock underlying the
Initial Closing Warrants issued and sold at the Closing, (4) a legal opinion in
form and substance acceptable to the Purchasers, and (5) executed Second
Additional Transaction Documents and the Transfer Agent Instructions relating to
the Second Additional Securities, and (y) Xxxxxxxx Xxxxxxxxx, the legal fees and
expenses incurred by the Purchasers to prepare the Second Additional Transaction
Documents, which amount shall not exceed $20,000 (and Xxxxxxxx Xxxxxxxxx shall
only be required to deliver its customary form of invoice), shall be deducted by
the Purchasers from the amount due to the Company for the Second Additional
Securities and shall be paid directly to Xxxxxxxx Xxxxxxxxx and (b) each
Purchaser shall deliver to the Company (1) its pro rata portion of the Second
Additional Purchase Price, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose prior to the Second Additional Closing Date and (2) the executed
Second Additional Transaction Documents.
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7. Conditions precedent to the First Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to purchase acquire the First Additional Securities is
subject to the satisfaction or waiver by the Purchasers of each of the following
conditions:
(a) Closing of Initial Shares and Initial Warrants. The Closing
shall have occurred;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the First
Additional Closing Date as though made on and as of the First Additional Closing
Date (other than representations and warranties which relate to a specific date
(which shall not include representations and warranties relating to the "date
hereof") which representations and warranties shall be true as of such specific
date), as evidenced by an Officer's certificate attesting to such effect to be
delivered by the Company to the Purchasers at the First Additional Closing;
(c) Performance by the Company. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company between the Closing Date and the First Additional Closing Date and no
Event (as defined in the Registration Rights Agreement ) shall have occurred
which has not been cured to the satisfaction of the Purchasers;
(d) Underlying Shares Registration Statement. The Underlying Shares
Registration Statement shall have been declared effective under the Securities
Act by the Commission and shall have remained effective at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the First Additional Closing Date;
(e) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the First Additional Transaction Documents or makes
impracticable the transactions contemplated thereby;
(f) Adverse Changes. Since the Closing Date, no event or series of
events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the NASDAQ at
any time since the Closing Date;
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(h) Listing of Common Stock. The Common Stock shall have been at all
times since the Closing Date listed for trading on the NASDAQ;
(i) Shares of Common Stock. The Company shall have duly reserved the
number of shares of Common Stock as required by the First Additional Transaction
Documents to be reserved for issuance upon exercise of the First Additional
Adjustable Warrants and the First Additional Closing Warrants;
(j) Performance of Exercise Obligations. The Company shall have
timely complied with its exercise and delivery requirements under the Initial
Warrants;
(k) Closing Threshold. For the ten (10) Trading Days immediately
preceding the date of the First Additional Financing Notice, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least 15,000 shares
and the average of the Per Share Market Value for such ten (10) Trading Day
period shall be greater than $15.00 (subject to stock splits and similar
adjustments);
(l) Shareholder Approval. No approval of the shareholders of the
Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is the traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock issuable upon exercise of the First Additional Adjustable Warrants
(assuming such exercise occurred on the First Additional Closing Date); and
(m) Deliveries pursuant to First Additional Transaction Documents.
At the First Additional Closing, the Company shall deliver the First Additional
Securities and executed First Additional Transaction Documents and Transfer
Agent Instructions relating to the First Additional Securities in the forms
contemplated by this letter.
8. Conditions precedent to the Second Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to purchase acquire the Second Additional Securities
is subject to the satisfaction or waiver by the Purchasers of each of the
following conditions:
(a) Company Milestones. The Company shall have attained milestones
to be determined at the sole option of the Purchasers;
(b) Closing of the First Additional Securities. The First Additional
Closing shall have occurred;
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the
Second Additional Closing Date as though made on and as of the Second Additional
Closing Date (other than representations and warranties which
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relate to a specific date (which shall not include representations and
warranties relating to the "date hereof") which representations and warranties
shall be true as of such specific date), as evidenced by an Officer's
certificate attesting to such effect to be delivered by the Company to the
Purchasers at the Second Additional Closing;
(d) Performance by the Company. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents and the First Additional Transaction Documents to be
performed, satisfied or complied with by the Company between the Closing Date
and the Second Additional Closing Date and no Event shall have occurred which
has not been cured to the satisfaction of the Purchasers;
(e) Second Underlying Shares Registration Statement. The
registration statement filed pursuant to the First Additional Registration
Rights Agreement shall have been declared effective under the Securities Act by
the Commission and shall have remained effective at all times, not subject to
any actual or threatened stop order or subject to any actual or threatened
suspension at any time prior to the Second Additional Closing Date;
(f) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Second Additional Transaction Documents or
makes impracticable the transactions contemplated thereby;
(g) Adverse Changes. Since the Closing Date, no event or series of
events which, in the sole opinion of the Purchasers, could have or result in a
Material Adverse Effect shall have occurred;
(h) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the NASDAQ at
any time since the Closing Date;
(i) Listing of Common Stock. The Common Stock shall have been at all
times since the Closing Date listed for trading on the NASDAQ;
(j) Shares of Common Stock. The Company shall have duly reserved the
number of shares of Common Stock as required by the Second Additional
Transaction Documents to be reserved for issuance upon exercise of the Second
Additional Adjustable Warrants and the Second Additional Closing Warrants;
(k) Performance of Exercise Obligations. The Company shall have
timely complied with its exercise and delivery requirements under the First
Additional Adjustable Warrants and the First Additional Closing Warrants;
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(l) Closing Threshold. For the ten (10) Trading Days immediately
preceding the date of the Second Additional Financing Notice, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least 15,000 shares
and the average of the Per Share Market Value for such ten (10) Trading Day
period shall be greater than $15.00 (subject to stock splits and similar
adjustments);
(m) Shareholder Approval. No approval of the shareholders of the
Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is the traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock issuable upon exercise of the Second Additional Adjustable Warrants
(assuming such exercise occurred on the Second Additional Closing Date); and
(n) Deliveries pursuant to Second Additional Transaction Documents.
At the Second Additional Closing, the Company shall deliver the Second
Additional Securities and executed Second Additional Transaction Documents and
Transfer Agent Instructions relating to the Second Additional Securities in the
forms contemplated by this letter.
9. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including,
without limitation, the rights arising out of this letter or out of the either
the First Additional Transaction Documents or the Second Additional Transaction
Documents, if any, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
10. Governing Law. This letter shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.
11. Execution. This letter may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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Please indicate your agreement with the foregoing by executing a
countersigned copy of this letter and returning the same to our attention,
whereupon effective immediately thereafter this letter shall become a legally
valid and binding agreement between the Purchasers and the Company.
We look forward to our continuing relationship.
Sincerely,
Strong River Investments, Inc.
By: /s/ Xxx Xxxxxxxxx
--------------------------------------
Name: Xxx Xxxxxxxxx
Title: Attorney-in-Fact
Bay Harbor Investments, Inc.
By: /s/ Xxx Xxxxxxxxx
--------------------------------------
Name: Xxx Xxxxxxxxx
Title: Attorney-in-Fact
Augusta Street LLC
By: Citco Trustees (Cayman) Limited
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Attorney-in-Fact
Agreed and accepted
June 24, 1999
Fidelity Holdings, Inc.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Title: President
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