EXHIBIT 10(a)
DEEPHAVEN PRIVATE PLACEMENT LTD.
C/O DEEPHAVEN CAPITAL MANAGEMENT LLC
000 XXXXXXXX XXXX
XXXXXXXXXX, XX 00000
HARP INVESTORS LLC
C/O WEC ASSET MANAGEMENT LLC
000 XXXXXXXXX XXXX XXXX
XXXXXX-XX-XXXXXX, XX 00000
November 6, 2000
FORTEL, Inc.
00000 Xxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
RE: FORTEL, INC (THE "COMPANY")
Ladies and Gentlemen,
Reference is made to: (i) the Securities Purchase Agreement,
dated as of July 18, 2000 (the "PURCHASE AGREEMENT") among the Company,
Deephaven Private Placement Ltd. and Harp Investors LLC (collectively, the
"INVESTORS"), (ii) the Registration Rights Agreement among the Company and the
Investors, dated July 18, 2000 (the "REGISTRATION RIGHTS AGREEMENT") and (iii)
the common stock purchase warrants, dated July 18, 2000, issued to the Investors
pursuant to the Purchase Agreement (the "WARRANTS").
The Company and the Investors agree as follows:
1. Section 3.14 of the Purchase Agreement shall be amended
and restated in its entirety as follows:
"LIQUIDATED DAMAGES. If at any time while the Securities are
outstanding: (i) the Common Stock shall fail to be listed for trading on the
NASDAQ or on a Subsequent Market or shall be suspended from trading on the
NASDAQ or on a Subsequent Market, in either case, for more than three Trading
Days (which need not be consecutive Trading Days), then, upon delivery of a
written
notice by a Purchaser, on such third Trading Day and each weekly anniversary of
such third Trading Day thereafter until the Common Stock shall be listed for
trading on the NASDAQ and not suspended from trading on the NASDAQ, or (ii) if
the Company shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach of the Transaction
Documents, and such failure or breach shall not have been remedied within five
Business Days after the date on which written notice of such failure or breach
shall have been given, then on such fifth Business Day and each weekly
anniversary of such fifth Business Day thereafter until such failure or breach
has been cured, the Company shall, in connection with the delivery of a written
notice pursuant to subsections (i) and (ii) hereof, pay an amount in cash to
each Purchaser, as liquidated damages and not as penalty, equal to the product
of (A) $400,000 and (B) the quotient obtained by dividing: (x) the number of
Shares issued and sold to such Purchaser on the Closing Date by (y) the number
of Shares issued and sold by the Company on the Closing Date, PROVIDED, that:
(A) the Company shall not be obligated to pay to a Purchaser for any single such
event in excess of 20% of the purchase price paid by such Purchaser for Shares
(as reflected on such Purchaser's signature page to this Agreement) and (B) the
aggregate amount of liquidated damages payable to each Purchaser pursuant to
this Section 3.14 shall not exceed 120% of the purchase price paid by such
Purchaser for Shares (as reflected on such Purchaser's signature page to this
Agreement) held by such Purchaser on the date a written notice is first
delivered pursuant to either subsection (i) or subsection (ii) hereof (the
amount contemplated by subsection (B) hereof, the "MAXIMUM LIQUIDATED DAMAGES").
If the Company fails to pay such liquidated damages in full pursuant to this
Section within seven days after the date first payable, the Company will pay
each Purchaser to whom such payment has not been made in full interest thereon
at a rate of 18% per annum or such lesser maximum amount that is permitted to be
paid by applicable law, accruing daily until such amount, plus all such interest
thereon, is paid in full."
2. The following section shall be added as a new Section 3.15 of
the Purchase Agreement:
"While any Securities are outstanding, the Company shall not consummate
or agree to consummate a "Rule 13e-3 transaction" (as defined in Rule 13e-3
under the Exchange Act)."
3. Section 3(c) of the Warrants shall be amended by adding the
following sentence at the end of such Section:
"On the date, if any, that the Company shall have, pursuant
to Section 3.14 of the Purchase Agreement, paid to the original Holder
either: (i) the Maximum Liquidated Damages or (ii) or liquidated damages
which, when added to a cash payment (which is not, other than pursuant to
this Section, contemplated by the Transaction Documents) made by the Company
to the original Holder, equals the Maximum Liquidated Damages, then all
Warrant Shares remaining unexercised hereunder shall expire and the Holder
shall have no further right to exercise this Warrant, provided that any Form
of Elections to Purchase delivered prior to such date shall be honored in
accordance with the terms hereof."
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4. Section 10(c) of the Warrants shall be amended and restated
in its entirety as follows:
"If the Company Stock is then listed for trading on the Nasdaq
or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not, upon
exercise of this Warrant, issue in excess of the product of (i) 5,341,126
Warrant Shares (which equals 19.999% of the number of shares of Common Stock
outstanding on the Closing Date) and (ii) the quotient obtained by dividing
(x) the number of shares of Common Stock issued and sold to the original
Holder on the Closing Date by (y) the number of shares of Common Stock issued
and sold by the Company on the Closing Date (such number of shares, the
"Issuable Maximum"). If any Holder shall no longer hold Warrants then such
Holder's remaining portion of the Issuable Maximum shall be allocated
pro-rata among the remaining Holders. If on any Date of Exercise (A) the
Company Stock is listed for trading on the Nasdaq or the Nasdaq SmallCap
Market, (B) the aggregate number of shares of Common Stock that would then be
issuable upon exercise in full of this Warrant, together with any shares of
Common Stock previously issued upon exercise of this Warrant, would equal or
exceeds the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders, if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market to approve the
issuance of shares of Common Stock in excess of the Issuable Maximum pursuant
to the terms hereof (the "Shareholder Approval"), then the Company shall
issue to the Holder a number of shares of Common Stock equal to the Issuable
Maximum and, with respect to the shares whose issuance would result in an
issuance of shares of Common Stock in excess of the Issuable Maximum, (the
"Excess Warrant Shares"), the Company shall, upon notice to the Holders,
either (1) use its best efforts to obtain the Shareholder Approval applicable
to such issuance as soon as possible, but in any event no later than 60 days
after such request (such 60th day, the "Target Date") or (2) cause its Common
Stock to be delisted from the Nasdaq and immediately thereafter quoted on the
OTC Bulletin Board. In the event the Company has elected to seek the
Shareholder Approval pursuant to clause (1) of the immediately preceding
sentence and the Company does not obtain the Shareholder Approval on or prior
to the Target Date, then, on the Target Date, the Company shall cause its
Common Stock to be delisted from the Nasdaq and immediately thereafter quoted
on the OTC Bulletin Board. The Company and the Holder understand and agree
that shares of Common Stock issued upon exercise of this Warrant and then
held by the Holder or an affiliate thereof may not cast votes or be deemed
outstanding for purposes of any vote to obtain the Shareholder Approval."
5. The following section shall be added as a new Section 3(f) of
the Warrants:
"(f) Notwithstanding the foregoing provisions of this Section
3, at any time during the period between the Closing Date and the Expiration
Date, within ten (10) Trading Days following the occurrence of any of the
following events, the Holder may acquire up to a number of Warrant Shares
calculated pursuant to Section 3(b) by delivering to the Company a Form of
Election to Purchase:
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(i) upon the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act of in
excess of 1/3 of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least 2/3 of the securities of the surviving entity or acquirer of
such assets or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii);
(ii) immediately prior to an assignment by the
Company for the benefit of creditors or commencement of a voluntary case under
Title 11 of the United States Code, or an entering into of an order for relief
in an involuntary case under Title 11 of the United States Code, or adoption by
the Company of a plan of liquidation or dissolution;
(iv) For any period of three (3) Trading
Days (which need not be consecutive Trading Days) commencing on or after the
date of issuance of this Warrant, there shall be no closing bid price on the
Common Stock on the Nasdaq or a Subsequent Market;
(v) The Common Stock fails to be listed or
quoted for trading on the Nasdaq or a Subsequent Market or for a period of three
(3) Trading Days (which need not be consecutive Trading Days);
(vi) After the Effective Date, a holder of
Registrable Securities (as defined in the Registration Rights Agreement) is not
permitted to sell Registrable Securities under the Underlying Shares
Registration Statement for any reason for five (5) or more days (whether or not
consecutive); or
(vii) The Company shall fail or default in the
timely performance of any material obligation under the Transaction Documents
and such failure or default shall continue uncured for a period of five (5)
Business Days after the date on which notice of such failure or default is
first given to the Company (it being understood that no prior notice need be
provided in the case of defaults which cannot reasonably be cured within a
5-day period)."
6. Section 2(c) of the Registration Rights Agreement shall be
amended by adding the following sentence at the end of such Section:
"Notwithstanding anything herein to the contrary, the Company
shall not be required to pay any liquidated damages pursuant to subsection (e)
of Section 2(c) if the Common Stock is
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delisted from the Nasdaq and immediately thereafter quoted for trading on the
OTC Bulletin Board pursuant to the terms of Section 10(c) of the Warrants."
7. Except as expressly amended hereby, all terms, conditions and
provisions of the Purchase Agreement, Registration Rights Agreement and Warrants
shall remain unchanged and in full force and effect and are ratified and
reaffirmed in all respects.
8. The execution and delivery of this letter agreement by each
of the Investors and the Company has been duly authorized by all necessary
action on the part of each of the Investors and the Company and no further
action is required by each of the Investors and the Company. Each of the
Investors and the Company has the requisite corporate power and authority to
enter into this letter agreement and otherwise to carry out its obligations
thereunder. When delivered and executed in accordance with the terms hereof,
this letter agreement will constitute the valid and binding obligation of
each of the Company and the Investors enforceable against each of the Company
and the Investors in accordance with its terms.
9. This letter agreement 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.
10. This letter agreement 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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Please indicate your agreement with the foregoing by executing a
countersigned copy of this letter agreement and returning the same to our
attention together with a check for $5,000 in the name of Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx & Xxxxxx LLP in payment of the Investor's legal fees, whereupon
effective immediately thereafter this letter agreement shall become a legally
valid and binding agreement between the Investors and the Company.
Sincerely,
DEEPHAVEN PRIVATE PLACEMENT LTD.
By: /s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: Director- Private Placement Trading
HARP INVESTORS LLC
By: /s/ Xxxxxx Xxxxx
Name:
Title:
Agreed and accepted:
FORTEL, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: CFO
