Exhibit F
ADDITIONAL SUBSCRIPTION AGREEMENT
---------------------------------
COMMON STOCK AND WARRANT
DIGITAL FUSION, INC.
This Subscription Agreement is made and entered into by and among DIGITAL
FUSION, INC., a Delaware corporation (the "Company"), MADISON RUN HOLDINGS, LLC,
a Delaware limited liability company ("Holdings") and MADISON RUN, LLC, a
Delaware limited liability company ("Madison Run" and, together with Holdings,
the "Investor") with respect to the purchase by the Investor of common stock,
par value $.001 per share (the "Common Stock") of the Company and a warrant to
purchase such Common Stock for the benefit of Holdings (the "Additional
Warrant") pursuant hereto.
As of May 11, 2004, the Company and Madison Run entered into a subscription
agreement for the purchase of shares of Common Stock and a warrant to purchase
shares of Common Stock (the "Original Subscription Agreement"). In consideration
of the Company's agreement to accept the Investor's subscription of additional
shares of the Common Stock and an additional Warrant for the benefit of Holdings
upon the terms and conditions set forth in this Additional Subscription
Agreement, the Company and the Investor agree and represent as follows:
A. SUBSCRIPTION
The Investor is subscribing for 1,650,000 shares of Common Stock (the
"Additional Shares") at a purchase price of $1.00 per share and the Warrant,
which grants Holdings the right to purchase 50,000 shares of Common Stock at a
price of $1.25 per share (the "Additional Underlying Shares") for a total
consideration of $1,650,000.00 (the "Purchase Price"). Simultaneous with the
execution of this Additional Subscription Agreement, the Investor shall pay and
deliver to the Company the Purchase Price in the form of a check or wire
transfer payable to "Digital Fusion, Inc." and the Company shall issue, sell and
deliver the Additional Shares to the Investor and the Additional Warrant to the
Investor for the benefit of Holdings.
B. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date of this Additional Subscription Agreement, the Company makes
the representations, warranties and covenants set forth in Sections B.1 through
B.3, B.5 through B.9, and B.11 through B.13, inclusive, of the Original
Subscription Agreement, which Sections are incorporated into this Additional
Subscription Agreement by reference thereto; provided, however, that any such
representations and warranties set forth in the Original Subscription Agreement
that refer to the Shares, the Warrant, the Underlying Shares or the Subscription
Agreement, shall, in lieu thereof, refer to the Additional Shares, the
Additional Warrant, the Additional Underlying Shares and the Additional
Subscription Agreement, respectively. The Company further makes the
representations and warranties set forth on Exhibit A.
C. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As of the date of this Additional Subscription Agreement, the Investor
makes the representations and warranties set forth in Sections C.1 through C-3,
inclusive, of the Original Subscription Agreement, which Sections are
incorporated into this Additional Subscription Agreement by reference thereto;
provided, however, that any such representations and warranties set forth in the
Original Subscription Agreement that refer to the Shares, the Warrant, the
Underlying Shares, Investor Qualification Questionnaire or the Subscription
Agreement, shall, in lieu thereof, refer to the Additional Shares, the
Additional Warrant, the Additional Underlying Shares, Additional Investor
Qualification Questionnaire (as hereinafter defined) and the Additional
Subscription Agreement, respectively.
D. ADDITIONAL AGREEMENTS
The representations, warranties, covenants, understandings,
acknowledgements, and agreements set forth in Sections D, E, F, and G of the
Original Subscription Agreement are incorporated into this Additional
Subscription Agreement by reference thereto and made applicable to the
transactions set forth in this Additional Subscription Agreement; provided,
however, that any such representations, warranties, covenants, understandings,
acknowledgements, and agreements set forth in the Original Subscription
Agreement that refer to the Shares, the Warrant, the Underlying Shares, Investor
Qualification Questionnaire or the Subscription Agreement, shall, in lieu
thereof, refer to the Additional Shares, the Additional Warrant, the Additional
Underlying Shares, Additional Investor Qualification Questionnaire (as
hereinafter defined) and the Additional Subscription Agreement, respectively.
This Additional Subscription Agreement does not address the subject matter of
the Original Subscription Agreement and does not amend, modify or supplement in
any respect the Original Subscription Agreement and the Original Subscription
Agreement remains in full force and effect on and after the date of this
Additional Subscription Agreement.
E. INVESTOR QUALIFICATION QUESTIONNAIRE
In order to aid in determining whether Madison Run and Holdings are each an
accredited investor pursuant to Rule 501(a) under Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, both Madison Run and Holdings have completed and submitted the
Additional Investor Qualification Questionnaire attached hereto as Exhibit B
(the "Additional Investor Qualification Questionnaire").
F. BOARD REPRESENTATION
The Company has agreed to create a vacancy on the board of directors and
the audit committee of the board of directors upon the execution of this
Additional Subscription Agreement, and upon the closing of transactions
contemplated hereby, to fill such vacancy with a candidate designated by the
Investor. Notwithstanding the foregoing, the candidate designated by the
Investor must be approved by the Nominating Committee of the Company's board of
directors and, the Investor must qualify as an "independent" director under
NASDAQ rules and qualify under NASDAQ and Securities and Exchange Commission
rules for membership on the audit committee of the board of directors. Until
such time as Investor holds less than five percent of the issued and outstanding
shares of Common Stock, the Company agrees to use its best efforts to have a
candidate designated by the Investor included on the board of directors,
assuming such candidate remains acceptable to the Nominating Committee of the
board of directors.
IN WITNESS WHEREOF, the Investor has executed this Additional Subscription
Agreement to be effective as of the 21st day of October, 2004.
MADISON RUN, LLC
By: MADISON RUN HOLDINGS, LLC
By: /s/ G. Xxxxxxx Xxxx
--------------------------------
G. Xxxxxxx Xxxx, Managing Member
MADISON RUN HOLDINGS, LLC
By: /s/ G. Xxxxxxx Xxxx
--------------------------------
G. Xxxxxxx Xxxx, Managing Member
ACCEPTED: DIGITAL FUSION, INC.
By: /s/ Xxx X. Xxxxxxx, III
---------------------------------
Xxx X. Xxxxxxx III, CEO
EXHIBIT F
EXHIBIT A
The authorized capital stock of the Company consists of 16,000,000 shares of
Common Stock of which 7,985,404 shares are currently issued and outstanding and
1,000,000 shares of preferred stock, par value $.01 per share, (the Preferred
Stock") of which no shares are currently issued and outstanding. All of the
issued and outstanding shares of the Common Stock are duly authorized, validly
issued, fully paid and non-assessable. Except for Digital Fusion Solutions,
Inc., a Florida corporation, (the "Subsidiary") the Company has no subsidiaries.
The Company owns all of the issued and outstanding capital stock of the
Subsidiary. None of the issued and outstanding capital stock of the Company or
the Subsidiary was issued in violation of any preemptive or preferential rights
or similar claims. Except with respect to the transaction between the Company
and Madison Run, LLC, as disclosed in the Company's Form 10-QSB for the quarter
ended June 30, 2004 (the "Madison Run Transaction"), and except for 245,000
stock options granted to employees since June 30, 2004 and except for currently
outstanding warrants to purchase 1,058,573 shares of Common Stock at an average
purchase price of $2.92 expiring on or before April 29, 2010, other than
disclosed, there are no outstanding or authorized subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating the Company or the Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or the Subsidiary or obligating the
Company or the Subsidiary to grant, extend or enter into any such agreement or
commitment, and no voting trusts, proxies or other agreements or understandings
to which the Company or the Subsidiary is a party or is bound with respect to
the voting of any shares of capital stock of the Company or the Subsidiary and,
to the knowledge of the Company, there are no such trusts, proxies, agreements
or understandings by, between or among any of the Company's stockholders with
respect to any shares of the Common Stock. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Common Stock or any security convertible into or
exchangeable for any of its Common Stock.
Since June 30, 2004, there have been no material adverse changes to the
financial condition or operations of the business of the Company. Since June 30,
2004, the Company has not accepted, except as set forth below and other than in
the Madison Run Transaction (i) declared or paid any dividend or other
distribution in respect of its Common Stock, (ii) incurred any indebtedness
except accounts payable incurred in the ordinary course of its business, (iii)
incurred any capital expenditure in excess of Five Thousand Dollars ($5,000),
(iv) sold any assets of the Company other than in the ordinary course of
business, (v) except as set forth above, issued any capital stock of the Company
or any options, warrants, or similar rights, to acquire any such capital stock,
(vi) redeemed, purchased or otherwise acquired, directly or indirectly, any of
its capital stock, (vii) engaged in any material change in the method of
conducting the business of the Company, (viii) effected any material change in
compensation, incentive or bonus plans or the terms of employment of any
employee of the Company, (ix) authorized or executed any amendment to the
Certificate of Incorporation or Bylaws of the Company, (x) invested in or made a
loan to any other person, company or enterprise, or (xi) entered into any
commitment or agreement to do any of the above. On July 1, 2004, the Company
fully redeemed the approximately $560,000 secured convertible debt with Laurus
and entered into a secured revolving line of credit with First Commercial Bank
of Huntsville. The line of credit has an interest rate of prime plus one
percent, is secured by the Company's receivables and certain guarantees, and is
not to exceed $800,000.
EXHIBIT F
EXHIBIT B
================================================================================
DIGITAL FUSION, INC. (THE "COMPANY")
ADDITIONAL INVESTOR QUALIFICATION QUESTIONNAIRE
Entities
EACH INVESTOR MUST COMPLETE PART A AND PART B BELOW. The purpose of this section
is to aid in determining whether an investor is an accredited investor pursuant
to Rule 501(a) under Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
================================================================================
PART A: General Information
================================================================================
Name of Subscriber State of Domicile
------------------------------------------- ------------------------------------
Address of Principal Place of Business Nature of Business
------------------------------------------- ------------------------------------
Was the Investor created for the specific purpose of investing in the Company?
|_| Yes |_| No
If the Investor is a partnership or a trust, do its individual partners or
beneficiaries have the right to make a decision whether or not to participate in
the proposed investment?
|_| Yes |_| No |_| Not Applicable
If the answer to either of the two preceding questions is "Yes," Item (m) of
Part B of this Questionnaire must be checked, if true. If Item (m) of Part B is
not applicable, the information required by Part A and Part B must be furnished
with respect to each owner of an equity interest in the entity (or each
beneficiary of a trust, if applicable) on separate pages that are validly signed
and dated on behalf of each such owner or beneficiary. Alternatively, each such
owner or beneficiary may complete and execute a separate copy of this Additional
Subscription Agreement.
--------------------------------------------------------------------------------
Has the investor or any of its equityholders or partners ever been charged with,
convicted of, or pleaded guilty, nolo contendere or no contest to, any crime or
civil offense (excluding only minor traffic offenses).
|_| Yes |_| No
If yes, please give the details, including relevant dates and locations:
--------------------------------------------------------------------------------
To the investor's knowledge, has the subscriber or any of its equityholders or
partners ever been the subject of an investigation by any law enforcement or
other governmental agency (other than routine background checks).
|_| Yes |_| No
If yes, please give the details, including relevant dates and locations.
================================================================================
B-1
================================================================================
PART B: Accredited Investor Qualification Standards
================================================================================
The financial information and representations in this section are intended to
permit the Company to determine whether the Investor qualifies as an accredited
investor under Regulation D of the Securities and Exchange Commission.
The Investor represents and warrants that it is (check one or more):
|_| (a) A bank, as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended (the "1933 Act");
|_| (b) A savings and loan association or other institution, as defined in
Section 3(a)(5)A) of the 1933 Act;
|_| (c) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended (the "1934 Act");
|_| (d) An insurance company, as defined in Section 2(13) of the 1933 Act;
|_| (e) An investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), or a business development company
as defined in Section 2(a)(48) of the 1940 Act;
|_| (f) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
|_| (g) A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, that has
total assets in excess of $5,000,000;
|_| (h) An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and either (i) investment
decisions are made by a plan fiduciary, as defined in Section 3(21) of
ERISA, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, (ii) the employee benefit
plan has total assets in excess of $5,000,000, or (iii) if a
self-directed plan, investment decisions are made solely by persons
that qualify as accredited investors either under this paragraph (1)
or paragraph (2);
|_| (i) A private business development company, as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
|_| (j) An organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, with total assets in excess of $5,000,000,
that was not formed for the specific purpose of acquiring the Shares;
|_| (k) A corporation, Massachusetts or similar business trust, or partnership
with total assets in excess of $5,000,000, that was not formed for the
specific purpose of acquiring the interests;
|_| (l) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, and whose purchase is
directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of purchasing the Shares;
|_| (m) An entity in which all of the equity owners qualify as accredited
investors, as defined in Rule 501(a) of Regulation D; or
|_| (n) None of the above.
================================================================================
B-2
================================================================================
PART B: Accredited Investor Qualification Standards (con't)
================================================================================
I certify that I have answered the foregoing questions to the best of my
knowledge and that my answers thereto are complete and accurate. I understand
that the Company will be relying on the accuracy and completeness of my
responses to the foregoing questions. I will notify the Company immediately of
any material change in any statement made herein occurring prior to the
effective date (after today) of any acquisition or exchange by me of stock of
the Company.
================================================================================
SUBSCRIBER Date
----------------------------- -----------------------------
Print or Type Name Signature
================================================================================
B-3
