EXHIBIT 2
SCP PRIVATE EQUITY PARTNERS II, L.P.
September 4, 2003
INSCI Corp.
Two Westborough Business Park
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxxx, President and Chief Executive Officer
Selway Partners, LLC
Selway Management, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxx
CIP Capital L.P.
000 Xxxxx Xxxx Xxxxx, Xxxxxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Gentleman:
This letter agreement confirms our agreement that following the closing of
the transactions contemplated by the Series C Convertible Preferred Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"), by and
among SCP Private Equity Partner II, L.P. ("SCP") and INSCI Corp. (the
"Company"), the Company, Selway Partners, LLC, Selway Management, Inc. and CIP
Capital L.P. will take all reasonable action to amend (a) the Certificate of
Designations, Number, Powers, Conversion Rights, Preferences and Relative,
Participating, Optional, and Other Special Rights and Qualifications,
Limitations and Restrictions of Series A Convertible Preferred Stock (the
"Series A Designation") and other related documents to change the conversion
price of the Series A Preferred Convertible Preferred Stock to $0.11; (b) the
Certificate of Designations, Number, Powers, Conversion Rights, Preferences and
Relative, Participating, Optional, and Other Special Rights and Qualifications,
Limitations and Restrictions of Series B Convertible Preferred Stock (the
"Series B Designation") and other related documents in accordance with the terms
set forth in the Proposed Series C Preferred Stock Term Sheet dated August 22,
2003 between the Company and SCP; and (c) the Series A Designation and the
Series B Designation to effectuate such other modifications to such designations
for purposes of clarifying the rights and
preferences of the Series A Convertible Preferred Stock and the Series B
Convertible Preferred Stock. SCP will cooperate with such parties in good faith
to ensure the timely filing of such amendments.
These changes shall include, but are not limited to the following:
Right of first refusal, participation and all other preemptive rights
as are described in the Series A and Series B Investment Agreements shall be
waived for future transactions.
Anti-dilution protection shall be as described in the Series C Term
Sheet and in the Series C Designation.
The revised Series B Preferred Conversion Price shall be .096980 in
the amended Series B Certificate of Designation.
A stock split of the Series B Preferred of 35:1 will result in a total
of 4,317,040 Series B Preferred post closing under the amended Certificate of
Designation. Such shares are convertible into 86,340,800 shares of common stock.
The parties agree to negotiate in good faith to amend various
operating related restrictions in the Series A and Series B Investment
Agreements in recognition of the Company's current business status.
SCP also agrees that the Securities (as defined in the Purchase Agreement)
will be issued to SCP as set forth in the Purchase Agreement; provided that SCP
agrees that 309,342 shares (representing 20% of the total number of Securities
being purchased by SCP under the Purchase Agreement) of the 515,571 shares of
the Securities that will be issuable to SCP on the Closing Date upon payment of
$1,000,000 of the Purchase Price (as defined in the Purchase Agreement), will be
held in escrow pursuant to an escrow agreement mutually agreeable to SCP and the
Company and will be released in accordance with the terms of such escrow
agreement upon amendment of the Series A Designation and the Series B
Designation as provided herein.
-2-
If this letter agreement accurately reflects your understanding of our
agreement, please sign where indicated below. This letter agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same instrument.
Sincerely,
SCP PRIVATE EQUITY PARTNERS II, L.P.
By: SCP Private Equity II General Partner, L.P.,
its General Partner
By: SCP Private Equity II LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: a Manager
Acknowledged and Agreed:
INSCI CORP.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President, Chief Executive Officer,
Chief Financial Officer and Secretary
SELWAY PARTNERS, LLC
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
SELWAY MANAGEMENT, INC.
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
CIP CAPITAL L.P.
-3-
By: /s/ Xxxxxx X. Carry
---------------------------------------
Name: Xxxxxx X. Carry
Title: President, CIP Capital Management, Inc.
General Partner
-4-
