1
EXHIBIT 10.17
[Letterhead of Objective Communications, Inc.]
May __, 1999
[Debenture Holder]
[address]
[address]
RE: REVISED AGREEMENT REGARDING $3.125 MILLION AGGREGATE
PRINCIPAL AMOUNT OF 5% CUMULATIVE CONVERTIBLE DEBENTURES DUE
2003
Dear [Debenture Holder]:
Objective is currently in registration with respect to an equity financing
that the Company believes will allow it to continue operations for the next 12
months. Timely closing of this offering, prior to May 31, 1999, is required for
the Company to remain listed on the Nasdaq SmallCap Market. In order to complete
the offering in that time and to remain compliant with Nasdaq rules and
regulations, the underwriters are requiring changes to terms upon which the
Convertible Debentures will convert to equity securities. Please note that in
order to meet our schedule, we need to hear from you as soon as possible, and in
any event before the end of the day on Monday, May 10.
The Company is subject to certain Nasdaq rules that prohibit Objective
from issuing common stock or securities convertible into common stock in excess
of 20% of the outstanding common stock at the time of issuance, except in
certain limited circumstances or with prior stockholder approval of the
issuance. The proposed issuance of equity securities upon conversion of the
Convertible Debentures does not qualify for any of the available exceptions from
the Nasdaq rules, the Company has not obtained stockholder approval of the
proposed issuance, and could not obtain stockholder approval of the proposed
issuance in time to complete the proposed equity financing. Accordingly, this
letter is to set forth our mutual agreement as to the modified terms upon which
the Convertible Debentures will convert to equity securities.
This letter agreement is to set forth our mutual agreement and
understanding with respect to the outstanding $3.125 million aggregate principal
amount of 5% Cumulative Convertible Debentures due 2003 (the "Convertible
Debentures") of Objective Communications, Inc., a Delaware corporation
("Objective" or the "Company"). The undersigned investor (an "Investor" and,
collectively with the additional holders of the Convertible Debentures, the
"Investors") currently holds $_______ aggregate principal amount of the
Convertible Debentures. Each individual signing this letter agreement on behalf
of an entity that holds Convertible Debentures represents and warrants to
Objective that it is authorized and has full authority to execute, deliver and
enter into this agreement on behalf of, and to bind, such investor.
2
-2- May __, 1999
In consideration of the mutual covenants and obligations set forth in this
letter agreement, and in the other documents and agreements among Objective and
the Investors, Objective and the undersigned Investor agree as follows:
1. The Investor agrees that he, she or it will not exercise its right to
convert the Convertible Debentures to common stock, par value $.01 per
share of Objective (the "Common Stock"), until the date on which a public
or private equity financing with gross proceeds to Objective of not less
than $8 million (a "Qualified Financing") is consummated. Immediately
following the closing of a Qualified Financing, the principal amount of
and accrued and unpaid interest on the Convertible Debentures will
automatically and without any further action on the part of the holder
convert into Common Stock at the conversion price set forth below.
2. The number of shares of Common Stock issuable upon such conversion will be
equal to the principal amount of the Convertible Debentures, plus accrued
and unpaid interest thereon, divided by a "conversion price" equal to
$3.75; provided, however, that notwithstanding the foregoing, the Company
shall not be obligated to issue shares of common stock in excess of the
number of shares of common stock permitted pursuant to the ExchangeCap (as
defined in the certificate evidencing the Convertible Debentures)
provision set forth in Section 13 of the certificate evidencing the
Convertible Debentures.
3. If the Qualified Financing is a public offering ("Qualified Public
Financing"), the shares of Common Stock issuable upon conversion of the
Convertible Debentures will be registered at the time of such offering. In
the event that the Qualified Financing is a private offering ("Qualified
Private Financing"), the shares of Common Stock issuable upon conversion
of the Convertible Debentures will be registered as promptly as
practicable following the conclusion of such financing, but in no event
will such shares be registered later than the time at which the shares
issued in the Qualified Private Financing are registered or the end of a
six-month lock-up period. The holders of the Convertible Debentures also
agree to hold the shares of Common Stock issued upon conversion of the
Convertible Debentures, in the case of a Qualified Public Financing, for a
period of at least twelve (12) months following the effective date of the
Company's registration statement that relates to the Qualified Public
Financing and, in the case of a Qualified Private Financing, for six
months following the date on which the Convertible Debentures are
converted.
4. The undersigned Investor also hereby waives any default by Objective with
respect to the failure to register the shares of Common Stock issuable
upon conversion of the Convertible Debentures for resale by the holders
thereof on a registration statement filed with the Securities and Exchange
Commission (the "Commission") and to maintain the effectiveness of the
registration statement. The undersigned Investor hereby waives any right
to have the Convertible Debentures registered on a registration statement
filed with the Commission prior to the Qualified Financing. In exchange
for such agreement, the Company agrees that if the Qualified Financing is
a public offering, then it will include the shares of Common Stock
issuable upon
3
-3- May __, 1999
conversion of the Convertible Debentures in the registration statement
filed with the Commission with respect to the Qualified Financing, and to
use its best efforts to have the registration statement effective at the
time at which the lock-up agreement described above expires.
5. The undersigned Investor hereby consents to the amendment of the
certificate evidencing the Convertible Debentures and/or the Subscription
Agreements and/or other documents relating to the issuance of the
Convertible Debentures (the "Debenture Agreements") to the extent
necessary to incorporate the above agreements, and, promptly upon the
request of the Company, agrees to execute and deliver such amendments to
the Company.
6. To the extent that the provisions of the Debenture Agreements are not
inconsistent with the terms hereof, the undersigned recognizes and agrees
that such Debenture Agreements remain in full force and effect, including,
without limitation, the ExchangeCap provision set forth in Section 13 of
the certificate evidencing the Convertible Debentures.
7. This Agreement supercedes in all respects that letter agreement dated
______ __, 1999 between the Company and the undersigned Investor (the "Old
Agreement"), and the Old Agreement shall be null and void and of no force
and effect.
8. In the event that the Qualified Financing is not completed on or before
June 30, 1999, then this letter agreement shall be null and void and of no
force and effect.
This Agreement shall be effective upon and as of the date hereof. All
numbers and share amounts set forth in this letter agreement are based on the
current number of shares of common stock outstanding, and shall be adjusted for
any future stock splits, stock recapitalizations, reverse stock splits or
similar changes in the Company's capitalization.
If you are in agreement with the foregoing, please sign and return one
original copy of this letter to the undersigned at Objective Communications,
Inc., 00 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxxxxx 00000 by overnight mail
and by telecopy (Telecopy number: (000) 000-0000). If you have any
questions, you can reach me at (000) 000-0000.
Sincerely,
Xxxxxx X. Xxxxx,
Vice President, Finance and
Administration
4
-4- May __, 1999
The undersigned authorized representatives of the Investors listed below
hereby acknowledge and agree to the terms and conditions of this letter
agreement and agree to be legally bound by its terms.
Dated: May __, 1999 [DEBENTURE HOLDER]
By: ____________________________
Name:
