Exhibit 10.4
RCG COMPANIES INCORPORATED
6836 Morrison Boulevard, Suite 200
Charlotte, NC 28211
April 6, 2005
Crescent International Ltd. Perfect Timing, LLC
Alpha Capital AG Andrew Reckles
Bristol Investment Fund, Ltd. JGB Capital L.P.
Palisades Master Fund LP Portside Growth and Opportunity Fund
Ladies and Gentlemen:
Reference is hereby made to that certain
(i) Securities Purchase Agreement dated September 13, 2004 (the
"Preferred Stock Purchase Agreement"), by and among RCG
Companies Incorporated (the "Company") and the purchasers
signatory thereto (the "Preferred Stock Purchasers"), pursuant
to which the Company issued certain shares of Series A
Preferred Stock (the "Preferred Stock") and common stock
purchase warrants (the "Preferred Stock Warrants") to the
Preferred Stock Purchasers;
(ii) Securities Purchase Agreement dated February 8, 2005 (the
"Debenture Purchase Agreement"), by and among the Company and
the purchasers signatory thereto ("Debenture Purchasers"), and
that certain Security Agreement dated February 8, 2005 (the
"Security Agreement"), by and among the Company, all
subsidiaries of the Company and the Debenture Purchasers,
pursuant to which agreements the Company issued certain
convertible debentures (the "Debentures") and common stock
purchase warrants (the "Debenture Warrants") to the Debenture
Purchasers; and
(iii) Securities Purchase Agreement dated October 2003 (the "October
Purchase Agreement"), by and among the Company and the
purchasers signatory thereto (the "October Purchasers" and
together with the Preferred Stock Purchasers and the Debenture
Purchasers, the "Purchasers") and common stock purchase
warrants issued pursuant thereto (the "$.94 Warrants" and
collectively with the Preferred Stock Warrants and Debenture
Warrants, the "Warrants").
The Preferred Stock Purchase Agreement, the Debenture Purchase
Agreement and the October Purchase Agreement are collectively referred to as the
"Purchase Agreements". The Purchase Agreements, Preferred Stock, Warrants,
Security Agreement, Debentures, and all agreements, instruments, certificates,
and other securities issued or entered into in connection therewith and any
other agreements you have with the Company are sometimes herein collectively
referred to as the "Transaction Documents."
April 6, 2005
Page 2
WHEREAS, the Company has determined it to be in its best interests to
offer and sell through a private placement to be closed on or before April 22,
2005 through Roth Capital Partners, LLC, as a placement agent, approximately
$35,000,000, but may, at the Company's sole discretion, be more or less (the
"Private Placement"), shares of redeemable convertible preferred stock of the
Company with a conversion price at closing of $0.55 (the "Private Placement
Preferred Stock") and common stock purchase warrants of the company with an
exercise price at closing of $0.55 per share (the "Private Placement Warrants"),
and in connection therewith to effectuate, upon receipt of stockholder approval,
a reverse stock split (the "Reverse Stock Split").
WHEREAS, the Company has determined it to be in its best interests to
use certain of the proceeds from the Private Placement to (i) acquire 100% of
the outstanding capital stock of OneTravel, Inc. (the "Acquisition"), and (ii)
to redeem the Debentures (the "Redemption").
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, notwithstanding any provision in any Transaction Documents
to the contrary, the Company and the Purchasers hereby agree as follows:
(i)
(a) the Purchasers, severally and not jointly, waive any right of
first refusal, participation or similar right, that any of
them may have under any Transaction Document to participate in
the Private Placement and, in connection therewith, waive any
claims that they may respectively have against any investment
banker, placement agent or potential investor in the Private
Placement as a result of the execution, delivery, performance
of, or participation in, the Private Placement;
(b) upon the closing of the Private Placement, the Company will
redeem, and the Purchasers hereby consent to the Redemption
of, the Debentures for an amount equal to 110% of the
outstanding principal amount thereof, and in connection
therewith the Debenture Purchasers agree to tender their
respective Debentures for Redemption at closing;
(c) effective immediately upon the closing of the Private
Placement and the receipt of the approval of our stockholders
as may be required under the rules of the American Stock
Exchange, (1) the conversion price of the Preferred Stock and
the exercise price of each of the $.94 Warrants and Debenture
Warrants shall be automatically adjusted to and permanently
fixed at $0.55, except that the conversion price of the
Preferred Stock will be reset to the same price which, and at
the same time as, the Private Placement Preferred Stock is
reset in connection with the Reverse Stock Split, and (2) the
exercise price of the Preferred Stock Warrants with an
April 6, 2005
Page 3
original exercise price of $1.20 shall automatically be
adjusted to and permanently fixed at $1.00, which adjustment
shall require no further action by either the Company or any
of the Purchasers;
(d) other than the adjustments specified in clause (c) above,
neither the exercise price of the Warrants nor the conversion
price of the Preferred Stock shall be subject to further
adjustments other than equitable adjustments following
subsequent stock splits and reverse stock splits (including
the Reverse Stock Split) or issuances or distributions to all
of our equity holders, and other similar events not relating
to the price of subsequent agreements relating to or issuances
of our securities, including the Private Placement other than
as specified in (c) above; and
(e) each Purchaser, severally and not jointly with the other
Purchasers, hereby agrees that neither it, nor any person
acting on its behalf or in concert therewith will engage in
any transactions in or involving our common stock (including
"Short Sales" as hereinafter defined) (i) until such time as
the closing of the Private Placement has been publicly
disclosed or April 23, 2005, whichever is earlier, and (ii) if
the Private Placement has closed no later than April 22, 2005,
during the time period that is used to calculate the reset
conversion price of the Private Placement Preferred Stock as a
result of the Reverse Stock Split. "Short Sales" include,
without limitation, all "short sales" as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and
all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and
lending of securities and sales and other transactions through
non-US broker dealers or foreign regulated brokers.
Notwithstanding anything herein to the contrary, in no event
shall the restrictions on a Purchaser's ability to undertake
any such transactions as provided in this clause (i)(e) be
more restrictive than the restrictions on the purchasers in
the Private Placement.
(ii) conditional upon and subject to the Company performing its
obligations under clause (i)(b) above, each Purchaser, severally and
not jointly with the other Purchasers, hereby:
(a) consents (to the extent it has the right or is required to do
so) to the Private Placement and the designation and issuance
of the Private Placement Preferred Stock as a security pari
passu with the Preferred Stock;
(b) agrees that all "Obligations" under the Security Agreement
will have been satisfied in full upon the payment of the
Redemption amount under clause (i)(b) above, and in connection
therewith, each Debenture Purchaser shall, at the reasonable
request of the Company, execute such termination statements
and other documents (including an estoppel certificate and
payoff letter) and make or join with the Company in such other
April 6, 2005
Page 4
filings with respect to any financing statements or similar
documents executed or filed pursuant to the Security Agreement
as may be reasonably requested by the Company to evidence the
termination of the security interests and liens under the
Security Agreement;
(c) agrees to modify and amend the Purchasers' respective
unsatisfied registration rights (it being understood that the
only Company securities not yet registered for the Purchasers
on the date hereof are the shares underlying the Debenture
Warrants) and the Transaction Documents entered in to in
connection therewith, such that (1) the Company may register
the resale of the shares of common stock issuable in
connection with the Private Placement concurrently with, and
in the same registration statement as, the registration of the
shares of common stock issuable upon exercise of the Debenture
Warrants, and may include the shares issued or issuable in
connection with the Farequest Holdings, Inc. merger, and up to
an additional 200,000 (calculated before giving effect to the
Reverse Split) common shares (2) the "Filing Date" will be the
earlier of (x) the filing date of the next registration
statement on Form S-3, which the Company will file to cover
the common stock issuable in connection with the Private
Placement and (y) July 15, 2005, (3) the "Effectiveness Date"
shall be the date on which the registration statement required
in connection with the Private Placement is required to first
be declared effective and (4) the Company may file additional
registration statements at any time following the filing of
your registration statement;
(d) waives any obligation of the Company to conduct a meeting of
its shareholders prior to June 30, 2005;
(e) acknowledges, consents to and approves the Reverse Stock Split
and the Redemption;
(f) waives any violations of the terms of, or conflicts with, or
liquidated damages in connection with, the Transaction
Documents which may exist or which may arise solely as a
result of the entering into or consummation of any of the
Private Placement, the Reverse Stock Split and the Redemption
and the respective transactions undertaken by the Company in
connection therewith;
(g) acknowledges that no default or violation by the Company of
any term of any Transaction Document has occurred that has not
been waived or cured; and
(h) waives any liquidated or other damages and penalties that
otherwise might have accrued to the benefit of the Purchasers
under the Transaction Documents prior to the Redemption.
April 6, 2005
Page 5
The Company acknowledges and agrees that any Voting Agreements
delivered to the investors under the Private Placement will provide that the
persons delivering such agreements will vote in favor of the reset of the
exercise prices and conversion prices as provided in clause (i)(c) above. The
Company also agrees that it will submit to its stockholders for approval as a
single proxy item (or otherwise provide that the approvals will be contingent
upon approval of both) the matters required to be approved by the stockholders
for the Private Placement and the resetting of exercise prices and conversion
prices as provided in clause (i)(c) above.
This letter agreement shall not be effective unless and until all
Purchasers agree to all of the foregoing actions, which agreement shall occur on
or before April 15, 2005.
Other than the waivers, consents and agreements set forth in clause
(i)(a) and (i)(e) (which will be irrevocable, effective and permanent upon the
execution and delivery of counterpart signature pages of this letter, the
waivers, consents and agreements set forth in this letter agreement shall
terminate ab initio and be of no further force and effect among the parties if
the closing of the Private Placement or the Redemption do not occur by April 22,
2005.
This letter is not a "Pre-Notice" under the Debenture Purchase
Agreement and shall not operate as an offer to sell securities to any Purchaser
pursuant to any other Transaction Document.
Each Debenture Purchaser hereby represents and warrants that it is the
sole owner of 100% of the Debentures originally issued to it upon the closing of
the transactions contemplated by the Debenture Purchase Agreement, so that, upon
the Redemption of its Debentures in accordance with clause (i)(b) above, all
Debentures issued to it at such closing will be fully redeemed, paid off and
discharged. Each Preferred Stock Purchaser hereby represents and warrants that
it is the sole owner of 100% of the Preferred Stock and Preferred Stock Warrants
originally issued to it upon the closing of the transactions contemplated by the
Preferred Stock Purchase Agreement. Each October Purchaser hereby represents and
warrants that it is the sole owner of 100% of the $.94 Warrants originally
issued to it upon the closing of the transactions contemplated by the October
Purchase Agreement. Each Purchaser severally and not jointly hereby acknowledges
the confidential nature of the information contained in this letter, and agrees
to maintain in strictest confidence such information and the existence and terms
of this letter. The Company agrees to file an 8-K with regard to this Agreement
at the same time it files an 8-K regarding the Private Placement.
This letter agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument and
shall become effective when counterparts have been signed by each party and
delivered to the other parties hereto, it being understood that all parties need
not sign the same counterpart. Execution of this letter agreement may be made by
delivery by facsimile.
April 6, 2005
Page 6
Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the
applicable Purchase Agreements, except as set forth on the signature pages
hereto.
The Company acknowledges and agrees that no consideration other than
the consideration set forth herein has been or shall be offered or paid to any
other person to obtain a Purchaser's agreement to enter into this letter
agreement or agree to the terms set forth herein. The first sentence of this
paragraph is intended to treat for the Company the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in concert or as a
group with respect to the purchase, disposition or voting of securities of the
Company or otherwise. We have elected to provide all Purchasers with the same
letter agreement for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
Except as expressly amended, waived or modified hereby, the Transaction
Documents are ratified and confirmed by the parties hereto and remain in full
force and effect in accordance with the terms hereof.
By their respective execution and delivery of this letter agreement,
each Purchaser and the Company hereby represents and warrants that the
execution, delivery, performance and consummation of this letter agreement has
been duly authorized by all necessary action on the part of such Purchaser or
the Company, as applicable, and upon the delivery of signatures to this letter
agreement by all Purchasers or the Company, as applicable, this letter agreement
shall form a legal and binding agreement of such Purchasers or the Company, as
applicable, enforceable against the signatory in accordance with the terms
hereof.
Sincerely,
RCG Companies Incorporated
/s/ William Goldstein
Chairman of the Board
Name of Purchaser: __________________________
Signature of Authorized Signatory of Purchaser: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________