Exhibit 10.10
FIRST AMENDMENT TO AGREEMENT OF UNDERSTANDING
THIS FIRST AMENDMENT TO AGREEMENT OF UNDERSTANDING (this "First
Amendment") is made as of the 30th day of September 1999, by and between Ash
Capital, LLC, a Utah limited liability company ("Ash Capital"), C&W/RSI
Partners, LLC, a Utah limited liability company ("C&W"), SKM Investments, LLC a
Utah limited liability company ("SKM"), Thunder Mountain Properties, LC, a Utah
limited liability company ("Thunder Mountain"), and RoomSystems, Inc., a Nevada
corporation (the "Corporation").
R E C I T A L S :
WHEREAS, Ash Capital and the Corporation are parties to that certain
Agreement of Understanding dated August 17, 1999 ("Agreement of Understanding")
(capitalized terms used herein but not defined shall have the meanings ascribed
to them in the Agreement of Understanding); and
WHEREAS, under the terms of the Agreement of Understanding, Ash Capital
agreed to purchase with a small group of investors (the "Investment Syndicate")
up to one million (1,000,000) Preferred Shares, such shares held to be referred
to herein as the "Preferred Shares"; and
WHEREAS, C&W has for all purposes replaced both Cherokee & Xxxxxx, LLC and
Birchbrook, LLC in the Agreement of Understanding and in all other agreements
among the parties; and
WHEREAS, C&W, SKM, and Thunder Mountain are now members of the Investment
Syndicate; and
WHEREAS, members of the Investment Syndicate have each entered into
individual subscription agreements, registration rights agreements and other
agreements setting forth the terms of each member's respective investment in the
Corporation; and
WHEREAS, C&W, SKM, and Thunder Mountain are intended third party
beneficiaries to the Agreement of Understanding and wish to become joinders to
the Agreement of Understanding by executing this First Amendment and the
Corporation has consented and agreed thereto; and
WHEREAS, the parties have negotiated additional terms to their respective
investments in the Corporation; and
WHEREAS, the parties intend to set forth herein such additional terms and
conditions relating to their respective investments in the Corporation.
NOW, THEREFORE, in consideration of the monetary consideration recited in
the Agreement of Understanding and this First Amendment, the recitals set forth
above which are
incorporated herein by this reference, the mutual promises herein contained and
subject to the fulfillment of the conditions herein set forth, the parties agree
as follows:
1. Joinder by and Substitution of Parties. C&W, SKM, and Thunder Mountain,
all of whom are third party beneficiaries to the Agreement of Understanding,
hereby join as parties to the Agreement of Understanding, and each assumes and
agrees to the terms and conditions set forth in the Agreement of Understanding.
The Corporation hereby consents to and agrees with such joinder and with the
substitution of C&W in the place of both Cherokee & Xxxxxx, LLC and Birchbrook,
LLC in the Agreement of Understanding, Registration Rights Agreement, and
Subscription Agreement. The irrevocable stock power executed by Cherokee Xxxxxx,
LLC in favor of Birchbrook, LLC shall be returned to C&W and voided. In
addition, the parties may, but shall not be required to, choose to execute
replacement agreements for the Registration Rights Agreement and Subscription
Agreement between C&W and the Corporation and return to and cancel the
previously executed agreements.
2. C&W Participation in Meetings of the Board of Directors. At all times
C&W continues to hold Preferred Shares, C&W will be entitled to designate a
representative to attend and participate in meeting of the Corporation's board
of directors, although such representative will not be entitled to vote at any
such meeting and will not be considered to be a member of the board of
directors. Any notice of meetings (together with any materials, reports or other
information distributed to directors in connection with any such meetings) will
be sent to C&W in the same manner as prescribed by applicable corporate law to
be sent to directors of the Corporation. In the event the board of directors of
the Corporation takes action by written consent without a meeting, the
Corporation will promptly provide notice of such action to C&W.
3. Delivery of Financial Statements. At all times when Preferred Shares
are outstanding and held by any member of the Investment Syndicate, the
Corporation shall deliver to each such member of the Investment Syndicate:
A. Monthly Financial Statements. Within forty-five days after the
end of each fiscal month, including the final month for each full fiscal
year, consolidating balance sheets of the Corporation as of the last day
of such period, and consolidating statements of income for each such
month, together with comparative figures for the corresponding period in
the preceding fiscal year (beginning with the year 2000), each such
statement to be prepared by the Corporation and certified by the president
or chief financial officer of the Corporation as being true, correct, and
accurate in all respects to the best of such person's knowledge and
belief, and as having been prepared in accordance with generally accepted
accounting principles on a basis consistent with the most recent prior
audited year end consolidated financial statements of the Corporation. On
a quarterly basis, such financials as described above will be prepared and
provided to each member of the Investment Syndicate both on a consolidated
and consolidating basis.
B. Year-end Financial Statements. Within ninety days after the end
of each fiscal year, a balance sheet of the Corporation as of the last
date of each such fiscal year, and statements of income; stockholders'
equity; and cash flows for each such fiscal year, together with
comparative figures for the preceding fiscal year (beginning with the year
2000), each prepared on a consolidated and consolidating basis, in
accordance with
generally accepted accounting principles and accompanied by an unqualified
audit report issued by a certified public accountant or firm of
independent certified public accountants acceptable to the Investment
Syndicate.
C. Additional Information. Such additional reports or information
concerning the Corporation as a member of the Investment Syndicate may
reasonably request, shall be prepared on a basis consistent with those
statements specified in A and B above.
4. Price Protection.
A. Issuance of Additional Preferred Shares. In the event the
Corporation sells shares of its common stock or common stock equivalents
(i.e., securities convertible into common stock) at an effective price per
common share of less than $3.00 per share (such lesser per share amount
referred to as the "Adjusted Per Share Amount"), the Corporation shall
issue to each member of the Investment Syndicate such additional shares of
Series B Preferred Stock equal to the aggregate dollar amount of the
investment of such party divided by the Adjusted Per Share Amount less the
number of Preferred Shares already issued to such party.
B. Adjustment for Recapitalizations. In the event of the outstanding
shares of common stock of the Corporation are changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, conversion, recapitalization, split (but
not a reverse split), or exchange of shares prior to the termination of
this covenant, the Corporation's obligation to issue additional Preferred
Shares pursuant to this subparagraph shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, conversion,
recapitalization, split, combination or exchange of shares.
C. Termination of Covenant. This covenant shall terminate on the
closing of the Corporation's underwritten initial public offering of its
common stock and shall not apply to any such registered offering.
5. Future Financings. Until the Corporation has completed its initial
public offering of its common stock, the members of the Investment Syndicate
shall have a preferential right, on the terms and subject to the conditions set
forth in this paragraph, to purchase for their account any securities of the
Corporation that the Corporation proposes to sell for cash in any public
offering or private placement; provided, however, that such right shall not
apply to the current offering by the Corporation of up to 2,000,000 shares of
Series B Convertible Preferred Stock at $3.00 per share. The Corporation will
consult with the Investment Syndicate regarding any such offering or placement
and will offer the members of the Investment Syndicate the opportunity, on terms
not more favorable to the Corporation than it can secure elsewhere, to purchase
any such securities. If any member of the Investment Syndicate fails to accept
in writing such proposal made by the Corporation within 30 days after receipt of
a notice containing such proposal, then such member of the Investment Syndicate
shall have no further claim or right with respect to the proposal contained in
such notice. If, thereafter, such proposal is modified in any material respect,
the Corporation shall again consult with all members of the
Investment Syndicate in connection with such modification and shall in all
respects have the same obligations and adopt the same procedures with respect to
such proposal as are provided hereinabove respecting the original proposal. The
rights and obligations of the Investments Syndicate in this paragraph
specifically do not apply to the offer and sale of securities to employees,
officers, or directors or to the exercise of options. The rights of the members
of the Investment Syndicate to purchase such securities shall entitle each
member to purchase its pro rata part (determined by dividing the number of
Preferred Shares held by the member by the number of Preferred Shares held by
all of the Investment Syndicate) of the securities being offered, provided,
however, that if a member of the Investment Syndicate does not purchase all of
its pro rata part, then the other members of the Investment Syndicate may
purchase such securities.
6. Costs. Paragraph 11F of the Agreement of Understanding shall be amended
by replacing Ash Capital and Ash with Investment Syndicate, such that the costs
and expenses, including attorneys' fees, of each member of the Investment
Syndicate shall by paid by the Corporation.
7. Continuation of Effectiveness. Except as amended by the First
Amendment, all other provisions of the
Agreement of Understanding are in full force and effect.
ROOMSYSTEMS, INC.
By: /s/
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Its: CEO
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000 Xxxxx 0000 Xxxx
Xx. Xxxxxx, Xxxx 00000
ASH CAPITAL, LLC
By Providence Management, LLC, Manager
By: /s/
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Its: MANAGER
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0000 X. Xxxxxxxx Xxxxx Xxxxx X00
Xxxx Xxxx Xxxx, Xxxx 00000
C&W/RSI PARTNERS, LLC
By: /s/
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Its: MANAGER
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0000 X. Xxxxxxxxx Xx. Xx. 000
Xxxx Xxxx Xxxx, Xxxx 00000
SKM INVESTMENTS, LLC
By: /s/
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Its: MANAGER
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0000 X. Xxxxxxxx Xxxxx Xxxxx X00
Xxxx Xxxx Xxxx, Xxxx 00000
THUNDER MOUNTAIN PROPERTIES, LLC
By: /s/
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Its: MANAGING MEMBER
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000 X. 000 X.
Xxxx, Xxxx 00000
