Exhibit 10.10
SECOND AMENDMENT TO AGREEMENTS
THIS SECOND AMENDMENT TO AGREEMENTS ("AMENDMENT") is made and entered
into as of February 18, 2003 by and between AVALON DIGITAL MARKETING SYSTEMS,
INC., a corporation organized under the laws of the State of Delaware (the
"COMPANY"), and EAST-WEST CAPITAL ASSOCIATES, INC., a California corporation
("EAST-WEST"), and amends (a) that certain Securities Purchase Agreement ("SPA")
and Investors' Rights Agreement ("XXX"), each dated as of June 12, 2002, to
which the Company and East-West are parties, as each such agreement was amended
by the first Amendment to Agreements dated as of July 29, 2002, and (b) that
certain Registration Rights Agreement ("RRA"), dated as of June 12, 2002, to
which the Company and East-West are parties. Capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to them in the
SPA, as amended hereby.
WITNESSETH
WHEREAS, East-West has remaining obligations under the SPA to invest
monies in the Company at the "Second Closing" in an aggregate amount of $175,000
and, upon Demand of the Company, to purchase the Demand Shares;
WHEREAS, the parties desire to amend the SPA, XXX and RRA on the terms
set forth herein.
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. COMPLETION OF SECOND CLOSING. Upon execution of this Amendment, East-West
will invest $175,000 in the Company by wire transfer of immediately available
funds in the amount of $25,000 to the Company and the assignment to the Company
of $150,000 of East-West's interest in the note of the Company payable to the
RCI Liquidating Trust, which investment shall constitute final satisfaction in
full of East-West's remaining obligations to invest monies in the Company at the
"Second Closing" as provided in Section 2.2(d) of the SPA. The date of execution
of this Amendment shall constitute the "Second Closing Date" for purposes of the
SPA and the XXX. As provided in the SPA, upon funding such amount, East-West
will receive:
(a) 43,750 Shares at a price per share of Common Stock equal to
$4.00;
(b) Consulting Warrants for 26,250 shares with initial exercise
prices of $5, $10 and $12.50, subject to adjustment as set
forth in Section 5.1 herein;
(c) Exclusivity and Advisory Warrants for 6,561 shares with an
initial exercise price of $5, subject to adjustment as set
forth in Section 5.1 herein; and
(d) Re-Set Warrants for 10,938 shares with an initial exercise
price set forth in Section 3 of the Amendment to the SPA,
subject to adjustment as set forth in Section 5.1 herein.
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2. CONVERTIBLE NOTE.
(a) PURCHASE OF CONVERTIBLE NOTE. Upon execution of this Amendment, the
Company will issue and sell to East-West, and East-West agrees to purchase from
the Company, a Convertible Promissory Note and Security Agreement in the amount
of $200,000 substantially in the form previously agreed to by the parties (the
"CONVERTIBLE NOTE"). East-West will transmit the purchase price for the
Convertible Note upon execution of this Amendment by wire transfer of
immediately available funds to the Company, which investment shall constitute
satisfaction in full of any and all of East-West's obligation to purchase
"Demand Securities" following a call by the Company's Board of Directors
pursuant to the SPA.
(b) NO SHORT SALES. East-West agrees that it will not engage in,
directly or indirectly, or authorize any of its affiliates to engage in, any
transaction that would involve a "short sale" of the Company's Common Stock, as
such term is defined in Rule 3b-3 under the Securities Exchange Act of 1934, as
amended, prior to any conversion of the Convertible Note or any portion thereof.
(c) REGISTRATION RIGHTS. The Company agrees to provide certain
registration rights with respect to the shares of Common Stock issuable upon
conversion of Convertible Note. Accordingly, the parties agree to amend the RRA
as follows:
(i) The defined term "Registrable Securities" in Section 1 of
the RRA is hereby deleted in the entirety and replaced with the
following:
"REGISTRABLE SECURITIES" means: (i) the Shares, (ii) the
Common Stock issuable or issued pursuant to the Exclusivity
Warrant, (iii) the Common Stock issuable or issued pursuant to
the Warrants, (iv) any shares of capital stock issued or
issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect
to any of the foregoing, and (v) the Common Stock issuable or
issued upon conversion into Common Stock of all or any portion
of that certain Convertible Promissory Note and Security
Agreement in the amount of $200,000 originally issued by the
Company on or about February 18, 2003; provided, however, that
the treatment as Registrable Securities shall terminate if and
when such securities can be resold under Rule 144(k) under the
Securities Act and provided further however, that any shares
of capital stock issued or issuable, from time to time (with
any adjustments), in exchange for or otherwise with respect to
any Shares shall not be considered Registrable Securities to
the extent such shares of capital stock are covered by
another, current and effective registration statement
permitting the resale without restriction of such shares.
(ii) The first sentence of Section 2.1 of the RRA is hereby
deleted in the entirety and replaced with the following:
The Company shall file with the SEC, on or before 30 days
after either the Closing or termination of the Friend
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Financing (the "FILING DEADLINE") a Registration Statement on
Form S-3 (if that form is available to effect a registration
of all of the Registrable Securities) covering the resale of
all of the Registrable Securities (the "INITIAL REGISTRATION
STATEMENT").
3. AMENDMENT TO SECURITIES PURCHASE AGREEMENT.
3.1 Section 5.14 of the SPA is hereby deleted in the entirety.
4. AMENDMENT TO INVESTORS' RIGHTS AGREEMENT.
4.1 Each of Section 3.1 and Section 3.2 of the XXX is hereby deleted in the
entirety.
5. AMENDMENT OF OLD WARRANTS.
5.1 Each of the Advisory Warrants, Consulting Warrants, Exclusivity
Warrants, and Re-Set Warrants issued by the Company to East West Venture Group
and East-West Capital Associates, Inc. pursuant to the SPA, which consist as of
the date hereof (including warrants issued under Section 1 herein) of (a)
165,625 Advisory and Exclusivity Warrants with an Exercise Price of $5.00 per
share, (b) 442,500 Consulting Warrants with Exercise Prices of $5.00, $10.00,
and $12.50 per share, and (d) 165,625 Re-Set Warrants with an Exercise Price set
forth set forth in Section 3 of the Amendment to the SPA (the "OLD WARRANTS"),
shall each be repriced so that the "Exercise Price" referred to in each Old
Warrant shall be, as of the date hereof, set at $2.00 per share, subject to
further adjustment after the date hereof as set forth in each such Old Warrant,
PROVIDED, HOWEVER, that in the event the Company sells shares of Common Stock
(or instruments convertible into Common Stock) in the Friend Financing (as such
term is defined in the Convertible Note) in an amount per share of less than
$1.50 per share, then the "Exercise Price" referred to in each Old Warrant shall
be, as of the date hereof, set at such lower price per share.
5.2 Each of the Old Warrants shall be fully vested on the date hereof
and be exercisable immediately for the full amount of shares set forth therein.
5.3 Each of the Old Warrants shall be amended so that the remaining
term thereof shall be 24 months from the date of this Amendment.
6. ASSISTANCE WITH OTHER FINANCINGS. East-West hereby affirms and agrees to
bound by its obligations set forth under the paragraphs in the "Summary of
Terms", executed by the parties on or about February 5, 2003, entitled "Rights
Offering" and "Friend Round Assistance".
7. EXPENSES. The Company agrees to pay the reasonable and documented legal fees
of counsel to East-West in connection with this Amendment and the transactions
contemplated hereby in an amount not to exceed $10,000 plus actual expenses. The
Company also agrees to pay, upon execution of this Amendment, out of funds
received from East-West in connection with the Convertible Note, the amount of
$5,041.66 to such counsel for past due fees in connection with the SPA.
8. MISCELLANEOUS.
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8.1 GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California as such laws apply to
agreements among California residents made and to be performed entirely within
the State of California.
8.2 ENTIRE AMENDMENT. This Amendment constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supercedes any and
all prior or contemporaneous amendments relating to the subject matter hereof.
Except as expressly amended hereby, the SPA (as previously amended), XXX (as
previously amended) and RRA shall remain unchanged and in full force and effect.
This Amendment shall be deemed part of and is hereby incorporated into the SPA,
XXX and RRA, as appropriate. To the extent that any terms or conditions of the
SPA, XXX or RRA, or any interim amendment thereof, shall contradict or be in
conflict with any terms or conditions of this Amendment, the terms and
conditions of this Amendment shall control.
8.3 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
8.4 AMENDMENTS. This Amendment may be amended and the observance of any
term hereof may be waived (either generally or in a particular instance and
either retroactively or prospectively) only in accordance with the Amendment
provisions of the SPA, XXX or RRA, as appropriate.
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IN WITNESS WHEREOF, the parties hereto have executed this SECOND
AMENDMENT TO AGREEMENTS as of the date first above written.
AVALON DIGITAL MARKETING SYSTEMS, INC.
By: /S/ XXXXXX XXXXXX
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Name: Xxxxxx Xxxxxx
Its: Chief Executive Officer
Address: 0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
EAST-WEST CAPITAL ASSOCIATES, INC.
By: /S/ XXXX XXXXXXX
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Name: Xxxx Xxxxxxx
Its: Chairman and CEO
Address: 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
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