EXHIBIT 10.1
January 30, 1998
DATA RACE, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
RE: SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK AND WARRANTS
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Dear Xx. Xxxxxx:
We refer to the Securities Purchase Agreement, dated November 7, 1997
(the "Purchase Agreement"), by and among DATA RACE, Inc. (the "Company") and
the buyers named therein (the "Buyers") relating to the sale by the Company of
shares of Series C Convertible Participating Preferred Stock (the "Preferred
Stock") and the related warrants (the "Warrants") of the Company to the Buyers.
Pursuant to the terms of the Purchase Agreement, on November 12, 1997 the
Company sold 5,000 shares of Preferred Stock and 139,861 Warrants to the Buyers.
Subject to the terms and conditions set forth in the Purchase Agreement, the
Company will sell an aggregate of an additional 3,000 shares of Preferred Stock
(the "Additional Preferred Shares") and the related Warrants to the Buyers.
The Company and the Buyers have agreed to the following changes to the
Purchase Agreement:
1. Section 1(c) of the Purchase Agreement is amended to define the
"Additional Closing Date" as "April 15, 1998 (or such later date as
is mutually agreed to by the Company and the Buyers)" rather than
the Additional Closing Date currently set forth in Section 1(c) of
the Purchase Agreement. Each of the Buyers acknowledges it has
received the Additional Share Notice.
2. Section 7(b)(iii) is amended and restated in its entirety as
follows:
(A) The representations and warranties of the Company shall be true
and correct as of the date when made and as of January 30, 1998 as
though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company (including, without
limitation, those set forth in Section 1(c) of this Agreement) at or
prior to the Additional Closing as if the Additional Closing had
occurred on January 30, 1998. Such Buyer shall have received a
certificate, executed by the Chief Financial Officer of the Company,
dated as of the Additional Closing Date, to the foregoing effect and
an update as of January 30, 1998 regarding the representation
contained in Section 3(c) above (including an updated Schedule
3(c)).
(B) The representations and warranties of the Company set forth in
paragraphs (a), (b), (c), (d), (f), (i), (k), (l), (w) and (x) of
Section 3 of this Agreement shall be true and correct as of the
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company
(subject to Section 7(b)(xi) of this Agreement) at or prior to the
Additional Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Financial Officer of the Company, dated as of
the Additional Closing Date, to the foregoing effect and an update as
of the Additional Closing Date regarding the representation contained
in Section 3(c) above (including an updated Schedule 3(c)).
(C) The following representations and warranties of the Company shall
be true and correct as of November 7, 1997 and as of the Additional
Closing Date as though made at that time and such Buyer shall have
received a certificate, executed by the Chief Financial Officer of the
Company, dated as of the Additional Closing Date, to the foregoing
effect:
(I) No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of the Transaction Documents
by the Company, the performance by the Company of its obligations
under the Statement of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby will
not (i) result in a violation of the Articles of Incorporation,
any Statement of Designations, Preferences and Rights of any
outstanding series of Preferred Stock of the Company or the By-
laws or (ii) 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 material
agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the
Common Stock is traded or listed) applicable to the Company or
any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except
as disclosed in Schedule 3(e), neither the Company nor its
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subsidiaries is in violation of any term of or in default under
the Articles of Incorporation, any Statement of Designations,
Preferences and Rights of any outstanding series of Preferred
Stock or the By-laws or their organizational charter or by-laws,
respectively, except for possible defaults or violations that
would not individually or in the aggregate have a Material
Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted, in violation
of any law, ordinance, regulation of any governmental entity,
except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not
required to obtain any consent, authorization or order of, or
make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents or
to perform its obligations under the Statement of Designations,
in each case in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents,
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authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof.
The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(II) Absence of Certain Changes. The Company has not taken any
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steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or
its subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
3. Section 7(b)(viii) is amended and restated in its entirety as follows
(and to such extent Section 5 of the Purchase Agreement shall be
qualified):
The Irrevocable Transfer Agent Instructions, in the form of Exhibit D
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attached hereto, shall have been delivered by the Company to the
Company's transfer agent and the Company shall have used, and will
continue to use, its best efforts to have the Irrevocable Transfer
Agent Instructions acknowledged in writing by the Company's transfer
agent.
4. Section 7(b)(xi) of the Purchase Agreement is amended and restated in
its entirety as follows (and to such extent Section 1(c) of the
Purchase Agreement shall be qualified):
(A) The conditions of Section 1(c) of this Agreement shall have been
satisfied as of January 30, 1998.
(B) The conditions of Section 1(c) of this Agreement shall have been
satisfied as of the Additional Closing Date, except that the
conditions set forth in clauses (ii), (iv) and (v) of Section 1(c) of
this Agreement are not required to be satisfied as the Additional
Closing Date.
(C) During the period beginning on November 7, 1997 and ending on and
including the Additional Closing Date, there shall not have occurred
(I) the consummation of a Major Corporate Event (as defined in Section
2(f) of the Statement of Designations) or (II) a Triggering Event (as
defined in Section 3(d) of the Statement of Designations).
5. Section 4(b) and Section 7(b)(xii) of the Purchase Agreement are
deleted in their entirety.
In addition, in the process of reviewing the form of Warrant attached to
the Purchase Agreement and to be issued at the Additional Closing Date we noted
that the vesting provisions
thereof should be clarified. Accordingly, the Company and the Buyers have
agreed to the following changes to the form of Warrant and to the Warrants
outstanding as of the date hereof:
1. Clause (B) of Section 1(d)(i) of the form of Warrant is amended and
restated to read "(B) the quotient of (x) the aggregate number of
shares of Preferred Stock issued on the date hereof to the initial
holder of this Warrant pursuant to the Securities Purchase Agreement
and which remain outstanding on the date which is 150 days after the
date hereof divided by (y) the aggregate number of shares of Preferred
Stock issued on the date hereof to such holder pursuant to the
Securities Purchase Agreement (such resulting number of shares is
referred to herein as the "INITIAL VESTED SHARES")".
2. Clause (B) of Section 1(d)(ii) of the form of Warrant is amended and
restated to read "(B) the quotient of (x) the aggregate number of
shares of Preferred Stock issued on the date hereof to the initial
holder of this Warrant pursuant to the Securities Purchase Agreement
and which remain outstanding on the date which is 270 days after the
date hereof divided by (y) the aggregate number of shares of Preferred
Stock issued on the date hereof to such holder pursuant to the
Securities Purchase Agreement (such resulting number of shares is
referred to herein as the "SUBSEQUENT VESTED SHARES")".
Except as modified above, the Purchase Agreement and the form of Warrant
attached thereto remain in full force and effect in accordance with their terms.
Pursuant to Section 2(b)(ii) of the Statement of Designations, Preferences and
Rights of Series C Convertible Participating Preferred Stock of DATA RACE, Inc.
(the "Statement of Designations"), any Additional Preferred Shares issued on
April 15, 1998 will have an initial Fixed Conversion Price equal to 120% of the
Market Price (as defined in the Statement of Designations) of the Common Stock
on April 15, 1998.
The Company agrees that, on or before February 5, 1998, the Company shall
publicly disclose the terms of this letter agreement by filing a Form 8-K or its
Form 10-Q for the three months ended December 31, 1997 on or before February 5,
1998, which Form 8-K or Form 10-Q shall include a description of the material
terms of this letter agreement and shall include as an exhibit a copy of this
letter agreement.
This letter agreement is effective January 30, 1998 and shall be binding
upon the parties and their successors and assigns and may be amended or
terminated only by a writing signed by all the parties hereto.
Please indicate your agreement to the above by signing in the space
provided below and faxing a signed copy to each of the Buyers listed below.
BUYERS:
XXXXXX PARTNERS
By: /s/ XXXXX XXXXXXXX
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Name: Xxxxx Xxxxxxxx
Title: Director
OLYMPUS SECURITIES, LTD.
By: /s/ XXXXX XXXXXXXX
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Name: Xxxxx Xxxxxxxx
Its: Director
CC INVESTMENTS, LDC
By: /s/ XXXX X. XXXXXXXX
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Name: Xxxx X. Xxxxxxxx
Its: Director
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management
Its: Authorized Agent
By: /s/ XXXXXX X. XXXXXX
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Name: Xxxxxx X. Xxxxxx
Its: Investment Manager
Accepted and agreed to this
30th day of January, 1998:
DATA RACE, INC.
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Vice President and Chief
Financial Officer
