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EXHIBIT 10.18
OBJECTIVE COMMUNICATIONS, INC.
00 XXXXXXXXXXXXX XXXXX
XXXXXXXXXX, XXX XXXXXXXXX 00000
February 2, 1999
RE: AGREEMENT REGARDING $3.125 MILLION AGGREGATE PRINCIPAL AMOUNT
OF 5% CUMULATIVE CONVERTIBLE DEBENTURES DUE 2003
Dear :
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 investors (collectively, the
"Investors" and individually, an "Investor") currently hold $2.5 million
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. This agreement shall supercede our letter agreement
dated January 13,1999.
As you are aware, Objective is negotiating an immediate bridge financing
and a subsequent equity financing, and the investors in that financing have
requested the Investors to agree to certain changes in their rights with respect
to the Convertible Debentures.
In consideration of the mutual covenants and obligations set forth in
this letter agreement, and in the other documents and agreements among
Objective, the Investors, and the other management investors who purchased
Convertible Debentures, Objective and each of the Investors, agree as follows:
1. Each Investor agrees that 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
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with gross proceeds to Objective of not less than $8 million (a
"Qualified Financing") is consummated.
2. Upon 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 the type(s) of securities issued in the
Qualified Financing at the conversion price set forth below. By
way of example, if Objective issues and sells shares of Common
Stock in the Qualified Financing, then the Convertible Debentures
will be converted into Common Stock, and if Objective issues and
sells units consisting of Common Stock and warrants to purchase
shares of Common Stock in the Qualified Financing, then the
Convertible Debentures will be converted into such units.
3. If the Qualified Financing is a public offering ("Qualified Public
Financing"), the number of securities 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" where the conversion price will be
equal to the lesser of (i) $2.50 per share, or (ii) 75% of the
price at which the securities were sold in the Qualified
Financing.
4. If the Qualified Financing is a private financing ("Qualified
Private Financing"), the number of securities 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" where the conversion price will be
equal to the price at which securities were sold in the Qualified
Financing. In addition, upon the closing of a Qualified Private
Financing, Objective will issue to the former holders of the
Convertible Debentures the number of warrants to purchase shares
of Common Stock equal to 20% of the shares of Common Stock
issuable upon conversion of the Convertible Debentures. Such
warrants shall have a five-year exercise period and an exercise
price per share equal to the market price per share of Common
Stock on the date on which the warrants are issued.
5. In the event of a 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 of a
Qualified Private Financing, the shares of Common Stock issuable
upon conversion of the Convertible Debentures will be registered
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 the 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.
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6. The holders of the Convertible Debentures also hereby waive 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 holders of the Convertible
Debentures hereby waive 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 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.
7. The undersigned 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 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.
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 and time at
which the Company consummates a bridge financing and receives gross proceeds
from a bridge financing in an amount of not less than $1 million. 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
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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: February 2, 1999
By:
Its:
By:
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Name:
Title:
