MSGI SECURITY SOLUTIONS, INC.
Exhibit
10.2
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
January
10, 2008
To
the
buyers (the "Buyers") listed on
the
Signature Pages to the SPA (as defined below)
Dear
Sirs:
Reference
is made to that certain Securities Purchase Agreement (the "SPA")
dated
as of the date hereof by and among each of the Buyers and MSGI Security
Solutions, Inc. (the "Company").
Capitalized terms used herein but not otherwise defined herein shall have the
respective meanings set forth in the SPA.
This
letter agreement (the "Agreement")
amends, restates and supersedes the Original Put Option Agreement (as defined
in
the SPA).
This
Agreement grants to each of the Buyers an irrevocable option (the "Put
Option")
to
sell up to the number of shares of Common Stock of the Company set forth
opposite such Buyer's name on column (5) to the Schedule of Buyers to the SPA
(or the same number of Preferred Shares or a combination of shares of Common
Stock and Preferred Shares) at a price equal to the Per Share Put Price (as
defined below) per share of Common Stock or Preferred Share (the aggregate
price
due to a Buyer on the exercise of the Put Option, the "Put
Price").
The
Put Option will be valid from the six month anniversary of the date hereof
until
the earlier of (i) the five year anniversary of the Closing Date and (ii) the
satisfaction of the Put Termination Event (as defined below) (the "Option
Period").
Each
Buyer may exercise the Put Option, at any time or from time to time from and
during the Option Period, by delivering to the Company written notice of
exercise, which notice shall specify the number of shares of Common Stock and/or
Preferred Shares to be purchased by the Company (the "Purchased
Securities").
The
closing of the sale and purchase of the Purchased Securities pursuant to an
exercise of the Put Option (the "Put
Closing"
and the
date of a Put Closing, the "Put
Closing Date")
will
occur no later than five (5) days following the delivery of such notice of
exercise unless mutually agreed otherwise by such exercising Buyer or its
assigns and the Company. Notwithstanding the foregoing, no Buyer may exercise
this Put Option to sell more than the Maximum Eligibility Number of shares
of
Common Stock and/or Preferred Shares at any time.
The
Put
Price shall be payable on the Put Closing Date, in shares of Common Stock (the
"Common
Shares")
so
long as there has been no Equity Conditions Failure; provided however that
the
Company may at its option following notice to the Buyer, either (i) pay the
Put
Price on such Put Closing Date in cash ("Cash
Payment")
or
(ii) a combination of Cash Payment and Common Shares; provided,
however,
that
the number of Common Shares to be paid by the Company may not exceed 100% of
the
average daily trading volume of the Common Stock for the ten (10) consecutive
trading days immediately prior to the Payment Election Date. The Company shall
deliver a written notice (each, a "Payment
Election Notice"
and the
date of such delivery the "Payment
Election Date")
to the
Buyer on or prior to the second (2nd) Business Days after the date of delivery
of a notice of exercise by a Buyer (the "Payment
Notice Due Date")
which
notice (1) either (A) confirms that the Put Price to be paid on such Put Closing
Date shall be paid entirely in Common Shares or (B) elects to pay the Put Price
as Cash Payment or a combination of Cash Payment and Common Shares and specifies
the amount of the Put Price that shall be paid as Cash Payment, and/or the
amount of the Put Price that shall be paid in Common Shares and (2) certifies
that there has been no Equity Conditions Failure. If any portion of the Put
Price for a particular Put Closing shall be paid in Common Shares, then the
Company shall pay to the Buyer a number of shares of Common Stock equal to
(x)
the amount of the Put Price payable on the applicable Put Closing Date in Common
Shares divided by (y) 75% of the Market Price. The Put Price to be paid on
a Put
Closing Date in Common Shares shall be paid in a number of fully paid and
nonassessable shares of Common Stock (rounded to the nearest whole share).
If
the Equity Conditions were satisfied as of the Put Notice Date but the Equity
Conditions are no longer satisfied at any time prior to the Put Closing Date,
the Company shall provide the Buyer a subsequent notice to that effect
indicating that unless the Buyer waives the Equity Conditions, the Put Price
shall be paid in cash.
On
or
prior to the date five (5) Trading Days after the applicable Put Closing Date,
each Buyer and its assigns exercising its Put Option hereunder will deliver
to
the Company the Purchased Securities and will take such action as may be
reasonably necessary in order to transfer to the Company good and marketable
title to such Purchased Securities, free and clear of all claims, liens and
encumbrances of any nature; provided,
that,
if the
Company has elected to pay the applicable Put Price in Common Shares and the
Buyer has exercised its Put Option with respect to shares of Common Stock,
then
the Buyer shall have no obligation to deliver such shares of Common Stock to
the
Company and the Company shall be obligated only to deliver to the Buyer the
difference between the number of Common Shares being paid by the Company and
the
number of shares of Common Stock being sold by the Buyer at such Put Closing.
If
the Buyer is required to deliver to the Company a stock certificate for more
than the number of shares of Common Stock and/or Preferred Shares being sold
to
the Company pursuant its exercise of the Put Option, the Company shall promptly
deliver to the Buyer a replacement stock certificate, as applicable, for the
difference between the number of shares of Common Stock or Preferred Shares,
as
applicable, represented by the stock certificate delivered to the Company and
the number of shares of Common Stock and/or Preferred Shares being sold to
the
Company pursuant the Buyer's exercise of the Put Option.
The
Company's obligations under this Agreement are secured by the Letters of Credit
(as defined in the SPA). Upon a Buyer exercising its Put Option, such Buyer
may
draw under its Letter of Credit, such portion of the Letter of Credit not to
exceed the Cash Payment amount of the Put Price due to the Buyer from the
Company on such Put Closing Date. In addition to the terms set forth in the
SPA,
a Buyer may draw under its Letter of Credit in the event of the bankruptcy
or
liquidation of the Company.
As
used
herein, "Equity
Conditions"
means
that
each of
the following conditions is satisfied: (i) on each day during the period
beginning six (6) month prior to the applicable date of determination and ending
on and including the applicable date of determination (the "Equity
Conditions Measuring Period"),
either
(x) a registration
statement filed by the Company under the 1933 Act
(the "Registration
Statement")
shall be effective and available for the resale of all of the Listed Securities
(as defined in the Securities Purchase Agreement) and there shall not have
been
any suspensions of the effectiveness of such registration statement or
(y)
all of the Listed Securities shall be eligible for sale without restriction
and
without the need for registration under any applicable federal or state
securities laws;
(ii) on
each day during the Equity Conditions Measuring Period, the Common
Stock
is
designated for quotation on the Principal Market (as defined in the Securities
Purchase Agreement) or any other Eligible Market (as defined in the Warrants)
and shall not have been suspended from trading on such exchange or market (other
than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by such exchange or market been threatened
or
pending either (A) in writing by such exchange or market or (B) by falling
below
the then effective minimum listing maintenance requirements of such exchange
or
market; (iii) during the one (1) year period ending on and including the date
immediately preceding the applicable date of determination, the Company shall
have delivered shares of Common Stock upon conversion of the Preferred Shares
and exercise of the Warrants to the holders on a timely basis as set forth
in
Section 6 of the Certificate of Designations and Section 1(a) of the Warrants,
respectively; (iv) any applicable shares of Common
Stock to
be
issued in connection with the event requiring determination may be issued in
full without violating Section 8 of the Certificate of Designations or Section
1(f)(i) of the Warrants or the rules or regulations of the Principal Market
or
any applicable Eligible Market; (v) during the Equity Conditions Measuring
Period, the Company shall not have failed to timely make any payments within
five (5) Business Days of when such payment is due pursuant to any Transaction
Document (as defined in the Securities Purchase Agreement); (vi) during the
Equity Conditions Measuring Period, there shall not have occurred the public
announcement of a pending, proposed or intended Fundamental Transaction (as
defined in the Warrants) which has not been abandoned, terminated or
consummated; (vii)
the Company shall have no knowledge of any fact that would cause (x) the
Registration Statement not to be effective and available for the resale of
all
remaining Listed Securities or (y) any shares of Common Stock issuable upon
conversion of the Preferred Shares not to be eligible for sale without
restriction pursuant to Rule 144 (and
not
subject to the public information requirements of Rule 144(c)(1)) and
any applicable state securities laws; and (ix) the
Company otherwise shall have been in compliance with and shall not have breached
any provision, covenant, representation or warranty of any Transaction
Document.
As
used
herein, "Equity
Conditions Failure"
means
that on any day during the period commencing ten (10) Trading Days prior to
the
date the applicable Payment Notice is delivered to the Buyer through the
applicable Put Closing Date, the Equity Conditions have not been satisfied
(or
waived in writing by the Buyer).
As
used
herein, "Market
Price"
means,
the arithmetic average of the Weighted Average Price (as defined in the
Warrants) of the Common Stock for the five (5) consecutive Trading Days (as
defined in the Warrants) prior to the applicable Put Closing Date.
As
used
herein, "Maximum
Eligibility Number"
means
initially one-sixth (1/6) of the number shares of Common Stock of the Company
set forth opposite such Buyer's name on column (5) to the Schedule of Buyers
to
the SPA (subject to adjustments for any stock dividend, stock split, stock
combination or other similar transaction) and shall be increased successively
on
each monthly anniversary of the commencement of the Option Period (each
successive month a "Monthly
Period")
by
one-sixth (1/6) of the number shares of Common Stock of the Company set forth
opposite such Buyer's name on column (5) to the Schedule of Buyers to the SPA
(subject to adjustments for any stock dividend, stock split, stock combination
or other similar transaction); provided,
that,
if the
Maximum Eligibility Number in any Monthly Period is less
than 35%
of the average monthly trading volume of the Common Stock in such Monthly
Period, as reported by Bloomberg, and the Company has elected to pay any portion
of a Put Price in such Monthly Period in Common Shares, then the Maximum
Eligibility Number shall equal 35% of the average monthly trading volume of
the
Common Stock for such Monthly Period, as reported by Bloomberg (for
the avoidance of doubt,
in no
event shall the Maximum Eligibility Number be less than the Maximum Eligibility
Number as determined without the application of this proviso).
As
used
herein, "Per
Share Put Price"
means,
(i) from the six month anniversary of the date hereof until the one year
anniversary of the date hereof, $1.20, (ii) from the one year anniversary of
the
date hereof until the two year anniversary of the date hereof, $1.40, (iii)
from
the two year anniversary of the date hereof until the three year anniversary
of
the date hereof, $1.60, (iv) from the three year anniversary of the date hereof
until the four year anniversary of the date hereof, $1.80 and (v) from the
four
year anniversary of the date hereof through the five year anniversary of the
date hereof, $2.00 (with all such amounts set forth in this definition subject
to adjustments for any stock dividend, stock split, stock combination or other
similar transaction).
As
used
herein, "Put
Termination Event"
shall
mean ten (10) trading days after the Company gives notice (the "Put
Termination Notice")
to
each Buyer that the following conditions have been satisfied: (i) the Weighted
Average Price of the Company's Common Stock is at or above (a) if the Put
Termination Event is from the six month anniversary of the date hereof until
the
one year anniversary of the date hereof, $2.00, (b) if the Put Termination
Event
is from the one year anniversary of the date hereof until the two year
anniversary of the date hereof, $2.33, (c) if the Put Termination Event is
from
the two year anniversary of the date hereof until the three year anniversary
of
the date hereof, $2.68, (d) if the Put Termination Event is from the three
year
anniversary of the date hereof until the four year anniversary of the date
hereof, $3.00 and (e) if the Put Termination Event is from the four year
anniversary of the date hereof through the five year anniversary of the date
hereof, $3.33 (with all such amounts set forth in clauses (a) through (e) above
subject to adjustments for any stock dividend, stock split, stock combination
or
other similar transaction), for twenty (20) consecutive trading days (the
"Put
Termination Measuring Period"),
(ii)
the dollar trading volume of the Common Stock during the Put Termination
Measuring Period is at or above $100,000, (iii) the Common Shares and the shares
of Common Stock underlying the Preferred Shares are registered or freely
tradeable without restriction or limitation pursuant to Rule 144 and not subject
to the public information requirements of Rule 144(c)(1) during the Put
Termination Measuring Period. The Company may not give notice of the Put
Termination Event later than ten (10) Trading Days after the conditions to
the
Put Termination Event have been satisfied and the Company may not deliver a
Put
Termination Notice prior to the six month anniversary of date hereof.
Notwithstanding the foregoing, nothing shall prohibit the Buyers from exercising
their Put Options from the date the Company gives notice of satisfaction of
the
conditions of the Put Termination Event until the end of the tenth (10th)
Trading Day thereafter.
The
Company shall not enter into or be party to a Fundamental Transaction (as
defined in the Warrants) unless (i) the Successor Entity (as defined in
the Warrants) assumes in writing all of the obligations of the Company under
this Agreement and the other Transaction Documents pursuant to written
agreements in form and substance satisfactory to the Required Holders (as
defined below) and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Put Options
in
exchange for such Put Options a put option agreement with the Successor Entity
evidenced by a written instrument substantially similar in form and substance
to
this Agreement, including, without limitation, an adjusted per share put price
equal to the value for the shares of Common Stock reflected by the terms of
such
Fundamental Transaction, and exercisable for a corresponding number of Put
Options equivalent to the number of Put Options exercisable pursuant to this
Agreement prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity
(as defined in the Warrants)) is a publicly traded corporation whose common
stock is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Agreement referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under
this
Agreement with the same effect as if such Successor Entity had been named as
the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Buyer confirmation that there shall be issued upon
exercise of this Put Option at
any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or
other
securities, cash, assets or other property) issuable
upon the exercise of this Agreement prior
to
such Fundamental Transaction,
such
shares of the publicly traded Common Stock (or its equivalent) of the Successor
Entity (including its Parent Entity) which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had this Agreement
been exercised in full immediately prior to such Fundamental Transaction, as
adjusted in accordance with the provisions of this Agreement.
In
addition to and not in substitution for any other rights hereunder, prior to
the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a "Corporate
Event"),
the
Company shall make appropriate provision to insure that the Buyer will
thereafter have the right to receive upon an exercise of its Put Options
at
any
time after the consummation of the Fundamental Transaction but
prior
to the expiration of the Option Period,
in lieu
of the shares of the Common Shares (or
other
securities, cash, assets or other property) issuable
upon the exercise of its Put Option prior to such Fundamental
Transaction,
such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Buyer
would have been entitled to receive upon the happening of such Fundamental
Transaction had its Put Options been exercised immediately prior to such
Fundamental Transaction. Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
Corporate Events and shall be applied without regard to any limitations on
the
exercise of this Warrant. Notwithstanding the foregoing, in the event of a
Fundamental Transaction, at the request of the Buyer delivered before the 90th
day after such Fundamental Transaction, the
Company (or the Successor Entity) shall purchase such Buyer's Put Options from
the Buyer by paying to the Buyer, within five Business Days after such request
(or, if later, on the effective date of the Fundamental Transaction),
cash in
an amount equal to the Black Scholes Value (as defined in the Warrants) of
the
remaining unexercised portion of its Put Options on the date of such Fundamental
Transaction.
The
Company and each Buyer will each be deemed to represent to the other party
as of
the date of this Agreement the following: (i) it has full power, authority
and
capacity to execute and deliver this Agreement, (ii) this Agreement is a valid
and binding obligation upon it and is fully enforceable according to the terms
contained herein except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies, and
(iii) the execution, delivery and performance by it of this Agreement and the
consummation by it of the transactions contemplated hereby will not result
in a
violation of the organizational documents of it, conflict with, or constitute
a
default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
it is a party or result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable
to
it.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the Put
Options. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of Put
Options representing at least a majority of the Put Options then outstanding
(the "Required
Holders"),
including by merger or consolidation. A Buyer may assign some or all of its
rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights.
The
terms and conditions of this Agreement shall be binding and inure to the benefit
of the parties and their respective
successors and permitted assign. This Agreement shall be construed in accordance
with the laws of the State of New York.
This
Agreement may be executed in two or more identical counterparts, all of which
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;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
Please
sign and return to us the enclosed copy of this letter to signify your agreement
with and acceptance of its terms.
| Yours faithfully, | ||||
| MSGI SECURITY SOLUTIONS, INC. | ||||
| By: | /s/ Xxxxxx Xxxxxxx | |||
|
Name:
|
Xxxxxx Xxxxxxx |
|||
|
Title:
|
Chairman and CEO | |||
| Acknowledged and agreed: | ||||
|
Xxxxxx
Bay Fund, LP
|
||||
| By: | /s/ Xxxx Xxxx | |||
|
Name:
|
Xxxx Xxxx |
|||
|
Title:
|
Principal and Portfolio Manager | |||
|
Xxxxxx
Bay Overseas Fund, Ltd.
|
||||
| By: | /s/ Xxxx Xxxx | |||
|
Name:
|
Xxxx Xxxx |
|||
|
Title:
|
Principal and Portfolio Manager | |||
| Acknowledged and agreed: | ||||
|
Enable
Growth Partners LP
|
||||
| By: | /s/ Xxxxxxx X’Xxxx | |||
|
Name:
|
Xxxxxxx X’Xxxx |
|||
|
Title:
|
President and Chief Investment Officer | |||
|
Xxxxxx
Diversified Strategy Master Fund LLC,
ena
|
||||
| By: | /s/ Xxxxxxx X’Xxxx | |||
|
Name:
|
Xxxxxxx X’Xxxx |
|||
|
Title:
|
President and Chief Investment Officer | |||
| Acknowledged and agreed: | ||||
|
JGB
Capital L.P.
|
||||
| By: | /s/ Xxxxx Xxxxx | |||
|
Name:
|
Xxxxx Xxxxx |
|||
|
Title:
|
President | |||
|
JGB
Capital Offshore
Ltd.
|
||||
| By: | /s/ Xxxxx Xxxxx | |||
|
Name:
|
Xxxxx Xxxxx |
|||
|
Title:
|
President | |||
