1
EXHIBIT 10.1
[EXECUTION COPY]
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
February 2, 2001, by and between The viaLink Company, a Delaware corporation
(the "Company"), with headquarters located at 00000 Xxxx Xxxx Xxxxx 000, Xxxxxx,
Xxxxx 00000 and Velocity Investment Partners Ltd. ("Purchaser") with regard to
the following:
RECITALS
A. The Company and Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
B. Purchaser desires to purchase, upon the terms and conditions stated
in this Agreement, (i) Series A Convertible Participating Preferred Stock of the
Company having the rights set forth in the Certificate of Designations,
Preferences and Rights (the "Certificate of Designation") attached hereto as
Exhibit A (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock, par value $.001 per share (the "Common Stock"), (ii)
Series A Warrants in the form of Exhibit B attached hereto (the "Series A
Warrants") and (iii) Series B Warrants in the form of Exhibit C attached hereto
(the "Series B Warrants" and, together with the Series A Warrants, the
"Warrants"). The Warrants entitle the holder thereof to purchase the number of
shares (the "Warrant Shares") of Common Stock as set forth below. The shares of
Common Stock issuable upon conversion of or otherwise pursuant to the Preferred
Stock are referred to herein as the "Conversion Shares". The Preferred Stock,
the Warrants, the Warrant Shares and the Conversion Shares are each referred to
as a "Security" and collectively the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit D (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase of Preferred Stock and Warrants. Subject to the terms and
the satisfaction or waiver of the conditions set forth in this Agreement, the
issuance, sale and
2
purchase of the Preferred Stock and the Warrants shall be consummated in two (2)
separate closings. The first closing is hereinafter referred to as the "First
Closing," and the second closing is hereinafter referred to as the "Second
Closing (each of the First Closing and the Second Closing is sometimes referred
to herein as a "Closing"). The purchase price (the "Purchase Price") per share
of Preferred Stock shall be equal to $2,750.
a. The Company shall consummate the Second Closing by (and only by)
delivering a notice satisfying the conditions of this Section (the "Second
Closing Notice") to Purchaser at least three (3) business days prior to the date
that the Company desires to consummate the Second Closing. The Second Closing
(if any) shall be consummated on the date which is five (5) days after the date
on which the Registration Statement contemplated by Section 2.1 of the
Registration Rights Agreement (the "Registration Statement") is declared
effective. In the Second Closing Notice, the Company shall represent to
Purchaser that (i) the Registration Statement is effective or will be declared
effective at the Second Closing; (ii) the Company elects to consummate the
transactions contemplated hereby as the Second Closing; and (iii) the conditions
set forth in Section 7.2 hereof have been satisfied or will be satisfied upon
the Second Closing.
b. On the date of the First Closing, subject to the satisfaction or
waiver of the conditions set forth in Articles VI and VII hereof, the Company
shall issue and sell to Purchaser, and Purchaser, shall purchase from the
Company (i) 1,000 shares of Preferred Stock, (ii) a Series A Warrant entitling
the holder thereof to purchase 1,000,000 Warrant Shares and (iii) a Series B
Warrant entitling the holder thereof to purchase 666,667 Warrant Shares. The
aggregate Purchase Price for the Securities purchased at the First Closing shall
be two million seven hundred fifty thousand dollars ($2,750,000).
c. On the date of the Second Closing (if any), subject to the
satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof, the Company shall issue and sell to Purchaser and Purchaser shall
purchase from the Company (i) 727 shares of Preferred Stock and (ii) a Series A
Warrant entitling the holder thereof to purchase 727,000 Warrant Shares. The
aggregate Purchase Price for the Securities purchased at the Second Closing (if
any) shall be one million nine hundred ninety-nine thousand two hundred fifty
dollars ($1,999,250).
1.2 Form of Payment. At each Closing, Purchaser shall pay the aggregate
Purchase Price for the Preferred Stock and the Warrants being purchased by
Purchaser hereunder by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed stock
certificates and certificates representing the Warrants for the same, and the
Company shall deliver such Preferred Stock and certificates representing the
Warrants against delivery of such aggregate Purchase Price.
1.3 Closing Dates. Subject to the satisfaction or waiver of the
conditions set forth in Articles VI and VII below, the date and time of the
issuance, sale and purchase of the Securities pursuant to this Agreement and the
Investment Agreements (as defined herein) contemplated hereby shall be (i) for
the First Closing, within three (3) business days of the execution of this
Agreement and (ii) for the Second Closing, on the day three (3) business days
following receipt by Purchaser of the Second Closing Notice, from the Company.
Each Closing shall occur at
2
3
10:00 a.m. Chicago time, at the offices of Altheimer & Xxxx, 00 X. Xxxxxx Xxxxx,
Xxxxxxx, XX 00000.
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to the Company as set forth in this
Article II. Purchaser does not make any other representations or warranties,
express or implied, to the Company in connection with the transactions
contemplated hereby or by any other Investment Agreements and any and all prior
representations and warranties, if any, which may have been made by Purchaser to
the Company in connection with the transactions contemplated hereby shall be
deemed to have been merged in this Agreement and any such prior representations
and warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Preferred Stock and
the Warrants for Purchaser's own account for investment only and not with a view
toward or in connection with the public sale or distribution thereof, and
Purchaser has no present intention of selling, granting any participation in or
otherwise distributing the same. Purchaser is entering into this Agreement to
purchase Securities on its own behalf and is not relying on any other investor
in making its investment decision. By executing this Agreement, Purchaser
further represents that Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Purchaser will not resell the Preferred Stock, the Warrants or any
securities which may be issued upon conversion thereof except pursuant to sales
that are exempt from the registration requirements of the Securities Act and/or
sales registered under the Securities Act. Purchaser understands that Purchaser
must bear the economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act and any applicable
state securities laws or an exemption from such registration is available, and
that the Company has no present intention of registering any such Securities
other than as contemplated by the Registration Rights Agreement. By making the
representations in this Section 2.1, Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from registration under the Securities
Act.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
2.3 Reliance on Exemptions. Purchaser understands that the Securities
are being offered and sold to Purchaser in reliance upon specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Securities.
2.4 Information. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company and
materials relating to the offer
3
4
sale of the Preferred Stock which have been specifically requested by Purchaser
which is all the information Purchaser considers necessary or appropriate for
deciding to purchase the Securities. Purchaser has been afforded the opportunity
to ask questions of the Company and has received what Purchaser believes to be
complete and satisfactory answers to any such inquiries. Neither such inquiries
nor any other due diligence investigation conducted by Purchaser or any of its
representatives shall modify, amend or affect Purchaser's right to rely on the
Company's representations and warranties contained in Article III hereof.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
will not be registered under the Securities Act or any state securities laws,
and may not be transferred unless subsequently registered thereunder or an
exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof); (ii) any sale of such Securities made in reliance on Rule
144 under the Securities Act (or a successor rule) ("Rule 144") may be made only
in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities without registration under the
Securities Act under circumstances in which the seller may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to this Agreement or
the Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Preferred Stock and the Warrants, and until such time
as the Conversion Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser pursuant to Rule 144, the certificates for the
Conversion Shares and Warrant Shares (respectively) will bear a restrictive
legend (the "Legend") in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE
OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
4
5
Except for the legends contemplated by this Section 2.7, Section 5.1 hereof and
the information required to be set forth on or stated on certificates pursuant
to Section 151(f) of the Delaware General Corporation Law, the Securities shall
bear no other legend.
2.8 Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their terms.
2.9 Residency. Purchaser is a resident of the Cayman Islands.
2.10 Trading Limitations.
(a) Purchaser represents that it has not (nor others acting on behalf
of, and pursuant to instructions from, Purchaser) engaged in any trading
activity involving the Company's Common Stock (through direct or indirect
purchases or sales) prior to the First Closing and agrees that, so long as it
owns any Securities, it will conduct any sales of Common Stock in compliance
with all relevant securities laws and regulations.
(b) During the fifteen (15) consecutive trading days immediately
preceding any Reset Date (as defined in the Certificate of Designation) on which
a reset pursuant to the Certificate of Designation is being calculated (a
"Trading Limitation Period"), Purchaser will not (i) create any daily low
trading prices in the Common Stock, (ii) have a Net Short Position (as defined
below) in the Common Stock or (iii) unless otherwise authorized by the Company
in writing, sell a number of shares of Common Stock, Conversion Shares and/or
Warrant Shares in excess of 15% of the aggregate trading volume of the Common
Stock on Nasdaq (as defined herein) (or the principal trading market on which
the Common Stock is then traded) as reported by Bloomberg during the applicable
Trading Limitation Period; provided that on any such day, Purchaser will not
sell a number of shares of Common Stock in excess of 20% of the trading volume
of the Common Stock on Nasdaq (or the principal trading market on which the
Common Stock is then traded) as reported by Bloomberg for such day; and
provided, further, that the limitations on sales contained in this Section
2.10(b)(iii) shall not apply to sales of shares of Common Stock at or above 110%
of the then applicable Conversion Price (as defined in the Certificate of
Designation). "Net Short Position" means that the aggregate short position of
Purchaser and its affiliates at any given time exceeds the number of shares of
Common Stock owned by Purchaser and its affiliates (including any shares of
Common Stock, Conversion Shares issuable upon conversion of the Preferred Stock
and Warrant Shares issuable upon exercise of the Warrants, without giving effect
to any limitations on the conversion or exercise thereof).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that as of the date
hereof, as of the First Closing, as of the Second Closing, and except as
specifically set forth in the Schedule of Exceptions attached hereto (the
"Schedule of Exceptions"):
5
6
3.1 Organization and Qualification. The Company and each of its
subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, and has the requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction where the failure to so qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on either
(i) the business, operations, properties, financial condition or operating
results of the Company and its subsidiaries, taken as a whole on a consolidated
basis, (ii) the Securities, (iii) the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith or (iv) the
authority or ability of the Company to perform its obligations under this
Agreement, the Certificate of Designation, the Warrants, the Registration Rights
Agreements, the Management Agreements (as hereinafter defined) or other
agreements or instruments to be entered into in connection herewith and
therewith (collectively, the "Investment Agreements").
3.2 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants, the Certificate of Designation and the Registration Rights Agreement,
and to issue and sell, perform its obligations with respect to, the Preferred
Stock and the Warrants in accordance with the terms hereof and to issue the
Conversion Shares in accordance with the terms and conditions of the Certificate
of Designation and the Warrant Shares in accordance with the terms and
conditions of the Warrants; (b) the execution, delivery and performance of this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the other Investment Agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation the
issuance of the Preferred Stock and the Warrants and the reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) have been
duly authorized by all necessary corporate action and, except as set forth on
Schedule 3.2 hereof, no further consent or authorization of the Company, its
board of directors, or its stockholders or any other person, body or agency is
required with respect to any of the transactions contemplated hereby or thereby
(whether under rules of the Nasdaq SmallCap Market or the Nasdaq National Market
("Nasdaq"), the National Association of Securities Dealers or otherwise), other
than the Nasdaq Authorization (as herein defined) and the declaration or
ordering of effectiveness by the SEC of the Registration Statement as
contemplated by the Registration Rights Agreement (collectively, the
"Consents"); (c) this Agreement, the Registration Rights Agreement, the
Certificate of Designation, the Preferred Stock and the Warrants have been duly
executed and delivered by the Company; and (d) each Investment Agreement
constitutes legal, valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Preferred Stock and the Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the
6
7
number of shares to be initially reserved for issuance upon conversion of the
Preferred Stock and the exercise of the Warrants is set forth on Schedule 3.3.
All of such outstanding shares of capital stock have been, or upon issuance will
be, validly issued, fully paid and non-assessable. Except as set forth in
Schedule 3.3, no shares of capital stock of the Company (including the Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares) are subject
to preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances. Except as disclosed in Schedule 3.3, as of
the date of this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement)
and (iii) there are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
holders of such securities). The Company further specifically represents that
RGC International Investors, LDC has exercised all warrants to purchase shares
of Common Stock owned by it. The Company has furnished to Purchaser true and
correct copies of the Company's Certificate of Incorporation as currently in
effect ("Certificate of Incorporation"), and the Company's Bylaws as currently
in effect (the "Bylaws"). The Company has set forth on Schedule 3.3 all
instruments and agreements (other than the Certificate of Incorporation and
Bylaws) governing securities convertible into or exercisable or exchangeable for
Common Stock of the Company (and the Company shall provide to Purchaser copies
thereof upon the request of Purchaser). Except as set forth on Schedule 3.3, the
Company has no indebtedness for borrowed money and no agreement providing for
indebtedness for borrowed money. Except as set forth on Schedule 3.3, the
Company has no subsidiaries and has no investments, either debt or equity, in
any other entity. The Company shall provide Purchaser with a written update of
this representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the date of the applicable
Closing. The Company does not have any so-called stockholder rights plan or
"poison pill" and there are no "shark-repellant" charter or bylaw provisions or
so-called "state anti-takeover" statutes applicable, in any case, to all or any
portion of the transactions contemplated hereby, including, without limitation,
issuance of the Securities.
3.4 Issuance of Shares. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the Preferred
Stock and the exercise of the Warrants in accordance with their respective
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances and will not be subject to preemptive
rights or other similar rights of stockholders of the Company, other than (i)
restrictions on transferability as may be applicable under federal and state
securities laws; (ii) restrictive stock legends contemplated by the Investment
Agreements;
7
8
or (iii) those created by Purchaser. The Preferred Stock and the Warrants are
duly authorized and are validly issued, fully paid and non-assessable, and free
from all taxes, liens claims and encumbrances and are not and will not be
subject to preemptive rights or other similar rights of stockholders of the
Company, other than (i) restrictions on transferability as may be applicable
under federal and state securities laws; (ii) restrictive stock legends
contemplated by the Investment Agreements; or (iii) those created by Purchaser.
The board of directors of the Company has unanimously approved the issuance of
the Preferred Stock and the Warrants pursuant to the terms hereof and of the
Conversion Shares and Warrant Shares issuable upon conversion of the Preferred
Stock and the exercise of the Warrants pursuant to the terms thereof (without
giving effect to any limitations on conversion or exercise contained therein,
including for purposes of Nasdaq Rule 4350 (the "Nasdaq Authorization")), has
unanimously recommended to the stockholders of the Company the approval of the
Nasdaq Authorization and will seek Stockholder Approval (as defined in Section
4.12) at the Company's next stockholder meeting, which shall be no later than
May 31, 2001. No further authorization or approval (other than the Stockholder
Approval) is required under the rules of Nasdaq with respect to the transactions
contemplated by this Agreement, including, without limitation, the issuance of
the Conversion Shares and the Warrant Shares and the inclusion thereof on
Nasdaq.
3.5 No Conflicts. The execution, delivery and performance of each of
the Investment Agreements by the Company, and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance and reservation for issuance, as applicable, of the Preferred
Stock, the Conversion Shares, the Warrants and the Warrant Shares) will not (a)
result in a violation of the Certificate of Incorporation or Bylaws, (b)
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 agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party (except for such conflicts, defaults, terminations, amendments,
accelerations, and cancellations as would not, individually or in the aggregate,
have a Material Adverse Effect), or (c) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, U.S.
federal and state securities laws and regulations) 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. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, Bylaws or
other organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. To
the Company's knowledge, the business of the Company and its subsidiaries is not
being conducted, and shall not be conducted so long as Purchaser owns any of the
Securities, in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal
except for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as set forth on
Schedule 3.5, 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 this Agreement or the
Registration Rights Agreement or to perform its obligations in accordance with
the terms hereof or thereof. The Company is not in violation of the listing
requirements of Nasdaq and does not reasonably anticipate that the Common Stock
will be de-listed by Nasdaq for the foreseeable future. The Company is not aware
of any facts or circumstances which might reasonably be expected to give rise to
any of the foregoing.
8
9
3.6 Registration and SEC Documents. The Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been so registered since November 14, 1996. Except as
disclosed in Schedule 3.6, since December 31, 1998, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act (all of the foregoing filed after December 31, 1998 and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being referred to herein as the "SEC
Documents" and all the SEC documents filed prior to the date of this Agreement,
the "Filed SEC Documents"). The Company has made available (which may include
access to the SEC's website) to Purchaser true and complete copies of the SEC
Documents, except for exhibits, schedules and incorporated documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except to the
extent corrected by a subsequent Filed SEC Document. None of the statements made
in any such SEC Documents is currently required to be updated or amended under
applicable law (except for such statements as have been amended or updated by
subsequent Filed SEC Documents prior to the date of this Agreement). The
financial statements of the Company included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, and the rules and regulations of the SEC during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they do not include footnotes or are condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the Filed SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred subsequent to the date of such financial statements in the ordinary
course of business consistent with past practice and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under U.S. generally accepted accounting principles to be reflected in
such financial statements, in each case of clause (i) and (ii) next above which,
individually or in the aggregate, are not material to the financial condition,
business, operations, properties, operating results or prospects of the Company
and its subsidiaries taken on a whole. The Filed SEC Documents contain or
incorporate by reference a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other instruments
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary is bound or to which any of the properties or assets of the Company
or any subsidiary is subject (each a "Contract"). None of the Company, its
subsidiaries or, to the best knowledge of the Company, any of the other parties
thereto, is in breach or violation of any Contract, which breach or violation
would have a Material Adverse Effect. No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or the happening
of any further event
9
10
or condition, would become a breach or default by the Company or its
subsidiaries under any Contract which breach or default would have a Material
Adverse Effect.
3.7 Absence of Certain Changes. Since December 31, 1999, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition or results of operations of the
Company or any of its subsidiaries, except as disclosed in Schedule 3.7 or as
disclosed in the SEC Documents filed after such date but prior to the date
hereof.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8, there
is no action, suit, proceeding, or to the knowledge of the Company or any of its
subsidiaries, inquiry or investigation before or by any court, public board,
governmental agency or authority, or self-regulatory organization or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such, wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect or
would adversely affect the transactions contemplated by this Agreement or any of
the other Investment Agreements or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other Investment Agreements.
The Company and each of its subsidiaries are unaware of any facts which could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could have a Material
Adverse Effect.
3.9 Disclosure. No information relating to or concerning the Company
set forth in this Agreement or provided to Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement and the
other Investment Agreements, no material fact (within the meaning of the federal
securities laws of the United States) exists with respect to the Company or any
of its subsidiaries which has not been publicly disclosed. The Company shall in
no event be deemed to have made to Purchaser any representations or warranties
with respect to any projections, estimates or budgets of future revenues,
expenses or expenditures, or future results of operations, which the Company
shall have supplied in good faith, except that with respect to projections
contained in the Confidential Private Placement Memorandum dated January 2001,
the Company represents that such projections were prepared in good faith and
that the Company believes there is a reasonable basis for such projections.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, that this Agreement and
the transactions contemplated hereby, and the relationship between Purchaser and
the Company, are "arms-length", and that any statement made by Purchaser, or any
of its representatives or agents, in connection with this Agreement or the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to Purchaser's purchase of the Securities and has not been relied
upon in any way by the Company, its officers, directors or other
representatives. The Company further represents to
10
11
Purchaser that the Company's decision to enter into this Agreement and the
transactions contemplated hereby has been based solely on an independent
evaluation by the Company and its representatives.
3.11 Current Public Information. The Company is currently eligible to
register the resale of the Conversion Shares and Warrant Shares on a
registration statement on Form S-3 under the Securities Act.
3.12 No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has conducted any "general solicitation," as described
in Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the Securities Act pursuant to the provisions of Regulation
D. The transactions contemplated hereby are exempt from the registration
requirements of the Securities Act, assuming the accuracy of the representations
and warranties herein contained of Purchaser to the extent relevant for such
determination.
3.14 No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with X.X. Xxxxxxx and Sons, Inc., Xxxxxxxx, Inc. and X.X.
Xxxxxxxxxx & Co., Inc. (the fees of which shall be paid in full by the Company).
The Company will indemnify Purchaser from and against any fees and expenses
sought or other claims made by X. X. Xxxxxxx and Sons, Inc., Xxxxxxxx, Inc. and
X.X. Xxxxxxxxxx & Co., Inc.
3.15 Acknowledgment of Dilution. The number of Conversion Shares
issuable upon conversion of the Preferred Stock and/or Warrant Shares issuable
upon exercise of the Warrants may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded in its good faith business judgment that such
issuance is in the best interests of the Company. The Company acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred Stock
and the Warrant Shares upon exercise of the Warrants is binding upon it and
enforceable regardless of the dilution that such issuance may have on the
ownership interests of other stockholders.
3.16 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of its
business as now
11
12
being conducted and as previously described in the Company's Annual Report on
Form 10-K for its most recently ended fiscal year. To the knowledge of the
Company and its subsidiaries, neither the Company nor any subsidiary of the
Company infringes on or is in conflict with any right of any other person with
respect to any Intangibles nor is there any claim of infringement made by a
third party against or involving the Company or any of its subsidiaries, which
infringement, conflict or claim, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
3.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee. Without limiting the generality of the foregoing, the Company and its
subsidiaries have not directly or indirectly made or agreed to make (whether or
not said payment is lawful) any payment to obtain, or with respect to, sales
other than usual and regular compensation to its or their employees and sales
representatives with respect to such sales.
3.18 Key Employees; Company's Knowledge. Each Key Employee (as defined
below) is currently serving the Company in the capacity disclosed in Schedule
3.18. No Key Employee, to the best of the knowledge of the Company and its
subsidiaries, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each Key Employee does not
subject the Company or any of its subsidiaries to any liability with respect to
any of the foregoing matters. No Key Employee has, to the best of the knowledge
of the Company and its subsidiaries, any intention to terminate or limit his
employment with, or services to, the Company or any of its subsidiaries, nor is
any such Key Employee subject to any constraints (e.g., litigation) which would
cause such employee to be unable to devote his full time and attention to such
employment or services. "Key Employee" means each of Xxxxx Xxxxxxxxx, Xxxxxx
Xxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxx and
Xxxx Xxxxx. For purposes hereof, the term "knowledge of the Company" shall mean
the knowledge of each of the Key Employees.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 Securities Laws. The Company agrees to file a Form D with respect
to the Securities with the SEC as required under Regulation D. The Company
shall, on or prior to the date of each Closing, take such action as is necessary
to sell the Securities to Purchaser in
12
13
accordance with applicable securities laws of the states of the United States,
and shall provide evidence of any such action so taken to Purchaser on or prior
to the date of each Closing. Without limiting any of the Company's obligations
under this Agreement, the Registration Rights Agreement, the Warrants or the
Certificate of Designation, from and after the date of the First Closing,
neither the Company nor any person acting on its behalf shall take any action
which would adversely affect any exemptions from registration under the
Securities Act with respect to the transactions contemplated hereby.
4.3 Reporting Status. So long as Purchaser beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities for working capital only, in the ordinary course of its
business, and, without limiting the generality of the foregoing, shall not use
such proceeds to make a loan to any employee, officer, director or stockholder
of the Company, to repay any loan or other obligation of the Company to any such
person or to repurchase or pay a dividend on shares of Common Stock or other
securities of the Company, other than any such payment explicitly required or
permitted by the terms of this Agreement, the Certificate of Designation or the
other Investment Agreements.
4.5 Restriction on Issuance of Securities. For a period beginning on
the date of the First Closing and ending on the date which is one hundred and
eighty (180) days (90 days if there is no Second Closing) following the
effective date of the Registration Statement, the Company shall not issue or
agree to issue, (except (i) to Purchaser pursuant to this Agreement, (ii)
pursuant to a bona fide business acquisition of or by the Company, whether by
merger, joint venture, consolidation, sale of assets, sale or exchange of stock
or otherwise that has been approved by the Board of Directors of the Company,
the primary purpose of which is not to raise equity capital, (iii) in private
placements of such securities pursuant to or in connection with a strategic
alliance or partnering relationship, the primary purpose of which is not to
raise equity capital, (iv) in a firm commitment underwritten public offering of
the Company's securities, (v) upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the Closings
and disclosed in the Schedule of Exceptions, (vi) pursuant to the Company's
stock option plans, employee stock purchase plan or restricted stock plans
approved by the stockholders of the Company, (vii) pursuant to written
agreements existing on the date hereof to independent contractors or consultants
for professional services provided to the Company, (viii) in connection with
lease lines bank financings or acquisitions of intellectual property rights, the
primary purpose of which is not to raise equity capital), any equity securities
at a price less than the fair market value thereof or any variably priced equity
securities or equity-linked or equity-like securities of the Company (or any
security convertible into or exercisable or exchangeable, directly or
indirectly, for equity, equity-linked or equity-like securities of the Company),
or (ix) to Key Employees of Preferred Stock and warrants upon receipt of
Stockholder Approval (as hereinafter defined) (each of the foregoing being a
"Restricted Security"). Without implication that the contrary would otherwise be
true, the Company shall not indirectly accomplish any action which the
immediately preceding sentence
13
14
would have otherwise prohibited from being effected directly (e.g., by an asset
drop-down to a subsidiary followed by the offering of securities of such
subsidiary).
4.6 Expenses. The Company shall pay to Purchaser, or at its direction,
at the First Closing, reimbursement for the expenses reasonably incurred by it
and its affiliates and advisors in connection with the negotiation, preparation,
execution, and delivery of this Agreement and the other Investment Agreements,
including, without limitation, Purchaser's and its affiliates' and advisors' due
diligence and attorneys' fees and expenses (the "Expenses"); provided, however,
that such reimbursement of Expenses shall not exceed $50,000 in the aggregate.
In addition, from time to time thereafter, upon Purchaser's written request,
subject to such $50,000 limit, the Company shall pay to Purchaser such Expenses,
if any, not so paid at the First Closing and/or covered by such payment, in each
case to the extent reasonably incurred by Purchaser.
4.7 Information. The Company agrees to deliver the following reports to
Purchaser until Purchaser transfers, assigns or sells all of its Securities: (a)
within five (5) business days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy
statements and any Current Reports on Form 8-K; and (b) on the same business day
as released, copies of all press releases issued by the Company or any of its
subsidiaries.
4.8 Listing. For so long as Purchaser owns any of the Securities, the
Company shall continue the listing and trading of its Common Stock on the Nasdaq
SmallCap Market, the Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange, secure and maintain listing and trading of the
Conversion Shares and Warrant Shares on such exchange, and comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of such exchange.
4.9 Prospectus Delivery Requirement. Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common Stock
in connection with any sale thereof pursuant to a registration statement under
the Securities Act covering the resale by Purchaser of the Common Stock being
sold, and Purchaser shall use its reasonable efforts to comply with the
applicable prospectus delivery requirements of the Securities Act in connection
with any such sale.
4.10 Intentional Acts or Omissions. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which, if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the other Investment Agreements or any of the
transactions contemplated hereby or thereby or the benefits intended to be
secured thereby by Purchaser (including, without limitation, pursuant to any
agreements or documents obtained by the Company as a condition to any Closing
hereunder). In addition, the Company shall not waive, and shall use its best
efforts to enforce any material rights under and shall not amend, the
Subscription Agreement of even date herewith among the Company and certain of
the Company's officers and the Escrow Agreement of even date herewith among the
Company, The Chase Manhattan Bank and the other parties listed thereto (the
"Management Agreements").
14
15
4.11 Corporate Existence. So long as Purchaser beneficially owns any
Securities, the Company shall use all commercially reasonable efforts to
maintain its corporate existence, except in the event of a merger, consolidation
or sale of all or substantially all of the Company's assets, as long as the
surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all Preferred Stock and the
exercise of the Warrants outstanding as of the date of such transaction
(including, without limitation, without giving effect to any limitations on
conversion or exercise thereof) and (ii) is a publicly traded corporation whose
common stock is listed for trading on the Nasdaq SmallCap Market, the Nasdaq
National Market, the New York Stock Exchange or the American Stock Exchange.
4.12 Share Authorization. The Company covenants and agrees that it
shall (i) solicit by proxy Stockholder Approval (as defined below) and (ii) use
its best efforts to obtain Stockholder Approval at its next stockholder meeting
which shall be held no later than May 31, 2001 (the "Stockholder Approval
Date"). For purposes hereof, "Stockholder Approval" means (a) authorization by
the required vote under Nasdaq Rule 4350 of the stockholders of the Company of
(i) the issuance of shares of Common Stock upon conversion of shares of
Preferred Stock pursuant to the terms of the Certificate of Designation and the
exercise of the Warrants pursuant to the terms thereof in the aggregate in
excess of 19.99% of the outstanding shares of Common Stock, and (ii) the
issuance of Preferred Stock and warrants for an aggregate purchase price of at
least $745,000 to one or more of the Key Employees, and (b) if necessary and to
the extent effected by stockholder vote, the elimination of any prohibitions
under the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or any of its securities on the Company's ability to issue shares of Common
Stock in excess of the Cap Amount (as defined in the Certificate of Designation)
and for all other applicable purposes. In addition, the Company shall, unless
otherwise consented to by Purchaser, have a definitive proxy statement mailed to
each stockholder of the Company at least ten (10) days prior to the Stockholder
Approval Date. The Company shall deliver any SEC comments it receives with
respect to its proxy statement to Purchaser and will not file such proxy
statement (or any revisions thereto), whether such proxy statement is in
preliminary or definitive form, without the approval of Purchaser, which
approval shall not be unreasonably withheld or delayed.
4.13 Transactions with Affiliates. The Company and each of its
subsidiaries will not enter into any agreement or arrangement, written or oral,
directly or indirectly, with an affiliate, or provide services or sell goods to,
or for the benefit of, or pay or otherwise distribute monies, goods or other
valuable consideration to, an affiliate, except upon fair and reasonable terms
under the circumstances as determined by the Company in good faith, taking into
account all of the facts and circumstances of such agreement or arrangement, and
except for existing intercompany debt or transactions with or between the
Company and any of its wholly-owned subsidiaries and payments and benefits to
officers and directors in their capacities as such in the ordinary course of
business, consistent with past practices.
4.14 Limitation of Agreements. The Company will not, and will not
permit any subsidiary to, enter into any Contract, or any amendment,
modification, extension or supplement
15
16
to any existing Contract, which limits the Company from performing its
obligations under any of the Investment Agreements or that would limit the
number of shares of Common Stock issuable to Purchaser upon conversion of the
Preferred Stock or exercise of the Warrants without Stockholder Approval,
including, without limitation, by integration of other shares of Common Stock
with the Cap Amount.
ARTICLE V
LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue a certificate without any legend to the holder of any Security upon
which such Legend is stamped, and a certificate for a Security shall be
originally issued without any legend, if, unless otherwise required by
applicable state securities laws, (a) the sale thereof is registered under the
Securities Act pursuant to an effective registration statement, (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company (the reasonable cost of which shall be borne by the
Company), to the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act or (c) Purchaser provides
reasonable assurances that such Security can be sold pursuant to Rule 144.
Purchaser agrees to sell all Securities, including those represented by a
certificate(s) from which the Legend has been removed, or which were originally
issued without the Legend, pursuant to an effective registration statement and
to deliver a prospectus in connection with such sale or in compliance with an
exemption from the registration requirements of the Securities Act. In the event
the Legend is removed from any Security or any Security is issued without the
Legend and thereafter the effectiveness of a registration statement covering the
resale of such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser holding such Security, the Company may
require that the Legend be placed on any such Security that cannot then be sold
pursuant to an effective registration statement or Rule 144 or with respect to
which the opinion referred to in clause (b) next above has not been rendered,
which Legend shall be removed when such Security may be sold pursuant to an
effective registration statement or Rule 144 or such holder provides the opinion
with respect thereto described in clause (b) next above.
5.2 Transfer Agent Instructions. The Company shall instruct its
transfer agent to issue certificates, registered in the name of Purchaser or its
nominee, for the Conversion Shares and/or Warrant Shares in such amounts as
specified from time to time by Purchaser to the Company upon, and in accordance
with, the conversion of the Preferred Stock and the exercise of the Warrants.
Such certificates shall bear a legend only in the form of the Legend and only to
the extent permitted by Section 5.1 above. The Company warrants that no
instruction other than such instructions referred to in this Article V, and no
stop transfer instructions other than stop transfer instructions to give effect
to Section 2.6 hereof in the case of the Conversion Shares and/or Warrant Shares
prior to registration of the Conversion Shares and/or Warrant Shares under the
Securities Act, will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company. Nothing in this Section shall affect in any way Purchaser's
obligations and agreement set forth in Section 5.1 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or in compliance with an exemption from
the
16
17
registration requirements of applicable securities laws. Without limiting the
foregoing, if (a) Purchaser provides the Company with an opinion of counsel,
which opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company (the reasonable cost of which shall be borne by the Company), to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) Purchaser transfers Securities
to an affiliate or pursuant to Rule 144, the Company shall permit the transfer,
and, in the case of the Conversion Shares and/or Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denomination as specified by Purchaser in order to effect such a
transfer or sale. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Purchaser by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Article V will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Article V, that
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Preferred Stock and the Warrants to
Purchaser at each Closing is subject to the satisfaction, as of the date of each
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived (except as
contemplated by Section 7.2(x) hereof) by the Company at any time in its sole
discretion:
(i) Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered the same
to the Company.
(ii) Purchaser shall deliver the applicable Purchase Price for
the Preferred Stock purchased at the Closing.
(iii) The representations and warranties of Purchaser shall be
true and correct as of the date when made and as of the Closing as
though made at that time, and Purchaser shall have performed, satisfied
and complied in all material respects with the covenants and agreements
required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement.
17
18
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE
7.1 Conditions to the First Closing. The obligation of Purchaser
hereunder to purchase the Preferred Stock and Warrants to be purchased by it on
the date of the First Closing is subject to the satisfaction of each of the
following conditions (including conditions to be performed at the First
Closing), provided that these conditions are for Purchaser's sole benefit and
may be waived by Purchaser at any time in Purchaser's sole discretion:
(i) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered the same
to Purchaser's counsel.
(ii) The Company shall have delivered duly executed
certificates for the Preferred Stock and duly executed Warrants being
so purchased by Purchaser at the Closing (each in such denominations as
Purchaser shall request).
(iii) The Common Stock shall be listed on the Nasdaq SmallCap
Market, the Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange and trading in the Common Stock shall not have
been suspended by the Nasdaq SmallCap Market, the Nasdaq National
Market, the New York Stock Exchange or the American Stock Exchange, the
SEC or other regulatory authority and no de-listing or suspension shall
be reasonably likely for the foreseeable future.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing as
though made at that time and the Company shall have performed,
satisfied and complied with the covenants and agreements required by
this Agreement to be performed or complied with by the Company at or
prior to the First Closing. Purchaser's counsel shall have received a
certificate, executed by the Chief Executive Officer or Chief Financial
Officer of the Company, dated as of the First Closing to the foregoing
effect and as to such other matters as may be reasonably requested by
Purchaser.
(v) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(vi) Purchaser's counsel shall have received the officer's
certificate described in Section 3.3, dated as of the First Closing.
(vii) Purchaser's counsel shall have received an opinion of
the Company's outside legal counsel, dated as of the First Closing in
the form attached hereto as Exhibit E.
(viii) The Company's transfer agent has agreed to act in
accordance with irrevocable instructions in the form attached hereto as
Exhibit F.
18
19
(ix) The Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Delaware and a
copy thereof certified by the Secretary of State of Delaware shall have
been delivered to Purchaser's counsel.
(x) Simultaneously with or prior to the First Closing, the
Company shall have sold Preferred Stock and warrants for an aggregate
purchase price of seven million dollars ($7,000,000) (including the
Securities sold pursuant hereto and excluding the sale of Preferred
Stock and warrants contemplated by Section 7.1(xii)).
(xi) The Company shall have provided evidence satisfactory to
Purchaser that Hewlett-Packard Company has converted a portion of the
convertible notes of the Company held by it into the Company's Common
Stock and agreed to a lock-up period on terms and conditions
satisfactory to Purchaser in its sole discretion, and consented to the
payment of dividends on the Preferred Stock.
(xii) Simultaneously with or prior to the First Closing, the
Company shall have entered into agreements reasonably satisfactory to
the Purchaser with one or more of the Key Employees providing for the
purchase and sale of Preferred Stock and warrants for an aggregate
purchase price of at least $745,000 and the applicable Key Employees
shall have placed at least $745,000 in escrow on terms reasonably
satisfactory to the Purchaser to be released to the Company upon
consummation of the sale of such Preferred Stock and warrants or to the
Key Employees if such purchase and sale does not receive Stockholder
Approval.
(xiii) The Company shall have filed a Form 8-K regarding its
revised financial projections for calendar year 2001 and issued a press
release regarding the conversion by Hewlett-Packard Company of one-half
of the amount of convertible notes held by it into the Company's Common
Stock.
7.2 Conditions to the Second Closing. The obligation of Purchaser
hereunder to purchase the Preferred Stock and Warrants to be purchased by it on
the date of the Second Closing is subject to the satisfaction of each of the
following conditions (including conditions to be performed at the Second
Closing), provided that these conditions are for Purchaser's sole benefit and
may be waived by Purchaser at any time in Purchaser's sole discretion:
(i) The First Closing shall have been consummated.
(ii) The Company shall have obtained Stockholder Approval on
or prior to May 31, 2001.
(iii) The Company shall have delivered duly executed
certificates for the Preferred Stock and duly executed Warrants being
so purchased by Purchaser at the Second Closing (each in such
denominations as Purchaser shall request).
(iv) The Common Stock shall be listed on the Nasdaq SmallCap
Market, the Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange and trading in the Common Stock shall not have
been suspended by the Nasdaq SmallCap Market, the Nasdaq National
Market, the New York Stock Exchange
19
20
or the American Stock Exchange, the SEC or other regulatory authority
and no delisting or suspension shall be reasonably likely for the
foreseeable future.
(v) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Second Closing
as though made at that time and the Company shall have performed,
satisfied and complied with the covenants and agreements required by
this Agreement to be performed or complied with by the Company at or
prior to the Second Closing, in each case, with respect to
representations and warranties, except for such changes as would not
have a Material Adverse Effect or a material adverse effect on
Purchaser's investment. Purchaser's counsel shall have received a
certificate, executed by the Chief Executive Officer or Chief Financial
Officer of the Company, dated as of the Second Closing to the foregoing
effect and as to such other matters as may be reasonably requested by
Purchaser.
(vi) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(vii) Purchaser's counsel shall have received the officer's
certificate described in Section 3.3, dated as of the Second Closing.
(viii) Purchaser's counsel shall have received an opinion of
the Company's outside legal counsel, dated as of the Second Closing, in
the form attached hereto as Exhibit E.
(ix) The Company's transfer agent has agreed to act in
accordance with irrevocable instructions in the form attached hereto as
Exhibit F.
(x) The Registration Statement shall have been declared
effective by the SEC, and shall be available for use by Purchaser for
the resale of all of the Registrable Securities (as defined in the
Registration Rights Agreement), including, without limitation, shares
of Conversion Shares and Warrant Shares receivable upon conversion or
exercise of Securities to be purchased at the Second Closing, within
120 days of the date of the First Closing.
(xi) There shall be no breach by the Company of this
Agreement, the Management Agreements or any other Investment Agreements
entered into at the First Closing and the Company shall not have waived
and shall have successfully enforced any material rights under any such
agreements.
(xii) No Bankruptcy Event (as defined in the Certificate of
Designation) shall have occurred.
(xiii) Since the First Closing, no event has occurred which
has had a Material Adverse Effect (as defined in Section 3.1).
20
21
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts
located in the State of Delaware and the state courts located in the County of
New Castle in the State of Delaware in any suit or proceeding based on or
arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by the first
class mail shall be deemed in every respect effective service of process upon
the Company in any suit or proceeding arising hereunder. Nothing herein shall
affect Purchaser's right to serve process in any other manner permitted by law.
The parties hereto agree that a final non-appealable judgment in any such suit
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
8.2 Counterparts; Facsimile Signatures. This Agreement may be executed
in two or more counterparts, including, without limitation, by facsimile
transmission, all of which counterparts shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause additional original executed signature pages to be delivered to the
other parties via a reputable overnight courier for next business day delivery.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
8.5 Scope of Agreement; Amendments. Except as specifically set forth
herein, Purchaser makes no representation, warranty, covenant or undertaking
with respect to the transactions contemplated hereby. No provision of this
Agreement may be waived other than by an instrument in writing signed by the
party to be charged with enforcement and no provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and
Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
facsimile-machine confirmed telecopy, and shall be deemed delivered at the time
and date of receipt (which shall include telephone line facsimile transmission).
The addresses for such communications shall be:
21
22
If to the Company:
THE VIALINK COMPANY
00000 Xxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
XXXXXXX, PHLEGER & XXXXXXXX, LLP
0000 Xxxxx xx xxx Xxxx
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: J. Xxxxxxx Xxxxx, P.C.
If to Purchaser:
VELOCITY INVESTMENT PARTNERS LTD.
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Portfolio Manager
with a copy to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Each party shall provide notice to the other parties of any change in address.
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.9 Survival. The representations and warranties of Purchaser and the
Company shall survive the applicable Closing hereunder for a period of two (2)
years after the date of the applicable Closing and the covenants of the parties
shall survive the applicable Closing, in each case notwithstanding any due
diligence investigation conducted by or on behalf of Purchaser.
22
23
The Company agrees to indemnify (which indemnity shall include advancement of
expenses as they are incurred) and hold harmless Purchaser and each of
Purchaser's officers, directors, employees, partners, agents and affiliates for
loss or damage or expenses (including reasonable attorneys fees) arising as a
result of or related to (a) any breach or alleged breach by the Company of any
of its representations or covenants set forth herein, (b) any cause of action,
suit or claim brought or made against Purchaser and arising out of or resulting
from the execution, delivery, performance or enforcement of the Investment
Agreements or the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, (c) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, (d) the status of Purchaser or
holder of the Securities as an investor in the Company or (e) any claim by i2
Technologies, Inc. that it has not waived its rights of first refusal with
respect to sales by the Company of the Company's Common Stock or securities
convertible into shares of the Company's Common Stock, including, without
limitation, sales of the Securities contemplated hereunder. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the indemnified liabilities which is permissible under applicable
law.
8.10 Public Filings; Publicity. Immediately following the First
Closing, the Company shall issue a press release with respect to the
transactions contemplated hereby. On the date of the First Closing, the Company
shall file a Form 8-K regarding (i) the transaction contemplated by this
Agreement and (ii) the change in the Company's relationship with i2
Technologies; such Form 8-K shall have as exhibits thereto the material
documents executed in connection with this transaction contemplated hereby.
Purchaser shall have the right to approve before issuance any press releases
(including the foregoing press releases), SEC or other filings, or any other
public statements, with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of Purchaser, to make any press release or SEC, NASDAQ, NASD or
exchange filings with respect to such transactions as is required by applicable
law and regulations (although Purchaser shall (to the extent time permits) be
consulted by the Company in connection with any such press release prior to its
release and shall be provided with a copy thereof).
8.11 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy
to Purchaser shall limit any remedy which would otherwise be available to
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
Purchaser may have with any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to
Purchaser and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such and breach or threatened
breach, Purchaser shall be entitled, in addition to all other available
remedies, to an injunction restraining any
23
24
breach, without the necessity of showing economic loss and without any bond or
other security being required.
8.13 Termination. In the event that the First Closing shall not have
occurred within three (3) business days of the execution of this Agreement,
unless the parties agree otherwise, this Agreement shall terminate.
8.14 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any person, or which such person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such person.
8.15 Failure or Indulgence Not Waiver. No failure or delay on the part
of a party in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
***
24
25
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Securities Purchase Agreement to be duly executed as of the date
first above written.
PURCHASER:
VELOCITY INVESTMENT PARTNERS LTD.
By: Velocity Capital Management LLC
Its: Its Investment Manager
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Its: Managing Director
COMPANY:
THE VIALINK COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Its: Vice President, Chief Financial Officer
& General Counsel
25
