Exhibit 10.1
Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
June 2, 2006
DCI USA, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx X Xxxx
Re: Agreement concerning the Secured Convertible Debentures and
the SEDA issued pursuant to inter alia the Securities
Purchase Agreement between Cornell Capital Partners, LP and
DCI USA, Inc.
Dear Xx. Xxxxxxxxxx:
This Letter Agreement ("Agreement") will confirm the understanding between
DCI USA, Inc. (the "Company") and Cornell Capital Partners, LP (the "Cornell").
The Company and Cornell entered into a Securities Purchase Agreement
("Securities Purchase Agreement") dated December 13, 2004 pursuant to which the
Company issued and sold to Cornell a secured convertible debentures in the
principal sum of Two Hundred Fifty Thousand Dollars ($250,000) on December 13,
2004 and a second secured convertible debenture in the principal sum of Two
Hundred Fifty Thousand Dollars ($250,000) on February 23, 2005 (collectively,
the "Debentures"). In connection with the Securities Purchase Agreement, the
parties entered into an Investor Registration Rights Agreement ("Registration
Rights Agreement") dated December 13, 2004, which, among other things, required
the Company to file a registration statement with the Securities and Exchange
Commission ("SEC") and obtain the effectiveness of such registration statement
within a specified timeframe, and a Security Agreement (the "Security
Agreement") dated December 13, 2004 pursuant to which the Company granted
Cornell a security interest in the Pledged Property (as defined therein).
Collectively, the Securities Purchase Agreement, the Debentures, the
Registration Rights Agreement, and the Security Agreement, together with any
other related or collateral documents or agreements, shall be referred to as the
"Transaction Documents." All capitalized terms not defined herein shall have the
meaning assigned to them in the Debentures or the Securities Purchase Agreement,
as applicable.
Due to third party reasons beyond the Company's control, the Company was
not able to meet all the requirements of the Transaction Documents (as defined
herein) and Cornell has agreed not to declare any default pursuant to the
Transaction Documents (collectively, the "Existing Waivers").
Our Agreement is as follows:
1. The Company shall issue to Cornell stock certificates for one million five
hundred thousand (1,500,000) shares of the Company's common stock ("Replacement
Common Stock"). The Replacement Common Stock will replace the existing Series A
Preferred Stock (the "Conversion Shares"), which Cornell shall surrender to the
Company upon the issuance of the Replacement Common Stock, and are being
acquired by Cornell for consideration consisting solely of Cornell's surrender
of the Conversion Shares. Upon receipt of the Replacement Common Stock, Cornell
will relinquish all rights relating to the Series A Preferred Stock of the
Company including all accrued dividends thereon. In addition, the Company will
grant to Cornell a Put option (the "Option") to sell the Replacement Common
Stock to the Company at a price of seven and a half cents ($0.075) per share.
The Option shall have duration of three (3) years from the date of issuance, and
shall be exercisable only at the option of Cornell.
The shares shall have "piggy back" registrations rights.
2. The interest rate on the Debentures shall be retroactively adjusted to twelve
percent (12%) per annum from the original issuance date of the Debentures ("the
Adjusted Interest Rate").
3. The Company shall have an unqualified right to pay the amounts owed under the
Debentures together with all interest accrued at the Adjusted Interest Rate
anytime on or before November 1, 2006. Upon payment by the Company to Cornell of
the full amounts owed under the Debentures together with the Adjusted Interest
Rate, all obligations under the Transaction Documents shall be void, satisfied,
and terminated.
4. The Company hereby acknowledges, confirms and agrees that Cornell has and
shall continue to have valid, enforceable and perfected first-priority liens
upon and security interests in the Pledged Property (as defined in the
Transaction Documents) heretofore granted pursuant to any and all security
agreements or otherwise granted to or held by Cornell until such times as the
amounts due in paragraph 3 are paid to Cornell by the Company in full.
5. In reliance upon the representations, warranties and covenants of the Company
contained in this Agreement, and subject to the terms and conditions set forth
herein, for the period (the "Forbearance Period") commencing on the date hereof
and continuing so long as the following conditions are met: (i) the Company
strictly complies with the terms of this Agreement, and (ii) there is no
occurrence or existence of any event of default under this Agreement, Cornell
hereby (a) agrees not to make any conversions of the Debentures until November
2, 2006 and (b) agrees to forbear from exercising its rights and remedies under
the Transaction Documents or applicable law, subject to the conditions,
amendments and modifications contained herein until November 2, 2006.
6. Upon the termination or expiration of the Forbearance Period, the agreements
of Cornell set forth in section 5 above shall automatically and without further
action terminate and be of no force and effect, it being expressly agreed that
the effect of such termination will be to permit Cornell to exercise such rights
and remedies immediately, including, but not limited to, the acceleration of all
of the Obligations without any further notice, passage of time or forbearance of
any kind.
7. The Company hereto acknowledges, confirms and agrees that: (a) each of the
Transaction Documents to which it is a party has been duly executed and
delivered to Cornell by the Company, and each is in full force and effect as of
the date hereof, (b) the agreements and obligations of the Company contained in
such documents and in this Agreement constitute the legal, valid and binding
obligations of the Company, enforceable against it in accordance with their
respective terms, and (c) Cornell is and shall be entitled to the rights,
remedies and benefits provided for in the Transaction Documents and applicable
law.
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8. This letter may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
instrument. This letter shall be accepted, effective and binding, for all
purposes, when the parties shall have signed and transmitted to each other, by
telecopier or otherwise, copies of this letter. The terms of this letter
supersede the terms of any other verbal or written agreement existing prior to
the date hereof. In the event of any litigation arising hereunder, the
prevailing party or parties shall be entitled to recover its or their reasonable
attorneys' fees and court costs from the other party or parties, including the
costs of bringing such litigation and collecting upon any judgments. This letter
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, legal representatives, trustees, successors
and assigns. Except for the amounts expressly set forth herein, none of the
parties hereto shall be liable to any other party for any amounts whatsoever.
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Please indicate your agreement to the foregoing by signing below where
indicated.
Sincerely,
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Its: President and Portfolio Manager
Acknowledged and Agreed
On June 2, 2006:
DCI USA, INC.
By: /s/ Xxxxxxxx Xxxx Xxxx
Name: Xxxxxxxx Xxxx Xxxx
Title: C.E.O.
cc:
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