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EXHIBIT 10.4
December 4, 1997
Geocapital III, L.P.
Attn: Xxxxxxxx Xxxxxx
Xxx Xxxxxx Xxxxx
Xxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
RE: ViaGrafix Corporation Series A Convertible Preferred Stock
Ladies and Gentlemen:
Reference is made to that certain Series A Convertible Preferred Stock
Purchase Agreement dated as of the 16th day of August, 1994 ("Purchase
Agreement"), by and among ViaGrafix Corporation ("ViaGrafix" or "Company"),
Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Geocapital III, L.P. ("Geocapital"). As we
have informally notified you previously, ViaGrafix has been negotiating with
several prospective underwriters with respect to a firm commitment underwriting
of an initial public offering of ViaGrafix common stock ("IPO"). ViaGrafix has
now entered into a letter of intent with Southwest Securities, Inc., to manage
such an underwriting.
The proceeds to ViaGrafix from the IPO will exceed $5,000,000, after
payment of commissions, discounts and other expenses of the offering.
Therefore, the offering will be a "Qualified Public Offering" as defined in the
Purchase Agreement and several ancillary agreements associated therewith. If
successful, the offering will have an impact not only on the terms of the
Purchase Agreement, but also on the terms of the Series A Convertible Preferred
Stock, the Registration Rights Agreement dated August 16, 1994, between
ViaGrafix and Geocapital ("Registration Rights Agreement") and the Stockholders
Agreement dated August 16, 1994 ("Stockholders Agreement"), by and among
ViaGrafix, Geocapital, Xxxx Xxxxxxx and Xxx Xxxxxxx.
The purpose of this correspondence is to provide you with formal
notice of the proposed IPO and to further clarify the effect of the IPO on
certain of the agreements referenced above as more fully discussed below.
Purchase Agreement and Terms of Preferred Stock
Section 4.12 of the Purchase Agreement provides pre-emptive rights to
Geocapital to purchase shares issued by ViaGrafix, until such time as ViaGrafix
completes a Qualified Public Offering. In order to clarify any ambiguity, we
would appreciate your acknowledgement (evidenced by your acceptance of the
terms hereof in the space indicated below) that the IPO itself does not trigger
such pre-emptive rights.
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Geocapital III, L.P.
December 4, 1997
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We also bring to your attention that, pursuant to Section 6.O of the
terms of the Series A Convertible Preferred Stock held by you, if ViaGrafix
effects a Qualified Public Offering, then upon the closing of such offering all
outstanding shares of the Series A Convertible Preferred Stock shall
automatically convert into shares of common stock.
Stockholders Agreement
The Stockholders Agreement provides certain rights of first refusal
and co-sale rights (Sections 2.1 and 2.2, respectively), in the event existing
stockholders desire to sell their stock. Because the IPO will also cover
secondary sales, we request further that by your execution of this letter you
formally waive your rights under these provisions in connection with the IPO.
By their execution hereof, each of Xxxxxxx and Xxxxxx Xxxxxxx are waiving their
rights as holders of the "Founders' Shares" (as defined in this agreement) in
the same respect The ability of Geocapital to participate in the IPO is more
fully discussed under "Registration Rights Agreement" below.
In addition, we would also bring to your attention that the
Stockholder Agreement will automatically terminate upon the successful
completion of a Qualified Public Offering.
Registration Rights Agreement
Pursuant to Section 2.1 of the Registration Rights Agreement, within
fifteen (15) days from the date hereof you are to notify ViaGrafix as to the
number of shares you desire to register for secondary sale under the IPO;
further, by your execution hereof, and for purposes of the proposed IPO only
(and not any possible future public offering, in the event the proposed IPO
does not become effective), ViaGrafix requests that you formally waive the
provisions of Section 2.1 of the Registration Rights Agreement which would
otherwise require that not less than one-half of the total number of shares of
common stock to be included in the IPO be made available for both your shares
and the "Founder Shares", as defined in said agreement. By their execution
hereof, each of Xxxxxxx and Xxxxxx Xxxxxxx are waiving their rights as holders
of the Founder Shares in this same respect. We bring to your attention that,
in the event all of your Registrable Shares are not included in the IPO, the
provisions of Section 2.2 of the Registration Rights Agreement (demand
registration on Form S-3) shall continue. Further, it is anticipated that upon
completion of the IPO the provisions of Rule 144 will thereafter become
available for limited resales of stock not included in the IPO.
In addition, by executing in the space indicated below, you signify
your approval of the engagement of Southwest Securities, Inc. as the managing
underwriter of the IPO, in satisfaction of Section 7.2 of the Registration
Rights Agreement.
Non-Competition Agreement
In addition to the other documents described above which were executed
in connection with the Purchase Agreement, there exists a Non-Competition
Agreement between the Company and Xxxxxxx Xxxxxxx of even date with the
Purchase Agreement. The Company further requests your
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Geocapital III, L.P.
December 4, 1997
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agreement to allow the termination of the Non-Competition Agreement upon the
completion of the IPO.
If you are in agreement with the above terms and conditions, we
request that a duly authorized officer of Geocapital execute the enclosed copy
of this correspondence and return it to the attention of the undersigned.
Further, please notify the undersigned within 15 days of the number of shares
of Registrable Securities which you desire to be included in the IPO. We shall
pass this information directly to Southwest Securities, and will promptly
notify you of any comments such managing underwriter may have. We shall
similarly keep you fully advised of the progress of the IPO throughout the
entire registration process.
If you have questions, feel free to contact either Xxxxxx X. Xxxxx,
Vice President - Finance, or the undersigned. Your prompt attention to this
matter will be appreciated.
Very truly yours,
/s/ MAW
Xxxxxxx X. Xxxxxxx
President
The foregoing terms and conditions are agreed upon and accepted this 4th day of
December, 1997.
GEOCAPITAL III, L.P.
By: Geocapital Management, L.P.
By:/s/ Xxxxxxxx Xxxxxx
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General Partner
/s/ MAW
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Xxxxxxx X. Xxxxxxx
/s/ REW
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Xxxxxx X. Xxxxxxx
c: Xxxxxxx X. Xxxxx, Xx., Esq.
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