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EXHIBIT 10.1
PURCHASE AGREEMENT
PURCHASE AGREEMENT ("AGREEMENT") dated as of December 8, 2000 between
VISUAL DATA CORPORATION, a Florida corporation (the "COMPANY"), and each person
or entity listed as a purchaser on SCHEDULE I attached to this Agreement (each
individually a "PURCHASER" and collectively the "PURCHASERS"). Undefined terms
contained herein shall have the meaning ascribed to them in the Debentures.
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchasers, and
the Purchasers wish to purchase from the Company, 6% Convertible Debentures due
December 8, 2003 (the "DEBENTURES"), in the aggregate principal amount of
$2,040,000 at an aggregate purchase price of $2,040,000, having the rights and
privileges set forth in the Debentures in the form of EXHIBIT 1A attached
hereto, on the terms and conditions set forth herein; and
WHEREAS, pursuant to the terms of the Debentures, the Debentures will
be convertible into shares ("COMMON SHARES") of common stock, par value $.0001,
of the Company ("COMMON STOCK"); and
WHEREAS, to induce the Purchasers to purchase the Debentures, the
Company has agreed to issue to the Purchasers: (i) warrants, expiring December
8, 2001 (the "ONE-YEAR WARRANTS") and (ii) warrants, expiring December 8, 2005
(the "FIVE YEAR WARRANTS" and together with the One-Year Warrants, the
"WARRANTS"), in each case exercisable for shares of Common Stock ("WARRANT
SHARES") in the forms of Exhibit 1B and 1C, respectively; and
WHEREAS, the Purchasers will have registration rights with respect to
such Common Shares and the Warrant Shares pursuant to the terms of that certain
Registration Rights Agreement to be entered into between the Company and the
Purchasers substantially in the form of EXHIBIT 4.2(E) hereto ("REGISTRATION
RIGHTS AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF DEBENTURES AND WARRANTS, ETC.
Section 1.1 Issuance of Debentures and Warrants.
(a) Issuance. Upon the following terms and conditions, the
Company shall issue and sell to each Purchaser severally, and each Purchaser
severally shall purchase from the Company, the outstanding principal amount of
Debentures and the
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number of Warrants indicated next to such Purchaser's name on SCHEDULE I
attached hereto.
(b) Purchase Price. The purchase price for the Debentures and
Warrants to be acquired by each Purchaser (the "PURCHASE PRICE") shall be the
Purchase Price set forth next to such Purchaser's name on SCHEDULE I.
(c) The Closing.
(i) The closing of the purchase and sale of the Debentures
and the Warrants (the "CLOSING") shall take place at the
offices of Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
("PURCHASERS' COUNSEL") or at such other place as is mutually
agreeable, at 10:00 am., local time on: (x) the date on which
the last to be fulfilled or waived of the conditions set forth
in Article 4 hereof and applicable to the Closing shall be
fulfilled or waived in accordance herewith, or (y) such other
time and place and/or on such other date as the Purchasers and
the Company may agree. The date on which the Closing occurs is
referred to herein as the "CLOSING DATE".
(ii) On the Closing Date, the Company shall deliver to
each Purchaser (x) one or more Debentures (with the number of
and outstanding principal amount of each debenture to be as
reasonably requested by such Purchaser) representing the
aggregate Debentures purchased hereunder by such Purchaser at
the Closing registered in the name of such Purchaser or its
nominee and (y) the Warrants registered in the name of
Purchaser or its nominee in such denominations as reasonably
requested by such Purchaser, and such Purchaser shall deliver
to the Company the Purchase Price for the Debentures and
Warrants purchased by such Purchaser hereunder by wire
transfer in immediately available funds to an account
designated in writing by the Company. In addition, each party
shall deliver all documents, instruments and writings required
to be delivered by such party pursuant to this Agreement at or
prior to the Closing. In addition, at the Closing, the Company
shall pay to the Purchasers' Counsel its legal fees and
disbursements as set forth in Section 3.4.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each of the
Purchasers as of the date hereof and on the Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Florida and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or
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indirect subsidiaries (defined as any entity of which the Company owns, directly
or indirectly, 50% or more of the equity or voting power) other than the
subsidiaries listed on SCHEDULE 2.1(A) attached hereto or in the Company's
reports, filed pursuant to the Exchange Act (as defined below) (the "SEC
Reports"). Except where specifically indicated to the contrary, all references
in this Agreement to subsidiaries shall be deemed to refer to all direct and
indirect subsidiaries of the Company. Except where specifically indicated to the
contrary, all references in this Article 2 to the Company shall be deemed to
refer to the Company and its consolidated subsidiaries. Each of the Company and
its subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary other than
those in which the failure so to qualify would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on the business,
operations, properties or financial condition of the entity with respect to
which such term is used and which is (either alone or together with all other
adverse effects) material to such entity and other entities controlling or
controlled by such entity taken as a whole, and any material adverse effect on
the transactions contemplated under this Agreement, the Registration Rights
Agreement or any other agreement or document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Debentures, the Warrants and the Registration Rights Agreement
(the "TRANSACTION DOCUMENTS") and to issue the Debentures and the Warrants in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Common Shares and the Warrant Shares, have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) the Transaction Documents have been duly executed and delivered
by the Company and (iv) the Transaction Documents constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the
Company consists of 50 million shares of Common Stock and 5 million shares of
preferred stock; as of November 30, 2000 there were 8,453,358 shares of Common
Stock and no shares of preferred stock issued and outstanding; and, except as
set forth on SCHEDULE 2.1(C) or in the SEC Reports, no shares of Common Stock
and no shares of preferred stock were reserved for issuance to persons other
than the Purchasers. All of the outstanding shares of the Company's Common Stock
and preferred stock have been validly issued and are fully paid and
nonassessable. No shares of capital stock are entitled to preemptive rights and,
except as set forth on Schedule 2.1(c), there are no outstanding options and
outstanding warrants for shares of Common Stock (excluding the Warrants). Except
as set forth on SCHEDULE 2.1(C)(I) or in the SEC Reports, there are no other
scrip, rights to
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subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights exchangeable for or convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of
capital stock of the Company or options, warrants, scrip, rights to subscribe
to, or commitments to purchase or acquire, any shares, or securities or rights
convertible or exchangeable into shares, of capital stock of the Company.
Attached hereto as EXHIBIT 2.1(C)(I) is a true and correct copy of the Company's
Certificate of Incorporation (the "CHARTER"), as in effect on the date hereof,
and attached hereto as EXHIBIT 2.1(C)(II) is a true and correct copy of the
Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
(d) Issuance of Common Shares. The Common Shares and the
Warrant Shares are duly authorized and reserved for issuance and, upon such
conversion in accordance with the Debentures and/or exercise in accordance with
the Warrants such Common Shares and Warrant Shares, as the case may be, will be
validly issued, fully paid and non-assessable, free and clear of any and all
liens, claims and encumbrances, and (subject to the registration of such shares
in accordance with the applicable provisions of the Securities Act of 1933, as
amended (the "SECURITIES ACT" or the "ACT") and the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") entitled to be traded on the Nasdaq
National Market (or the American Stock Exchange, the New York Stock Exchange, or
the Nasdaq Small-Cap Market, collectively with the Nasdaq National Market, the
"APPROVED MARKETS"), and the holders of such Common Shares and Warrant Shares
shall be entitled to all rights and preferences accorded to a holder of Common
Stock. The outstanding shares of Common Stock are currently listed on the Nasdaq
National Market.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby and the issuance of the
Debentures and the Warrants (collectively, the "SECURITIES") do not and will not
(i) result in a violation of the Company's Charter or By-Laws or (ii) 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, patent,
patent license or material instrument to which the Company or any of its
subsidiaries is a party (collectively, "COMPANY AGREEMENTS") except for such
conflicts, defaults or rights of termination, amendment, acceleration or
cancellation which would not have a Material Adverse Effect, or (iii) result in
a violation of any federal, state, local or foreign law, rule, regulation,
order, judgment or decree (including 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, except (other than in the case of clause (i) above) where such
violation would not reasonably be expected to have a Material Adverse Effect.
The business of the Company and its direct and indirect subsidiaries is being
conducted in material compliance with (i) its Charter and By-Laws, (ii) all
Company Agreements and (iii) all applicable laws, ordinances or regulations of
any governmental entity, except (other than in the case of clause (i) above)
where such violation would not reasonably be expected to have a Material Adverse
Effect. Except for filings, consents and approvals required
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under applicable state and federal securities laws or the rules and regulations
of the applicable Approved Markets and covered by the Registration Rights
Agreement, the Company is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Debentures and the Warrants or
to issue and sell the Debentures, Warrants or the Common Shares and Warrants
Shares issuable upon conversion or exercise thereof except for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC Documents; No Non-Public Information; Financial
Statements. The Common Stock of the Company is registered pursuant to Section
12(g) of the Exchange Act and the Company and its subsidiaries have filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Securities and Exchange Commission ("SEC") pursuant to the
reporting requirements of the Exchange Act, including all such proxy
information, solicitation statements and registration statements, and any
amendments thereto required to have been filed (all of the foregoing including
filings incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). The Company has not directly or indirectly provided, and will not
directly or indirectly provide, to the Purchasers any material non-public
information or any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed. 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 and other federal, state and
local laws, rules and regulations applicable to such SEC Documents, and none of
the SEC Documents 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. The SEC Documents contain all material information
concerning the Company and its subsidiaries required to be filed, and no event
or circumstance has occurred prior to the date hereof which would require the
Company to disclose such event or circumstance in order to make the statements
in the SEC Documents not misleading but which has not, or will have not, been so
disclosed.
(g) Financial Statements. The financial statements of the
Company and its subsidiaries included in the SEC Documents comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis 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 may not include footnotes, may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company and its subsidiaries as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The audited financial statements of each of the Company and its
subsidiaries for the fiscal year ending September 30, 1999
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have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis 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 may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company
and its subsidiaries, as the case may be, as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(h) Principal Exchange/Market. The principal market on which
the Common Stock is currently traded is the Nasdaq National Market.
(i) No Material Adverse Change. Since June 30, 2000, no
Material Adverse Effect has occurred or exists, and no event or circumstance has
occurred that with notice or the passage of time or both is reasonably likely to
result in a Material Adverse Effect with respect to the Company or its
subsidiaries.
(j) No Undisclosed Liabilities. Except as set forth on
Schedule 2.1(j), the Company and its subsidiaries have no liabilities or
obligations not disclosed in the Pre-Agreement SEC Documents (as defined below),
other than those liabilities incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since June 30, 2000, which liabilities,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its direct or indirect subsidiaries.
(k) No Undisclosed Events or Circumstances. To the best
knowledge of the Company, no material event or circumstance has occurred or
exists with respect to the Company or its direct or indirect subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(l) No General Solicitation. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Debentures, the Warrants, Common Shares or the Warrant
Shares.
(m) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor to its knowledge 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 require
registration of the Debentures, the Warrants, the Common Shares or Warrant
Shares under the Act.
The issuance of the Debentures, Warrants, Common Shares or Warrant
Shares to the Purchasers will not be integrated with any other issuance of the
Company's securities (past, current or future) which requires stockholder
approval under the rules of the Nasdaq National Market.
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(n) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
by it for the registration of securities for resale.
(o) Intellectual Property. The Company and/or its wholly-owned
subsidiaries owns or has licenses to use certain patents, copyrights and
trademarks ("INTELLECTUAL PROPERTY") associated with its business. The Company
and its subsidiaries have all intellectual property rights which it believes are
needed to conduct the business of the Company and its subsidiaries as it is now
being conducted or as proposed to be conducted as disclosed in the SEC
Documents. The Company and its subsidiaries have no reason to believe that the
material intellectual property rights which it owns are invalid or unenforceable
or that the use of such intellectual property by the Company or its subsidiaries
infringes upon or conflicts with any right of any third party, and neither the
Company nor any of its subsidiaries has received notice of any such infringement
or conflict, which individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
have no knowledge of any infringement of its intellectual property by any third
party.
(p) Poison Pill Provisions. Neither Company nor its
wholly-owned subsidiaries have a stockholder rights plan. None of the
acquisition of Debentures, Warrants, Common Shares or Warrant Shares nor the
deemed beneficial ownership of shares of Common Stock prior to, or the
acquisition of such shares pursuant to, the conversion of Debentures or the
exercise of the Warrants will in any event under any circumstance trigger the
poison pill provisions of any other or subsequently adopted plan or agreement,
or a substantially similar occurrence under any successor or similar plan.
(q) No Litigation. Except as set forth in the reports or
documents filed at least 5 Trading Days prior to the applicable Closing Date by
the Company pursuant to Section 13(a) or 15(d) of the Exchange Act (the
"PRE-AGREEMENT SEC DOCUMENTS"), no litigation or claim (including those for
unpaid taxes) against the Company or any of its subsidiaries is pending or, to
the Company's knowledge, threatened, and no other event has occurred, which if
determined adversely could reasonably be expected to have a Material Adverse
Effect on the Company or could reasonably be expected to materially and
adversely affect the transactions contemplated hereby. There is no legal
proceeding described in the Pre-Agreement SEC Documents that could reasonably be
expected to have a Material Adverse Effect on the Company.
(r) Brokers. Except as set forth on Schedule 2.1(r), 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 by the Company or any
Purchaser relating to this Agreement or the transactions contemplated hereby.
(s) Other Purchasers. Other than the Securities and except as
set forth on SCHEDULE 2.1(S)(I) or the SEC Reports, there are no outstanding
securities issued by the Company that are entitled to registration rights under
the Act. Other than the Securities and except as set forth on SCHEDULE
2.1(S)(II) or the SEC Reports, there are no
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outstanding securities issued by the Company that are directly or indirectly
convertible into, exercisable into, or exchangeable for, shares of Common Stock
of the Company, or that have anti-dilution or similar rights that would be
affected by the issuance of the Debentures, the Common Shares, the Warrants or
the Warrant Shares.
(t) Certain Transactions. Except as disclosed in the
Pre-Agreement SEC Documents, none of the officers, directors, or key employees
of the Company is presently a party to any transaction with the Company or any
of its subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(u) Permits; Compliance. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), except where failure to possess such Company Permits would not have a
Material Adverse Effect on the Company and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits except for such Company Permits the failure of which to
possess, or the cancellation or suspension of which, would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. To the best of
its knowledge, neither the Company nor any of its subsidiaries is in material
conflict with, or in material default or material violation of, any of the
Company Permits. Since September 30, 1999, neither the Company nor any of its
subsidiaries has received any notification with respect to possible material
conflicts, material defaults or material violations of applicable laws.
(v) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's management, to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) Environmental Matters. Except as otherwise disclosed in
the Pre-Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all respects with all applicable state and federal environmental
laws except where any such non-compliance would not reasonably be expected to
have a Material Adverse Effect on the Company and no event or condition has
occurred that may interfere with the
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compliance by the Company or any of its subsidiaries with any environmental law
or that may give rise to any liability under any environmental law that,
individually or in the aggregate, would have a Material Adverse Effect.
(x) Solvency.
(i) Based on the financial condition of the Company as of
the Closing Date, the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on
or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they
mature.
(ii) Based on the financial condition of the Company as of
the Closing Date, including the receipt of the proceeds of the
sale of the Debentures and Warrants as of such date, the
Company's assets do not constitute unreasonably small capital
to carry out its business for the year 2000 as now conducted
and as proposed to be conducted including the Company's year
2001 capital needs taking into account the particular capital
requirements of the business conducted by the Company, and
projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts beyond
its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). Based on the financial condition of the
Company as of the Closing Date, the current cash flow of the
Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such
amounts are required to be paid.
(iv) Neither the Company nor any of its subsidiaries is
subject to any bankruptcy, insolvency or similar proceeding.
(y) Taxes. Since September 30, 1999, all federal, state, city
and other tax returns, reports and declarations required to be filed or extended
by or on behalf of the Company and each of its subsidiaries have been filed or
extended and all such filed returns are complete and accurate in all material
respects, and disclose all taxes (whether based upon income, operations,
purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby. All
taxes required to be withheld by or on behalf of the Company or any such
subsidiary in connection with amounts paid or owing to any employees,
independent contractor, creditor or other party have been withheld, and such
withheld taxes have either been duly and timely paid to the proper governmental
authorities or set aside in accounts for such purposes.
(z) Title to Properties; Encumbrances. Each of the Company and
its subsidiaries owns (with good and marketable title in the case of real
property, except for
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such imperfections of title as would not have a Material Adverse Effect) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible ("COMPANY PROPERTY")) that it purports to own.
(aa) No Reliance on Purchasers. The Company acknowledges and
agrees that each Purchaser is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the Registration Rights Agreement
and the performance under the Debentures and the Warrants and the transactions
contemplated hereby and thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the Registration Rights
Agreement and the performance under the Debentures and the Warrants and the
transactions contemplated hereby and thereby. The Company further represents to
the Purchaser that the Company's decision to enter into this Agreement and the
Registration Rights Agreement and the performance under the Debentures and the
Warrants has been based solely on the independent evaluation by the Company and
its representatives.
(bb) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary of the Company has, in the course of acting for, or on
behalf of, the Company, directly or indirectly used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; directly or indirectly made any direct or indirect
unlawful payment to any foreign or domestic government or party 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 any similar
treaties of the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government or party official or employee.
(cc) MFN and Variable Rate Transactions. The Company has not
entered into any MFN Transaction or Variable Rate Transaction (other than
transactions entered into with the Purchasers), pursuant to which: (1)
securities or potential obligations to issue securities are still outstanding or
(2) the issuance conversion, or exercise, as the case may be, of the Debentures
or the Warrants trigger, or may in the future trigger, an adjustment.
The term "MFN TRANSACTION" shall mean a transaction in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions (the "MFN Offering") which grants to a purchaser
(the "MFN Purchaser") the right to receive additional shares (including without
limitation as a result of a lower conversion, exchange or exercise price but
excluding customary antidilution protections) based upon subsequent transactions
of the Company on terms more favorable than those granted to such MFN Purchaser
in such MFN Offering. As used herein, term "VARIABLE RATE TRANSACTION" shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of, Common Stock either (x)
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at a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the Common Stock at
any time after the initial issuance of such debt or equity securities, or (y)
with a fixed conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common
Stock (but excluding standard stock split anti-dilution provisions), or (ii) any
securities of the Company pursuant to an "equity line" structure which provides
for the sale, from time to time, of securities of the Company which are
registered for resale under the Act.
(dd) Acknowledgement of Dilution. The number of shares of
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants may increase substantially in certain circumstances. The Company
acknowledges that its obligation to issue shares of Common Stock in accordance
with the Transaction Documents is absolute and unconditional, regardless of the
dilution that such issuance may have on other shareholders of the Company.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers, severally (as to itself) and not jointly hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:
(a) Organization and Qualification. Such Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification necessary except where the failure to be so
qualified or in good standing would not reasonably be expected to have a
Material Adverse Effect on such Purchaser.
(b) Authorization; Enforcement. (i) Such Purchaser has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement to purchase the Debentures and to acquire the
Warrants being sold to it hereunder and to acquire the Common Shares and the
Warrant Shares, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by such Purchaser and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate or partnership action, and (iii) this Agreement and the
Registration Rights Agreement constitute valid and binding obligations of such
Purchaser enforceable against such Purchaser in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the performance under
the Debentures and Warrants and the consummation by such Purchaser of the
transactions
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contemplated hereby and thereby do not and will not (i) result in a violation of
such Purchaser's organizational documents, (ii) conflict with any agreement,
indenture or instrument to which such Purchaser is a party, or (iii) result in a
material violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Purchaser. Such
Purchaser is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement and the Registration Rights Agreement.
(d) Investment Representations.
(i) Access to Other Information. Such Purchaser
acknowledges that the Company has made available to such
Purchaser the opportunity to examine such additional documents
from the Company and to ask questions of, and receive full
answers from, the Company concerning, among other things, the
Company, its financial condition, its management, its prior
activities and any other information which such Purchaser
considers relevant or appropriate in connection with entering
into this Agreement.
(ii) Risks of Investment. Such Purchaser acknowledges that
the Debentures and Warrants and the Common Shares and Warrant
Shares issuable upon conversion and/or exercise thereof have
not been registered under the Act. Such Purchaser is familiar
with the provisions of Rule 144 and understands that in the
event all of the applicable requirements of Rule 144 are not
satisfied, registration under the Act or some other exemption
from the registration requirements of the Act will be required
in order to dispose of the Debentures and Warrants and the
Common Shares and Warrant Shares issuable upon conversion
and/or exercise of the rights granted thereunder, and that
such Purchaser may be required to hold the Debentures and
Warrants and the Common Shares and Warrant Shares issuable
upon conversion and/or exercise of the Debentures and Warrants
received under this Agreement for a significant period of time
prior to reselling them, subject to the Company successfully
registering the Common Shares and Warrant Shares pursuant to
the Registration Rights Agreement. Such Purchaser is capable
of assessing the risks of an investment in the Debentures and
Warrants and is fully aware of the economic risks thereof.
(iii) Investment Representation. Such Purchaser is
purchasing the Debentures, and Warrants and may purchase the
Common Shares, and Warrants Shares in each case, for its own
account and not with a view to distribution in violation of
any securities laws. Such Purchaser has no present intention
to sell the Debentures, Warrants, Common Shares or Warrant
Shares in violation of federal or state securities laws and
such Purchaser has no present arrangement (whether or not
legally binding) to sell the Debentures, Warrants, Common
Shares or Warrant Shares to or through any person or entity;
provided, however, that by making the
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representations herein, such Purchaser does not agree to hold
the Debentures, Warrants, Common Shares or Warrant Shares for
any minimum or other specific term and reserves the right to
dispose of the Debentures, Warrants, Common Shares or Warrant
Shares at any time in accordance with federal and state
securities laws applicable to such disposition.
(iv) Restricted Securities. It acknowledges and
understands that the terms of issuance have not been reviewed
by the SEC or by any state securities authorities and that the
Debentures and Warrants have been issued in reliance on the
certain exemptions for non-public offerings under the Act,
which exemptions depend upon, among other things, the
representations made and information furnished by such
Purchaser, including the bona fide nature of such Purchaser's
investment intent as expressed above.
(v) Ability to Bear Economic Risk. It is an "accredited
investor" as defined in Rule 501 of Regulation D, as amended,
under the Act, and that it (i) is able to bear the economic
risk of its investment in the Debentures, (ii) is able to hold
the Debentures for an indefinite period of time, (iii) can
afford a complete loss of its investment in the Debentures and
(iv) has adequate means of providing for its current needs.
(vi) No Public Solicitation. At no time was such Purchaser
presented with or solicited by any general mailing, leaflet,
public promotional meeting, newspaper or magazine article,
radio or television advertisement, or any other form of
general advertising or general solicitation in connection with
the issuance.
(vii) Reliance by the Company. Such Purchaser understands
that the Debentures and Warrants are being or will be, as the
case may be, offered and sold and that the Common Shares or
Warrant Shares, as the case may be, will be issued, in
reliance on a transactional exemptions from the registration
requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to
determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Debentures and
Warrants.
(e) Brokers. Except for payment of $40,000 to Cardinal
Securities LLC for brokerage services, which payment has been made, such
Purchaser has taken no written action which would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments by the
Company relating to this Agreement or the transactions contemplated hereby.
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ARTICLE 3
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. For so
long as the Debentures and Warrants are outstanding, the Company will cause the
Common Stock issuable upon the exercise or conversion thereof to continue at all
times to be registered under Section 12(b) or Section 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such reporting and filing obligations; provided that foregoing shall not prevent
the Company from entering into a tender offer or merger pursuant to which it
ceases to become a public reporting company. Until such time as no Debentures
and Warrants are outstanding, the Company shall continue the listing or trading
of the Common Stock on the Nasdaq National Market or one of the other Approved
Markets and comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Approved Market on which
the Common Stock is listed. The Company shall cause the Common Stock to be
listed on the Nasdaq National Market no later than the registration of the
Common Stock under the Act, and at all times shall continue such listing(s) on
one of the Approved Markets. As used herein and in the Registration Rights
Agreement, the Debenture and the Warrants, the term "EFFECTIVE REGISTRATION"
shall mean: (i) the Company is in compliance with the Transaction Documents;
(ii) the resale of Registrable Securities (as defined in the Registration Rights
Agreement) is covered by an effective registration statement and such
registration statement is not subject to any suspension or stop orders; (iii)
the resale of such securities may be effected pursuant to a current and
deliverable prospectus that is not subject to any blackout or similar
circumstance (except as permitted in the Registration Rights Agreement); (iv)
the securities are listed on an Approved Market and are not subject to any
trading suspension; (v) no Interfering Event (as described in the Registration
Rights Agreement) then exists; and (vi) none of the Company or any direct or
indirect subsidiary of the Company is subject to any bankruptcy, insolvency or
similar proceeding.
Section 3.2 Debentures on Conversion and Warrants on Exercise.
(a) Subject to the book-entry procedures set forth in the
Debentures, upon any conversion by a Purchaser (or then holder of Debentures) of
the Debentures pursuant to the terms thereof, the Company shall issue and
deliver to such Purchaser (or holder) within five (5) Trading Days of the
Conversion Date, a new Debenture for the principal amount of Debentures which
such Purchaser (or holder) has not yet elected to convert but which is evidenced
in part by the Debenture(s) submitted to the Company in connection with such
conversion (with the number of and denomination of such new Debenture(s)
designated by such Purchaser or holder).
(b) Subject to the book-entry procedures set forth in the
Warrants, upon any partial exercise by a Purchaser (or then holder of the
Warrants) of the Warrants, the Company shall issue and deliver to such Purchaser
(or holder) within five (5) Trading Days of the date on which such Warrants are
exercised, a new Warrant or Warrants
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representing the number of adjusted Warrant Shares in accordance with the terms
of Section 3 of such Warrants.
Section 3.3 Replacement Debentures and Warrants.
(a) The Debentures held by any Purchaser (or then holder) may
be exchanged by such Purchaser (or such holder) at any time and from time to
time for Debentures with different denominations of at least $50,000
representing an equal aggregate number of Debentures or to reflect the actual
Conversion Price pursuant to Section 5(c) of the Debentures, as requested by
such Purchaser (or such holder) upon surrendering the same. No service charge
will be made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Purchaser (or then holder of the Warrants) at the office of the Company for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of Warrant Shares as are purchasable
under such Warrants. No service charge will be made for such transfer or
exchange.
Section 3.4 Expenses. The Company shall pay the Purchasers' Counsel for
legal fees and expenses incurred in connection with the transactions
contemplated by this Agreement, regardless of whether the Closing occurs, up to
$30,000, at the option of such counsel, at either (i) the Closing, or (ii)
within 5 Trading Days of submission of a written request for such payment.
Section 3.5 Securities Compliance. The Company shall notify the SEC, in
accordance with their requirements, of the transactions contemplated by this
Agreement, the Debentures, the Registration Rights Agreement and the Warrants,
and shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Debentures hereunder, the Common Shares issuable upon conversion
thereof, the Warrants and the Warrant Shares issuable upon exercise of the
Warrants.
Section 3.6 Dividends or Distributions; Purchases of Equity Securities.
Except as provided in this Section 3.6 to the contrary, for so long as any
Debentures remain outstanding, the Company agrees that it shall not (a) declare
or pay any dividends or make any distributions to any holder or holders of
Common Stock (other than dividends payable in Common Stock) in their capacity as
shareholders, or (b) purchase or otherwise acquire for value, directly or
indirectly , any shares of Common Stock or other equity security of the Company;
provided that (i) the Company may purchase or acquire shares of Common Stock
that are hereafter issued to employees pursuant to employment, stock repurchase
or other similar agreements and (ii) the Company may acquire the capital stock
it does not own of the non-wholly owned subsidiaries set forth on Schedule 3.6
hereto.
Section 3.7 Notices. The Company agrees to provide all holders of
Debentures and Warrants with copies of all notices and information, including
without limitation
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notices and proxy statements in connection with any meetings, that are provided
to the holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such Common Stock holders.
Section 3.8 Use of Proceeds. The Company agrees that the proceeds
received by the Company from the sale of the Debentures and Warrants hereunder
shall be used for working capital purposes.
Section 3.9 Reservation of Stock Issuable Upon Conversion and Upon
Exercise of the Warrants. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Debentures and the exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Debentures and
the full exercise of the Warrants and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding Debentures and the full exercise of the
Warrants, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the requisite
shareholder approval. Without in any way limiting the foregoing, the Company
agrees to reserve and at all times keep available solely for purposes of
conversion of Debentures and the exercise of the Warrants such number of
authorized but unissued shares of Common Stock that is at least equal to 200% of
the aggregate shares issuable upon conversion of Debentures, and 100% of the
aggregate shares issuable on exercise of the Warrants, which number shall be
appropriately adjusted for any stock split, reverse split, stock dividend or
reclassification of the Common Stock. If the Company falls below the reserves
specified in the immediately preceding sentence and does not cure such
non-compliance within 30 days of its start, then the Purchasers will be entitled
to the compensatory provisions specified in Section 2(b)(iv) of the Registration
Rights Agreement. If at any time the number of authorized but unissued shares of
Common Stock is not sufficient to effect the conversion of all the then
outstanding Debentures or the full exercise of the Warrants, the Purchasers
shall be entitled to, inter alia, the premium price redemption rights provided
in the Registration Rights Agreement.
Section 3.10 Best Efforts. The parties shall use their reasonable best
efforts to satisfy timely each of the conditions described in Article 4 of this
Agreement.
Section 3.11 Limitations on Issuance of Debt, Liens and Transfers
(a) Until the sixth month anniversary (THE "EFFECTIVENESS
ANNIVERSARY") of the effectiveness of the first registration statement filed
pursuant to the Registration Rights Agreement (the "Registration Statement"),
the Company agrees that neither the Company nor any of its subsidiaries shall
(i) create, incur, assume, guarantee, secure or in any manner become liable in
respect of any debt financing other than traditional bank financing on customary
terms not to exceed $1,000,000 in the aggregate; or (ii) create, incur or permit
to exist any security interest, lien or other encumbrance on
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or with respect to any of the assets of the Company or its subsidiaries other
than (1) than in connection with purchase money financings; (2) non-consensual
statutory liens (other than liens securing the payment of taxes) arising in the
ordinary course of the Company's business to the extent: (A) such liens secure
indebtedness which is not overdue or (B) such liens secure indebtedness relating
to claims or liabilities which are fully insured and being contested in good
faith by appropriate proceedings diligently pursued and available to the
Company, in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside on
its books; (3) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property which do not interfere in any
material respect with the use of such real property or ordinary conduct of the
business of the Company as presently conducted thereon or materially impair the
value of the real property which may be subject thereto; and (4) liens arising
by operation of law securing tax obligations, worker's compensations, and lease
obligations.
(b) The Company shall not contribute or transfer, in a single
transaction, or in a series of transactions, a material portion its assets to
any of its subsidiaries, other than a subsidiary that has delivered its
guarantee to the Purchasers in form and substance satisfactory to the
Purchasers.
Section 3.12 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Debentures, Warrants, Common Shares and Warrant Shares, as
required under Regulation D and to provide a copy thereof to each Purchaser
promptly after such filing. The Company shall, on or before each Closing Date,
take such action as the Company shall have reasonably determined is necessary to
qualify the Debentures, Warrants, Common Shares and Warrant Shares for sale to
the Purchasers at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date.
Section 3.13 Nasdaq Rule. The Purchasers shall, in the aggregate, be
entitled to convert Debentures into a total of 1,689,826 Common Shares (19.99%
of the Common Stock issued and outstanding on the date hereof, which number
shall be subject to readjustment for any stock split, stock dividend or
reclassification of the Common Stock) (the "20% CAP"). Each Purchaser shall be
entitled to convert that amount of its Debentures into such total number of
Common Shares equal to such Purchaser's pro rata share of the 20% Cap. Once a
Purchaser has received its total pro rata share upon conversion of its
Debentures, and if the Company shall not have complied with its obligations to
obtain the stockholder approval described below by the dates set forth below, it
shall have the right to compel the Company to redeem its remaining Debentures at
a price equal to the Premium Redemption Price (as defined in the Registration
Rights Agreement) plus accrued but unpaid interest and default payments in
effect at that time. If a Purchaser has converted all of its Debentures, but has
not depleted the total number of pro rata shares allocated to it, its remaining
pro rata shares shall be reallocated amongst the Purchasers still holding
Debentures on a pro rata basis. The Company hereby covenants that on or prior to
March 31, 2001 it shall use its reasonable best efforts to convene a
stockholders meeting on or prior to March 31, 2001, pursuant to which it
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shall obtain written stockholder approval to issue Common Stock in excess of the
20% Cap pursuant to Nasdaq Rule 4460 whereupon, the restrictions and redemption
obligations set forth in this Section 3.13 (including, without limitation, a
Purchaser's right to redeem Debentures at the Premium Redemption Price) shall
cease to apply. In the event that the Company fails to obtain such approval by
March 31, 2001, or in the event the SEC has issued comments to the proxy
statement for such meeting and the Company is diligently responding to such
comments, April 30, 2001, each Purchaser shall have the right to redeem the
portion of its Debentures which cannot be converted because of the 20% Cap at
the Premium Redemption Price.
Section 3.14 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.15 Press Release. Immediately following the Closing, the
Company shall issue a press release in the form set forth in SCHEDULE 3.15
hereto. Purchasers shall have the opportunity to review such press release prior
to its issuance. No press release shall name the Purchasers except as shall be
required by law. If the Company fails to issue a press release within 1 business
day of the Closing, the Purchasers may issue a press release covering the
Closing and complying with any legal requirement applicable to the Purchasers.
Section 3.16 Form 8-K. Within 5 Trading Days of the Closing, the
Company shall file a Form 8-K with the SEC which discloses the transactions
contemplated hereby and by the Registration Rights Agreement, Warrants and
Debentures. Purchasers shall have the opportunity to review such Form 8-K prior
to its filing.
Section 3.17 Limitation on Variable Rate Transactions. From the date
hereof until the Effectiveness Anniversary, the Company will not enter into any
Variable Rate Transactions.
Section 3.18 Registration Statement Filing. Except as set forth on
Schedule 3.18 hereto and except for (i) registration statements covering current
stock options, rights, warrants and shares issued to officers, directors,
employees and consultants and (ii) registration statements covering Common Stock
issued pursuant to acquisitions reasonably related to the Company's business and
contemplated by the Company's business model, the Company will not file another
registration statement until the Effectiveness Anniversary, other than the
Registration Statement and other registration statements filed pursuant to the
Registration Rights Agreement.
Section 3.19 Right of First Refusal. From the date hereof until the one
year anniversary of the Closing Date, if the Company or any subsidiary of the
Company desires to enter into any private equity financing or private equity
related transaction, the Purchasers shall have a right of first refusal with
respect to such transactions and shall
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have the right to match the terms of any bona fide offer with respect thereto
received from a third party; provided, in the case of an offer consisting in
whole or in part of consideration other than cash, Purchasers shall have the
right to offer the cash equivalent of such offer. To effect the foregoing, the
Company shall provide written notice of the terms of such proposed transaction
to the Purchasers promptly following receipt of such offer. The Purchasers may
then exercise their right to match by issuing a written counter-notice of their
intention to do so within 15 days of receipt of the notice from the Company and
the consummation of such counteroffer shall occur by the later of (i) the time
provided by the original bona fide third party offer or (ii) 15 days from the
receipt of the Purchasers' counteroffer. Any material changes or modifications
to the proposed transaction shall be reflected to the Purchasers pursuant to the
procedures of this Section 3.19. The foregoing right of first refusal shall be
allocated pro-rata among the Purchasers based on the amount of Debentures
purchased; provided, however, that the Purchasers must match, in the aggregate,
the entire terms of the bona fide offering without regard to proportional
interest.
The foregoing right of first refusal shall not apply to issuances of
the Company's equity in connection with a strategic partnership of the Company
with any person in the same, related or complementary business as the Company or
any vendor or customer of the Company entered into, in each such case, with the
intent to further the business of the Company and not for the primary purpose of
providing financing.
Section 3.20 Short Sales. No Purchaser shall sell short any shares of
Common Stock with the intention of manipulating the price thereof; provided,
however, that a decline in the price of the Common Stock following any short
sales by the Purchaser shall not be considered evidence of an intent to
manipulate the price of the Common Stock.
ARTICLE 4
CONDITIONS TO CLOSINGS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Debentures and Warrants. The obligation hereunder of the Company to
issue and/or sell the Debentures and Warrants to the Purchasers at the Closing
(unless otherwise specified) is subject to the satisfaction, at or before the
Closing, of each of the applicable conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser will be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties as of an earlier date,
which will be true and correct as of such date).
(b) Performance by the Purchasers. Each Purchaser shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Purchaser at or prior to the Closing.
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(c) No Injunction. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Debentures or the Warrants.
(d) Purchase Price. The Company shall have received the
aggregate Purchase Price from the Purchasers.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Debentures and Warrants. The obligation hereunder of each Purchaser
to acquire and pay for the Debentures and Warrants at the Closing (unless
otherwise specified) is subject to the satisfaction, at or before the Closing,
of each of the applicable conditions set forth below. These conditions are for
each Purchaser's benefit and may be waived by each Purchaser at any time in its
sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties as of an earlier date, which shall be
true and correct as of such date).
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Debentures or the Warrants.
(d) Opinion of Counsel. At the Closing, the Purchasers shall
have received an opinion of the independent counsel of the Company, in the form
attached hereto as EXHIBIT 4.2(D) and such other opinions, certificates and
documents as the Purchasers or their counsel shall reasonably require incident
to the Closing.
(e) Registration Rights Agreement. The Company and the
Purchasers shall have executed and delivered the Registration Rights Agreement
in the form and substance of EXHIBIT 4.2(E) attached hereto.
(f) Adverse Changes. No event which had or is likely to have,
in the reasonable judgment of the Purchasers, a Material Adverse Effect on the
Company or any of its direct or indirect subsidiaries shall have occurred.
(g) Officer's Certificate. The Company shall have delivered to
the Purchasers a certificate in form and substance of EXHIBIT 4.2(G) attached
hereto, executed by an officer of the Company, certifying as to satisfaction of
closing conditions,
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incumbency of signing officers, and the true, correct and complete nature of the
Charter, By-Laws, good standing and authorizing resolutions of the Company.
(h) Debentures and Warrants. The Purchasers shall have
received certificates representing the Debentures, the One-Year Warrants and the
Five-Year Warrants in the form and substance of EXHIBIT 1A and EXHIBIT 1B and
Exhibit 1C hereto.
ARTICLE 5
COMPANY PUT RIGHTS
Section 5.1 First Company Put Right. Subject to the conditions set
forth below, commencing on the effective date of the Registration Statement (the
"EFFECTIVE DATE"), the Company shall have the right to sell to Purchasers (the
"FIRST PUT RIGHT"), an additional $1,000,000 principal amount of Debentures and
Five-Year Warrants to purchase 50,000 shares of Common Stock (the "FIRST
ADDITIONAL SECURITIES"). The conversion price of such Debentures and the
exercise price of such Five Year Warrants shall be identical to those of the
Debentures and Five Year Warrants purchased pursuant to Section 1.1 of this
Agreement. The obligation of Purchasers to purchase such securities shall be
several and not joint and shall be allocated pro-rata based on the amount of
Debentures and Warrants purchased pursuant to Section 1.1 of this Agreement.
Section 5.2 Exercise of First Put Right. The First Put Right must be
exercised by the Company upon written notice (the "FIRST PUT NOTICE") to be
delivered to the Purchasers within 15 days of the Effective Date. The Put Notice
shall set forth the date (the "FIRST PUT CLOSING DATE") of the Closing of the
transaction contemplated by Section 5.1 above (the "FIRST PUT CLOSING"), which
shall be within 15 days of the date of the Put Notice, subject to the conditions
set forth below.
Section 5.3 Conditions to First Put Right. The obligation of the
Purchasers to purchase the First Additional Securities is subject to the
following conditions, which may be waived by the Purchasers:
(a) No Event of Default, or any event which, with the giving
of notice or the passage of time or both, would constitute an Event of Default,
shall have occurred with respect to any Debenture;
(b) The Company shall not be in breach with respect to any
representation, warranty, or covenant contained in any of the Transaction
Documents.
(c) The Company shall have obtained the stockholder approval
required by Section 3.13.
(d) Xxxxx Xxxxxx shall be the Chief Executive Officer or the
President of the Company.
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(e) The closing conditions set forth in Section 4.2 (other
than Section 4.2(e)), including, without limitation, the issuance of a
satisfactory legal opinion, shall have been satisfied, mutatis mutandis with
respect to the First Additional Securities.
(f) There shall be Effective Registration (as defined in
Section 3.1 above).
Section 5.4 Second Company Put Right. Subject to the conditions set
forth below, if the First Put Closing shall have occurred and if the Total
Dollar Volume (as defined below), exceeds $400,000, then commencing on the 90th
day following the First Put Closing Date and ending on the one year anniversary
of the Closing Date, the Company shall have the right to sell to Purchasers (the
"SECOND PUT RIGHT"), an additional $1,000,000 principal amount of Debentures and
Five Year Warrants to purchase 50,000 shares of Common Stock (the "SECOND
ADDITIONAL SECURITIES"). The conversion price of such Debentures and the
exercise price of such Five Year Warrants shall be determined using the formula
contained in such securities based on the Second Put Closing Date (as defined
below). The obligation of Purchasers to purchase such securities shall be
several and not joint and shall be allocated pro rata based on the amount of
Debentures and Warrants purchased pursuant to Section 1.1 of this Agreement.
As used herein, "TOTAL DOLLAR VOLUME" shall refer to the
average of the products of the (x) Market Price for Shares of the Common Stock
multiplied by (y) the daily trading volume, for each of the 20 Trading Days
immediately prior to the date in question, excluding the two Trading Days on
which the two highest products occurred and the two Trading Days on which the
two lowest products occurred (thus the Total Dollar volume shall be the average
of the foregoing products for each of a total of 16 Trading Days).
Section 5.5 Exercise of Second Put Right. The Second Put Right must be
exercised by the Company upon written notice (the "SECOND PUT NOTICE") to be
delivered to the Purchasers. The Put Notice shall certify that the conditions
set forth in Section 5.4 have been met and shall set forth the date (the "SECOND
PUT CLOSING DATE") of the Closing of the transaction contemplated by Section 5.4
above (the "SECOND PUT CLOSING"), which shall be within 15 days of the date of
the Put Notice, subject to the conditions set forth below.
Section 5.6 Conditions to Second Put Right. The obligations of the
Purchasers to purchase the Second Additional Securities is subject to the
conditions set forth in Section 5.3 above (applied to the Second Additional
Securities, with references to the "Debentures" to include the Debentures
purchased pursuant to the exercise of the First Put and references to
"Transaction Documents" to include such Debentures and the Five Year Warrants
issued pursuant to the exercise of the First Put) and in addition shall require
that:
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(i) The Total Dollar Volume as of the Second Put Closing
Date shall have exceeded $400,000 on each date between the
date of the Second Put Notice and the Second Put Closing Date.
ARTICLE 6
LEGEND AND STOCK
The Company will issue one or more certificates representing the
Debentures and the Warrants in the name of the Purchaser and in such
denominations to be specified by the Purchaser prior to (or from time to time
subsequent to) Closing. Each certificate representing the Debentures and the
Warrants and any shares of Common Stock issued upon conversion or exercise
thereof initially shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE TRANSFERRED,
ASSIGNED, SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Debentures and reissue or issue Warrants,
as the case may be, without the legend set forth above at such time as (i) the
holder thereof is permitted to dispose of such Debentures and/or Warrants and
Common Stock issuable upon conversion or exercise thereof pursuant to Rule 144
under the Act, or (ii) such Debentures and/or Warrants are sold to a purchaser
or purchasers who (in the opinion of counsel to the seller or such purchaser(s),
in form and substance reasonably satisfactory to the Company and its counsel)
are able to dispose of such shares publicly pursuant to an Effective
Registration or exemption.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Debentures or Warrant Shares or Common Shares issued upon exercise
of the Warrants shall bear a legend in the same form as the legend indicated
above. Upon such Registration Statement becoming effective, or Rule 144 under
the Act becoming available the Company agrees to promptly, but no later than
three (3) Trading Days thereafter, issue new certificates representing such
Common Shares and Warrant Shares without such legend. Except as provided in
Section 2(f) of the Registration Rights Agreement, any Common Shares issued
pursuant to conversion of Debentures or shares of Common Stock issued upon
exercise of the Warrants after the Registration Statement has become effective
shall be free and clear of any legends, transfer restrictions and stop orders.
Notwithstanding the removal of such legend, each Purchaser agrees to sell the
Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are
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provided to such Purchaser by the Company) or in accordance with an exemption
from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE 7
TERMINATION
Section 7.1 Termination. This Agreement may be terminated by action of
the Board of Directors of the Company or by any of the Purchasers at any time if
the Closing shall not have been consummated by the third business day following
the date of this Agreement; provided, however, that the party (or parties)
prepared to close shall retain its (or their) right to xxx for any breach by the
other party (or parties).
ARTICLE 8
MISCELLANEOUS
Section 8.1 Stamp Taxes. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Securities and
the shares of Common Stock issued upon conversion or exercise thereof.
Section 8.2 Specific Performance; Consent to Jurisdiction; Jury Trial.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Debentures, the Registration Rights Agreement and the Warrants
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) THE COMPANY AND EACH OF THE PURCHASERS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY AND EACH OF THE PURCHASERS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
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PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(c) THE COMPANY AND EACH PURCHASER HEREBY WAIVES ALL RIGHTS TO
A TRIAL BY JURY.
Section 8.3 Entire Agreement; Amendment. This Agreement, together with
the Registration Rights Agreement, the Warrants, the Debentures and the
agreements and documents executed in connection herewith and therewith, contains
the entire understanding of the parties with respect to the matters covered
hereby and thereby, supercedes any prior understanding, memoranda or other
written or oral agreements between or among any of them respecting the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended except by a written instrument signed by
both the Company and Purchasers holding at least a majority of the then
outstanding principal amount of Debentures; provided that for purposes hereof,
Debentures held by the Company or an affiliate of the Company shall not be
deemed outstanding. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 8.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice.
The addresses for such communications shall be:
to the Company:
0000 X.X. 00xx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
with copies to:
Atlas Xxxxxxxx P.A.
000 Xxxx Xxx Xxxx Xxxx.
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
to the Purchasers:
c/o The Palladin Group, L.P.
000 Xxxxxxxxx Xxxxxx
00
00
Xxxxxxxxx, Xxx Xxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
with copies to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 8.5 Indemnity. In consideration of the Purchasers' execution
and delivery of this Agreement and the Registration Rights Agreement and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Purchasers and all of their partners, officers, directors, employees, members
and direct or indirect Purchasers and any of the foregoing persons' agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or any other certificate or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party and arising out of or resulting from (i) the execution,
delivery, performance, breach by the Company or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Debentures and
Warrants or (iii) the status of the Purchaser or holder of the Debentures as
securityholders in the Company, and (d) the enforcement of this Section.
Notwithstanding the foregoing, Indemnified Liabilities shall not include any
liability of any Indemnitee to the extent it arises out of such Indemnitee's
willful misconduct, gross negligence, or fraudulent action(s). 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. Except as otherwise set forth herein, the mechanics
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and procedures with respect to the rights and obligations under this Section 8.5
shall be the same as those set forth in Section 6 (other than Section 6(B)) of
the Registration Rights Agreement, including, without limitation, those
procedures with respect to the settlement of claims and Company's right to
assume the defense of claims.
Section 8.6 Waivers. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.7 Headings. 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.
Section 8.8 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Purchasers (which consent may be withheld for any
reason in their sole discretion). No Purchaser may assign this Agreement (in
whole or in part) or any rights or obligations hereunder without the consent of
the Company (which shall not be unreasonably withheld), except that a Purchaser
may assign its rights hereunder in connection with an assignment of Debentures
or Warrants; provided that: (i) no Purchaser may assign Debentures in an amount
less than $50,000 in principal amount, and (ii) any transferee of Debentures or
Warrants must agree in writing to be bound by the applicable terms of the
Transaction Documents.
Section 8.9 No 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.
Section 8.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 8.11 Survival. The representations and warranties and the
agreements and covenants of the Company and each Purchaser contained herein
shall survive the Closing.
Section 8.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
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Section 8.13 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Purchaser
without the express written agreement of such Purchaser, unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Company agrees that it will deliver a copy of
any public announcement regarding the matters covered by this Agreement or any
agreement and document executed herewith to each Purchaser and any public
announcement including the name of a Purchaser to such Purchaser, reasonably in
advance of the release of such announcements.
Section 8.14 Severability. The parties acknowledge and agree that the
Purchasers are not agents or partners of each other, that all representations,
warranties, covenants and agreements of the Purchaser hereunder are several and
not joint, that no Purchaser shall have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any other Purchaser,
and that any rights granted to "Purchasers" hereunder shall be enforceable by
each Purchaser hereunder.
Section 8.15 Like Treatment of Holders; Redemption. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of Debentures or exercise of the
Warrants, or otherwise, to any holder of Debentures or Warrants, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Debenture or this Agreement or the
Registration Rights Agreement or the Warrants, unless such consideration is
offered to be paid to all holders of Debentures and Warrants bound by such
consent, waiver or amendment whether or not such holders so consent, waive or
agree to amend and whether or not such holders tender their Debentures or
Warrants for redemption, conversion or exercise. The Company shall not, directly
or indirectly, redeem any Debentures or Warrants unless such offer of redemption
is made pro rata to all holders of Debentures or Warrants, as the case may be,
on identical terms.
Section 8.16 No Strict Construction. 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.
Section 8.17 Rescission and Withdrawal Right. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, wherever the Purchasers exercise a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Purchasers may rescind or withdraw, in their sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.
Section 8.18 Obligations Absolute. The Company's obligations under the
Transaction Documents are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction.
Signature Page Follows
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
VISUAL DATA CORPORATION
By:
----------------------------------------
Name:
Title:
PURCHASERS:
HALIFAX FUND, L.P.
By:
----------------------------------------
Name:
Title:
PALLADIN OPPORTUNITY FUND, L.L.C.
By:
----------------------------------------
Name:
Title:
Signature page to Visual Data Corporation Purchase Agreement
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EXHIBITS AND SCHEDULES
Schedule 1 List of Purchasers
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of One Year Warrant
Exhibit 1.1C Form of Five Year Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(c)(i) Capitalization
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1(j) Liabilities and Obligations
Schedule 2.1(r) Brokers
Schedule 2.1(s)(i) Outstanding securities entitled to registration rights
Schedule 2.1(s)(ii) Outstanding securities affected by the issuance of
Debentures, etc.
Schedule 3.6 Non-wholly owned Subsidiaries
Schedule 3.15 Press Release
Schedule 3.18 Registration Statements
Exhibit 4.2(d) Opinion of Company Counsel
Exhibit 4.2(e) Registration Rights Agreement
Schedule 4.2(g) Officer's Certificate
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SCHEDULE I
OUTSTANDING AMOUNT
PRINCIPAL OF AMOUNT OF
AMOUNT ONE YEAR FIVE YEAR PURCHASE PRO RATA
PURCHASER OF DEBENTURES WARRANTS WARRANTS PRICE SHARE
--------- ------------- -------- -------- ---------- ---------
Halifax Fund, LP $1,040,000 250,000 100,000 $1,040,000 50%
Palladin Opportunity Fund, LLC $1,000,000 250,000 100,000 $1,000,000 50%
---------- ------- ------- ---------- ----
$2,040,000 500,000 200,000 $2,040,000 100%
