UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
Speedcom Wireless Corporation
-----------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
---------------------------------------
(Title of Class of Securities)
847703105
---------
(CUSIP Number)
Steven Derby
SDS Management, LLC
53 Forest Avenue, 2nd Floor
Old Greenwich, CT 06870
(203) 967-5880
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
January 27, 2004
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 847703105 13D Page 2 of 10 Pages
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
SDS Capital Group SPC, Ltd.
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds (See Instructions):
WC
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [ ]
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6. Citizenship or Place of Organization
Cayman Islands
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Number of 7. Sole Voting Power 24,583,386
Shares Bene- ------------------------------------------------------
ficially Owned 8. Shared Voting Power 0
By Each ------------------------------------------------------
Reporting 9. Sole Dispositive Power 24,583,386
Person With ------------------------------------------------------
10. Shared Dispositive Power 0
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
24,583,386
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
66.8%
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14. Type of Reporting Person (See Instructions)
CO
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CUSIP No. 847703105 13D Page 3 of 10 Pages
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
SDS Management, LLC
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3. SEC Use Only
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4. Source of Funds: (See Instructions)
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [ ]
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6. Citizenship or Place of Organization
Delaware
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Number of 7. Sole Voting Power 0
Shares Bene- ------------------------------------------------------
ficially Owned 8. Shared Voting Power 24,583,386
By Each ------------------------------------------------------
Reporting 9. Sole Dispositive Power 0
Person With ------------------------------------------------------
10. Shared Dispositive Power 24,583,386
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
24,583,386
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
66.8%
--------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
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CUSIP No. 847703105 13D Page 4 of 10 Pages
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Mr. Steven Derby
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds: (See Instructions)
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization
United States
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Number of 7. Sole Voting Power 0
Shares Bene- ------------------------------------------------------
ficially Owned 8. Shared Voting Power 24,583,386
By Each ------------------------------------------------------
Reporting 9. Sole Dispositive Power 0
Person With ------------------------------------------------------
10. Shared Dispositive Power 24,583,386
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
24,583,386
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
66.8%
--------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
IN
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CUSIP No. 847703105 13D Page 5 of 10 Pages
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INTRODUCTION
------------
This Amendment No. 1 to Schedule 13D is being filed by SDS Capital
Group SPC, Ltd., a Cayman Islands corporation (the "Reporting Person"), with
respect to its beneficial ownership of shares of common stock, par value $.001
per share ("Common Stock"), of Speedcom Wireless Corporation, a Delaware
corporation ("Speedcom"). The Reporting Person filed an initial Schedule 13D on
January 30, 2004.
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock of Speedcom Wireless
Corporation. Speedcom's executive offices are located at 7020 Professional
Parkway East, Sarasota, FL 34240.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by SDS Capital Group SPC, Ltd., a Cayman
Islands corporation. SDS Management, LLC, a Delaware limited liability company,
is the investment manager (the "Investment Manager") of the Reporting Person.
Mr. Steven Derby, a United States citizen ("Mr. Derby"), is the sole managing
member of the Investment Manager. The Reporting Person is principally engaged in
making investments. The address of the principal business office of the
Reporting Person is RK Consulting (Cayman) Ltd., P.O. Box 174865, Cayman
Corporate Center, 27 Hospital Road, Georgetown, Grand Cayman, Cayman Islands.
The address of the principal business office of the Investment Manager is 53
Forest Avenue, 2nd Floor, Old Greenwich, Connecticut 06870. The address of the
principal business office of Mr. Derby is 53 Forest Avenue, 2nd Floor, Old
Greenwich, Connecticut 06870.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) During the last five years, neither the Reporting Person, the
Investment Manager, Mr. Derby nor any executive officer or
director of the Reporting Person or the Investment Manager has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, neither the Reporting Person, the
Investment Manager, Mr. Derby nor any executive officer or
director of the Reporting Person or the Investment Manager has
been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of
which such person or entity was or is subject to a judgment,
decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or
State securities laws or findings of any violation with
respect to such laws.
CUSIP No. 847703105 13D Page 6 of 10 Pages
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(f) Not applicable.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On January 27, 2004, the Reporting Person converted all shares of
Series B Convertible Preferred Stock of Speedcom held by the Reporting Person
into 15,925,990 shares of Common Stock at a conversion price of $.12 per share
pursuant to a Recapitalization Agreement dated December 31, 2003 between
Speedcom and the Reporting Person (the "Recapitalization Agreement"). The shares
of Series B Convertible Preferred Stock were purchased on August 23, 2001 by SDS
Merchant Fund, LP, a Delaware limited partnership ("SDS Merchant Fund"), and SDS
Merchant Fund paid the purchase price for such shares out of working capital of
SDS Merchant Fund. SDS Merchant Fund assigned and transferred all of the shares
of Common Stock and other securities of Speedcom beneficially owned by it to the
Reporting Person effective as of October 1, 2003.
On January 23, 2004, the Reporting Person purchased 2,233,333 shares of
Common Stock in a private transaction for an aggregate purchase price of $67,000
pursuant to a Securities Purchase Agreement dated as of January 23, 2004 by and
among P-Com, Inc., the Reporting Person and the other purchasers named therein
(the "Securities Purchase Agreement") and paid the purchase price for such
shares out of working capital of the Reporting Person.
SDS Merchant Fund purchased 25,000 shares of Common Stock in the open
market on August 27, 2002 at $.09 per share and paid the purchase price for such
shares out of its working capital. SDS Merchant Fund acquired 570,000 shares of
Common Stock in September 2002 pursuant to a cashless exercise of a warrant held
by SDS Merchant Fund and surrendered 71,250 shares issuable upon exercise of the
warrant in connection therewith. SDS Merchant Fund acquired 227,705 shares of
Common Stock on December 26, 2002 pursuant to a cashless exercise of a warrant
and surrendered 75,901 shares issuable upon exercise of the warrant in
connection therewith. Pursuant to a letter agreement dated October 22, 2003
between Speedcom and SDS Merchant Fund (the "Letter Agreement"), SDS Merchant
Fund acquired 5,601,358 shares of Common Stock as satisfaction and repayment in
full for certain promissory notes issued by Speedcom to SDS Merchant Fund.
ITEM 4. PURPOSE OF TRANSACTION
The purpose of the acquisitions by the Reporting Person was to purchase
and acquire securities of Speedcom for investment purposes.
SDS Merchant Fund assigned and transferred all of the shares of Common
Stock and other securities of Speedcom beneficially owned by it to the Reporting
Person effective as of October 1, 2003.
CUSIP No. 847703105 13D Page 7 of 10 Pages
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On January 27, 2004, the Reporting Person converted all shares of
Series B Convertible Preferred Stock of Speedcom held by the Reporting Person
into 15,925,990 shares of Common Stock at a conversion price of $.12 per share
pursuant to the Recapitalization Agreement. The shares of Series B Convertible
Preferred Stock were purchased on August 23, 2001 by SDS Merchant Fund.
On January 23, 2004, the Reporting Person purchased 2,233,333 shares of
Common Stock in a private transaction for an aggregate purchase price of $67,000
pursuant to the Securities Purchase Agreement.
Outlined below is a summary of the various transactions effected by SDS
Merchant Fund:
SDS Merchant Fund purchased 25,000 shares of Common Stock in the open
market on August 27, 2002 at $.09 per share.
SDS Merchant Fund acquired 570,000 shares of Common Stock in September
2002 pursuant to a cashless exercise of a warrant and surrendered 71,250 shares
issuable upon exercise of the warrant in connection therewith.
On December 26, 2002, SDS Merchant Fund acquired 227,705 shares of
Common Stock pursuant to a cashless exercise of a warrant and surrendered 75,901
shares issuable upon exercise of the warrant in connection therewith.
On October 22, 2003, SDS Merchant Fund acquired 5,601,358 shares of
Common Stock pursuant to the Letter Agreement. The shares of Common Stock were
acquired in satisfaction and as repayment in full for certain promissory notes
issued by Speedcom to SDS Merchant Fund which were then outstanding. The date of
issuance and the amount of outstanding principal and accrued interest on each
promissory note issued by Speedcom to SDS Merchant Fund as of the date of the
Letter Agreement is as follows: (i) note issued on June 10, 2002 in the
principal amount of $60,000 which accrued interest as of the date of the Letter
Agreement of $12,500; (ii) note issued on June 11, 2002 in the principal amount
of $60,000 which accrued interest as of the date of the Letter Agreement of
$12,475; (iii) note issued on June 12, 2002 in the principal amount of $325,000
which accrued interest as of the date of the Letter Agreement of $67,438; (iv)
note issued on April 14, 2003 in the principal amount of $100,000 which accrued
interest as of the date of the Letter Agreement of $8,000; and (v) note issued
on May 8, 2003 in the principal amount of $25,000 which accrued interest as of
the date of the Letter Agreement of $1,750. The aggregate outstanding principal
amount of such promissory notes was $570,000 with accrued interest thereon of
$102,163. Pursuant to the Letter Agreement, SDS Merchant Fund exchanged these
notes for 5,601,358 shares of Common Stock.
Except as disclosed herein, the Reporting Person does not have any
other plans or proposals which would result in: (i) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation of Speedcom or any
of its subsidiaries; (ii) a sale or transfer of a material amount of assets of
Speedcom or any of its subsidiaries; (iii) any change in the present board of
directors or management of Speedcom, including any plans or proposals to change
the number or term of directors or to fill any existing vacancies on the board;
(iv) any material change in the present capitalization or dividend policy of
Speedcom; (v) any other material
CUSIP No. 847703105 13D Page 8 of 10 Pages
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change in Speedcom's business or corporate structure, (vi) any changes in
Speedcom's charter, by-laws or instruments corresponding thereto or other
actions which may impede the acquisition of control of Speedcom by any person;
(vii) causing a class of securities of Speedcom to be delisted from a national
securities exchange or cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association; (viii) causing
a class of equity securities of Speedcom to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934, as amended; or (ix) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
1. The Reporting Person.
(a) Amount beneficially owned: 24,583,386 shares of Common Stock.
(b) Percent of Class: 66.8%
(c) Number of shares as to which such person has:
(i) sole power to vote or direct the vote: 24,583,386
(ii) shared power to vote or direct the vote: 0
(iii) sole power to dispose or direct the disposition of:
24,583,386
(iv) shared power to dispose or direct the disposition of:
0
2. The Investment Manager - same as Mr. Derby, see below.
3. Mr. Derby.
(a) Amount beneficially owned: 24,583,386 shares of Common Stock.
(b) Percent of Class: 66.8%
(c) Number of shares as to which such person has:
(i) sole power to vote or direct the vote: 0
(ii) shared power to vote or direct the vote: 24,583,386
(iii) sole power to dispose or direct the disposition of: 0
(iv) shared power to dispose or direct the disposition of:
24,583,386
CUSIP No. 847703105 13D Page 9 of 10 Pages
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During the past 60 days the Reporting Person has effected the following
transactions:
On January 27, 2004, the Reporting Person converted all shares of
Series B Convertible Preferred Stock of Speedcom held by the Reporting Person
into 15,925,990 shares of Common Stock at a conversion price of $.12 per share
pursuant to the Recapitalization Agreement.
On January 23, 2004, the Reporting Person purchased 2,233,333 shares of
Common Stock in a private transaction for an aggregate purchase price of $67,000
pursuant to the Securities Purchase Agreement.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
To the knowledge of the Reporting Person on the date hereof, except to
the extent set forth herein or in the Exhibits herewith, the Reporting Person
does not have any other contracts, arrangements, understandings or relationship
(legal or otherwise) with any person with respect to securities issued by
Speedcom, including, but not limited to, transfer or voting of any such
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees or profits, divisions or profits or loss or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Joint Filing Agreement.
Exhibit 2 Recapitalization Agreement dated December 31, 2003 by and
between Speedcom and the Reporting Person.
CUSIP No. 847703105 13D Page 10 of 10 Pages
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SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: February 11, 2004
SDS CAPITAL GROUP SPC, LTD.
By: SDS Management, LLC,
its Investment Manager
By: /s/ Steven Derby
-----------------------------------
Name: Steven Derby
Title: Managing Member
SDS MANAGEMENT, LLC
By: /s/ Steven Derby
-----------------------------------
Name: Steven Derby
Title: Managing Member
/s/ Steven Derby
-----------------------------------
Steven Derby
EXHIBIT 1
JOINT FILING AGREEMENT
This Agreement is filed as an exhibit to this Amendment No. 1 to Schedule 13D
being filed by SDS Capital Group SPC, Ltd., SDS Management, LLC and Mr. Steven
Derby in compliance with Rule 13d-1(k) of the Securities and Exchange
Commission, which requires an agreement in writing indicating that this Schedule
13D to which this Agreement is attached is filed on behalf of the below-named
companies and individual, that they are each responsible for the timely filing
of the Schedule 13D and any amendments thereto and for the completeness and
accuracy of the information concerning such persons contained therein.
Dated: February 11, 2004
SDS CAPITAL GROUP SPC, LTD.
By: SDS Management, LLC,
its Investment Manager
By: /s/ Steven Derby
-----------------------------------
Name: Steven Derby
Title: Managing Member
SDS MANAGEMENT, LLC
By: /s/ Steven Derby
-----------------------------------
Name: Steven Derby
Title: Managing Member
/s/ Steven Derby
-----------------------------------
Steven Derby
EXHIBIT 2
RECAPITALIZATION AGREEMENT
December 31, 2003
VIA FACSIMILE AND FIRST CLASS MAIL
----------------------------------
To the holders of Series B Convertible Preferred Stock listed on Schedule A
attached hereto
RE: RECAPITALIZATION AGREEMENT
Ladies and Gentlemen:
Pursuant to our communication dated November 28, 2003 and subsequent discussions
with SPEEDCOM Wireless Corporation's (the "COMPANY" or "SPEEDCOM") majority
holders of the Company's outstanding demand notes and the Company's Series B
Convertible Preferred Stock (the "SERIES B PREFERRED"), we propose the
recapitalization transaction described herein pursuant to which all outstanding
shares of Series B Preferred shall be exchanged for shares of the Company's
common stock.
As you are aware, the Company does not have the financial resources needed to
pay its outstanding liabilities. Now that the sale of substantially all of the
operating assets of the Company to P-Com, Inc. ("P-COM") has closed, the
Company's assets consist of approximately $75,000 in cash and 63,500,000 shares
of P-Com common stock (having a value of approximately $9,525,000 as of December
15, 2003) and, in addition to liabilities associated with the Series B
Preferred, the Company has liabilities of approximately $2,100,000. Inclusive in
the Company's liabilities are accrued financial advisory and financing fees in
the amount of $300,000, which is reduced by $35,600 from the total amount owed.
These fees were calculated using the following remuneration guideline formula:
(($12,260,000 (reported gain on sale) X 2%) + ($4,523,000 (financings) X 2%) =
$335,660
SPEEDCOM plans to contact all of its creditors and offer to settle its
outstanding liabilities by issuing shares of common stock at a value of $.12 per
share in exchange for and in full satisfaction of such liabilities.
The Series B Preferred is senior to the Company's common stock and restricts the
ability of the Company to engage in certain transactions that the Company
believes to be in its best interests. Thus, in addition to eliminating all
outstanding debt and trade liabilities of the Company, the Company wishes to
eliminate all liabilities and obligations in respect of the Series B Preferred
by exchanging all of the outstanding Series B Preferred for 76,868,961 shares of
the Company's common stock in the aggregate as described below.
Schedule B attached hereto shows the capitalization of the Company assuming that
all of the foregoing liabilities are so exchanged for the Company's common
stock.
Based on the following assumptions we propose to you as follows:
--------------------------------------------------------------------------------
Assumptions
--------------------------------------------------------------------------------
SPEEDCOM Share Price $.12
(debt conversion price versus market price)
--------------------------------------------------------------------------------
Dividend Yield 14%
--------------------------------------------------------------------------------
Days Accrued (ending December 31, 2003) 130
--------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Existing Liquidation Payout
----------------------------------------------------------------------------------------------------------------------
No. of Pf. Shares Liq. Price Dollar Value No. of Common Shares*
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Liquidation Preference 3,835,554 $4.50 $17,259,993 143,833,275
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
No. of Pf. Shares Div. Yield Dollar Value No. of Common Shares
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Dividend Accrual 3,835,554 14.00% $860,635 7,171,958
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Late Fee $163,970 1,366,417
(S-3 Reg.)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Total 152,371,650
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
* Note: Rather than using market price, this figure was reached using the higher
debt conversion price (e.g. $.12).
----------------------------------------------------------------------------------------------------------------------
Proposed Payout
----------------------------------------------------------------------------------------------------------------------
Pf. Face ($) Share Price Dollar Value No. of Common Shares
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Liquidation Preference $8,629,988 $0.12 $8,629,988 71,916,567
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Pf. Face ($) Div. Yield Dollar Value No. of Common Shares
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Dividend Accrual $8,629,988 14.00% $430,317 3,585,977
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Late Fee $163,970 1,366,417
(S-3 Reg.)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Total 76,868,961
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Note: The late fee shares are included in the "other debt" line item in the
capitalization table attached as Schedule B.
After conversion of all outstanding obligations into SPEEDCOM common stock,
SPEEDCOM will have approximately 116,500,000 common shares outstanding. The
Company plans to distribute approximately 62,500,000 common shares of P-Com
(OTCBB: PCOM), which equals approximately .552 P-Com, Inc. common shares for
each common share of SPEEDCOM (see Schedule C attached).
Management anticipates that at some point during the First Quarter of 2004, the
Company may enter into an agreement to merge a private company into SPEEDCOM. It
is believed that post closing, SPEEDCOM shareholders would have an equity stake
in the new company ranging from 6%-9%. Thus, you would retain your SPEEDCOM
shares and remain a shareholder in the new company after the P-Com share
distribution.
By executing a counterpart of this letter agreement in the space provided below
you and the Company agree as follows:
1. Each outstanding share of Series B Preferred held by you is hereby exchanged
for 20.0411625 shares of the Company's common stock, and effective as of the
date of your execution of this letter agreement, you shall have no further
rights with respect to the Series B Preferred other than the right to be issued
such shares of the Company's common stock in accordance herewith. You agree to
deliver to the Company each stock certificate representing your shares of Series
B Preferred (or an appropriate certificate of loss and indemnity, if requested)
promptly for cancellation. The Company shall issue to you the shares of common
stock for which your Series B Preferred is exchanged hereunder promptly
following the Effective Date (defined below) upon receipt of your executed
counterpart of this letter agreement and the related stock certificates (or
certificate of loss) representing the Series B Preferred you hold.
2. You hereby represent to the Company that (i) you are an accredited investor
as defined in Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and (ii) by reason of your business and financial experience,
you have such knowledge, sophistication and experience in business and financial
matters as to be capable of evaluating the merits and risk of an investment in
the Company's common stock, and that you are effecting the transactions
contemplated by this letter agreement for your own account and not with a view
to the distribution of any common stock received hereunder or with any present
intention of distributing or selling any such common stock except in compliance
with the Securities Act. You understand and agree that the Company's common
stock issuable to you hereunder has not been registered under the Securities Act
and that such common stock may be resold only if such sale is registered
thereunder or if an exemption from the registration requirements thereof is
available.
3. The Company hereby represents to you that the shares of the Company's common
stock issuable to you hereunder, when and as issued pursuant to the terms of
this letter agreement, shall be duly authorized, validly issued, fully paid and
non-assessable, and free and clear of any liens. Except for the representations
made in this Section 3 and in Section 4 below, the Company makes no
representations or warranties to you with respect to any of the matters
described in this letter agreement.
4. The individuals who have executed this letter agreement on behalf of you and
the Company, respectively, are fully authorized to sign on behalf of the
applicable party for the purpose of duly and legally binding such party to the
agreements contained herein.
5. You hereby consent to the exchange and issuance of the Company's common stock
for all of the outstanding Series B Preferred and the other transactions
described in this letter agreement for all purposes and waive any and all
covenants restricting such transactions, including without limitation the
restrictions contained in Section 3.1(c) and 3.9 of the Series B Convertible
Stock Purchase Agreement dated as of August 23, 2001 among the Company and the
other signatories thereto.
6. This letter agreement constitutes the entire agreement and understanding of
the parties hereto with respect to the exchange of the Series B Preferred and
supersedes all prior agreements and understandings, written or oral, among the
parties with respect thereto.
NOTWITHSTANDING ANYTHING TO CONTRARY CONTAINED HEREIN, THIS LETTER AGREEMENT
SHALL BE NULL AND VOID AND OF NO FORCE OR EFFECT IF ANY HOLDER OF THE SERIES B
PREFERRED FAILS TO ENTER INTO A RECAPITALIZATION AGREEMENT WITH THE COMPANY ON
TERMS SUBSTANTIALLY SIMILAR TO THOSE CONTAINED HEREIN (THE DATE AS OF WHICH ALL
HOLDERS OF SERIES B PREFERRED HAVE ENTERED INTO SUCH AGREEMENTS IS REFERRED TO
HEREIN AS THE "EFFECTIVE DATE"). THE COMPANY SHALL NOTIFY YOU PROMPTLY OF THE
OCCURRENCE OF THE EFFECTIVE DATE.
Please review this letter agreement over the coming weeks and we look forward to
your feedback in the early New Year.
If you agree and accept the foregoing, please sign and date below.
Very truly yours,
/s/ Mark Schaftlein by /s/ Gil Sharell
Mark Schaftlein
Chief Financial Officer
Accepted and agreed to as of Dec 31, 2003
------------
/s/ Steve Derby
----------------------------------------------
Name: Steve Derby
Title: Managing Member