EXHIBIT 4.1
THIRD AMENDED MODIFICATION AGREEMENT
This THIRD AMENDED MODIFICATION AGREEMENT (the "Agreement") is made as of
May 21, 2002, by and between SALES ONLINE DIRECT, INC., a Delaware corporation
(the "Company"), and AUGUSTINE FUND, L.P. (the "Buyer").
WITNESSETH
R. 1. On March 23, 2000 (the "Transaction Date"), the Company and the
Buyer entered into a Securities Purchase Agreement (the "Purchase Agreement")
with respect to the purchase of the common stock of the Company, par value $.001
per share (the "Common Stock"), pursuant to which the Buyer purchased from the
Company a Series A Eight Percent Convertible Note (the "Note"), convertible into
shares of Common Stock, with the first payment of interest to be made on
September 30, 2000 (the "Interest Due Date").
R.2. In connection with the issuance of the Note, the Buyer was also
granted a five year warrant to purchase 300,000 shares of the Company's Common
Stock and the placement agent, Delano Group Securities, LLC, was granted a
warrant to purchase 100,000 shares (collectively, the "Warrants").
R.3. In connection with the issuance of the Note and the Warrants, the
Company and the Buyer executed a Registration Rights Agreement pursuant to which
the Company agreed to file with the Securities and Exchange Commission (the
"Commission") within 180 days after the closing date (the "Filing Date") a
registration statement (the "Registration Statement") for the resale of the
shares of Common Stock issuable upon the conversion of the Note and the exercise
of the Warrants (the Purchase Agreement, the Note, the Warrants and the
Registration Rights Agreement are collectively referred to herein as the
"Transaction Documents"), which was to have been effective by September 30, 2000
(the "Effectiveness Date").
R.4. On September 19, 2000, the Company and the Buyer entered into a
Modification Agreement to extend (i) the Interest Due Date from September 30,
2000 to October 31, 2000, (ii) the Filing Date from the 180th day following the
closing date to October 25, 2000, and (iii) the Effectiveness Date from
September 30, 2000 to December 15, 2000.
R.5. On January 1, 2001, the Company and Buyer entered into another
Modification Agreement to amend the Note by establishing the Applicable
Percentage (as defined in the Note) at 73%, subject to certain conditions, and
to waive all liquidated damages except $30,000 and required an Effectiveness
Date of July 15, 2001. Pursuant to such Modification Agreement, the Company also
granted a security interest in all of its assets as security of the Company's
obligations under the Purchase Agreement.
R.6 On July 15, 2001, the Company and Buyer entered into an Amended
Modification Agreement, under which all references in the Modification Agreement
to July 15, 2001, were revised to August 31, 2001.
R.7. On August 30, 2001, the Company and Buyer entered into a Second
Amended Modification Agreement, under which all references in the Amended
Modification Agreement and the Second Amended Modification Agreement to July 15,
2001 and August 31, 2001 were revised to September 30, 2001.
R.8. On September 7, 2001, a Registration Statement became effective with
the Commission.
R.9. On March 24, 2002, the Company and Buyer agreed to amend the Purchase
Agreement, the Note, and the Registration Rights Agreement in the manner and
subject to the terms and conditions set forth herein. The Company made its final
interest and liquidated damages payment under the Transaction Documents in the
form of common stock of the Company in the amount of 428,083 shares of common
stock of the Company, there being no further interest, penalties, liquidated
damages, fees, or charges that may be payable or that may accrue under the
Transactions Documents.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Buyer hereby agree
as follows:
1. Recitals; Definitions. The recitals set forth above are true and
correct in every respect and are incorporated herein by reference. Any
capitalized terms contained herein not defined herein shall have the meaning
assigned to such term in the Purchase Agreement, or if not defined in the
Purchase Agreement, in the Note, or if not defined in the Purchase Agreement or
Note, in the Registration Rights Agreement.
2. Amendments to Purchase Agreement. (a) Section 4(k) of the Purchase
Agreement is hereby deleted in its entirety, and replaced with the following:
"The Buyer covenants that upon full or partial conversion of the Note,
unless the Company agrees otherwise in advance, the Buyer will not sell
more shares of common stock of the Company in any one trading day than the
greater of (x) ten percent (10%) of the current trading day's total share
volume or (y) ten percent (10%) of the previous trading day's total share
volume. In addition, unless the Company agrees otherwise in advance, the
Buyer may only sell shares of common stock of the Company between the
hours of 10:00 a.m. and 3:30 p.m. eastern standard time. The Buyer shall
trade through a brokerage firm mutually acceptable to the Buyer and the
Company. In the event that the Buyer desires to replace its broker, the
new broker shall be selected from a list pre-approved by Buyer and the
Company, and Buyer shall give the Company at least forty-eight (48) hours
notice of such change, which notice shall include the reasons for the
change. In the event of any change of the initial broker mutually selected
by the Company and the Buyer, the Buyer shall cause the replacement broker
to mail duplicate confirmations of sales to the Company."
3. Amendments to Note. The Note is hereby amended so that:
(a) The Fixed Price used in determining the Conversion Price shall be
deleted and replaced with "$0.375."
(b) All references to a Maturity Date of March 31, 2002 shall be changed
from March 31, 2002 to June 30, 2002; and
(c) The first sentence in the fourth paragraph shall be stricken, and in
lieu thereof shall state as follows:
"This Note is subject to the following additional provisions, provided,
however, that notwithstanding any statement to the contrary in this Note,
(i) no interest, liquidated damages, or penalties shall be paid, be
payable, or accrue on this Note, and no liquidated damages or
penalty shall be assessed against the Company, after March 31, 2002,
with principal payable in such coin or currency of the United States
of America at any time on or before the Maturity Date;
(ii) the Maturity Date, with respect to all or part of the remaining
principal, shall be extended to September 30, 2002 and to each
calendar quarter-end thereafter through March 31, 2005 unless both
parties agree in writing not to extend the Maturity Date, with such
written notice given no later than 3 business days prior to June 30,
2002 or such other quarter-end as the case may be;
(iii) the Conversion Price on any Maturity Date with respect to all or
part of the remaining principal shall be based on the average of the
closing bid prices of the Common Stock for the 90 days immediately
preceding the Conversion Date, except with respect to a Maturity
Date on March 31, 2005, if the Maturity Date is so extended as
provided herein, the Conversion Price with respect to all remaining
principal shall be based on the average of the closing bid prices of
the Common Stock for the 30 days immediately preceding the
Conversion Date;
(iv) the Holder may submit only one Notice of Conversion per trading day,
and, on any date that is not a Maturity Date, to the extent the
number of shares being converted pursuant to such notice of
conversion are converted at a 5-day average closing bid price of
$.3424 or less, the Holder may convert principal into Common Stock
only equal to or less than the higher of 10% of the trading volume
of the Company from the trading day prior to or on such Conversion
Date, unless the Company permits otherwise in writing; and
(v) effective March 31, 2002, the Company shall not be required to
register any shares issuable under this Note, or to keep any
existing registration statement effective with respect to shares
issuable under this Note, whether such shares were issued or are
issuable prior to, on, or after March 31, 2002:"
4. Termination of Registration Rights Agreement. The Registration Rights
Agreement is hereby terminated. Buyer, and the holder of any Warrants delivered
in connection with the Transaction Documents have no rights of registration
under the Note, Purchase Agreement or under any of the other Transaction
Documents, notwithstanding any language to the contrary in any of the
Transaction Documents, and have no piggyback registration rights, or any other
registration rights, with respect to shares issuable under the Transaction
Documents.
5. Termination of Security Interest. Buyer and the Company agree that the
Note represents a general unsecured obligation of the Company, and that the
Company's grant of a security interest pursuant to Paragraph 4 of the
Modification Agreement dated January 1, 2001, is hereby rescinded and revoked,
and Buyer hereby authorizes the Company, without any further action of Buyer, to
terminate such security interest on the records of any state or local
jurisdiction, by filing a UCC Financing Statement Amendment on Form UCC-3 or
other appropriate form. Buyer shall cooperate fully with the Company in the
termination of any financing statement related to the Note or the Transaction
Documents
6. Not a Novation. The Company and the Buyer each ratifies and confirms
all of its liabilities and obligations under the Transaction Documents and
agrees that, except as expressly modified by this Agreement, the Transaction
Documents continue in full force and effect. The Company and the Buyer agree
that except as set forth in this Agreement, this Agreement shall not be
construed as an agreement to extinguish the Company's or Buyer's original
obligations or covenants under the Note and other Transaction Documents and
shall not constitute a novation as to the obligations of the Company or Buyer
under the Note or other Transaction Documents.
7. Registration Rights Agreement and Note. The term "Purchase Agreement"
shall hereinafter meant the Purchase Agreement dated the Transaction Date, as
amended and modified by this Agreement. The term "Registration Rights Agreement"
shall hereinafter mean the Registration Rights Agreement dated the Transaction
Date, as amended and modified by this Agreement. The term "Note" shall
hereinafter mean the Series A Eight Percent Convertible Note dated the
Transaction Date, as amended and modified by this Agreement.
8. No Shorting. As a material inducement for the Company to enter into
this Agreement, the Buyer represents that is has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliates of the
Buyer beneficially owns any shares of Common Stock of the Company, engage in any
short sales of, or hedging or arbitrage transactions with respect to, the Common
Stock, or buy "put" options or similar instruments with respect tot he Common
Stock. The Company acknowledges that a sale of shares on the same date as a
Conversion Notice is delivered to the Company with respect to such shares is not
a "short sale" for purposes of this Paragraph 8.
9. Amendment. The Transaction Documents may not be further amended,
altered or extended without, in each instance, the prior written consent of the
parties.
10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one Agreement.
11. Successors and Assigns. Whenever used herein, the words "Company" and
"Buyer" shall be deemed to include their respective successors and assigns. All
words used herein shall be deemed to refer to the singular, plural, masculine,
feminine or neuter as the identity of the person or entity or the context may
require.
12. Other Agreements. This document shall be executed simultaneously with
(a) the Modification Agreement related to a Loan Agreement, Convertible
Promissory Note and Registration Rights Agreement, each dated November 7, 2001,
by and between Buyer and the Company and (b) the Loan Agreement, dated as of May
21, 2002 by and between Buyer and the Company. Each of the documents referenced
in (a) and (b) above shall become effective solely upon execution of all of such
referenced documents.
13. Termination. This Agreement shall not terminate unless and until Buyer
represents in writing that it has no further rights to obtain Common Stock of
the Company under any agreement, or to convert any outstanding indebtedness into
shares of Common Stock of the Company, and until Buyer does not beneficially own
any shares of Common Stock of the Company.
IN WITNESS WHEREOF the Company and the Buyer have caused this Agreement to
be executed under seal as of the date first above written.
SALES ONLINE DIRECT, INC.
By: /s/ Xxxxxxx Xxxxxx
Xxxxxxx X. Xxxxxx, Chief Executive
Officer
AUGUSTINE FUND, L.P.
By: Augustine Capital Management, LLC,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
