AMENDMENT AND WAIVER AGREEMENT
EXHIBIT
10.22
THIS
AMENDMENT AND WAIVER AGREEMENT (this “Agreement”) dated as of August 28, 2008,
is entered into among Visual Management Systems, Inc, a Nevada corporation
(the
“Company”) and the holders of the Company’s Original Issue Discount 5% Senior
Secured Convertible Debentures (individually, a “Holder” and collectively, the
“Holders”). Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to such terms in the Purchase Agreement or the Debentures
(each as defined below).
WHEREAS,
pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated
November 29, 2007, between the Company and the Holders, the Company sold
Original Issue Discount 5% Senior Secured Convertible Debentures (the
“Debentures”) to the Holders, in the aggregate sum of $3.75 million in Principal
Amount; and
WHEREAS,
the Company has requested that the Holders agree to certain waivers and
amendments under the Transaction Documents, and the Holders have agreed to
such
request, subject to the terms and conditions of this Agreement;
NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, each Holder hereby agrees as follows:
1. Waiver
of
Subsequent Equity Sales Prohibition. The Holders hereby waive the terms of
Section 4.13(a) of the Purchase Agreement, solely in connection with the
financing of Common Stock or Common Stock Equivalents currently contemplated
by
the Company (such financing, the “Potential Financing”) including potential
private offerings of securities to institutional or accredited retail investors
and other strategic alternatives This waiver granted by the Holders in this
Section 1 shall not affect any other rights of the Holder set forth in Section
4.13.
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2. Public
Information Covenant. The Company and the Holders hereby acknowledge and agree
that the following shall be added to the Purchase Agreement as Section
4.18:
“4.18 Public
Information Requirements. At any time during the period commencing from August
8, 2008 and ending at such time that all of the Securities may be sold without
the requirement for the Company to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, if the Company
shall fail for any reason to satisfy the current public information requirement
under Rule 144(c) for a period of three (3) consecutive Trading Days or more
(a
“Public Information Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash, as partial
liquidated damages and not as a penalty, by reason of any such delay in or
reduction of its ability to sell the Securities, an amount in cash equal to
two
percent (2.0%) of the aggregate principal amount of such Purchaser’s outstanding
Debentures on the day of a Public Information Failure and on every thirtieth
(30th) day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure is cured
and
(b) such time that such public information is no longer required for the
Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments
to which a Purchaser shall be entitled pursuant to this Section 4.18 are
referred to herein as “Public Information Failure Payments.” The filing of a
timely Form 12b-25 shall not constitute a Public Information Failure provided
that the report that is subject of such Form 12b-25 is filed within the
applicable extension period. Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial
months) until paid in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.”
3. Waiver
of
Defaults on the Debentures. The Holders hereby waive the Company’s compliance
with Section 8(a)(ix) and 8(a)(x) of the Debentures in connection with the
Registration Waiver (the “Limited Default Waiver”). This Limited Default Waiver
shall not affect the rights set forth in Section 8 of the Debentures with
respect to any future Events of Default.
4. Waiver
of
Anti-Dilution on the Debentures. Each Holder hereby waives the Company’s
compliance with Section 5(b) of the Debentures with respect to the reduction
of
the conversion price to $0.40 per share for the shares of the Company’s Series A
preferred stock and the adjustment to $.40 per share of the exercise price
of
the warrants issued to the purchasers and placement agent of the Company’s
Series A preferred stock (the “Preferred Dilutive Adjustment”). This waiver
granted by the Holders in this Section 4 shall not affect the rights set forth
in Section 5(b) of the Debentures with respect to any future financings or
other
transactions or issuances of securities by the Company.
5. Adjustment
to Exercise Price of Warrants. The Exercise Price of the Warrants shall be
adjusted pursuant to Section 3(b) in connection with the Preferred Dilutive
Adjustment. As such, Section 2(b) of the Warrants is hereby deleted in its
entirety and replaced with the following:
“Exercise
Price. The exercise price per share of the Common Stock under this Warrant
shall
be $0.40, subject to adjustment hereunder (the “Exercise Price”).
6. Cashless
Exercise of the Warrants. The Company and the Holders hereby acknowledge that
Section 2(c) of the Warrants shall be effective as of August 8,
2008.
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7. Waiver
of
Registration Rights. The Holders agree to waive all registration rights under
Section 2 of the Registration Rights Agreement in connection with the shares
of
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants (the “Registration Waiver”); provided, however, if the Company or the
Transfer Agent fail to deliver certificates evidencing such shares of Common
Stock issuable upon conversion of the Debentures or upon exercise of the
Warrants, without any restrictive legend within 5 trading days following
delivery by the Holder to the Company or the Transfer Agent of a completed
request to remove the restrictive legend from such shares of Common Stock,
then,
the Company shall pay liquidated damages to the Holder pursuant to Section
4.1(d) of the Purchase Agreement; provided, further, if the Company suffers
a
Public Information Failure (as defined in the Purchase Agreement, as amended)
as
of any date after August 8, 2008, and such Public Information Failure remains
uncured for more than 10 business days (such 10th business day, the “Public
Information Failure Date”), then the Company shall be required to file a
registration statement for the Registrable Securities (as defined in the
Registration Rights Agreement) within 10 days of such Public Information Failure
Date and the “Effectiveness Date” for such registration statement shall be the
45th day following such Public Information Failure Date (all other rights and
obligations of the Company and the Holder pursuant to the Registration Rights
Agreement shall then be applicable and such waiver shall be null and
void).
8. Issuance
of Common Stock. In consideration for the Registration Waiver and in lieu of
(i)
$250,000 of liquidated damages that have accrued to the Holders pursuant to
Section 2(b) of the Registration Rights Agreement and (ii) $46,875 of accrued
and unpaid interest due to the Holders under the Debentures as of July 1, 2008,
the Company hereby agrees to issue to the Holders shares of Common Stock valued
at $296,875 (the “New Share Principal”) at a per share purchase price equal to
80% of the average of the VWAPs for the 20 Trading Days immediately prior to
the
date hereof (subject to adjustment for forward and reverse stock splits or
the
like after the date hereof) (such new shares, the “New Shares”). On or prior to
the execution of this Agreement, the Company shall deliver to the Holder, a
copy
of the irrevocable instructions to the Transfer Agent instructing the Transfer
Agent to deliver, on an expedited basis, a certificate evidencing the New
Shares, registered in the name of such Holder (such issuance date, the “Issuance
Date”). The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent, if required by the Transfer Agent, to effect the removal of
the
legend in connection with the New Shares, promptly after the earlier of (a)
the
effective date of a registration statement covering all of the New Shares and
(b) the date such New Shares are eligible for resale pursuant to Rule 144
(provided, with respect to a removal pursuant to clause (b), the New Shares
are
to be sold immediately). Additionally, the Company hereby agrees to register
the
New Shares pursuant to the Registration Rights Agreement with the “Filing Date”
no later than the fifteenth day following the date that the Company’s
registration statement on Form S-1, Registration No. 333-148309 is declared
effective by the Commission and the “Effective Date” no later than the sixty
days following the Filing Date. All of the Company’s obligations and covenants
under the Registration Rights Agreement shall apply to the New Shares and the
Company hereby agrees and acknowledges to comply with all such obligations
and
covenants; provided, however, that the liquidated damages payable pursuant
to
Section 2(b) of the Registration Rights Agreement shall be based on the New
Share Principal instead of the aggregate purchase price of the Registrable
Securities and in no event shall such liquidated damages exceed 20% of the
New
Share Principal.
9. Representations
and Warranties of the Company. The Company hereby makes the representations
and
warranties set forth below to the Holders as of the date of its execution of
this Agreement:
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(a) Authorization;
Enforcement. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by this Agreement
and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all
necessary action on the part of the Company and no further action is required
by
the Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals. This Agreement has been
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
(b) No
Conflicts. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby do not and will not: (i) conflict with or violate any provision of the
Company’s certificate or articles of incorporation, bylaws or other
organizational or charter documents; or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, result in the creation of any Lien upon any of the properties
or
assets of the Company in connection with, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any material agreement, credit facility, debt or
other material instrument (evidencing Company debt or otherwise) or other
material understanding to which such Company is a party or by which any property
or asset of the Company is bound or affected; or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including federal and
state securities laws and regulations), or by which any property or asset of
the
Company is bound or affected.
(c) Issuance
of New Shares. The New Shares, when issued in accordance with the terms of
this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The Company
has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the New Shares.
(d) Equal
Consideration. Except as set forth in this Agreement, no consideration has
been
offered or paid to any person to amend or consent to a waiver, modification,
forbearance or otherwise of any provision of any of the Transaction
Documents.
(e) Affirmation
of Prior Representations and Warranties. Except as set forth in the SEC Reports,
the Company hereby represents and warrants to the Holder that the Company’s
representations and warranties set forth in each of the documents executed
by
the Company in connection with the Transaction Documents are true and correct
as
of the date hereof.
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10. Representations
and Warranties of the Holders. The Holders severally and not jointly hereby
make
the representation and warranty set forth below to the Company that as of the
date of its execution of this Agreement. Such Holder represents and warrants
that (a) the execution and delivery of this Agreement by it and the consummation
by it of the transactions contemplated hereby have been duly authorized by
all
necessary action on its behalf and (b) this Agreement has been duly executed
and
delivered by such Holder and constitutes the valid and binding obligation of
such Holder, enforceable against it in accordance with its terms except (i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
11. Public
Disclosure. The Company shall, as soon as practical and, in any event, within
4
days of the date hereof, issue a Current Report on Form 8-K, reasonably
acceptable to the Holders, disclosing the material terms of the transactions
contemplated hereby and attaching this Agreement as an exhibit thereto. The
Company shall consult with the Holders in issuing any other press releases
with
respect to the transactions contemplated hereby.
12. Effect
on
Transaction Documents. Except as expressly set forth above, all of the terms
and
conditions of the Transaction Documents shall continue in full force and effect
after the execution of this Agreement and shall not be in any way changed,
modified or superseded by the terms set forth herein, including, but not limited
to, any other obligations the Company may have to the Holders under the
Transaction Documents. Notwithstanding the foregoing, this Agreement shall
be
deemed for all purposes as an amendment to any Transaction Document as required
to serve the purposes hereof, and in the event of any conflict between the
terms
and provisions of any other Transaction Document, on the one hand, and the
terms
and provisions of this Agreement, on the other hand, the terms and provisions
of
this Agreement shall prevail. The New Shares issued pursuant to this Agreement
shall be deemed “Securities” under the Transaction Documents.
13. Amendments
and Waivers. The provisions of this Agreement, including the provisions of
this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the same
shall
be in writing and signed by the Company and the Holders.
14. Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be delivered as set forth in the Purchase
Agreement.
15. Survival.
All warranties and representations (as of the date such warranties and
representations were made) made herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to
have been relied upon by the parties hereto and shall survive the issuance
of
the New Shares.
16. Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties; provided, however,
that no party may assign this Agreement or the obligations and rights of such
party hereunder without the prior written consent of the other parties
hereto.
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17. Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
18. Fees
and
Expenses. Each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.
19. Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined pursuant to the Governing
Law provision of the Purchase Agreement.
20. Severability.
If any provision of this Agreement is held to be invalid or unenforceable in
any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
21. Construction.
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
22. Entire
Agreement. The Agreement, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
23. Independent
Nature of Holders’ Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any other Holders
hereunder, and no Holder shall be responsible in any way for the performance
of
the obligations of any other Holder hereunder. Nothing contained herein or
in
any other agreement or document delivered at any closing, and no action taken
by
any Holder pursuant hereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Holder shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not
be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their proper and duly authorized officers as of the day and year
first above written.
Visual
Management Systems, Inc.
By:
___________________________________
Name:
Title:
Enable
Opportunity Partners, LP
By:
___________________________________
Name:
Title:
Enable
Growth Partners, LP
By:
___________________________________
Name:
Title:
Xxxxxx
Diversified Master Fund, LLC, Ena
By:
___________________________________
Name:
Title:
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